Day: November 22, 2024

CANTON, Mass., Nov. 22, 2024 (GLOBE NEWSWIRE) — Destination XL Group, Inc. DXLG, the leading integrated-commerce specialty retailer of Big + Tall men’s clothing and shoes, today reported operating results for the third quarter of fiscal 2024, and updated sales and earnings guidance for the fiscal year. 

Third Quarter Financial Highlights

• Total sales for the third quarter were $107.5 million, down 9.8% from $119.2 million in the third quarter of fiscal 2023. Comparable sales for the third quarter of fiscal 2024 decreased 11.3% as compared to the third quarter of fiscal 2023.
• Net loss for the third quarter was $(0.03) per diluted share, as compared to net income of $0.06 per diluted share in the third quarter of fiscal 2023.
• Adjusted EBITDA (a non-GAAP measure) for the third quarter was $1.0 million, or 1.0% of sales, as compared to $8.6 million, or 7.3% of sales in the third quarter of fiscal 2023.
• Total cash and investments were $43.0 million at November 2, 2024, as compared to $60.4 million at October 28, 2023, with no outstanding debt for either period.
• Repurchased 3.6 million shares of common stock for $10.2 million, or an average cost of $2.85 per share, pursuant to a $15.0 million stock repurchase program approved during the third quarter of fiscal 2024.

Management’s Comments 

“DXL’s business continued to be challenged in the third quarter by consumer spending headwinds which resulted in lower traffic to our stores and lower conversion online. The consumer has been very price conscious, and our customers are gravitating toward our more moderate and entry-level price points. Despite these challenges, we have maintained our disciplined operating regimen, and we have avoided a material erosion in merchandise margin, while keeping our inventory position healthy and controlling our operating expenses,” said Harvey Kanter, President and Chief Executive Officer.

“As we head into the fourth quarter, we will remain focused on achieving profitable sales, generating free cash flow and maintaining a healthy balance sheet. While we expect that consumer spending headwinds will persist into the fourth quarter, we are optimistic. With inflation stabilizing, interest rates coming down and the election now behind us, we believe that consumer sentiment will recover over time. Until our Big + Tall consumer is ready to more actively engage with DXL, we will continue to look for opportunities to drive sales through a mix of promotional activities and limited advertising. As I provide an update on our strategic initiates, it is important to note that we are proceeding cautiously until the macroenvironment improves by pausing our brand campaign and slowing the velocity of new store openings.

Marketing & Brand Building: In the second quarter of fiscal 2024, we launched our new brand advertising campaign to build awareness of our brand. The campaign ran in a three-matched-market test in Boston, Detroit, and St. Louis and the results were positive in all three markets, with increased traffic, sessions, and customer acquisition. However, as we previously disclosed, given current market conditions, we have paused our brand campaign at this time and are instead investing our marketing dollars back into our traditional marketing channels that will be more productive, including a video campaign on various social media platforms.

Store Development: Our initiative to open new stores was driven by insights into the frustrations our customers have with limited access to our stores. Consumers told us that they do not shop with us because no store is near or convenient to them. During the third quarter, we opened two new stores for a total of four new stores year to date, with four additional stores opening in the fourth quarter. We are developing our fiscal 2025 store development schedule and are targeting 8 new store openings, down from our previous expectation of 10 new store openings.

New Website Platform: We are making significant progress in our transition to a new and improved eCommerce platform, with 100% of the site traffic now on our new platform. The platform addresses friction online and will drive a richer and simpler consumer experience, as well as drive measurably greater speed and agility. During the third quarter, we completed the second phase of this project, which included catalog pages, product detail pages, and a new site search experience. The last phase, which will improve the checkout process and other user experiences is scheduled to be completed in early 2025.

Alliances & Collaborations: In the second quarter of fiscal 2024, we launched our DXL Big + Tall merchandise assortment on Nordstrom’s digital marketplace platform and currently have 37 brands and over 1,400 styles available on the platform, with plans for an additional 500 styles in the next month. We believe this collaboration will allow us to bring the DXL experience beyond our four walls and directly to the Nordstrom customer, thereby further extending DXL’s relationship with the female consumer.”

“Pulling back on parts of our initiatives was prudent to ensure that we remain fiscally responsible with our investment spending and remain focused on near-term profitability and positive free cash flow,” Kanter concluded.

Third Quarter Results

Sales

Total sales for the third quarter of fiscal 2024 were $107.5 million, as compared to $119.2 million in the third quarter of fiscal 2023. The decrease in total sales was primarily attributable to a decrease in comparable sales for the third quarter of 11.3%, partially offset by an increase in non-comparable sales. 

The comparable sales decrease of 11.3% consisted of comparable sales from our stores down 9.9% and our direct business down 14.7%. This third quarter decline was consistent with the trend from the first half of fiscal 2024, with the decrease in comparable sales principally driven by a decrease in traffic in our stores and decreased conversion in our direct business. We continued to see a shift toward our private-label merchandise, as opposed to our national brands, as customers continued to be cost-conscious with their discretionary spending.

Gross Margin

For the third quarter of fiscal 2024, our gross margin rate, inclusive of occupancy costs, was 45.1% as compared to a gross margin rate of 47.5% for the third quarter of fiscal 2023. 

Our gross margin rate decreased by 240 basis points, which was driven by an increase of 220 basis points in occupancy costs, as a percentage of sales, primarily due to the deleveraging of sales and increased rents as a result of lease extensions. Merchandise margin for the third quarter decreased by 20 basis points, as compared to the third quarter of fiscal 2023, primarily due to an increase in markdown activity on seasonal merchandise as well as an increase in inbound freight. These increases were partially offset by favorable outbound shipping costs, a decrease in loyalty expense and a shift in product mix. For 2024, we expect gross margin rates to be approximately 130 to 180 basis points lower than fiscal 2023 primarily related to the deleveraging of occupancy on a lower sales base. 

Selling, General & Administrative

As a percentage of sales, SG&A (selling, general and administrative) expenses for the third quarter of fiscal 2024 were 44.1% as compared to 40.2% for the third quarter of fiscal 2023.

On a dollar basis, SG&A expenses decreased by $0.6 million as compared to the third quarter of fiscal 2023. The decrease was primarily due to a decrease in marketing of $1.4 million as compared to the prior year’s third quarter, partially offset by increases in healthcare costs, technology costs and professional services. On a percentage of sales basis, SG&A expenses increased due to the decrease in sales for the third quarter of fiscal 2024 as compared to the third quarter of fiscal 2023.

Marketing costs were 5.7% of sales for the third quarter of fiscal 2024 as compared to 6.3% of sales for the third quarter of fiscal 2023. For fiscal 2024, marketing costs are expected to be approximately 6.8%.

Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 24.2% of sales in the third quarter of fiscal 2024 as compared to 22.5% of sales in the third quarter of fiscal 2023. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 19.9% of sales in the third quarter of fiscal 2024 as compared to 17.7% of sales in the third quarter of fiscal 2023.

Interest Income, Net

Net interest income for the third quarter of fiscal 2024 was $0.6 million, which was flat as compared to the third quarter of fiscal 2023. For both periods, interest income was earned from investments in U.S. government-backed investments and money market accounts. Interest costs for both periods were minimal because we had no outstanding debt and no borrowings under our credit facility.

Income Taxes

Our tax provision for income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any. Each quarter, we update our estimate of the annual effective tax rate and make a year-to-date adjustment to the provision.

For the third quarter of fiscal 2024, the effective tax rate was 9.2% as compared to an effective tax rate of 30.2% for the third quarter of fiscal 2023. The difference in the effective tax rate for the third quarter of fiscal 2024, as compared to the third quarter of fiscal 2023, was due to the net loss reported during the third quarter of fiscal 2024 and its impact on our estimated annual effective tax rate for fiscal 2024. For the fiscal year, we expect an increase in the effective tax rate primarily due to permanent book-to-tax differences combined with a lower pretax income as compared to fiscal 2023.

Net Income (Loss)

For the third quarter of fiscal 2024, net loss was $1.8 million, or $(0.03) per diluted share, as compared to net income for the third quarter of fiscal 2023 of $4.0 million, or $0.06 per diluted share.

Adjusted EBITDA

Adjusted EBITDA, a non-GAAP measure, for the third quarter of fiscal 2024 was $1.0 million, as compared to $8.6 million for the third quarter of fiscal 2023.

Cash Flow

Cash flow from operations for the first nine months of fiscal 2024 was $12.5 million as compared to $33.1 million for the first nine months of fiscal 2023. 

Free cash flow, before capital expenditures for store development, a non-GAAP measure, was $2.5 million for the first nine months of fiscal 2024 as compared to $26.5 million for the first nine months of fiscal 2023.

Free cash flow, a non-GAAP measure, was $(7.0) million for the first nine months of fiscal 2024 as compared to $22.7 million for the first nine months of fiscal 2023. The decrease in free cash flow was primarily due to a decrease in operating income as well as increases in capital expenditures of $5.6 million for store development and other capital projects of $3.4 million.

		For the nine months ended
(in millions)		November 2, 2024				October 28, 2023
Cash flow from operating activities (GAAP basis)		$	12.5			$	33.1
Capital expenditures, excluding store development			(10.0	)			(6.6	)
Free Cash Flow before capital expenditures for store development (non-GAAP basis)		$	2.5			$	26.5
Capital expenditures for store development			(9.4	)			(3.8	)
Free Cash Flow (non-GAAP basis)		$	(7.0	)		$	22.7

Non-GAAP Measures

Adjusted EBITDA, adjusted EBITDA margin, free cash flow before capital expenditures for store development and free cash flow are non-GAAP financial measures. Please see “Non-GAAP Measures” below and reconciliations of these non-GAAP measures to the comparable GAAP measures that follow in the tables below.

Balance Sheet & Liquidity

As of November 2, 2024, we had cash and investments of $43.0 million as compared to $60.4 million as of October 28, 2023, with no outstanding debt in either period. We did not have any borrowings under our credit facility during either period and, as of November 2, 2024, the availability under our credit facility was $78.1 million, as compared to $87.6 million as of October 28, 2023. Availability under our credit facility is primarily driven by our available inventory.

As of November 2, 2024, our inventory decreased approximately $10.7 million to $89.1 million, as compared to $99.9 million as of October 28, 2023. We continue to take proactive measures to manage our inventory and adjust our receipt plan given the ongoing macroeconomic factors affecting consumer spending. At November 2, 2024, our clearance inventory was 9.2% of our total inventory, as compared to 9.7% at October 28, 2023. Our inventory position is very strong and our clearance levels are in line with our benchmark of 10% even with the 10.7% decrease in total inventory. Our inventory turnover rate has improved by over 30% from fiscal 2019.

Stock Repurchase Program

In September 2024, our Board of Directors approved a stock repurchase program. Under the stock repurchase program, we may repurchase up to $15.0 million of our common stock, including excise tax, through open market and privately negotiated transactions. The stock repurchase program will expire on February 1, 2025. During the third quarter of fiscal 2024, we repurchased 3.6 million shares at a total cost, including fees, of $10.2 million under this stock repurchase program.

Retail Store Information

The following is a summary of our retail square footage since the end of fiscal 2021 through the end of the third quarter of fiscal 2024:

	At November 2, 2024						Year End 2023						Year End 2022						Year End 2021
	# of  Stores			Sq Ft. (000’s)			# of  Stores			Sq Ft. (000’s)			# of  Stores			Sq Ft. (000’s)			# of  Stores			Sq Ft. (000’s)
DXL retail		239			1,753			232			1,725			218			1,663			220			1,678
DXL outlets		15			76			15			76			16			80			16			80
CMXL retail		12			37			17			55			28			92			35			115
CMXL outlets		19			57			19			57			19			57			19			57
Total		285			1,923			283			1,913			281			1,892			290			1,930

During the first nine months of fiscal 2024, we opened four new DXL stores, relocated one DXL store, converted four Casual Male XL stores to the DXL format, completed four DXL remodels, closed one Casual Male XL store and one DXL store. We expect to open four additional DXL stores, convert another Casual Male store to the DXL store format and complete one additional DXL remodel before the end of fiscal 2024. We expect our capital expenditures to range from $21.0 million to $24.0 million, net of tenant incentives, in fiscal 2024. Over the next five years, we believe we could potentially open approximately 50 net new DXL stores across the country, which could average 6,000 square feet or 300,000 sq. ft. in total, a 15% increase over our current square footage. We are currently planning to open 8 stores in fiscal 2025.

Digital Commerce Information

We distribute our national brands and own brand merchandise directly to consumers through our stores, website, app, and third-party marketplaces. Digital commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level or through a third-party marketplace. Our direct business is a critical component of our business and an area of significant growth opportunity for us. For the third quarter of fiscal 2024, our direct sales were $31.3 million, or 29.1% of retail segment sales, as compared to $36.2 million, or 30.4% of retail segment sales in the third quarter of fiscal 2023.

Financial Outlook

As a result of continuing headwinds in men’s apparel and our sales results through the first nine months of fiscal 2024, we are revising our full year guidance, with expected sales for fiscal 2024 to be at the low end of our previous guidance, which is approximately $470.0 million. We have lowered our adjusted EBITDA guidance to 4.5% from 6.0%, primarily as a result of the deleveraging of costs on the lower sales base. Sales guidance for fiscal 2024 reflects a comparable sales decrease of approximately 10%.

Conference Call

The Company will hold a conference call to review its financial results on Friday, November 22, 2024, at 9:00 a.m. ET.

To participate in the live webcast, please pre-register at: https://register.vevent.com/register/BI086e2ca09b4247779965833973a12671

Upon registering, you will be emailed a dial-in number, and unique PIN.

For listen-only, please join and register at: https://edge.media-server.com/mmc/p/x2e2arje. An archived version of the webcast may be accessed by visiting the “Events” section of the Company’s investor relations website for up to one year.

During the conference call, the Company may discuss and answer questions concerning business and financial developments and trends. The Company’s responses to questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been disclosed previously.

Non-GAAP Measures

In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release contains non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, free cash flow before capital expenditures for store development, and free cash flow. The presentation of these non-GAAP measures is not in accordance with GAAP and should not be considered superior to or as a substitute for net income (loss), net income (loss) per diluted share or cash flows from operating activities or any other measure of performance derived in accordance with GAAP. In addition, not all companies calculate non-GAAP financial measures in the same manner and, accordingly, the non-GAAP measures presented in this release may not be comparable to similar measures used by other companies. The Company believes the inclusion of these non-GAAP measures help investors gain a better understanding of the Company’s performance, especially when comparing such results to previous periods, and that they are useful as an additional means for investors to evaluate the Company’s operating results, when reviewed in conjunction with the Company’s GAAP financial statements. Reconciliations of these non-GAAP measures to their comparable GAAP measures are provided in the tables below. 

Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and adjusted for asset impairment charges (gain) and the loss from the termination of retirement plans, if any. Adjusted EBITDA margin is calculated as adjusted EBITDA divided by total sales. The Company believes that providing adjusted EBITDA and adjusted EBITDA margin is useful to investors to evaluate the Company’s performance and are key metrics to measure profitability and economic productivity.

Free cash flow is a metric that management uses to monitor liquidity. Management believes this metric is important to investors because it demonstrates the Company’s ability to strengthen liquidity while supporting its capital projects and new store development. Free cash flow is calculated as cash flow from operating activities, less capital expenditures and excludes the mandatory and discretionary repayment of debt. Free cash flow before capital expenditures for store development is calculated as cash flow from operating activities less capital expenditures other than capital expenditures for store development. Capital expenditures for store development includes capital expenditures for new stores, conversions of Casual Male XL stores to DXL and remodels. Capital expenditures related to store relocations and maintenance are not included in store development. 

About Destination XL Group, Inc.

Destination XL Group, Inc. is the leading retailer of Men’s Big + Tall apparel that provides the Big + Tall man the freedom to choose his own style. Subsidiaries of Destination XL Group, Inc. operate DXL Big + Tall retail and outlet stores and Casual Male XL retail and outlet stores throughout the United States, and an e-commerce website, DXL.COM, and mobile app, which offer a multi-channel solution similar to the DXL store experience with the most extensive selection of online products available anywhere for Big + Tall men. The Company is headquartered in Canton, Massachusetts, and its common stock is listed on the Nasdaq Global Market under the symbol “DXLG.” For more information, please visit the Company’s investor relations website: https://investor.dxl.com.

Forward-Looking Statements

Certain statements and information contained in this press release constitute forward-looking statements under the federal securities laws, including statements regarding our guidance for fiscal 2024, including expected sales, gross margin rate and adjusted EBITDA margin; expected sales trends for fiscal 2024; expected marketing costs and expected capital expenditures in fiscal 2024; expected store openings and store conversions in the remainder of fiscal 2024 and fiscal 2025; our long-range strategic plan and the expected impact of our strategic initiatives on future growth, including with respect to marketing efforts and raising brand awareness, store development and future alliances and collaborations; our ability to manage inventory; expected changes in our store portfolio and long-term plans for new or relocated stores; the expected completion of our rollout of our improved eCommerce platform; and our ability to achieve profitable sales and generate free cash flow. The discussion of forward-looking information requires the management of the Company to make certain estimates and assumptions regarding the Company’s strategic direction and the effect of such plans on the Company’s financial results. The Company’s actual results and the implementation of its plans and operations may differ materially from forward-looking statements made by the Company. The Company encourages readers of forward-looking information concerning the Company to refer to its filings with the Securities and Exchange Commission, including without limitation, its Annual Report on Form 10-K filed on March 21, 2024, its Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission that set forth certain risks and uncertainties that may have an impact on future results and the direction of the Company, including risks relating to: changes in consumer spending in response to economic factors; the impact of inflation with rising costs and high interest rates; the impact of ongoing worldwide conflicts on the global economy, including the Israel-Hamas conflict and the ongoing Russian invasion of Ukraine; potential labor shortages; and the Company’s ability to execute on its marketing, digital, store and collaboration strategies, ability to grow its market share, predict customer tastes and fashion trends, forecast sales growth trends and compete successfully in the United States men’s big and tall apparel market.

Forward-looking statements contained in this press release speak only as of the date of this release. Subsequent events or circumstances occurring after such date may render these statements incomplete or out of date. The Company undertakes no obligation and expressly disclaims any duty to update such statements occurring after such date may render these statements incomplete or out of date. The Company undertakes no obligation and expressly disclaims any duty to update such statements.

DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
		For the three months ended								For the nine months ended
		November 2, 2024				October 28, 2023				November 2, 2024				October 28, 2023
Sales		$	107,503			$	119,188			$	347,812			$	384,673
Cost of goods sold including occupancy			59,064				62,577				183,520				196,767
Gross profit			48,439				56,611				164,292				187,906
Expenses:
Selling, general and administrative			47,409				47,962				148,594				143,689
Depreciation and amortization			3,569				3,393				10,232				10,338
Total expenses			50,978				51,355				158,826				154,027
Operating income (loss)			(2,539	)			5,256				5,466				33,879
Loss on termination of retirement plans			—				(57	)			—				(4,231	)
Interest income, net			552				564				1,673				1,408
Income (loss) before provision (benefit) for income taxes			(1,987	)			5,763				7,139				31,056
Provision (benefit) for income taxes			(182	)			1,743				2,768				8,436
Net income (loss)		$	(1,805	)		$	4,020			$	4,371			$	22,620
Net income (loss) per share:
Basic		$	(0.03	)		$	0.07			$	0.08			$	0.37
Diluted		$	(0.03	)		$	0.06			$	0.07			$	0.35
Weighted-average number of common shares outstanding:
Basic			57,135				60,169				57,801				61,612
Diluted			57,135				63,464				60,642				64,995

DESTINATION XL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
November 2, 2024, February 3, 2024 and October 28, 2023
(In thousands)
(unaudited)
		November 2,				February 3,				October 28,
		2024				2024				2023
ASSETS
Cash and cash equivalents		$	7,108			$	27,590			$	10,723
Short-term investments			35,851				32,459				49,632
Inventories			89,139				80,968				99,858
Other current assets			8,159				12,228				10,287
Property and equipment, net			51,988				43,238				38,429
Operating lease right-of-use assets			167,814				138,118				139,907
Intangible assets			1,150				1,150				1,150
Deferred tax assets, net of valuation allowance			19,609				21,533				22,223
Other assets			503				457				451
Total assets		$	381,321			$	357,741			$	372,660
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	28,013			$	17,353			$	28,256
Accrued expenses and other liabilities			26,728				36,898				33,297
Operating leases			181,124				154,537				160,340
Stockholders’ equity			145,456				148,953				150,767
Total liabilities and stockholders’ equity		$	381,321			$	357,741			$	372,660

CERTAIN COLUMNS IN THE FOLLOWING TABLES MAY NOT FOOT DUE TO ROUNDING

GAAP TO NON-GAAP RECONCILIATION OF ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN (unaudited)
		For the three months ended								For the nine months ended
		November 2, 2024				October 28, 2023				November 2, 2024				October 28, 2023
(in millions)
Net income (loss) (GAAP basis)		$	(1.8	)		$	4.0			$	4.4			$	22.6
Add back:
Loss on termination of retirement plans			—				0.1				—				4.2
Provision (benefit) for income taxes			(0.2	)			1.7				2.8				8.4
Interest income, net			(0.6	)			(0.6	)			(1.7	)			(1.4	)
Depreciation and amortization			3.6				3.4				10.2				10.3
Adjusted EBITDA (non-GAAP basis)		$	1.0			$	8.6			$	15.7			$	44.2
Sales		$	107.5			$	119.2			$	347.8			$	384.7
Adjusted EBITDA margin (non-GAAP), as a percentage of sales			1.0	%			7.3	%			4.5	%			11.5	%

GAAP TO NON-GAAP RECONCILIATION OF FREE CASH FLOW (unaudited)
		For the nine months ended
(in millions)		November 2, 2024				October 28, 2023
Cash flow from operating activities (GAAP basis)		$	12.5			$	33.1
Capital expenditures, excluding store development			(10.0	)			(6.6	)
Free Cash Flow before capital expenditures for store development (non-GAAP basis)		$	2.5			$	26.5
Capital expenditures for store development			(9.4	)			(3.8	)
Free Cash Flow (non-GAAP basis)		$	(7.0	)		$	22.7

FISCAL 2024 FORECAST GAAP TO NON-GAAP ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN RECONCILIATION (unaudited)
		Projected
		Fiscal 2024
(in millions, except per share data and percentages)							per diluted share
Sales (low-end of guidance)		$	470.0
Net income (GAAP basis)				5.6			$	0.09
Add back:
Provision for income taxes				3.4
Interest income, net				(2.3	)
Depreciation and amortization				14.5
Adjusted EBITDA (non-GAAP basis)		$		21.2
Adjusted EBITDA margin as a percentage of sales (non-GAAP basis)				4.5	%
Weighted average common shares outstanding – diluted				60.0
* forecasted weighted average common shares outstanding does not reflect share repurchase activity

Investor Contact:
investor.relations@dxlg.com
(603) 933-0541

JERUSALEM, Nov. 22, 2024 /PRNewswire/ — Scinai Immunotherapeutics Ltd. SCNI (“Scinai”, or the “Company”), a biopharmaceutical company focused on developing inflammation and immunology (I&I) biological products and on providing CDMO services through its Scinai Bioservices business unit, today published its financial results for the nine months ended September 30, 2024 and provided a business update.

Business Update & Recent Highlights

Conversion of EIB Loan into Equity bringing shareholders’ equity to $10 million

On August 21, 2024, the Company announced that it had closed a Loan Restructuring Agreement, which included an amendment and restatement to the amended Finance Contract with the European Investment Bank (the “EIB”). In connection with the transaction, an amount equal to approximately EUR 26.6 million (equal to approximately $28.1 million as of November 21, 2024), including interest accrued through the closing date, owed by the Company to the EIB under the amended Finance Contract between the parties was converted into 1,000 preferred shares, no par value per share, of the Company (the “Preferred Shares”) convertible into a fixed number of ADSs, calculated at the closing date to represent 19.5% of the then fully diluted outstanding capital stock of the Company (364 thousand ADSs). The Preferred Shares do not contain any anti-dilution provisions, do not accrue dividends, and are not subject to mandatory redemption, but are redeemable at the election of the Company at a cumulative redemption value of $34 million. Under the terms of the agreement, EIB may not convert its Preferred Shares into ADSs for a period of twelve (12) months from the date of issuance of the Preferred Shares. In addition, EIB may not convert its Preferred Shares into ADSs if at the time of conversion, the aggregate number of ADSs EIB will receive or would have been entitled to receive within the twelve months prior to such conversion would exceed 4.99% of the ADSs issued and outstanding at the time of such conversion.

Following the conversion, the total outstanding amount owed by the Company to the EIB was reduced to EUR 250,000 (equal to approximately $264,000 as of November 21^st, 2024). This remaining outstanding amount has a maturity date of December 31, 2031, is not prepayable in advance, and no interest accrues or is due and payable on such amount.

On August 29, 2024, the Company announced that on August 27, 2024, it had received formal notification from the Listing Qualification Department of the Nasdaq Stock Market that the Company had regained compliance with Nasdaq Listing Rule 5550(b)(1) (the “Rule”) that requires listed companies to maintain stockholders’ equity of at least $2.5 million. Regaining compliance with the Rule was facilitated by the closing of the Loan Restructuring Agreement with the EIB and the concomitant conversion of the EIB loan as described above.

CDMO business unit

Since Jan 2024, the Company has received CDMO work orders valued at approximately $600K, and the Company is in advanced contract discussions with several other potential clients. The Company’s sales guidance for 2024 is at $600,000 in expected revenues. The Company has also received $575,000 in grants from the Israeli Innovation Authority in support of its CDMO business unit creation. The Company applied for a grant extension that, if granted, would provide reimbursement for 66% of approved CDMO costs covering up to NIS 1.5 million (approximately $400,000 as of November 21, 2024) of costs. As the Company’s CDMO unit is new, and the Company is focused on rapidly growing, acquiring new clients and building its reputation and brand awareness of its CDMO services, the Company expects revenues from the CDMO business to increase materially in the coming years. This is also coupled with growing demand for boutique CDMO services from early-stage biotech companies looking for fast project onset at competitive pricing without compromising on meeting the most stringent scientific and quality standards.

In addition, in 2024 the Company has been pursuing extensive targeted marketing activities, including online advertisements, direct outreach campaigns and participation in major pharmaceutical conferences, such as BIO Europe Spring in Barcelona (March 2024), the BioMed Israel conference in Tel Aviv, Israel (May 2024), and Bio Europe in Stockholm Sweden (November 2024) at which the Company marketed its CDMO services and met with prospective clients for its CDMO business unit, potential partners for its R&D pipeline and potential investors.

The Company’s CDMO unit is currently focused both on executing drug development projects for its clients and on validating its processes and facilities as required by cGMP standards.

R&D business unit – Pipeline Development

On June 4, 2024, the Company met for a scientific advisory meeting with the Paul Erlich Institute (the PEI) of Germany, the scientific advice of which is considered acceptable guidance for IMPD filing with the European Medicines Agency (EMA) and is also considered the European comparable to a pre-IND meeting with the FDA in the U.S.  Consequently, on July 23, 2024, the Company announced the receipt of positive regulatory feedback from the PEI for its drug development program towards Phase 1/2a clinical trial of its anti-IL-17A/F nanoAb (SCN-1) in Plaque Psoriasis. The Phase 1/2a study is expected to include approximately 24 plaque psoriasis patients and is expected to commence in the second half of 2025 with readout in 2026.   

On July 15, 2024, the Company announced promising results from its pre-clinical, in-vivo proof of concept study in plaque psoriasis, conducted by the team of Prof. Amos Gilhar at the internationally renowned Skin Research Laboratory at the Technion, Israel Institute of Technology, Haifa. The statistical analysis of psoriasis markers measured in the study confirmed that the effect of Scinai’s nanoAb was similar to that of the two comparator drugs. This supports the hypothesis that intralesional injection of a nanoAb blocking the IL-17 cytokine can positively impact the inflammatory cytokine cascade, leading to a reduction in psoriatic lesion severity and improvement in skin integrity. By delivering a biological treatment directly into psoriatic lesions, the Company aims to improve disease management for patients suffering from mild to moderate plaque psoriasis and those with psoriatic lesions in hard-to-treat areas (such as the scalp, genitals, palms of hands, and soles of feet). This approach offers the high potency and specificity advantages of biologic drugs while providing a safer and more convenient treatment option compared to existing therapies for this patient category. On September 26, 2024, the Company filed with the Securities and Exchange Commission a Current Report on Form 6-K disclosing that it had  entered into a license agreement with an unaffiliated U.S. private company (“Licensee”), pursuant to which Scinai has granted Licensee exclusive global rights to certain patents and know-how under Scinai’s agreement with the Max Planck Society and the University Medical Center Göttingen for the development and commercialization of licensed products in exchange for an up-front license fee payable by the Licensee’s completion of specified pre-clinical work, as well as other contingent development milestone payments across several indications and royalties on net sales of licensed products.

Additional nanoAbs for treatment of additional autoimmune diseases, such as asthma, atopic dermatitis and wet AMD, have been discovered and characterized at the Max Planck Institute in Gottingen and the University Medical Center Göttingen, both in Germany as part of their research collaboration agreement with Scinai. Scinai holds exclusive options for exclusive, world-wide licenses to develop and commercialize these nanoAbs at pre-agreed financial terms.

The Company is pursuing strategic partnerships and sublicensing options for its anti-IL-17 nanoAb for the treatment of plaque psoriasis and other potential indications and also is looking for partners to co-develop or sub license the additional nanoAbs that have been discovered and characterized. Parties interested in discussing partnering opportunities should contact the company at BD@scinai.com

Nine (9) Months of 2024 Financial Summary

• Revenues for the nine months ended September 30, 2024, amounted to $452 thousands, compared to no revenues for the period of nine months ended September 30, 2023.
  The increase is due to the CDMO starting to generate revenues for the first time in 2024.
  
  
• R&D expenses for the nine months ended September 30, 2024, amounted to $4,195 thousands compared to $4,583 thousands for the nine months ended September 30, 2023. The decrease was not material and primarily reflects minor fluctuations in R&D activities during the period.
  
  
• Marketing, general and administrative expenses for the nine months ended September 30, 2024, amounted to $1,767 thousands compared to $3,300 thousands for the nine months ended September 30, 2023. The decrease was primarily due to salaries and service providers decrease.
• Financial income, net for the nine months ended September 30, 2024, amounted to $13,374 thousands compared to $3,713 thousands for the nine months ended September 30, 2023. The increase was primarily due to $14,759 financial income from loan conversion to equity.
  
  
• Net Gain for the nine months ended September 30, 2024, was $7,026 thousands compared to net loss of $4,170 thousands for the nine months ended September 30, 2023. The increase was primarily due to $14,759 financial income from loan conversion.

As of September 30, 2024, Scinai had cash and cash equivalents and short-term deposits of $1,169 thousands compared to $5,010 thousands as of September 30, 2023.

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

About Scinai Immunotherapeutics

Scinai Immunotherapeutics Ltd. SCNI is a biopharmaceutical company with two complementary business units, one focused on in-house development of inflammation and immunology (I&I) biological therapeutic products beginning with an innovative, de-risked pipeline of nanosized VHH antibodies (nanoAbs) targeting diseases with large unmet medical needs, and the other a boutique CDMO providing biological drug development, analytical methods development, clinical cGMP manufacturing, and pre-clinical and clinical trial design and execution services for early stage biotech drug development projects.

Company website: www.scinai.com.

Company Contacts

Investor Relations | +972 8 930 2529 | ir@scinai.com
Business Development | +972 8 930 2529 | bd@scinai.com

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Litigation Reform Act of 1995. Words such as “expect,” “believe,” “intend,” “plan,” “continue,” “may,” “will,” “anticipate,” and similar expressions are intended to identify forward-looking statements. All statements, other than statements of historical facts, are forward-looking statements. Examples of such statements include, but are not limited to, the potential of Scinai’s nanoAb program, expected revenues of Scinai’s CDMO business and timing of pre-clinical and clinical studies of the Company’s anti-IL nanoAbs for the treatment of plaque psoriasis and their results. These forward-looking statements reflect management’s current views with respect to certain current and future events and are subject to various risks, uncertainties and assumptions that could cause the results to differ materially from those expected by the management of Scinai Immunotherapeutics Ltd. Risks and uncertainties include, but are not limited to;  the risk that the Company will otherwise be unable to  remain compliant with the continued listing requirements of Nasdaq; lower than anticipated revenues of Scinai’s CDMO business in 2024 and thereafter; failure to sign agreements with other potential clients of the CDMO business; a delay in the commencement and results of pre-clinical and clinical studies, including the Phase 1/2a study for psoriasis, the risk of delay in, Scinai’s inability to conduct, or the unsuccessful results of, its research and development activities, including the contemplated in-vivo studies and a clinical trial; the risk that Scinai will not be successful in expanding its CDMO business or in-license other nanoAbs; the risk that Scinai may not be able to secure additional capital on attractive terms, if at all; the risk that the therapeutic and commercial potential of nanoAbs will not be met or that Scinai will not be successful in bringing the nanoAbs towards commercialization; the risk of a delay in the preclinical and clinical trials data for nanoAbs, if any; the risk that our business strategy may not be successful; Scinai’s ability to acquire rights to additional product opportunities; Scinai’s ability to enter into collaborations on terms acceptable to Scinai or at all; timing of receipt of regulatory approval of Scinai’s manufacturing facility in Jerusalem, if at all or when required; the risk that the manufacturing facility will not be able to be used for a wide variety of applications and other vaccine and treatment technologies; and the risk that drug development involves a lengthy and expensive process with uncertain outcomes. More detailed information about the risks and uncertainties affecting the Company is contained under the heading “Risk Factors” in the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission (“SEC”) on May 15, 2024, and the Company’s subsequent filings with the SEC. Scinai undertakes no obligation to revise or update any forward-looking statement for any reason.

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SOURCE Scinai Immunotherapeutics Ltd.