UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ |
Commission File Number
(Exact name of Registrant as specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
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* Trading, but only in connection with the American Depositary Shares.
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
請勾選：公司是否已在過去12個月（或公司需要提交此類文件的較短時間）通過電子方式提交了所有根據S-t規則405條（本章節第232.405條）規定需要提交的互動數據檔案。
勾選以下選框，指示申報人是大型加速評估提交人、加速評估提交人、非加速評估提交人、小型報告公司或新興成長型公司。關於「大型加速評估提交人」、「加速評估提交人」、「小型報告公司」和「新興成長型公司」的定義，請參見《交易所法規》第12億.2條。
大型加速文件管理器 |
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加速過濾器 |
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規模較小的申報公司 |
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新興成長型公司 |
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如果公司無法符合證券交易法第13(a)條規定，使用延長過渡期來遵守任何新的或修訂的財務會計準則，請在複選框中指示。 ☐
請用√標記表示註冊人是否爲殼公司（如交易所法規120億.2規定）。是 ☐ 不
截至2024年11月15日，註冊人普通股的流通股數爲
目錄
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頁面 |
第一部分 |
1 |
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項目1。 |
1 |
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1 |
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2 |
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3 |
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5 |
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6 |
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項目2。 |
24 |
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項目3。 |
34 |
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項目4。 |
35 |
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第II部分 |
36 |
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項目1。 |
36 |
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項目1A。 |
36 |
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項目2。 |
36 |
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項目3。 |
36 |
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項目4。 |
36 |
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項目5。 |
36 |
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項目6。 |
37 |
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38 |
i
一般信息
除非另有說明或上下文另有要求，否則本季度報告表格10-Q（"表格10-Q"）中提到的「Akari」、「公司」、「我們」、「我們的」或類似稱謂均指akari therapeutics，Plc及其子公司。所有在本報告中使用的商標、服務標誌、商號和註冊標誌均爲其各自所有者的商標、商號或註冊標誌。
本季度報告表格10-Q中所作的有關任何協議、合同或其他文件內容的陳述，均爲該等協議、合同或文件的摘要，並非其所有條款的完整描述。如果我們在本季度報告表格10-Q或向證券交易委員會（SEC）的任何之前備案文件中提交了任何這些協議、合同或文件作爲附件，您可以閱讀文件本身以全面了解其條款。
ii
有關向前看聲明的說明
本季度10-Q表格報告及我們引用的文件包含根據1933年《證券法》（經修訂，以下簡稱「證券法」）第27A條和1934年《證券交易法》（經修訂，以下簡稱「交易所法」）第21E條的規定，構成前瞻性聲明的內容。本報告中所有除歷史事實聲明以外的陳述，涉及我們的現金資源、預測的現金儲備、財務狀況、我們的策略、戰略選擇、未來運營、臨床試驗（包括但不限於預期的入組時間和結果）、合作、知識產權、未來收入、預測成本、融資和/或籌款計劃、前景、與我們競爭對手及行業板塊相關的發展、監管行動的時間或可能性、我們當前和未來藥物候選者的申請和批准情況，以及與合併協議（定義如下）相關的利益和管理層的計劃與目標，均爲前瞻性聲明。「相信」、「預計」、「估計」、「計劃」、「期望」、「打算」、「可能」、「可以」、「應該」、「潛在」、「很可能」、「項目」、「意圖」、「繼續」、「將」、「安排」、「會」、「目標」、「考慮」、「估算」等類似表達被用來識別前瞻性聲明，儘管並非所有前瞻性聲明都包含這些識別性詞彙。我們無法保證將實際實現我們在前瞻性聲明中披露的計劃、意圖或期望，因此，您不應對我們的前瞻性聲明過度依賴。這些前瞻性聲明涉及已知和未知的風險、不確定性及其他因素，可能超出我們的控制，並可能導致公司的實際結果、表現或成就與前瞻性聲明所表達或隱含的未來結果、表現或成就存在重大差異。
有許多重要因素可能導致我們的實際結果與前瞻性聲明所指示或暗示的結果存在重大差異。這些重要因素包括在我們截至2023年12月31日的年度報告Form 10-K第一部分「項目1A. 風險因素」以及在本Form 10-Q的第二部分「項目1A. 風險因素」中列出的因素，以及我們向證券交易委員會（SEC）提出的其他披露和備案。這些因素及我們在本Form 10-Q及所引用的文件中所作的其他警告聲明，應視爲適用於本Form 10-Q及所引用的文件中出現的所有相關前瞻性聲明。
此外，任何前瞻性聲明僅代表我們截至提交本10-Q表格給證監會（SEC）之日的估計，不應被依賴爲我們在任何後續日期的估計。本10-Q表格中包含的所有前瞻性聲明均以本日期爲準，並且完全受到本警示的明確限定。我們不承諾或有義務更新或修訂任何前瞻性聲明，無論是由於新信息、未來事件還是其他原因，除非法律要求。
iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
AKARI THERAPEUTICS, PLC
Condensed Consolidated Balance Sheets
(Unaudited, in U.S. dollars)
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9月30日, |
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2023年12月31日, |
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(以千爲單位，除每股及每價外) |
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2024 |
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2023* |
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資產 |
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流動資產： |
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現金 |
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$ |
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$ |
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預付費用 |
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其他流動資產 |
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總流動資產 |
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專利獲取成本，淨額 |
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— |
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總資產 |
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$ |
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$ |
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負債和股東權益赤字 |
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流動負債: |
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應付賬款 |
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$ |
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$ |
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應計費用 |
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有關方可轉換票據 |
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— |
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認股權責任 |
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其他流動負債 |
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總流動負債 |
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（注9） |
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股東虧損： |
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股份資本爲$ |
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授權： |
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追加實收資本 |
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資本贖回儲備 |
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累計其他綜合損失 |
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累積赤字 |
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( |
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股東權益不足合計 |
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負債合計和股東權益赤字總額 |
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$ |
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$ |
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———————
* 2023年12月31日的簡明資產負債表是根據當日審計的合併基本報表推導出來的。
附帶的說明是這些簡明合併財務報表不可或缺的一部分。
1
akari therapeutics, PLC
濃縮公司損益表
和綜合損失
（未經審計，美元）
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三個月已結束 |
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九個月已結束 |
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九月三十日 |
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九月三十日 |
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（以千計，股票和每股金額除外） |
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2024 |
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2023 |
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2024 |
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2023 |
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運營費用： |
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研究和開發 |
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$ |
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$ |
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$ |
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$ |
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一般和行政 |
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合併相關成本 |
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— |
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— |
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重組和其他成本 |
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— |
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— |
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運營損失 |
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其他收入（支出）： |
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利息收入 |
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利息支出 |
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— |
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認股權證負債公允價值的變化 |
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外匯匯兌收益（虧損），淨額 |
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其他費用，淨額 |
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— |
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其他收入（支出）總額，淨額 |
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淨虧損 |
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$ |
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$ |
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$ |
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每股淨虧損——基本虧損和攤薄虧損 |
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$ |
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$ |
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$ |
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$ |
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用於計算每股淨虧損的普通股加權平均數——基本和攤薄後 |
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綜合損失： |
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淨虧損 |
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$ |
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$ |
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$ |
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$ |
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扣除稅款的其他綜合收入： |
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外幣折算調整 |
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扣除稅款的其他綜合收益總額 |
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( |
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綜合虧損總額 |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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附帶的說明是這些簡明合併財務報表不可或缺的一部分。
2
akari therapeutics, PLC
簡明的現金流量表股東權益（或赤字）變動表
（未經審計，美元）
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截至2024年9月30日的九個月 |
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累計 |
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額外的 |
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資本 |
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其他 |
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總計 |
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股本 $ |
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實收資本 |
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贖回 |
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綜合 |
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累計 |
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股東的 |
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(以千爲單位，除每股額外數量) |
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股份 |
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金額 |
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資本 |
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準備金 |
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虧損 |
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虧損 |
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虧損 |
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2023年12月31日餘額 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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與股本發行有關 |
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— |
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— |
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— |
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限制股份的分配 |
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— |
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— |
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基於股份的薪酬 |
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— |
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— |
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— |
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外匯翻譯 |
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— |
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— |
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— |
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— |
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— |
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淨虧損 |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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2024 年 3 月 31 日餘額 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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股本發行相關 |
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— |
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— |
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爲服務而發行股本 |
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( |
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— |
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— |
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限制股份的分配 |
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— |
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— |
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股份被扣留用於支付稅款 |
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( |
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( |
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— |
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— |
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— |
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基於股份的薪酬 |
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— |
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— |
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— |
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— |
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— |
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外匯翻譯 |
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— |
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— |
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— |
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— |
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— |
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淨虧損 |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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餘額，2024年6月30日 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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限制股份發行所得款項 |
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— |
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— |
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— |
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股份被扣留用於支付稅款 |
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( |
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— |
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( |
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— |
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— |
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— |
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基於股份的薪酬 |
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— |
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外匯翻譯 |
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— |
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淨虧損 |
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— |
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— |
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餘額，2024年9月30日 |
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$ |
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$ |
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$ |
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$ |
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附帶的說明是這些簡明合併財務報表不可或缺的一部分。
3
akari therapeutics，PLC
合併股東權益（赤字）變動的簡要合併財務報表（續）
（未經審計，美元）
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截至2023年9月30日的九個月 |
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累計 |
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額外的 |
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資本 |
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其他 |
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總計 |
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股本 $ |
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實收資本 |
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贖回 |
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綜合 |
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累計 |
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股東的 |
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(以千爲單位，除每股額外數量) |
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股份 |
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金額 |
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資本 |
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準備金 |
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虧損 |
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虧損 |
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股權 |
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2022年12月31日餘額 |
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$ |
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與發行股本相關 |
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基於股份的薪酬 |
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外匯翻譯 |
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— |
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淨利潤 |
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2023年3月31日的結存 |
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$ |
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$ |
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$ |
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$ |
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限制股份的分配 |
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基於股份的薪酬 |
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— |
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— |
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— |
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— |
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— |
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外匯翻譯 |
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— |
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— |
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— |
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— |
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( |
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— |
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淨虧損 |
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— |
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— |
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— |
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— |
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— |
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餘額，2023年6月30日 |
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$ |
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限制股份的分配 |
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— |
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— |
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— |
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基於股份的薪酬 |
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— |
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— |
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— |
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— |
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外匯翻譯 |
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— |
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— |
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— |
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— |
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淨虧損 |
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— |
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— |
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— |
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— |
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餘額，2023年9月30日 |
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$ |
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$ |
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$ |
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$ |
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附帶的說明是這些簡明合併財務報表不可或缺的一部分。
4
akari therapeutics，PLC
精簡的綜合損益表現金流量表的更新版
（未經審計，美元）
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截至九個月 |
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9月30日, |
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(以千爲單位) |
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2023 |
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經營活動產生的現金流量： |
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淨虧損 |
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調整爲淨損失到經營活動現金流量淨使用： |
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折舊和攤銷 |
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基於股份的薪酬 |
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權證責任公允價值變動 |
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外匯兌換損失（收益） |
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資產和負債的變動： |
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預付費用及其他流動資產 |
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應付賬款和應計費用 |
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用於經營活動的淨現金 |
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籌資活動產生的現金流量： |
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發行股份所得款項，扣除發行成本後的淨額 |
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發行可轉換債券所得款項 |
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受限股份發行所得款項 |
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短期融資安排的支付 |
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現金匯率影響 |
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現金淨減少額 |
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期初現金餘額 |
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期末現金餘額 |
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$ |
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非現金活動的補充披露： |
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撥入費用中的融資成本 |
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$ |
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非現金賣方融資購買 |
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$ |
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$ |
— |
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撥入費用中的股權激勵支付的工資稅 |
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$ |
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$ |
— |
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現金流量信息的補充披露： |
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期間支付的利息 |
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$ |
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$ |
— |
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||
附帶的說明是這些簡明合併財務報表不可或缺的一部分。
5
akari therapeutics，PLC
N基本報表附註
(未經審計)
註釋1. 業務描述
業務概況
akari therapeutics, Plc，（以下簡稱「公司」或「akari」）在英國註冊成立。該公司是一家生物技術公司，專注於開發針對自身免疫和炎症疾病的先進療法，這些疾病涉及補體成分5（「C5」）和白三烯B4（「LTB4」）途徑。公司自成立以來的活動包括進行研究和開發活動並籌集資金。
公司面臨着許多與臨床前階段公司相似的風險，包括對關鍵個人的依賴、產品開發和收益生成的不確定性、對外部資金來源的依賴、與產品臨床前試驗相關的風險、對第三方合作者的依賴以進行研究和開發操作、對產品的市場授權需求、與知識產權保護相關的風險，以及與更大、更有資本實力公司的競爭。
爲了充分執行其業務計劃，公司需要，除了其他事情外，完成其研究和開發工作以及臨床和監管活動。這些活動可能需要幾年的時間，並且在可預見的未來將需要重大運營和資金支出。不能保證這些活動會成功。如果公司在這些活動中不成功，可能會延遲、限制、減少或終止臨床前研究、臨床試驗或其他研究和開發活動。
與Peak Bio的合併
如第10條所述，2024年11月14日，公司完成了之前宣佈的與Peak Bio, Inc.（「Peak Bio」）的合併。因此，公司擴大了其涵蓋早期和晚期開發階段的資產管道，並增加了Peak Bio的抗體藥物偶聯物（「ADC」）工具包，擁有新型負載和連接技術，以及Peak Bio的PHP-303小分子選擇性和可逆性中性粒細胞彈性蛋白酶抑制劑。通過將化療與免疫療法策略相結合，公司的目標是爲癌症患者開發前沿解決方案。
流動性和財務控件
本公司遵循財務會計標準委員會（「FASB」）會計標準彙編（「ASC」）205-40的規定， 基本報表的呈現—持續經營這要求管理層評估本公司在合併基本報表發佈後一年內繼續作爲持續經營單位的能力。
自成立以來，公司已經產生了巨額虧損和負現金流，截至2024年9月30日累積赤字爲 $
公司預期在能夠產生顯著銷售其當前開發產品候選者之前，將會遭受額外損失，公司面臨着與生物技術行業內其他同規模公司的類似多種風險和不確定性，例如不確定性。
6
臨床試驗結果、額外資金的不確定性以及經營虧損的歷史。公司將需要大量額外融資來支持其運營並商業開發其產品候選。管理層目前正在評估不同的策略來獲得未來運營所需的資金。這些策略可能包括但不限於：產品開發融資、私募和/或公開發行股權和/或債務證券，以及戰略研究與開發合作和/或類似安排。無法保證這些未來的融資努力將會成功。
納斯達克持續上市規則
2024年4月5日，公司收到了來自納斯達克資本市場（「納斯達克」）上市資格工作人員（「工作人員」）的一封信（「信」），通知公司其在10-K表格中報告的股東權益不再符合根據納斯達克上市規則5550(b)(1)持續上市要求的最低股東權益要求，該規則要求上市公司維持至少$的股東權益。
根據納斯達克上市規則，2024年5月20日，公司提交了一項計劃以重新獲得對股東權益要求（「合規計劃」）的合規性，供工作人員審議。2024年8月5日，公司收到工作人員的通知，獲准延長至2024年9月30日，以遵守合規計劃並證明符合股東權益要求。2024年10月1日，公司收到了來自工作人員的退市決定信函（「退市決定信函」），通知公司未能滿足納斯達克給予的恢復符合股東權益要求的延長期限的條款。2024年10月8日，公司請求召開聽證會（「聽證會」），以向納斯達克上市資格小組（「小組」）上訴工作人員的退市決定。
2024年11月18日，公司收到納斯達克總法律顧問辦公室的信件，通知公司已重新符合股東權益要求，同時原定於2024年11月21日舉行的聽證會已被取消。
注2. 重要會計政策摘要
做法的基礎 – 附帶的未經審計的中期合併基本報表是根據美國普遍接受的會計原則（「美國GAAP」）爲中期基本報表準備的，並遵循SEC的規則和規定，假設公司將繼續作爲持續經營單位運作。因此，它們不包括美國GAAP對完整基本報表所要求的所有信息和附註。這些合併基本報表的準備基礎與公司的年度合併基本報表相同，並且在管理層的意見中，反映了公司認爲爲公平陳述財務信息所必要的所有調整，包括正常和經常性調整。截至2024年9月30日的三個月和九個月的經營結果和全面虧損並不一定代表截至2024年12月31日的財年或未來任何其他期間的預期結果。這些中期合併基本報表應與公司截至2023年12月31日的經過審計的合併基本報表及其在2024年3月29日向SEC提交的10-k表格中的附註一起閱讀。
7
合併原則 – 簡明綜合財務報表包括了公司、特爾庫斯治療股份有限公司（一家特拉華州公司）、Volution免疫製藥股份公司（一家瑞士私人公司）和Akari Malta有限公司（一家馬耳他私人公司）的帳戶，它們均爲全資子公司。所有公司間交易已被消除。
外匯 – 公司的功能貨幣是美元，因爲這是公司經營的主要經濟環境的貨幣，也是公司籌資的貨幣。
公司的報告貨幣是美元。公司的某些外國子公司的財務報表以其本地貨幣作爲功能貨幣進行衡量。公司將以外幣計價的非美國業務的資產和負債按照資產負債表日的匯率換算爲美元，而收入和費用項目則按照報告期間的平均匯率進行換算。來自匯率波動的翻譯調整被記錄爲外匯翻譯調整，作爲其他全面損失的組成部分。外匯交易利潤或虧損包括在外幣兌換盈利/（損失）中。
使用估計 – 根據美國通用會計準則，公司的簡明綜合財務報表的編制要求管理層進行估計和假設，可能會影響資產、負債、費用及相關披露的報告金額。在這些簡明綜合財務報表中反映的重大估計和假設包括但不限於股份獎勵的估值、認股權負債的估值、研發預付款、應計費用及相關費用的估值，以及遞延所得稅準備計提。公司根據歷史經驗、已知趨勢及其他市場特定或其他相關因素進行估計，認爲在情況下是合理的。估計定期經過審查，考慮到情況、事實和經驗的變化。估計變更記錄在變更變得已知的期間內。實際結果可能與這些估計或假設有所不同。
信用風險的集中 – 潛在使公司面對信用風險集中的金融工具主要包括現金。公司通常在各種運營帳戶中保持餘額，金額可能超過聯邦保險限額。公司未經歷與現金相關的任何損失，也不認爲自己面臨飛凡信用風險，超出商業銀行關係所伴隨的正常信用風險。
公允價值計量 ——某些資產和負債根據美國通用會計準則（U.S. GAAP）計入公允價值。公允價值是出售資產或轉讓負債時將收到或支付的金額，代表市場參與者之間在有序交易中的交易價格。因此，公允價值是基於市場的衡量，應根據市場參與者定價資產或負債所使用的假設確定。作爲考慮此類假設的依據，《ASC 820》（「ASC 820」）建立了一個三層價值層次結構，優先考慮衡量公允價值的估值方法中使用的輸入： 公允價值計量和披露 ——活躍市場上的報價價格，用於相同的資產和負債。
確定資產或負債屬於層級的哪個類別需要做出重大判斷。公司在每個報告期評估其層級披露。公允價值層級要求公司在測量公允價值時最大限度地利用可觀察到的輸入，最小化使用不可觀察到的輸入。
8
Cash – The Company considers all highly-liquid investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents. The Company had
Prepaid expenses – Payments made prior to the receipt of goods or services are capitalized until the goods or services are received.
Other current assets – Other current assets as of September 30, 2024 and December 31, 2023 were principally comprised of Value Added Tax (“VAT”) receivables.
Patent acquisition costs – Patent acquisition costs and related capitalized legal fees are amortized on a straight-line basis over the shorter of the legal or economic life. The estimated useful life is
Accrued expenses – As part of the process of preparing the condensed consolidated financial statements, the Company estimates accrued expenses. This process involves identifying services that third parties have performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred on these services as of each balance sheet date in the Company’s condensed consolidated financial statements. Examples of estimated accrued expenses include contract service fees in conjunction with pre-clinical and clinical trials, professional service fees and contingent liabilities. In connection with these service fees, the Company’s estimates are most affected by its understanding of the status and timing of services provided relative to the actual services incurred by the service providers. If the Company does not identify certain costs that have been incurred or it under or over-estimates the level of services or costs of such services, the Company’s reported expenses for a reporting period could be understated or overstated. The date on which certain services commence, the level of services performed on or before a given date, and the cost of services are often subject to the Company’s estimation and judgment. The Company makes these judgments based upon the facts and circumstances known to it in accordance with U.S. GAAP. See Note 5.
Convertible Notes – On May 10, 2024, the Company entered into unsecured convertible promissory notes (the “May 2024 Notes”) with existing investors: the Company’s Chairman, Dr. Ray Prudo, and Interim President and Chief Executive Officer and director of the Company, Dr. Samir Patel, for an aggregate of $
The Company accounts for convertible promissory notes in accordance with ASC Topic 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and has not elected the fair value option as provided for within ASC Topics 815 and 825. Accordingly, the Company evaluated the embedded conversion and other features within the May 2024 Notes to determine whether any of the embedded features should be bifurcated from the host instrument and accounted for as a derivative at fair value. Based on management’s evaluation, the Company determined that the May 2024 Notes were not issued at a substantial premium and none of the embedded features were required to be bifurcated and accounted for separately. Accordingly, the May 2024 Notes are accounted for as a single liability measured at its amortized cost. Issuance costs incurred in connection with the issuance of the May 2024 Notes were
9
immaterial. Interest expense incurred on the May 2024 Notes was less than $
Warrant Liability – The Company accounts for ordinary share or ADS warrants as either equity instruments, liabilities or derivative liabilities in accordance with ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and/or ASC Topic 815, Derivatives and Hedging (“ASC 815”), depending on the specific terms of the warrant agreement. Liability-classified warrants are recorded at their estimated fair values at issuance and are remeasured each reporting period until they are exercised, terminated, reclassified or otherwise settled. Changes in the estimated fair value of liability-classified warrants are recorded in "change in fair value of warrant liability" in the Company’s condensed consolidated statements of operations and comprehensive loss. Equity-classified warrants are recorded within "additional paid-in capital" in the Company's condensed consolidated statements of shareholders' (deficit) equity at the time of issuance and not subject to remeasurement.
In connection with the sale of the ADSs in the September 2022 Registered Direct Offering, the Company issued to the investors registered Series A warrants (“Series A Warrants”) to purchase an aggregate of
Other Current Liabilities – In February 2024, the Company entered into a short-term financing arrangement with a third-party vendor to finance insurance premiums. The aggregate amount financed under this agreement was $
Research and development expenses – Costs associated with research and development are expensed as incurred unless there is an alternative future use in other research and development projects. Research and development expenses include, among other costs, salaries and personnel–related expenses, fees paid for contract research services, fees paid to clinical research organizations, costs incurred by outside laboratories, manufacturers and other accredited facilities in connection with clinical trials and preclinical studies.
Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. The Company records expenses related to clinical studies and manufacturing development activities based on its estimates of the services received and efforts expended pursuant to contracts with multiple contract research organizations and manufacturing vendors that conduct and manage these activities on its behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven cash flows. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical study milestones. In amortizing or accruing service fees, the Company estimates the time period over which services will be performed, enrollment of subjects, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, the Company will adjust the accrued or prepaid expense balance accordingly.
The Company accounts for research and development tax credits at the time its realization becomes probable as a credit to research and development expenses in the condensed consolidated statements of operations and comprehensive loss. During the three and nine months ended September 30, 2024 and 2023, the Company recognized research and development tax credits of approximately $
10
Merger-Related Costs – Merger-related costs include direct expenses incurred in connection with the proposed Merger, as more fully described in Note 3, and are comprised primarily of legal and professional fees and other incremental costs directly associated to the Merger. For the three and nine months ended September 30, 2024 merger-related costs totaled $
Restructuring and Other Costs – In May 2024, the Company began to implement a reduction-in-force of approximately
As of September 30, 2024, of the $
Share-based compensation expense – The Company measures all share-based awards granted to employees, directors and non-employees based on the estimated fair value on the date of grant and recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective awards. Forfeitures are accounted for as they occur. The Company classifies share-based compensation expense in its condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
The fair value of each restricted ordinary share award is determined on the date of grant based on the fair value of the Company’s ordinary shares on that same date. The fair value of each share option grant is determined on the date of grant using the Black-Scholes option pricing model, which requires inputs based on certain assumptions, including the expected stock price volatility, the expected term of the award, the risk-free interest rate, and expected dividends. See Note 7. The Company estimates stock price volatility based on the Company’s historical stock price performance over a period of time that matches the expected term of the stock options. The expected term of the Company’s options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is based on the fact that the Company has never paid cash dividends on ordinary shares and does not expect to pay any cash dividends in the foreseeable future.
Leases – The Company accounts for its leases in accordance with ASC 842, Leases. In accordance with ASC 842, the Company records a right-of-use (“ROU”) asset and corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet and are recognized on a straight-line basis over the lease term. As of September 30, 2024 and December 31, 2023, the Company did not have any leases with a term longer than twelve months. Accordingly, no ROU assets and corresponding lease liabilities are included in the Company’s condensed consolidated balance sheets as of September 30, 2024 or December 31, 2023.
Income taxes – In accordance with ASC 270, Interim Reporting, and ASC 740, Income Taxes, the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis. For the three and nine months ended September 30, 2024 and 2023, the Company recorded no tax expense or benefit due to the expected current year loss and its historical losses. The Company has not recorded its net deferred tax asset as of either September 30, 2024 or December 31, 2023 because it maintained a full valuation allowance against all deferred tax assets as of these dates as management has determined that it is not more likely than not that the Company will
11
realize these future tax benefits. As of September 30, 2024 and December 31, 2023, the Company had no uncertain tax positions.
Net loss per share – Basic net loss per ordinary share is computed by dividing net loss available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, which includes ordinary shares underlying pre-funded warrants, as such warrant is exercisable, in whole or in part, for nominal cash consideration with no expiration date. Diluted net loss per ordinary share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, unvested restricted stock units, and warrants, which would result in the issuance of incremental ordinary shares, unless their effect would be anti-dilutive. For each of the three and nine months ended September 30, 2024 and 2023, diluted net loss per ordinary share is the same as basic net loss per ordinary share as the effects of the Company’s potentially dilutive securities were anti-dilutive.
The following potential dilutive securities, presented based on amounts outstanding at the end of each reporting period, have been excluded from the calculation of diluted net loss per share because including them would have had an anti-dilutive impact:
|
|
As of September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
Warrants |
|
|
|
|
|
|
||
Convertible notes |
|
|
|
|
|
— |
|
|
Total |
|
|
|
|
|
|
||
New Accounting Pronouncements – From time to time, new accounting pronouncements are issued by the FASB and rules are issued by the SEC that the Company has or will adopt as of a specified date. Unless otherwise noted, management does not believe that any other recently issued accounting pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have, a material impact on the Company’s present or future consolidated financial statements.
Recently Issued (Not Yet Adopted) Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. This ASU modified the disclosure and presentation requirements primarily through enhanced disclosures of significant segment expenses and clarified that single reportable segment entities must apply Topic 280 in its entirety. This guidance is effective for the Company for the year beginning January 1, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statement. The Company is currently assessing the impact of this guidance on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU improves the transparency of income tax disclosure by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. This guidance is effective for the Company for the year beginning January 1, 2025, with early adoption permitted. The amendments should be applied on a prospective basis, with retrospective application permitted. The Company is currently assessing the impact of this guidance on its consolidated financial statements and related disclosures.
12
Note 3. Agreement and Plan of Merger
Agreement and Plan of Merger
On March 4, 2024, the Company entered into an Agreement and Plan of Merger with Peak Bio and Pegasus Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Akari (“Pegasus Merger Sub”), as amended by that certain side letter dated August 15, 2024 (the “Merger Agreement”), pursuant to which, on November 14, 2024, Pegasus Merger Sub merged with and into Peak Bio (the “Merger”), with Peak Bio surviving the Merger as a wholly owned subsidiary of Akari.
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of Peak Bio common stock, par value $
The board of directors of each of Akari and Peak has unanimously approved the Merger Agreement and the transactions contemplated thereby. On November 14, 2024, the Company closed the business combination contemplated by the Merger Agreement, as more fully described in Note 10.
Note 4. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s financial liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such values:
|
|
September 30, 2024 |
|
|||||||||||||
(In thousands) |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liability - Series B |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
|
|
December 31, 2023 |
|
|||||||||||||
(In thousands) |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liability - Series A |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Warrant liability - Series B |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
The Company’s Level 3 liabilities consist of the Series B Warrants as of September 30, 2024 and the Series A and Series B Warrants as of December 31, 2023, which were determined to be liability-classified instruments. There were no transfers between Level 1, Level 2, and Level 3 during the nine months ended September 30, 2024 and 2023.
13
Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the activity in the warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) during the nine months ended September 30, 2024:
|
|
Warrant Liability |
|
|||||||||
(In thousands) |
|
Series A |
|
|
Series B |
|
|
Total |
|
|||
Balance, December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Change in the fair value of liability |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Assumptions Used in Determining Fair Value of Liability-Classified Warrants
The fair value of the warrant liability is based on significant inputs, which represents a Level 3 measurement within the fair value hierarchy. The fair value of both the Series A Warrants and the Series B Warrants was determined using the Black-Scholes Option Pricing Model, which uses various assumptions, including (i) fair value of the Company’s ADSs, (ii) exercise price of the warrant, (iii) expected term of the warrant, (iv) expected volatility and (v) expected risk-free interest rate.
Below are the assumptions used for the fair value calculations of the Series B Warrants as of September 30, 2024, and Series A Warrants and Series B Warrants as of December 31, 2023:
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||
|
|
Series B |
|
|
Series A |
|
|
Series B |
|
|||
Stock (ADS) price |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Exercise price |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Expected term (in years) |
|
|
|
|
|
|
|
|
|
|||
Expected volatility |
|
|
% |
|
|
% |
|
|
% |
|||
Risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|||
Expected dividend yield |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Note 5. Accrued Expenses
Accrued expenses consisted of the following as of September 30, 2024 and December 31, 2023:
|
|
September 30, |
|
|
December 31, |
|
||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Employee compensation and benefits |
|
$ |
|
|
$ |
|
||
External research and development expenses |
|
|
|
|
|
|
||
Professional and consulting fees |
|
|
|
|
|
|
||
Restructuring |
|
|
|
|
|
— |
|
|
Other |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
Accrued restructuring expenses of approximately $
14
Note 6. Shareholders’ (Deficit) Equity
Ordinary Shares
On September 30, 2023, the Company’s shareholders approved an increase to the number of authorized ordinary shares, par value $
Currently, each ADS represents
May 2024 Private Placement
In May 2024, the Company entered into a definitive purchase agreement with certain investors, Dr. Prudo and Dr. Patel, pursuant to which the Company sold and issued in a private placement an aggregate of
At close of the May 2024 Private Placement, the Company issued to Paulson Investment Company, LLC (“Paulson”), as placement agent for the May 2024 Private Placement, warrants to purchase
The Company determined that the Series C Warrants and May 2024 Placement Agent Warrants met all of the criteria for equity classification. Accordingly, upon closing of the May 2024 Private Placement, each of the Series C Warrants and May 2024 Placement Agent Warrants were recorded as a component of additional paid-in capital.
March 2024 Private Placement
In March 2024, the Company entered into a definitive purchase agreement with certain existing investors, pursuant to which the Company sold and issued in a private placement an aggregate of
At close of the March 2024 Private Placement, the Company issued to Paulson, as placement agent for the March 2024 Private Placement, warrants to purchase
The Company determined that the March 2024 Placement Agent Warrants met all of the criteria for equity classification. Accordingly, upon closing of the March 2024 Private Placement, each of the March 2024 Placement Agent Warrants were recorded as a component of additional paid-in capital.
15
December 2023 Private Placement
In December 2023, the Company entered into purchase agreements to sell, in a private placement, to existing investors, Dr. Ray Prudo and Dr. Patel, (the “December 2023 Private Placement”) an aggregate of
September 2023 Private Placement
In September 2023, the Company entered into purchase agreements to sell in a private placement to existing investors and directors, including Dr. Prudo and Ms. Rachelle Jacques, the Company’s then President and Chief Executive Officer (the “September 2023 Private Placement”) an aggregate of
At close of the September 2023 Private Placement, the Company issued to Paulson, as placement agent for the September 2023 Private Placement, warrants to purchase
The Company determined that the Pre-Funded Warrants and October 2023 Placement Agent Warrants met all of the criteria for equity classification. Accordingly, upon closing of the September 2023 Private Placement, each of the Pre-Funded Warrants and October 2023 Placement Agent Warrants were recorded as a component of additional paid-in capital.
March 2023 Registered Direct Offering
On March 31, 2023, the Company entered into securities purchase agreements with certain accredited and institutional investors, including Dr. Prudo (the “March Registered Direct Offering”) providing for the issuance of an aggregate of
Warrants
In connection with various financing transactions, the Company has issued warrants to purchase the Company’s ordinary shares represented by ADSs. The Company accounts for such warrants as equity instruments or liabilities, depending on the specific terms of the warrant agreement. See Note 2 for further details on accounting policies related to the Company’s warrants.
16
The following table summarizes the Company’s outstanding warrants as of September 30, 2024 and December 31, 2023:
|
|
Number of Warrant ADSs |
|
|
|
|
|
|
||||||
|
|
September 30, |
|
|
December 31, |
|
|
Weighted-Average |
|
|
|
|||
|
|
2024 |
|
|
2023 |
|
|
Exercise Price |
|
|
Expiration Date |
|||
Equity-classified Warrants |
|
|
|
|
|
|
|
|
|
|
|
|||
2019 Investor Warrants |
|
|
|
|
|
|
|
$ |
|
|
7/1/2024 |
|||
2019 Placement Warrants |
|
|
|
|
|
|
|
$ |
|
|
6/28/2024 |
|||
2020 Investor Warrants |
|
|
|
|
|
|
|
$ |
|
|
Feb-Mar 2025 |
|||
2020 Placement Warrants |
|
|
|
|
|
|
|
$ |
|
|
Feb-Mar 2025 |
|||
July 2021 Placement Agent Warrants |
|
|
|
|
|
|
|
$ |
|
|
7/7/2026 |
|||
December 2021 Investor Warrants |
|
|
|
|
|
|
|
$ |
|
|
1/4/2027 |
|||
December 2021 Placement Agent |
|
|
|
|
|
|
|
$ |
|
|
12/29/2026 |
|||
March 2022 Investor Warrants |
|
|
|
|
|
|
|
$ |
|
|
3/10/2027 |
|||
March 2022 Placement Agent Warrants |
|
|
|
|
|
|
|
$ |
|
|
3/10/2027 |
|||
October 2023 Investor Prefunded |
|
|
|
|
|
|
|
$ |
|
|
None |
|||
October 2023 Placement Agent Warrants |
|
|
|
|
|
|
|
$ |
|
|
10/6/2028 |
|||
March 2024 Placement Agent Warrants |
|
|
|
|
|
— |
|
|
$ |
|
|
3/27/2029 |
||
May 2024 Investor Warrants |
|
|
|
|
|
— |
|
|
$ |
|
|
May-Jun 2027 |
||
May 2024 Placement Agent Warrants |
|
|
|
|
|
— |
|
|
$ |
|
|
5/31/2029 |
||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Liability-classified Warrants |
|
|
|
|
|
|
|
|
|
|
|
|||
September 2022 Series A Investor |
|
|
|
|
|
|
|
$ |
|
|
9/14/2024 |
|||
September 2022 Series B Investor |
|
|
|
|
|
|
|
$ |
|
|
9/14/2029 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total outstanding |
|
|
|
|
|
|
|
|
|
|
|
|||
The following table summarizes the Company’s warrants activity for the nine months ended September 30, 2024:
|
|
Number of |
|
|
Weighted-Average |
|
||
|
|
Warrant ADSs |
|
|
Exercise Price |
|
||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
||
Issued |
|
|
|
|
|
|
||
Exercised |
|
|
— |
|
|
|
— |
|
Expired |
|
|
( |
) |
|
|
|
|
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
Capital Redemption Reserve
In December 2020, for the purpose of changing the nominal value of the Company's ordinary shares from £
Amounts transferred from share capital on the redemption of the Deferred Shares of $
17
Note 7. Share-Based Compensation
2023 Equity Incentive Plan
On June 30, 2023, the Company’s shareholders approved the 2023 Equity Incentive Plan (the “2023 Plan”), which provides for the grant of stock options, both incentive stock options and nonqualified stock options, stock, with and without vesting restrictions, restricted stock units (“RSUs”) and stock appreciation rights, to be granted to employees, directors and consultants. The Company is permitted to issue up to
As of September 30, 2024, the Company had
The 2023 and 2014 Plans provide that they be administered by the compensation committee of the board of directors. The exercise price for stock option awards may not be less than
2014 Equity Incentive Plan
Under the 2014 Plan the Company was authorized to grant stock options, RSUs and other awards, to employees, members of the board of directors and consultants. Upon effectiveness of the 2023 Plan no further awards were available to be issued under the 2014 Plan. As of September 30, 2024, the Company had
Stock Options
The following is a summary of the Company’s stock option activity under the 2014 Plan and the 2023 Plan for the nine months ended September 30, 2024:
($ in thousands, except share and per share data) |
|
Stock |
|
|
Weighted- |
|
|
Weighted-Average |
|
|
Aggregate |
|
||||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2024 (1) |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
___________
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s ordinary shares for those options that had exercise prices lower than the fair value of the Company’s ordinary shares.
18
The weighted-average grant-date fair value per ordinary share of options granted during each of the nine months ended September 30, 2024 and 2023 was less than $
Option Valuation
The weighted-average assumptions that the Company used to determine the fair value of share options granted were as follows, presented on a weighted average basis:
|
|
2024 |
|
|
2023 |
|
||
Expected volatility |
|
|
% |
|
|
% |
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Expected dividend yield |
|
|
— |
|
|
|
— |
|
Expected term (in years) |
|
|
|
|
|
|
||
Restricted Stock Units
The 2014 Plan provided, and the 2023 Plan provides, for the award of RSUs. RSUs are granted to employees that are subject to time-based vesting conditions that lapse between
The following table summarizes the Company’s RSU activity for the nine months ended September 30, 2024:
|
|
Time-based Awards |
|
|||||
($ in thousands, except per share data) |
|
Number of Shares |
|
|
Weighted-Average |
|
||
Nonvested shares at December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
Nonvested shares at September 30, 2024 |
|
|
|
|
$ |
|
||
The fair value of time-based RSUs that vested during the nine months ended September 30, 2024 and 2023 was approximately $
Share-Based Compensation Expense
The Company classifies share-based compensation expense in the statement of operations in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring and other costs |
|
|
- |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Total share-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
19
During the nine months ended September 30, 2024,
As of September 30, 2024, total unrecognized compensation cost related to unvested stock options and time-based RSUs was $
Note 8. Related Party Transactions
The Doctors Laboratory
The Company leases office space for its U.K. headquarters in London from The Doctors Laboratory (“TDL”) and has incurred expenses of less than $
The Company received certain laboratory testing services for its clinical trials and other administrative services provided by TDL and incurred expenses of less than $
The Company recorded payable balances owed to TDL of less than $
Interim CEO Agreement
On May 31, 2024, the Company and Dr. Patel entered into an Interim Chief Executive Officer Agreement, effective as of May 1, 2024 (the “Interim CEO Agreement”). Pursuant to the Interim CEO Agreement, Dr. Patel serves as the Company’s Interim President and Chief Executive Officer as an independent contractor on an at-will basis. The Interim CEO Agreement can be terminated by the Company immediately for any reason. As the sole compensation for services provided under the Interim CEO Agreement, Dr. Patel was to be paid $
During the three and nine months ended September 30, 2024, the Company recognized approximately $
20
Note 9. Commitments and Contingencies
Leases
The Company is currently party to a short-term lease for its U.S headquarters, which currently expires in May 2025, and a short-term lease with TDL for its London offices, which currently expires in July 2025. The Company is not party to any material lease agreements.
For each of the three months ended September 30, 2024 and 2023, the Company incurred lease costs of less than $
Employee Benefit Plans
The Company adopted an employee benefit plan under Section 401(k) of the Internal Revenue Code for its U.S.-based employees. The plan allows employees to make contributions up to a specified percentage of their compensation.
During each of the three months ended September 30, 2024 and 2023, the Company charged less than $
Note 10. Subsequent Events
Conversion of May 2024 Notes
In October 2024, Drs. Prudo and Patel each elected to convert $
November Private Placement
On November 13, 2024, the Company entered into a securities purchase agreement with certain investors, including Akari’s Chairman, Dr. Ray Prudo, and a director and Interim President and Chief Executive Officer of the Company, Dr. Samir R. Patel, pursuant to which the Company agreed to sell and issue in a private placement (the “November Private Placement”) an aggregate of
The Series D Warrants have a term of
21
Akari paid Paulson and Chardan Capital Markets, LLC (“Chardan”) (i) with respect to Paulson, a cash fee equal to
Merger with Peak Bio
On November 14, 2024, the Company completed the previously announced strategic combination contemplated by the Merger Agreement, pursuant to which, Merger Sub merged with and into Peak Bio, with Peak Bio surviving the Merger as a wholly owned subsidiary of Akari.
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, at the Effective Time, each issued and outstanding share of Peak Common Stock (other than (x) shares of Peak Common Stock held by Peak Bio as treasury stock, or shares of Peak Common Stock owned by Akari, Merger Sub or any direct or indirect wholly-owned subsidiaries of Akari and (y) Dissenting Shares (as defined in the Merger Agreement), was converted into the right to receive Akari ADSs representing a number of Akari Ordinary Shares equal to
At the Effective Time, each warrant to purchase capital stock of Peak Bio (“Peak Warrant”) that was outstanding immediately prior to the Effective Time was converted into and exchangeable for warrants to purchase a number of Akari Ordinary Shares or Akari ADSs, as determined by Akari (each, an “Adjusted Warrant”), on substantially similar terms and subject to substantially similar conditions as were applicable to such Peak Warrant immediately prior to the Effective Time, except (i) for terms rendered inoperative by reason of the transactions contemplated by the Merger Agreement, (ii) as provided in the following sentence and (iii) such amendments to the terms of the Adjusted Warrants as are necessary to comply with applicable Law (as defined in the Merger Agreement). The number of Akari Ordinary Shares (or the number of Akari Ordinary Shares underlying Akari ADSs, as applicable) subject to each Adjusted Warrant is equal to the number of shares of Peak Common Stock issuable upon exercise of such Peak Warrant immediately prior to the Effective Time multiplied by the Exchange Ratio, with any fractional Akari Ordinary Shares or Akari ADSs rounded down to the nearest whole Akari Ordinary Share or Akari ADS, as applicable, and the exercise price with respect to each Akari Ordinary Share (or each Akari Ordinary Share underlying Akari ADSs, as applicable) underlying such Adjusted Warrant equal to the exercise price of such Peak Warrant immediately prior to the Effective Time divided by the Exchange Ratio.
At the Effective Time, each option to acquire shares of Peak Common Stock (“Peak Option”) that was outstanding and unexercised immediately prior to the Effective Time, whether or not vested, was assumed and converted into an option to purchase a number of Akari ordinary shares or Akari ADSs, as determined by Akari (each, an “Adjusted Option”). The number of Akari Ordinary Shares (or the number of Akari Ordinary Shares underlying Akari ADSs, as applicable) subject to the Adjusted Option is equal to the product of (i) the total number of shares of Peak Common Stock subject to such Peak Option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, with any fractional Akari Ordinary Shares or Akari ADSs rounded down to the nearest whole Akari Ordinary Share or Akari ADS, as applicable, and the exercise price per share of each Adjusted Option equal to the exercise price of such Peak Option immediately prior to the Effective Time divided by the Exchange Ratio.
The issuance of Akari Ordinary Shares, which are represented by Akari ADSs, in connection with the Merger were registered under the Securities Act, pursuant to a registration statement on Form S-4 (File No. 333-282127) filed by Akari with the SEC and declared effective on October 11, 2024.
The parties to the Merger Agreement have agreed that the November Private Placement satisfies the conditions set forth in Sections 7.2(e) and 7.3(e) of the Merger Agreement.
22
Authorized Shares
On November 7, 2024, the Company’s shareholders approved certain proposals such that the Company’s directors or any duly authorized committee of the directors be generally and unconditionally authorized to (i) allot shares in the Company and to grant rights to subscribe for or to convert any security into shares in the Company up to a maximum aggregate nominal amount of $
2023 Equity Incentive Plan
On November 7, 2024, the Company’s shareholders approved an increase in the number of shares available for the grant of awards under the 2023 Plan by
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with:
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.
24
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.
25
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 $11.7 million for the nine months ended September 30, 2023. Our total operating expenses are set forth by category in the table below:
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
|
|
|
September 30, |
|
|
|
|
||||||||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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 $2.8 million, or 95%, as compared to the nine months ended September 30, 2023. The following sets forth research and development expenses for the three and nine months ended September 30, 2024 and 2023 by category:
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
||||||||||||
|
|
September 30, |
|
|
|
|
|
September 30, |
|
|
|
|
||||||||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
||||||
Clinical Trials: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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.
27
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.
28
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.
29
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:
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
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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
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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:
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:
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.
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Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented (in thousands):
|
|
Nine Months Ended |
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|||||
|
|
September 30, |
|
|||||
(In thousands) |
|
2024 |
|
|
2023 |
|
||
Net cash (used in) provided by: |
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|
|
|
|
|
||
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:
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.
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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:
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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.
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Item 4. Controls and Procedures.
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.
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.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in various legal proceedings that arise in the ordinary course of our business. We are not currently a party to any material legal proceedings, and are not aware of any pending or threatened legal proceeding against us that we believe could have an adverse effect on our business, operating results or financial condition.
Item 1A. Risk Factors.
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended September 30, 2024, we did not have any sales of unregistered securities.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None of our directors or “officers,” as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934,
Nasdaq Compliance Update
On April 5, 2024, we received a letter (“Letter”) from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Capital Market (“Nasdaq”) notifying us that our shareholders’ equity as reported in our Form 10-K was not in compliance with the minimum shareholders’ equity requirement under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain shareholders’ equity of at least $2.5 million (the “Shareholders’ Equity Requirement”). In accordance with the Nasdaq Listing Rules, on May 20, 2024, we submitted a plan to regain compliance with the Stockholders’ Equity Requirement (the “Compliance Plan”) for the Staff’s consideration. On August 5, 2024, we were notified by the Staff that we had been granted an extension until September 30, 2024 to comply with the Compliance Plan and evidence compliance with the Shareholders’ Equity Requirement. On October 1, 2024, we received a delisting determination letter (“Delisting Determination Letter”) from the Staff notifying us that we did not meet the terms of the extension. On October 8, 2024, we requested a hearing before the Nasdaq Listing Qualifications Panel to appeal the Staff’s delisting determination.
On November 18, 2024, we received a letter from the Nasdaq Office of General Counsel notifying us that we have regained compliance with the Shareholders’ Equity Requirement. While we have regained compliance with the Shareholder’s Equity Requirement, we cannot guarantee that we will maintain compliance with this requirement and the other continued listing requirements of Nasdaq.
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Item 6. Exhibits.
Exhibit Number |
|
Description |
10.1 |
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|
10.2† |
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31.1* |
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31.2* |
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32.1** |
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32.2** |
|
|
101.INS |
|
Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
lnline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates it by reference.
† Indicates management contract or compensatory arrangement.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Akari Therapeutics, Plc |
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By: |
|
Date: November 19, 2024 |
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/s/ Samir R. Patel, M.D. |
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Samir R. Patel, M.D. |
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Interim President, Chief Executive Officer and Director |
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|
|
(Principal Executive Officer) |
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By: |
/s/ Wendy DiCicco |
Date: November 19, 2024 |
|
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Wendy DiCicco |
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|
|
Interim Chief Financial Officer |
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|
|
(Principal Financial Officer) |
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