Akari Therapeutics(AKTX) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements of Akari Therapeutics, Plc for the periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Amounts in thousands) | ASSETS | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $2,711 | $2,599 | | Total current assets | $3,301 | $2,952 | | Goodwill | $8,430 | $8,430 | | Other intangible assets | $39,180 | $39,180 | | Total assets | $50,911 | $50,562 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Accounts payable | $11,607 | $12,407 | | Accrued expenses | $2,468 | $3,137 | | Total current liabilities | $17,138 | $19,910 | | Total liabilities | $25,306 | $28,333 | | Total shareholders' equity | $25,605 | $22,229 | | Total liabilities and shareholders' equity | $50,911 | $50,562 | Condensed Consolidated Statements of Operations and Comprehensive Loss Condensed Consolidated Statements of Operations and Comprehensive Loss (Amounts in thousands) | Operating Expenses | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $667 | $3,314 | $1,480 | $5,593 | | General and administrative | $2,452 | $2,241 | $5,164 | $4,907 | | Merger-related costs | $0 | $254 | $0 | $1,298 | | Restructuring and other costs | $0 | $1,640 | $0 | $1,640 | | Loss from operations | $(3,119) | $(7,449) | $(6,644) | $(13,438) | | Total other income (expense), net | $1,224 | $(109) | $1,044 | $314 | | Net loss | $(1,895) | $(7,558) | $(5,600) | $(13,124) | | Net loss per share –– basic and diluted | $(0.00) | $(0.00) | $(0.00) | $(0.00) | | Total comprehensive loss | $(2,228) | $(7,546) | $(5,968) | $(12,833) | Condensed Consolidated Statements of Shareholders' Equity (Deficit) Condensed Consolidated Statements of Shareholders' Equity (Deficit) (Amounts in thousands) | Item | Balance, Dec 31, 2024 | Issuance of share capital related to financing, net of issuance costs | Stock-based compensation | Foreign currency translation | Net loss | Balance, June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Share Capital $0.0001 par value (Amount) | $5,319 | $457 (Mar 31) + $575 (Jun 30) | — | — | — | $6,523 | | Additional Paid-in Capital | $212,706 | $1,785 (Mar 31) + $3,829 (Jun 30) | $1,015 (Mar 31) + $719 (Jun 30) | — | — | $220,846 | | Capital Redemption Reserve | $52,194 | — | — | — | — | $52,194 | | Accumulated Other Comprehensive Loss | $(738) | — | — | $(35) (Mar 31) + $(333) (Jun 30) | — | $(1,106) | | Accumulated Deficit | $(247,252) | — | — | — | $(3,705) (Mar 31) + $(1,895) (Jun 30) | $(252,852) | | Total Shareholders' Equity | $22,229 | $2,242 (Mar 31) + $4,404 (Jun 30) | $1,015 (Mar 31) + $719 (Jun 30) | $(35) (Mar 31) + $(333) (Jun 30) | $(3,705) (Mar 31) + $(1,895) (Jun 30) | $25,605 | - Total shareholders' equity increased from $22,229 thousand at December 31, 2024, to $25,605 thousand at June 30, 2025, primarily due to issuance of share capital related to financing and stock-based compensation, partially offset by net loss and foreign currency translation adjustments[24] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Amounts in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,406) | $(8,938) | | Net cash provided by financing activities | $5,514 | $9,277 | | Effect of exchange rates on cash | $4 | $(7) | | Net change in cash | $112 | $332 | | Cash and restricted cash at beginning of period | $2,659 | $3,845 | | Cash and restricted cash at end of period | $2,771 | $4,177 | - Net cash used in operating activities decreased by $3,532 thousand (from $(8,938) thousand in 2024 to $(5,406) thousand in 2025) for the six months ended June 30, primarily due to reduced R&D and restructuring costs[28][193] - Net cash provided by financing activities decreased by $3,763 thousand (from $9,277 thousand in 2024 to $5,514 thousand in 2025) for the six months ended June 30, reflecting lower proceeds from share issuances and convertible notes[28][198] Notes to Unaudited Condensed Consolidated Financial Statements Note 1. Description of Business - Akari Therapeutics, Plc is developing next-generation antibody-drug conjugates (ADCs) through its proprietary technology platform, focusing on novel payloads to target a range of cancers[30] - The company completed a strategic business combination with Peak Bio, Inc in November 2024, shifting its focus to the ADC platform utilizing a novel anti-cancer payload called PH1[30][31] - Akari has incurred substantial losses and negative cash flows since inception, with an accumulated deficit of $252.9 million as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern[37] Note 2. Summary of Significant Accounting Policies - The unaudited condensed consolidated financial statements are prepared in accordance with U.S GAAP for interim financial information and SEC rules, reflecting management's estimates and assumptions[34][35] - No new accounting pronouncements issued or effective in the first six months of 2025 are expected to have a material impact on the financial statements[40] Note 3. Agreement and Plan of Merger - On November 14, 2024, Akari completed the acquisition of Peak Bio, issuing 12,613,942 Akari ADSs to Peak Bio shareholders, representing approximately 48.4% of Akari's outstanding shares on a fully diluted basis[30][41] Total Consideration Paid for Peak Bio Acquisition (in thousands) | Item | Consideration | | :--- | :--- | | Company ADSs issued to Peak Bio Inc shareholders | $28,129 | | Company ADSs issuable on exercise of November 2022 Peak Investor Warrants and April 2023 Peak Investor Warrants | $1,844 | | Total consideration | $29,973 | Fair Values of Assets Acquired and Liabilities Assumed (in thousands) | Assets Acquired | Amount | | :--- | :--- | | Cash and restricted cash | $382 | | Prepaid expenses and other current assets | $10 | | Acquired in-process research and development | $39,180 | | Total assets acquired | $39,572 | | Liabilities Assumed | Amount | | Accounts payable and accrued expenses | $6,979 | | Convertible notes | $700 | | Notes payable | $659 | | Notes payable, related party | $1,651 | | Deferred tax liability | $8,040 | | Total liabilities assumed | $18,029 | | Goodwill | $8,430 | | Net assets acquired | $29,973 | - The acquisition resulted in the recognition of $39.2 million in IPR&D intangible assets (AKTX-101: $34.0 million, PHP-303: $5.18 million) and $8.4 million in goodwill[48][50] Note 4. Fair Value Measurements Fair Value of Warrant Liabilities (in thousands) | Warrant Liability | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | November 2022 Peak Warrants | $63 | $95 | | April 2023 Peak Warrants | $689 | $736 | | September 2022 Series B Warrants | $114 | $181 | | Total liabilities | $866 | $1,012 | - The fair value of warrant liabilities decreased from $1,012 thousand at December 31, 2024, to $866 thousand at June 30, 2025, primarily due to a decrease in the Company's stock price during the reporting period[53][164] - All liability-classified warrants (November 2022 Peak, April 2023 Peak, and September 2022 Series B) are Level 3 measurements, determined using the Black-Scholes Option Pricing Model with unobservable inputs[53][55] Note 5. Accrued Expenses Accrued Expenses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Employee compensation and benefits | $775 | $473 | | External research and development expenses | $134 | $178 | | Professional and consulting fees | $1,249 | $1,305 | | Restructuring | $50 | $450 | | Other | $260 | $731 | | Total accrued expenses | $2,468 | $3,137 | - Total accrued expenses decreased from $3,137 thousand at December 31, 2024, to $2,468 thousand at June 30, 2025, driven by reductions in restructuring accruals and other liabilities[57] Note 6. Convertible Notes and Notes Payable - The Company assumed several notes from Peak Bio in November 2024, including the September 2024 Note ($0.2 million outstanding at June 30, 2025) and the April 2023 Convertible Notes ($0.7 million outstanding and in default at June 30, 2025)[58][59][63] - The November 2023 Note ($0.4 million principal) was settled for $325,000 on March 6, 2025, resulting in a gain on debt extinguishment[60][61] Note 7. Shareholders' Equity (Deficit) - Shareholders approved an increase in authorized ordinary shares to 330,854,276,210 as of June 30, 2025[67] - In March and April 2025, the Company completed a private placement, issuing 4,942,626 ADSs (or pre-funded warrants) and various Series A and Series B warrants, generating approximately $5.6 million in net proceeds (net of $1.0 million note termination)[69][71][72] Outstanding Warrant ADSs | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Equity-classified Warrants | 23,253,769 | 6,788,070 | | Liability-classified Warrants | 3,284,272 | 3,519,566 | | Total outstanding warrants | 26,538,041 | 10,307,636 | - Total outstanding warrants increased significantly from 10,307,636 at December 31, 2024, to 26,538,041 at June 30, 2025, primarily due to new issuances in the March/April 2025 private placement[75][76] Note 8. Stock-Based Compensation Stock Option ADSs Activity (Six Months Ended June 30, 2025) | Item | Number of Stock Option ADSs | Weighted Average Exercise Price per ADS | | :--- | :--- | :--- | | Outstanding at December 31, 2024 | 1,981,982 | $8.21 | | Granted | 5,391,336 | $1.49 | | Forfeited | (87,130) | $26.50 | | Expired | (116,569) | $20.78 | | Outstanding at June 30, 2025 | 7,169,619 | $2.73 | | Exercisable at June 30, 2025 | 1,041,615 | $8.38 | Total Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $184 | $13 | $375 | $56 | | General and administrative | $535 | $147 | $1,359 | $400 | | Restructuring and other costs | $0 | $285 | $0 | $285 | | Total stock-based compensation expense | $719 | $445 | $1,734 | $741 | - Total stock-based compensation expense increased significantly to $1,734 thousand for the six months ended June 30, 2025, from $741 thousand in the prior year, primarily due to increased grants and non-cash compensation[84] - As of June 30, 2025, unrecognized compensation cost for unvested stock options was $5.6 million, expected to be recognized over a weighted average period of 2.8 years[85] Note 9. Net Loss per Share Potential Dilutive Securities Excluded from Diluted Net Loss per Share Calculation | Security Type | As at June 30, 2025 (Ordinary Shares) | As at June 30, 2024 (Ordinary Shares) | | :--- | :--- | :--- | | Stock options | 14,339,239,000 | 351,934,688 | | Restricted stock units | — | 251,823,915 | | Warrants | 49,679,308,000 | 13,191,074,600 | | Convertible notes | 749,192,000 | 1,257,860,000 | | Total | 64,767,739,000 | 15,052,693,203 | - All potential dilutive securities were excluded from diluted net loss per share calculations for both periods due to their anti-dilutive impact[86] Note 10. Income Taxes - The Company recorded no tax expense or benefit for the three and six months ended June 30, 2025 and 2024, due to expected current year losses and historical losses[87] - A full valuation allowance is maintained against all deferred tax assets as of June 30, 2025, and December 31, 2024, as management has determined that it is not more likely than not that the Company will realize these future tax benefits[87] Note 11. Segment Information - The Company operates as a single operating segment, with the CEO serving as the Chief Operating Decision Maker (CODM), reviewing consolidated financial information and net loss to allocate resources[88][91] - Akari has not generated any revenue since inception and primarily incurs expenses in research and development of pre-clinical product candidates (next-generation precision bifunctional ADCs for cancer) and general and administrative costs[89] Note 12. Related Party Transactions - Dr Samir Patel, former Interim CEO, received non-cash stock-based compensation (NQSOs) and accrued professional fees for his services[95][96] - The Company assumed notes payable to Dr Hoyoung Huh (Chairman) from the Peak Bio acquisition, including 2021 Notes and a January 2024 Note; $1.0 million of these notes were cancelled and extinguished in connection with the March 2025 Private Placement for ordinary shares and warrants[97][99][101] - May 2024 Convertible Notes with Dr Ray Prudo and Dr Samir Patel for $1.0 million were partially repaid in cash ($750,000) and partially converted into ADSs ($250,000 principal and accrued interest) in October 2024[103] Note 13. Commitments and Contingencies - The Company leases office and laboratory space on a short-term basis, incurring less than $0.1 million in lease costs for the three and six months ended June 30, 2025[107][108] - Under the Bayer Acquisition Agreement (assumed in November 2024), Akari is committed to pay up to $23.5 million in development and regulatory milestones and high single-digit royalties for PHP-303, with no expenses incurred to date[111][112][114] - Legal proceedings include a claim for discretionary bonuses from a former Peak Bio employee, and settlements with former consultants totaling $0.4 million, leading to the issuance of 251,822,000 ordinary shares[115][116] - A lawsuit with 'Sabby' Volatility Warrant Master Fund Ltd was settled in May 2025, with Akari agreeing to issue 272,450 ADSs (544,900,000 ordinary shares)[117] - The Company recognized a $1.2 million gain on settlement of current liabilities with a former vendor during the six months ended June 30, 2025[118][161] Note 14. Restructuring - In May 2024, the Company implemented a reduction-in-force (RIF) of approximately 67% of its workforce and suspended the nomacopan HSCT-TMA program, completing the restructuring plan in Q3 2024[120] Restructuring Reserve and Activity (in thousands) | Category | Balance at Dec 31, 2024 | Restructuring adjustment | Cash payments | Balance at June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | | Severance and Employee Benefit Costs | $450 | $(50) | $(350) | $50 | Note 15. Subsequent Events - In August 2025, the Company entered into Note Purchase Agreements with certain investors and directors for a private placement of unsecured promissory notes totaling $3 million (aggregate principal $3.8 million), with a 20% original issuance discount, expected to close in two tranches in August and September 2025[122][217] - The Chairman, Dr Hoyoung Huh, agreed to purchase a $1.25 million note for $1.0 million, satisfied by cancelling $837,433 of outstanding debt and $162,567 in cash[122][217] - Series A Warrants previously issued in the March 2025 Private Placement will have their expiration date extended from 2026 to 2030 for certain August 2025 Note Investors[122][217] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Akari's financial condition and operational results, highlighting the strategic shift to an ADC platform and recent financing activities Overview - Akari is an oncology company focused on developing next-generation antibody-drug conjugates (ADCs) using novel proprietary cancer-killing toxins (payloads), aiming to improve efficacy and safety[125] - The lead product candidate, AKTX-101, is a pre-clinical stage Trop2-targeting ADC combining the novel PH1 payload (spliceosome modulator) with the Trop2 antibody, targeting various solid tumors[127] - Following the Peak Bio acquisition in November 2024, Akari has suspended internal development of legacy programs (nomacopan and PAS-nomacopan) and PHP-303, focusing efforts on the ADC platform and seeking external partners for legacy assets[130] Recent Developments - In August 2025, the Company entered into Note Purchase Agreements for a private placement of unsecured promissory notes totaling $3 million (aggregate principal $3.8 million), with a 20% original issuance discount[133] - Mr Abizer Gaslightwala was appointed President and Chief Executive Officer, effective April 21, 2025, with compensation including base salary, annual cash bonus, and share-based payments[135] - The March 2025 Private Placement generated approximately $5.6 million in net proceeds, involving the issuance of ADSs, pre-funded warrants, and Series A and B warrants[136][139] - The Company completed a portfolio prioritization review in May 2024, suspending the nomacopan HSCT-TMA program and pre-clinical PAS-nomacopan program to focus on Peak Bio's ADC platform technology[140] - A reduction-in-force (RIF) of approximately 67% of the total workforce was implemented in May 2024 as part of an operational restructuring plan[141] Results of Operations Operating Expenses and Net Loss (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $667 | $3,314 | $1,480 | $5,593 | | General and administrative | $2,452 | $2,241 | $5,164 | $4,907 | | Merger-related costs | $0 | $254 | $0 | $1,298 | | Restructuring and other costs | $0 | $1,640 | $0 | $1,640 | | Total operating expenses | $3,119 | $7,449 | $6,644 | $13,438 | | Loss from operations | $(3,119) | $(7,449) | $(6,644) | $(13,438) | | Net loss | $(1,895) | $(7,558) | $(5,600) | $(13,124) | - Loss from operations decreased by 58% to $3.1 million for Q2 2025 (from $7.4 million in Q2 2024) and by 51% to $6.6 million for H1 2025 (from $13.4 million in H1 2024)[144] - Research and development expenses decreased by 80% ($2.6 million) for Q2 2025 and 74% ($4.1 million) for H1 2025, primarily due to the suspension of legacy programs (nomacopan and PHP-303) and prioritization of the ADC platform[146] - General and administrative costs increased by 9% ($0.2 million) for Q2 2025 and 5% ($0.3 million) for H1 2025, mainly due to higher non-cash stock-based compensation, partially offset by lower insurance premiums and cash-based salaries[153][154] - Merger-related costs and restructuring costs were zero for Q2 and H1 2025, compared to $0.3 million and $1.6 million respectively in Q2 2024, reflecting the completion of the merger and restructuring activities[155][156] - A gain on settlement of current liabilities of $1.2 million was recognized in both Q2 and H1 2025, primarily from a settlement with a former vendor and a debt extinguishment[160][161] - Net loss decreased to $1.9 million for Q2 2025 (from $7.6 million in Q2 2024) and to $5.6 million for H1 2025 (from $13.1 million in H1 2024)[168] Financial Condition, Liquidity and Capital Resources - As of June 30, 2025, the Company had $2.7 million in cash and an accumulated deficit of $252.9 million, with existing cash and committed funds from the August 2025 Financing sufficient to fund operations only into October 2025[170][187] - The Company has incurred substantial losses and negative cash flows since inception and will require significant additional financing to fund future operations, raising substantial doubt about its ability to continue as a going concern[170][172][191] - Future capital requirements depend on factors such as R&D progress, merger integration costs, clinical trial scope, revenues from licensing, operational infrastructure expansion, regulatory approval costs, and intellectual property protection[171][173] - Net cash used in operating activities decreased to $(5.4) million for the six months ended June 30, 2025, from $(8.9) million in the prior year, primarily due to reduced R&D and restructuring costs[193] - Net cash provided by financing activities was $5.5 million for the six months ended June 30, 2025, primarily from the March 2025 Private Placement ($5.9 million net proceeds) and pre-funded warrants ($0.3 million), offset by debt repayments[198] - Debt obligations assumed from the Peak Bio Merger are expected to result in approximately $1.6 million in principal payments as of June 30, 2025[196] Critical Accounting Estimates - Key critical accounting estimates include stock-based compensation, fair value of warrants classified as liabilities, research and development prepayments/accruals, income taxes, and intangible assets impairment[199] - There have been no material changes to critical accounting policies and estimates since December 31, 2024[200] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Akari Therapeutics, Plc is not required to provide detailed quantitative and qualitative disclosures about market risk - Akari Therapeutics, Plc is a smaller reporting company and is exempt from providing detailed quantitative and qualitative disclosures about market risk[201] Item 4. Controls and Procedures This section addresses the effectiveness of Akari's disclosure controls and procedures, noting that material weaknesses identified in the previous annual report persist - Management concluded that internal control over financial reporting was not effective as of December 31, 2024, due to material weaknesses, and disclosure controls and procedures were not effective as of June 30, 2025[203][205] - Remediation efforts to address the material weaknesses have not yet commenced but are expected to begin in Q3 2025 and continue through fiscal year 2025[204][206] - No changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[208] PART II OTHER INFORMATION Item 1. Legal Proceedings This section refers to the legal proceedings detailed in the notes to the financial statements, indicating routine litigation may arise from normal business operations - The Company may become involved in routine litigation related to claims arising out of normal business operations[210] - Specific legal proceedings and settlements are detailed in Note 13 of the financial statements[210] Item 1A. Risk Factors This section advises investors to consider the risks outlined in the company's Annual Report on Form 10-K, noting no material changes to these risk factors - Investing in Akari's securities involves a high degree of risk, and investors should review the risk factors in the Annual Report on Form 10-K[211] - There have been no material changes to the risk factors previously disclosed in the Form 10-K[212] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states there were no unregistered sales of equity securities during the period other than those previously disclosed in a Current Report on Form 8-K - No unregistered sales of equity securities occurred during the three and six months ended June 30, 2025, beyond those previously reported in a Form 8-K[213] Item 3. Defaults Upon Senior Securities This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[214] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures to report - No mine safety disclosures are applicable or required[215] Item 5. Other Information This section details the August 2025 Financing, including the issuance of unsecured promissory notes and the amendment of Series A Warrants - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the fiscal quarter[216] - In August 2025, the Company entered into Note Purchase Agreements for a private placement of unsecured promissory notes totaling approximately $3 million (aggregate principal $3.8 million), with a 20% original issuance discount[217] - The Chairman, Dr Hoyoung Huh, purchased a $1.25 million note for $1.0 million, satisfied by cancelling $837,433 of outstanding debt and $162,567 in cash[217] - Series A Warrants from the March 2025 Private Placement will have their expiration date extended from 2026 to 2030 for certain August 2025 Note Investors[217] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including merger agreements, incentive plan amendments, and certifications - Exhibits include the Agreement and Plan of Merger, Amendment No 2 to the 2023 Equity Incentive Plan, Form of August 2025 Note Purchase Agreement, Form of 20% Original Issue Discount Promissory Note, Form of Amendment No 1 to Series A Warrant, and various certifications[221] SIGNATURES - The report is signed by Abizer Gaslightwala, President and Chief Executive Officer, and Torsten Hombeck, Ph.D, Chief Financial Officer, on August 13, 2025[225]