Cyclacel Pharmaceuticals Inc

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PROPOSALS TO BE ACTED UPON AT THE SPECIAL MEETING

PROPOSAL NO. 1 — NASDAQ PROPOSAL

General

We are seeking stockholder approval for (i) the issuance to Mr. Lazar, our interim Chief Executive Officer, of the Common Stock upon conversion of the Preferred Stock, and (ii) an amendment to the Series C Preferred Stock Certificate of Designations removing the Series C Ownership Limitation, for purposes of Nasdaq Listing Rules 5635(b), (c) and (d). Copies of the Series C Certificate of Designations, the amended and restated Series C Certificate of Designations removing the Series C Ownership Limitation, and the Series D Certificate of Designations are attached to this proxy statement as Appendix A, B and C, respectively. We encourage stockholders to read such amended and restated Certificate of Designations in its entirety.

Under the Purchase Agreement, we agreed to sell to Mr. Lazar (i) 1,000,000 shares of Series C Preferred Stock at a price of $1.00 per share and (ii) upon approval of the Nasdaq Proposal, 2,100,000 shares of Series D Preferred Stock at a price of $1.00 per share, for aggregate gross proceeds of $3.1 million. Each share of Series C Preferred Stock is convertible into 2.65 shares of Common Stock and each share of Series D Preferred Stock is convertible into 110 shares of Common Stock. In no event will the Series C Preferred Stock be convertible into Common Stock in a manner that would result in Mr. Lazar or his transferees or their affiliates holding more than the lower of (i) the maximum percentage of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of the Preferred Stock that can be issued to the holder without requiring a vote of the stockholders of the Company under the rules and regulations of Nasdaq; and (ii) 5% of the number of shares of Common Stock outstanding immediately before the original issue date (the “Series C Ownership Limitation”), prior to the date that the Company’s stockholders approve the issuance of shares of Common Stock to Mr. Lazar upon conversion of the Preferred Stock. In addition, prior to a Fundamental Transaction (as defined below), in no event will the Series D Preferred Stock be convertible into Common Stock in a manner that would result in Mr. Lazar or his transferees or their affiliates holding more than the lower of (i) the maximum percentage of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of the Preferred Stock that can be issued to the Holder without requiring a vote of the stockholders of the Company under the rules and regulations of Nasdaq; and, (ii) 49.99% of the number of shares of the Common Stock outstanding immediately before the original issue date (the “Series D Ownership Limitation”). The term “Fundamental Transaction,” as used herein means when (i) the Corporation effects any merger of the Company with or into another entity and the Company is not the surviving entity, (ii) any tender offer or exchange offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders of at least 50% of the Common Stock accept such offer, or (iii) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock). The certificate of designations for each of the Series C Preferred Stock and Series D Preferred Stock further provide that even following a vote of the stockholders of the Company in accordance with the rules and regulations of the trading market on which the Common Stock trades on such date and applicable securities laws to approve the removal of the Ownership Limitations, the Company shall not effect any conversion of the Preferred Stock, and a holder of the Preferred Stock shall not have the right to convert any portion of the Preferred Stock, to the extent that, after giving effect to the conversion, such holder (together with any other shares of Common Stock otherwise held by such holder(s) or their affiliates) would beneficially own the number of shares of Common Stock, which would be in excess of any statutory threshold pursuant to which the acquisition of such shares would trigger a compulsory offer requirement under applicable federal or state tender offer rules for the holder and its affiliates to make a tender offer for all the shares of the Company.

Stockholder Approval Requirement for Purposes of Nasdaq Listing Rules 5635(b), (c) and (d)

Pursuant to Nasdaq Listing Rule 5635(b), stockholder approval is required prior to the issuance of common stock that will result in a change of control of a listed company. Because we expect that the transactions contemplated by the Purchase Agreement will constitute a change of control for purposes of Nasdaq Listing Rule 5635(b), we are seeking the approval of our stockholders for the issuance to David Lazar of our shares of Common Stock issuable upon conversion of the Preferred Stock sold or to be sold pursuant to the Purchase Agreement. In addition, pursuant to Nasdaq Listing Rule 5635(c), stockholder approval is required prior to issuance of securities when a stock option or purchase plan is established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which shares of Common Stock may be acquired by officers, directors, employees or consultants of the Company. In connection with the signing of the Purchase Agreement, the Board of Directors appointed Mr. Lazar as interim Chief Executive Officer of the Company, effective as of the signing of the Purchase Agreement. We believe the issuance or delivery of shares of Common Stock underlying the Preferred Stock to Mr. Lazar should not be treated as equity compensation within the meaning of Rule 5635(c). However, it is possible Nasdaq may deem all or a portion of any arrangement as compensatory in nature, particularly in circumstances where the value deemed received by a listed company is less than the fair value of the securities issued. Accordingly, we are seeking the approval of our stockholders for the issuance of shares of the Common Stock pursuant to the Purchase Agreement pursuant to Nasdaq Listing Rule 5635(c). In addition, pursuant to Nasdaq Listing Rule 5635(d), stockholder approval is required for a transaction other than a public offering involving the sale, issuance or potential issuance by an issuer of common stock (or securities convertible into or exercisable for common stock) at a price that is less than the lower of (i) the closing price immediately preceding the signing of the binding agreement or (ii) the average closing price of the common stock for the five trading days immediately preceding the signing of the binding agreement, if the number of shares of common stock (or securities convertible into or exercisable for common stock) to be issued equals to 20% or more of the common stock, or 20% or more of the voting power, outstanding before the issuance. The closing price of the Common Stock on January 2, 2025, which immediately preceded the signing of the Purchase Agreement, was $0.371 per share, and the average closing price of the Common Stock for the five trading days immediately preceding the signing of the Purchase Agreement was $0.35834 per share. Because the price at which we will issue the shares of Common Stock underlying the Preferred Stock to Mr. Lazar may be deemed to be lower than $0.35834 per share, we are seeking the approval of our stockholders for the issuance of shares of the Common Stock pursuant to the Purchase Agreement pursuant to Nasdaq Listing Rule 5635(d).

Under the applicable Nasdaq rules and the Purchase Agreement, in the absence of stockholder approval, we may only issue to Mr. Lazar upon conversion of the Series C Preferred Stock such number of shares of Common Stock, equal to the lower of either, (X) the maximum percentage of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of the Preferred Stock that can be issued to the Holder without requiring a vote of our shareholders under the rules and regulations of the Trading Market on which the Common Stock trades on such date and applicable securities laws; or, (Y) 19.99% of the number of shares of the Common Stock outstanding immediately prior to the date of issuance. In addition, under the applicable Nasdaq rules and the Purchase Agreement, in the absence of stockholder approval, we may not issue to Mr. Lazar the Series D Preferred Stock.

The Purchase Agreement contains customary representations, warranties and agreements of the Company and Mr. Lazar, limitations and conditions regarding sales of the Preferred Stock or underlying Common Stock, indemnification rights and other obligations of the parties. Furthermore, the Purchase Agreement contains certain covenants, including our commitment to call a meeting of stockholders for purposes of soliciting approval (i) of an amendment to the Series C Certificate of Designations in order to remove the Series C Ownership Limitation from the Series C Preferred Stock and (ii) the issuance to Mr. Lazar, our interim Chief Executive Officer, of the Common Stock upon conversion of the Preferred Stock.

In the Purchase Agreement, Mr. Lazar has agreed that he will not engage in or effect, directly or indirectly, any short sales involving the Company’s securities or any hedging transaction that transfers the economic risk of ownership of the Preferred Stock. Additionally, prior to the transaction, the Board unanimously adopted resolutions (i) exempting Mr. Lazar’s acquisition of the Preferred Stock from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 and (ii) granting Mr. Lazar the right to sell, assign or otherwise transfer either the Preferred Stock (as well as any Common Stock underlying any such Preferred Stock) or its rights to acquire the Preferred Stock (as well as any Common Stock underlying any such securities) pursuant to the Purchase Agreement.

We encourage you to read the Purchase Agreement in its entirety, a copy of which was previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2025.

At the Special Meeting, for purposes of complying with Nasdaq Listing Rule 5635, we will ask stockholders to authorize the issuance of our Common Stock upon the conversion of the Preferred Stock, in an amount that ultimately may equal or be in excess of 20% of our Common Stock outstanding before the entry into of the Purchase Agreement and which may constitute a “change of control” under Nasdaq rules. In addition, we will ask stockholders to authorize an amendment to the Series C Preferred Stock Certificate of Designations to remove the Series C Ownership Limitation. We may also transact any other business that may properly come before the Special Meeting or at any adjournments or postponements of the Special Meeting.

In the event that we do not receive approval of the Nasdaq Proposal after holding four (4) stockholder meetings, the Series C Preferred Stock Certificate of Designations provides that the Company will redeem the Series C Preferred Stock by paying the holder the fair value of such shares. Fair value is defined in the Series C Preferred Stock Certificate of Designations as the last reported closing stock price on Nasdaq on the day of the last such stockholder meeting. Upon the redemption of the Series C Preferred Stock, the outstanding shares of Series C Preferred Stock will be deemed cancelled.

The Series C Preferred Stock Certificate of Designations attached hereto as Appendix A reflects the filing previously submitted to the Secretary of State of the State of Delaware. In the event stockholders approve this proposal, the Company will file the amended and restated Series C Preferred Stock Certificate of Designations, in the form attached hereto as Appendix B, with the Secretary of State of the State of Delaware, which will thereafter set forth the rights, privileges and terms of the Series C Preferred Stock. The Series D Preferred Stock Certificate of Designations attached hereto as Appendix C reflects the filing previously submitted to the Secretary of State of the State of Delaware.

Whether or not any of the Proposals are approved, we will continue to remain a public company and the requirement to file our annual reports (including the audited financial statements contained therein) and other reports with the SEC, although our listing on Nasdaq may be affected and we may be delisted if any of the Nasdaq Proposal, the Warrant Exchange Issuance Proposal or the Reverse Stock Split Proposal is not approved.

Because of Mr. Lazar’s significant ownership of our Common Stock upon conversion of the Preferred Stock, any transaction or arrangement between us, on the one hand, and Mr. Lazar or any of their respective affiliates, on the other hand, will need to be approved by the Board consistent with its fiduciary duties to all of our stockholders. This will entail full disclosure of any relationships, transactions or other arrangements between us and Mr. Lazar and his respective affiliates in our filings with the SEC.

Following the approval of the Nasdaq Proposal and the removal of the Series C Ownership Limitation from the Series C Preferred Stock and the issuance of the Series D Preferred Stock in a second closing under the Purchase Agreement, Mr. Lazar will be our largest stockholder, and he would own a majority of the outstanding shares of our Common Stock upon conversion of the Preferred Stock and we would be treated as a “controlled company” under the rules of Nasdaq. As a controlled company, we would not be required to have a majority independent Board and our Compensation Committee would no longer be required to be composed solely of independent directors. Further, if Mr. Lazar owns a majority of our Common Stock and our Preferred Stock, he will then have sufficient votes to elect all of our directors and to approve any other corporate action requiring the affirmative vote of holders of a majority of the outstanding shares of our Common Stock and our Preferred Stock.

Reasons for the Nasdaq Proposal

After careful consideration, the Board determined that the Purchase Agreement and the transactions contemplated thereby, including the issuances of the Common Stock upon conversion of the Preferred

Stock and the removal of the Series C Ownership Limitation from the Series C Preferred Stock, are advisable and in the best interests of the Company and its stockholders, and determined to recommend that our stockholders approve Proposal No. 1.

In making its determination, the Board considered various factors, including:

The immediate and long-term benefit to the Company’s financial condition of receiving an aggregate of $3.1 million in cash from the sale of the Preferred Stock, in light of the Company’s current cash position and liquidity needs.

The fact that, as previously reported, the Company received a notice from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) stating that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1) requiring stockholders’ equity of at least $2.5 million (the “Stockholders’ Equity Rule”) and after a hearing before the Nasdaq Hearings Panel, the Company was granted until December 24, 2024 to regain compliance with the Stockholders’ Equity Rule, which was subsequently extended to February 6, 2025. If the Company is unable to regain compliance with the listing standards of the Nasdaq Capital Market by February 6, 2025, the Company’s securities may be delisted from Nasdaq. We believe that the ability to raise equity by approving the Nasdaq Proposal will help to facilitate our ability to regain compliance with the Stockholders’ Equity Rule.

The likelihood of securing alternative sources of capital, of a potential public or private sale of common stock, warrants, or convertible or nonconvertible debt securities and the likely price and other terms and conditions of such sales, revealed a low likelihood of consummation of any alternatives, as well as a significant cost of such financing, assuming it could be obtained, to the Company and the associated significant dilution to its stockholders, which the Board determined was substantially less favorable to the Company than pursuing the transactions contemplated by the Purchase Agreement.

The significant likelihood that, without the consummation of the transactions contemplated by the Purchase Agreement, the Company would pursue a liquidation and dissolution of the Company, which would likely result in the Company’s common stockholders receiving no or very little value in respect of their shares of the Common Stock after payment of the liquidation preference of the Company’s outstanding preferred stock.

The funding that Mr. Lazar has provided would allow us to explore strategic alternatives in an attempt to maximize stockholder value.

The recent performance of the Company’s stock price on Nasdaq and the capital markets as a whole, including the Company’s inability to secure any alternative offers to finance the Company via an investment in the Company’s equity or to acquire the Company outright.

During the Company’s extensive exploration, both by the Company’s management as well as its strategic advisors of opportunities for strategic partnership and/or investment, and based on the Board’s determination that the Purchase Agreement offered the best opportunity with greatest financial benefit, including after considering the risks that any such anticipated benefits could ultimately not materialize, the Board has decided to support the proposal.

We have covenanted under the Purchase Agreement to solicit approval of the proposals from our stockholders.

The terms and conditions of the Purchase Agreement, including, among other things, the representations, warranties, covenants and agreements of the parties, the conditions to closing, the form and governance of the Company post-closing and the termination rights of the parties, taken as a whole, which the Board determined were more favorable to the Company and its stockholders than those terms and conditions which could have been negotiated with or offered by other potential strategic partners and/or investors.

The Company will redeem the Series C Preferred Stock for the fair value (as defined in the Series C Certificate of Designation) of such shares if we do not obtain approval for the removal of the Series C Ownership Limitation after four (4) stockholder meetings. In addition, if the Company does not receive the required approvals by the second meeting of stockholders, the Company shall issue 200,000 shares of common stock to David Lazar at a purchase price per share equal to the closing price of the Common Stock on the date of the second meeting plus $0.02.

Potential risks associated with alternatives to the Purchase Agreement, including the potential impact on the price of the Common Stock and ability to generate sufficient capital to support our ongoing operations.

Potential risks associated with Mr. Lazar’s significant ownership percentage following the Closing include the right to designate directors to the Board, which will enable him to affect the outcome of, or exert significant influence over, all matters requiring Board or stockholder approval, including the election and removal of directors and any change in control, and could have the effect of delaying or preventing a change in control of the Company or otherwise discouraging or preventing a potential acquirer from attempting to obtain control of the Company, which, in turn, could have a negative effect on the market price of the Common Stock and could impact the low trading volume and volatility of the Common Stock.

Vote Required

In order to approve this proposal, assuming that a quorum is present at the Special Meeting, the affirmative vote of a majority of the votes cast by the stockholders entitled to vote on the Nasdaq Proposal is required for the proposal to pass. Abstentions and broker non-votes, if any, will have no effect on the Nasdaq Proposal. David Lazar, who is the holder of the Series C Preferred Stock, will not be permitted to vote on this Proposal.

The Board unanimously recommends that you vote “FOR” Proposal No. 1 to approve the Nasdaq Proposal.