# Akari Therapeutics Plc: Form 10-Q for the period ended Sep 30, 2024

- Company: [Akari Therapeutics Plc](/companies/aktx.md) (CIK 1541157)
- Form: 10-Q
- Filed: 2024-11-19
- Accepted by EDGAR: Nov 19, 2024, 16:48 ET
- Period: 2024-09-30
- Accession: 0000950170-24-128727
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1541157/000095017024128727/aktx-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1541157/000095017024128727/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $143.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $5.7m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $1.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $6.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$2.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$16.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $69.0k | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $120.0k | us-gaap:InterestExpenseNonoperating |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$2.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$16.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.00 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.00 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.00 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.00 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 24,386,005,523 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 18,911,928,794 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$10.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-09-30 | $2.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $2.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $2.7m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $9.4m | us-gaap:LiabilitiesCurrent |
| Short-term borrowings | at 2024-09-30 | $200.0k | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-09-30 | −$6.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 37,004 characters.

#### The following discussion and analysis of our financial condition and results of operations should be read in conjunction with:

- *our unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q; and*
- *our audited consolidated financial statements and accompanying notes included in the Form 10-K, as well as the information contained under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K.*

*In addition to historical information, this discussion and analysis contains forward-looking statements that are subject to risks and uncertainties, including those discussed in the section titled “Risk Factors,” set forth in Item 1A of our Form 10-K and this Form 10-Q, that could cause actual results to differ materially from historical results or anticipated results.*

### Overview

We are a biotechnology company focused on developing advanced therapies for autoimmune and inflammatory diseases involving the complement component 5 (“C5”) and leukotriene B4 (“LTB4”) pathways. Each of these pathways has scientifically well-supported causative roles in the diseases we are targeting. We believe that blocking early mediators of inflammation will prevent initiation and continual amplification of the processes that cause certain diseases. Our activities since inception have consisted of performing non-clinical and clinical research and development activities and raising capital.

Our lead product candidate, nomacopan, is a recombinant small protein (16,769 Da) derived from a protein originally discovered in the saliva of the *Ornithodoros moubata* tick, which modulates the host immune system to allow the parasite to feed without alerting the host to its presence or provoking an immune response. Nomacopan is a second-generation complement inhibitor which has been shown to act on complement C5, preventing release of C5a and formation of C5b-9 (also known as the membrane attack complex (“MAC”)). Nomacopan also specifically sequesters and inhibits LTB4. Complement C5 and LTB4 activation and their proinflammatory actions are typically co-localised during an immune reaction. With its unique bispecific mode of action and biophysical properties, we believe nomacopan may be able to prevent inflammatory and prothrombotic activities of these two important pathways and also and has the potential to be formulated for administration by a variety of routes including subcutaneous, intravenous, topical to eye, inhaled and intravitreous.

We are investigating PAS-nomacopan, a long-acting form of nomacopan that is a bispecific inhibitor of C5 and LTB4, for the intravitreal treatment of geographic atrophy (“GA”) secondary to dry age-related macular degeneration (“AMD”) in preclinical studies. Following a positive and constructive Pre-Investigational New Drug application meeting with FDA in August 2024, we are completing final non-clinical studies and Good Manufacturing Practices (“GMP”) manufacturing and expect to file an Investigational New Drug Application (“IND”) with the FDA in 2025 for PAS-nomacopan in GA. We believe PAS-nomacopan has the potential for longer dose intervals between intravitreous injections than currently approved complement only inhibitors, as well as potential reduction of the choroidal neovascularization (“CNV”) risk that is associated with approved inhibitors. CNV is a sight-threatening over development of blood vessels within the retina, which is typically treated with anti-vascular endothelial growth factor (“VEGF”) intravitreal injections. As a bispecific inhibitor of complement C5 and LTB4 we believe PAS-nomacopan may be more efficacious than marketed treatments for GA that only inhibit complement.

Until May 2024, we were conducting a clinical trial of subcutaneous nomacopan for the treatment of hematopoietic stem cell transplant-related thrombotic microangiopathy (“HSCT-TMA”) in pediatrics. Following completion of a portfolio prioritization review, we announced that our HSCT-TMA program will be suspended, as more fully described below.

### Recent Developments

### Pipeline Prioritization of the Merged Companies

In May 2024, we announced the completion of a joint portfolio prioritization review pursuant to which the anticipated combined entity, following completion of the proposed Merger (as defined below), will focus on Peak Bio’s antibody drug conjugate (“ADC”) platform technology and our PAS-nomacopan GA program. As a result, our HSCT-TMA program was suspended, with enrollment in our pediatric clinical study discontinued due to cost and timeline. Following the closing of the Merger on November 14, 2024, we have expanded our pipeline of assets spanning early and late development stages with the addition of Peak Bio’s ADC toolkit with novel payload and linker technologies as well as the Peak Bio PHP-303 small molecule selective and reversible neutrophil elastase inhibitor. The ADC program includes a novel pre-clinical ADC candidate targeting TROP-2. By combining chemotherapy with immunotherapy strategies, we aim to develop cutting-edge solutions for cancer patients. Further, related to PHP-303, we expect to emphasize partnering/collaboration and licensing opportunities with broad potential impact on patients. We also plan to work closely with the FDA to define the best path for this platform and will pursue opportunities for external partnering/collaboration and licensing for nomacopan, including as a potential treatment for pediatric HSCT-TMA.

### Restructuring and Reduction-in-Force

In May 2024, we began to implement a reduction-in-force (the “RIF”) of approximately 67% of our total workforce, as a result of the recently announced program prioritization under which our HSCT-TMA program was suspended. The RIF is part of an operational restructuring plan and includes the elimination of certain senior management positions and was substantially completed by the end of the second quarter. The purpose of the restructuring plan, including the reduction-in-force, is to reduce HSCT-TMA related operating costs, while supporting the execution of our long-term strategic plan. For additional information, refer to the below discussion under the heading “Restructuring and Other Costs” and Note 2 to the notes to unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

### Merger Agreement

On November 14, 2024, we completed the previously announced strategic combination (the “Closing”) contemplated by that Agreement and Plan of Merger by and among Akari, Peak Bio, Inc. (“Peak Bio”) and Pegasus Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Akari (“Merger Sub”) as amended by that certain side letter dated August 15, 2024 (the “Merger Agreement”), pursuant to which, upon the terms and subject to the conditions thereof, Merger Sub was merged with and into Peak Bio (the “Merger”), with Peak Bio surviving the Merger as a wholly owned subsidiary of Akari.

For additional information on the Merger and the Closing, refer to Note 3 and Note 10 to the notes to unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

### Results of Operations

### Three and Nine Months Ended September 30, 2024 and 2023

### Overview

During the three months ended September 30, 2024, our loss from operations totaled $2.9 million, a 17% increase, compared to a loss from operations of $2.5 million for the three months ended September 30, 2023. During the nine months ended September 30, 2024, our loss from operations totaled $16.4 million, a 40% increase, compared to a loss from operations of $11.7 million for the nine months ended September 30, 2023. Our total operating expenses are set forth by category in the table below:

*($ in thousands)*

| Operating expenses: | Three Months Ended September 30, 2024 | 2023 | $ Change | Nine Months Ended September 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $143 | $(314) | $457 | $5,736 | $2,941 | $2,795 |
| General and administrative | 1,709 | 2,821 | (1,112) | 6,616 | 8,775 | (2,159) |
| Merger-related costs | 992 | — | 992 | 2,290 | — | 2,290 |
| Restructuring and other costs | 83 | — | 83 | 1,723 | — | 1,723 |
| Total operating expenses | $2,927 | $2,507 | $420 | 16,365 | 11,716 | 4,649 |
| Loss from operations | $(2,927) | $(2,507) | $(420) | $(16,365) | $(11,716) | $(4,649) |

### Research and development expenses

Our research and development expenses are charged to operations as incurred, and we incur both direct and indirect expenses for each of our programs. We track direct research and development expenses by preclinical and clinical programs, which may include third-party costs such as CROs, contract laboratories, consulting, and clinical trial costs. We do not allocate indirect research and development expenses, which may include product development and manufacturing, clinical, medical, regulatory, laboratory (equipment and supplies), personnel, facility and other overhead costs, to specific programs.

During the three months ended September 30, 2024, total research and development expenses increased by approximately $0.5 million, or 146%, as compared to the three months ended September 30, 2023. During the nine months ended September 30, 2024, total research and development expenses increased by approximately $2.8 million, or 95%, as compared to the nine months ended September 30, 2023. The following sets forth research and development expenses for the three and nine months ended September 30, 2024 and 2023 by category:

*($ in thousands)*

| Clinical Trials: | Three Months Ended September 30, 2024 | 2023 | $ Change | Nine Months Ended September 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| HSCT-TMA clinical development (AK901) | $477 | $364 | $113 | $1,560 | $1,088 | $472 |
| BP clinical development (AK802) | — | (10) | 10 | — | (1,073) | 1,073 |
| Chemistry, manufacturing and control | 459 | 795 | (336) | 3,401 | 1,639 | 1,762 |
| Other external development expenses | 159 | 281 | (122) | 754 | 1,346 | (592) |
| Personnel costs | 330 | 827 | (497) | 1,303 | 2,512 | (1,209) |
| Tax credits | (1,282) | (2,571) | 1,289 | (1,282) | (2,571) | 1,289 |
| Total research and development expenses | $143 | $(314) | $457 | $5,736 | $2,941 | $2,795 |

26

#### HSCT-TMA clinical development (AK901)

These expenses include external expenses that we have incurred in connection with the development of nomacopan for the treatment of pediatric HSCT-TMA and primarily consist of payments to CROs and other vendors. The $0.1 million, or 31%, increase in expenses incurred during the three months ended September 30, 2024 and $0.5 million, or 43%, increase in expenses incurred during the nine months ended September 30, 2024, each as compared to the corresponding 2023 period, is primarily due to changes in clinical trial status and related impact on direct service fees incurred with CROs and timing of investigator payments. While the increase for three months ended September 30, 2024 was primarily due to clinical trial close out costs, the increase for the nine months ended September 30, 2024 was also due to increases in patient enrollment and related clinical trial costs incurred during the first quarter of 2024, prior to suspension of the program. In May 2024, following the completion of a pipeline prioritization review, we determined to suspend our HSCT-TMA program. Accordingly, we expect future HSCT-TMA costs to decrease following completion of the wind-down and closeout of the clinical trial.

#### BP clinical development (AK802)

These expenses previously included external expenses that we incurred in connection with the development of nomacopan for the treatment of bullous pemphigoid (“BP”) and primarily consist of payments to CROs and other vendors. In 2022, we discontinued our BP clinical program and in connection with the final reconciliation of clinical trial close-out costs, we recorded a $1.1 million credit in 2023 and do not expect to incur material additional costs related to this program.

#### Chemistry, manufacturing and control

These expenses include external expenses incurred related to the development and manufacturing of nomacopan for use in clinical trials and preclinical development of PAS-nomacopan. Such expenses primarily consist of payments to CMOs and other vendors for manufacturing of drug substance (including raw materials), drug product, supplies, and validation, quality assurance and manufacturing development activities. The $0.3 million, or 42%, decrease in expenses incurred during the three months ended September 30, 2024 and $1.8 million, or 108%, increase in expenses incurred during the nine months ended September 30, 2024, each as compared to the corresponding periods in 2023, is primarily due to the timing of manufacturing and development activities, including decreases in spending on the development of and preparation for manufacturing of PAS-nomacopan during the three months ended September 30, 2024 as a result of the completion of PAS-nomacopan good manufacturing practice (“GMP”) drug substance manufacturing during the second quarter of 2024 which was the primary reason for the increase in costs during the nine months ended September 30, 2024, as compared to 2023.

#### Other external development expenses

These expenses include external expenses, such as payments to contract vendors, which may be related to preclinical development activities and other unallocated expenses. The $0.1 million, or 43%, decrease in expenses incurred during the three months ended September 30, 2024 and $0.6 million, or 44%, decrease in expenses incurred during the nine months ended September 30, 2024, each as compared to the corresponding periods in 2023, is primarily related to lower costs incurred related to preclinical studies and other development work investigating PAS-nomacopan for the treatment of GA.

#### Personnel costs

These expenses include compensation and related costs associated with employees, independent consultants and staffing firms. The $0.5 million, or 60%, decrease in expenses incurred during the three months ended September 30, 2024 and $1.2 million, or 48%, decrease in expenses incurred during the nine months ended September 30, 2024, each as compared to the corresponding periods in 2023, is primarily due to the impact of the RIF which was announced in May 2024, along with lower costs incurred with consultants. Separation benefits paid to impacted employees are classified separately under “Restructuring and other costs” as discussed below.

#### Tax credits

We record receipts of U.K. tax credits in the year received as a reduction in research and development expenses. Changes in tax credits received are the result of eligible research and development expenses incurred in the previous tax year, which can fluctuate depending on timing of and location in which expenses are incurred.

The extent of our future research and development expenditures will be determined based on future funding and closing of the Merger.

### General and administrative expenses

During the three months ended September 30, 2024, total general and administrative costs decreased by approximately $1.1 million, or 39%, as compared to the three months ended September 30, 2023. During the nine months ended September 30, 2024, total general and administrative costs decreased by approximately $2.2 million, or approximately 25%, as compared to the nine months ended September 30, 2023. The decreases during both periods were primarily due to decreases in personnel costs resulting from the impact of the RIF which was announced in May 2024, along with lower costs incurred with consultants. Separation benefits paid to impacted employees are classified separately under “Restructuring and other costs” as discussed below.

### Merger-related Costs

Merger-related costs consist of direct expenses incurred in connection with the proposed Merger and are comprised primarily of legal and professional fees.

Merger-related costs for the three and nine months ended September 30, 2024 were $1.0 million and $2.3 million, respectively. No such costs were incurred during the corresponding 2023 periods.

### Restructuring and Other Costs

Restructuring costs consist primarily of severance and related benefit costs related to workforce reductions incurred in connection with the RIF, which the Company began to implement in May 2024.

Restructuring and other costs for the three and nine months ended September 30, 2024 were $0.1 million and $1.7 million, respectively, and includes $0.3 million of non-cash share-based compensation expense for the nine months ended September 30, 2024. No such costs were incurred during the corresponding 2023 periods.

### Interest income

Interest income consists primarily of interest income received on deposits.

During the three and nine months ended September 30, 2024 and 2023, interest income was less than $0.1 million. Interest income may fluctuate from period to period due to changes in average cash balances and prevailing interest rates.

### Interest expense

Interest expense primarily consists of interest incurred on the May 2024 Notes and in connection with the financing of director and officer insurance premiums.

During the three and nine months ended September 30, 2024, interest expense was less than $0.1 million and approximately $0.1 million, respectively. Interest expense may fluctuate from period to period due to changes in average interest-bearing loans and related interest rates. No interest expense was recognized during the three and nine months ended September 30, 2023.

### Change in fair value of warrant liability

Change in fair value of warrant liability represents non-cash warrant revaluation gains or losses related to the remeasurement of our liability-classified September 2022 Warrants, as more fully described in Note 2 and Note 4 of the notes to the condensed consolidated financial statements appearing elsewhere in this Form 10-Q. Due to the nature of and inputs in the model used to assess the fair value of our outstanding September 2022 Warrants, it is not abnormal to experience significant fluctuations during each remeasurement period. These fluctuations may be due to a variety of factors, including changes in our stock price and changes in estimated stock price volatility over the remaining life of the warrants.

During the three months ended September 30, 2024, we recorded a change in the fair value of warrant liability, representing a non-cash warrant revaluation gain of less than $0.1 million, as compared to a non-cash warrant revaluation loss of approximately $0.3 million for the three months ended September 30, 2023. Changes in the fair value of the warrant liability and resulting warrant revaluation gain for the three months ended September 30, 2024 was driven primarily by decreases in expected term and expected volatility assumptions during the reporting period. Changes in the fair value of the warrant liability and resulting warrant revaluation loss for the three months ended September 30, 2023 was driven primarily by an increase in our stock price during the reporting period.

During the nine months ended September 30, 2024 and 2023, we recorded a change in the fair value of warrant liability, representing a non-cash warrant revaluation gain, of approximately $0.5 million and $5.9 million, respectively. Changes in the fair value of the warrant liability and resulting warrant revaluation gains for each of the nine months ended September 30, 2024 and 2023 was driven by a decrease in our stock price and decreases in expected term and expected volatility assumptions during the reporting period.

### Foreign currency exchange gain (loss), net

During the three months ended September 30, 2024, we recorded a net foreign currency exchange gain of $0.1 million, as compared to a net foreign currency exchange loss for the three months ended September 30, 2023. During each of the nine months ended September 30, 2024 and 2023, we recorded a net foreign currency exchange loss of less than $0.1 million. Exchange gains and losses can fluctuate significantly from period to period due to changes in exchange rates as well as the volume and timing of expenditures and related payments denominated in foreign currencies.

### Other expense, net

During each of the three and nine months ended September 30, 2024 and 2023, net other expense was less than $0.1 million and not material. Such expenses are not expected to be material to our future results of operations.

### Net Loss Applicable to Ordinary Shareholders

As a result of the factors discussed above, net loss applicable to ordinary shareholders for each of the three months ended September 30, 2024 and 2023 was $2.9 million. Net loss applicable to ordinary shareholders for the nine months ended September 30, 2024 and 2023 was $16.0 million and $5.9 million, respectively.

### Financial Condition, Liquidity and Capital Resources

### Sources of Liquidity

Since inception, we have incurred substantial losses, and we have primarily funded our operations with proceeds from the sale of equity securities, including ordinary shares, warrants and pre-funded warrants, and convertible notes. At September 30, 2024, we had $2.2 million in cash and an accumulated deficit of $243.5 million. To date, we have not generated any revenue.

We have devoted substantially all of our efforts to research and development, including clinical trials, and we have not commercialized any products. Our research and development activities, together with our general and administrative expenses, are expected to continue to result in substantial operating losses for the foreseeable future. These losses, among other things, have had and will continue to have an adverse effect on our shareholders’ equity, total assets and working capital. Due to the numerous risks and uncertainties associated with developing drug candidates and, if approved, commercial products, we are unable to predict the extent of any future losses, whether or when any of our drug candidates will become commercially available or when we will become profitable, if at all. Our future capital requirements will depend on many factors, including:

- the progress and costs of our preclinical studies, clinical trials and other research and development activities;
- the costs associated with the completion of the Merger and integration activities related thereto;
- the scope, prioritization and number of our clinical trials and other research and development programs;
- the amount of revenues and contributions we receive under future licensing, development and commercialization arrangements with respect to our product candidates;
- the costs of the development and expansion of our operational infrastructure;
- the costs and timing of obtaining regulatory approval for our product candidates;
- the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
- the costs and timing of securing manufacturing arrangements for clinical or commercial production;
- the costs of contracting with third parties to provide sales and marketing capabilities for us;
- the magnitude of our general and administrative expenses; and
- any cost that we may incur under future in- and out-licensing arrangements relating to our product candidates.

We currently do not have any firm commitments for future external funding. We will need to raise additional funds, and we may decide to raise additional funds even before we need such funds if the conditions for raising capital are favorable. Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt or equity financings, credit facilities or by out-licensing applications of our product candidates. The sale of equity or convertible debt securities may result in dilution to our existing shareholders. The incurrence of indebtedness would result in increased fixed obligations and could also subject us to covenants that restrict our operations. We cannot be certain that additional funding, whether through grants, financings, credit facilities or out-licensing arrangements, will be available to us on acceptable terms, if at all. If sufficient funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to, one or more applications of our product candidates, or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain potential products that we might otherwise seek to develop or commercialize independently.

#### November 2024 Private Placement

As discussed in Note 10 to our notes to unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q, in November 2024, we entered into a purchase agreement with certain investors, pursuant to which we agreed to sell and issue in a private placement an aggregate of 1,713,402 ADSs, and warrants to purchase up to 1,713,402 ADS, at a per unit (each unit consists of one ADS and one warrant) purchase price of (i) $1.70 per ADS and warrant for all investors other than Drs. Patel and Prudo, and (ii) $2.385, which is equal to the consolidated closing bid price of the ADSs on The Nasdaq Stock Market on November 12, 2024 plus $0.125 for Drs. Patel and Prudo, for aggregate gross proceeds of $3.2 million.

#### May 2024 Private Placement

As discussed in Note 6 to our notes to unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q, in May 2024, we entered into a purchase agreement with certain investors, pursuant to which we sold and issued in a private placement an aggregate of 4,029,754 ADSs, and warrants to purchase up to 4,029,754 ADS, at a per unit (each unit consists of one ADS and one warrant) purchase price of $1.885, for aggregate gross proceeds of approximately $7.6 million. Net proceeds from the May 2024 Private Placement were approximately $7.0 million after deducting placement agent fees and other expenses.

#### May 2024 Convertible Notes

As discussed in Note 2 to our notes to unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q, in May 2024, we entered into convertible promissory notes with existing investors and directors, Dr. Prudo and Dr. Patel, for an aggregate of $1.0 million (the “May 2024 Notes”).

#### March 2024 Private Placement

As discussed in Note 6 to our notes to unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q, in March 2024, we entered into a definitive purchase agreement with certain existing investors, pursuant to which we sold and issued in a private placement an aggregate of 1,320,614 ADSs at $1.48 per ADS, for aggregate gross proceeds of approximately $2.0 million. Net proceeds from the March 2024 Private Placement were approximately $1.7 million after deducting placement agent fees and other expenses.

### Funding Requirements

As of the date of this report, we expect our existing cash, plus cash expected to be received from the November 2024 Private Placement to be sufficient to fund our operations into the first quarter of 2025. We do not currently have any products approved for sale and do not generate any revenue from product sales. We are currently seeking and expect to continue to seek additional funding through financings of equity and/or debt securities. We may also engage in strategic research and development collaborations, clinical funding arrangements, the sale or license of technology assets, and/or other strategic alternatives.

Financing may not be available to us when we need it, or on favorable or acceptable terms, or at all. We could be required to seek funds through means that may require us to relinquish rights to some of our technologies, drug candidates or drugs that we would otherwise pursue on our own. In addition, if we raise additional funds by issuing equity securities, our then existing shareholders may experience dilution. The terms of any financing may adversely affect the holdings or the rights of existing shareholders. An equity financing that involves existing shareholders may cause a concentration of ownership. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and are likely to include rights that are senior to the holders of our ordinary shares. Any additional debt or equity financing may contain terms which are not favorable to us or to our shareholders, such as liquidation and other preferences, or liens or other restrictions on our assets. As discussed in

Note 9 to the consolidated financial statements included in the 2023 Form 10-K, additional equity financings may also result in cumulative changes in ownership over a three-year period in excess of 50% which would limit the amount of net operating loss and tax credit carryforwards that we may utilize in any one year.

If we are unable to raise additional capital when required, or on acceptable terms, we may be required to:

- significantly delay, scale back, or discontinue the development or commercialization of our product candidates;
- seek strategic alliances for research and development programs at an earlier stage than otherwise would be desirable or that we otherwise would have sought to develop independently, or on terms that are less favorable than might otherwise be available in the future;
- dispose of technology assets, including current product candidates, or relinquish or license on unfavorable terms, our rights to technologies or any of our product candidates that we otherwise would seek to develop or commercialize ourselves;
- pursue the sale of our company to a third party at a price that may result in a loss on investment for our shareholders; or
- file for bankruptcy or cease operations altogether.

Any of these events could have a material adverse effect on our business, operating results, and prospects.

We believe the key factors which will affect our ability to obtain funding are:

- the receptivity of the capital markets to financings by biotechnology companies generally and companies with drug candidates and technologies similar to ours specifically;
- the receptivity of the capital markets to any in-licensing, product acquisition or other transaction we may enter into or attempt to enter into;
- our ability to successfully integrate operations with Peak Bio following the Merger and realize

anticipated benefits of the Merger;

- the results of our clinical development activities in our drug candidates we develop on the timelines anticipated;
- competitive and potentially competitive products and technologies and investors’ receptivity to our drug candidates we develop and the technology underlying them in light of competitive products and technologies;
- the cost, timing, and outcome of regulatory reviews; and
- continued compliance with both Nasdaq continued listing requirements and Exchange Act requirements.

In addition, increases in expenses or delays in clinical development may adversely impact our cash position and require additional funds or cost reductions.

Based on our recurring losses from operations incurred since inception, our expectation of continuing operating losses for the foreseeable future, negative operating cash flows for the foreseeable future, and the need to raise additional capital to finance its future operations, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date that our unaudited condensed consolidated financial statements, included elsewhere in this Form 10-Q (such unaudited condensed consolidated financial statements, the “consolidated financial statements”) are issued. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As such, the accompanying condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be necessary if we are unable to continue as a going concern.

### Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):

*(In thousands)*

| Net cash (used in) provided by: | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(10,428) | $(12,023) |
| Net cash provided by financing activities | 8,834 | 3,503 |
| Effect of exchange rates on cash | (5) | 1 |
| **Net decrease in cash** | $(1,599) | $(8,519) |

*Operating Activities.* The net cash used in operating activities for the periods presented consists primarily of our net loss adjusted for non-cash charges and changes in components of working capital. The decrease in cash used in operating activities during the nine months ended September 30, 2024, as compared to the 2023 period, was primarily due to the net impact of deferrals of payables in order to preserve cash until additional capital is raised for working capital purposes, partially offset by an increase in operating expenses.

*Investment Activities.* There were no investing activities during the nine months ended September 30, 2024 and 2023.

*Financing Activities.* Net cash provided by financing activities primarily consisted of the following:

- For the nine months ended September 30, 2024, an aggregate of $8.7 million in net proceeds received from debt and equity financings, including (i) $1.7 million in net proceeds from the March 2024 Private Placement, (ii) $1.0 million in net proceeds from the issuance of the May 2024 Notes, and (iii) $7.0 million in net proceeds from the May 2024 Private Placement, partially offset by $0.9 million in payments related to our short-term insurance premium financing arrangement; and
- For the nine months ended September 30, 2023, an aggregate of $3.5 million in net proceeds received from the March 2023 Registered Direct Offering.

### Material Cash Requirements

During the nine months ended September 30, 2024, there were no material changes outside the ordinary course of our business to our contractual obligations and cash requirements, as disclosed in our Form 10-K.

### Critical Accounting Estimates

This management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. In doing so, we must make estimates and assumptions that affect our reported amounts of assets, liabilities and expenses, as well as related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates and judgments, including, but not limited to, those related to (i) share-based compensation, (ii) fair value of warrants classified as liabilities, (iii) research and development prepayments, accruals and related expenses, and (iv) the valuation allowance for deferred income taxes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We regard an accounting estimate or assumption underlying our financial statements as a “critical accounting estimate” if:

- the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and
- the impact of the estimates and assumptions on financial condition or operating performance is material.

There have been no material changes to our critical accounting policies and estimates since December 31, 2023. See “*Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates”* of our Form 10-K, for a discussion of significant estimates and assumptions made by our management as part of the preparation of this management's discussion and analysis of financial condition and results of operations and accompanying condensed consolidated financial statements.

## Market risk

As filed, 186 characters.

We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this item.

## Controls and procedures

As filed, 1,795 characters.

### Disclosure Controls and Procedures

### a) Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2024. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of September 30, 2024, our disclosure controls and procedures were (1) designed to ensure that material information relating to us is made known to our principal executive officer and principal financial officer by others, particularly during the period in which this report was prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

### b) Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 243 characters.

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024.

Filed Nov 19, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-128727. Last ingested by Listed: Oct 30, 2026, 17:09 ET. No prices; not investment advice.