Unless the context otherwise requires, all references
to “Akari,” “we,” “us,” “our,” the “Company”, the “Group” and
similar designations refer to Akari Therapeutics, Plc and its subsidiaries. All references to “parent company” refer to Akari
Therapeutics, Plc excluding its subsidiaries.
The directors present their report and the audited
financial statements for the year ended 31 December 2021.
The principal activity of the Group is developing
advanced therapies for autoimmune and inflammatory diseases, specifically through the inhibition of the complement and leukotriene pathways.
Each of these systems has scientifically well-supported causative roles in the diseases the Company is targeting. Management believes
that blocking early mediators of inflammation will prevent initiation and continual amplification of the processes that cause certain
diseases.
The directors who served the Company during the
year and up to the date of signing the Annual Report were as follows:
It is the Group’s policy to agree to commercial
terms with its suppliers prior to purchase of goods or services. The Group negotiates favourable payment terms where possible.
The Group is committed to a policy of recruitment
and promotion on the basis of aptitude and ability. Applications for employment by disabled persons are given full and fair consideration
having regard to their particular aptitudes and abilities. Where existing employees become disabled, it is the Group’s policy, wherever
possible, to provide continuing employment under normal terms and conditions and to provide training, career development and promotion
wherever appropriate.
The Company’s Articles of Association provide,
subject to the provisions of UK legislation, an indemnity for directors and officers of the Company in respect of liabilities they may
incur in the discharge of their duties or in the exercise of their powers, including any liabilities relating to the defence of any proceedings
brought against them which relate to anything done or omitted, or alleged to have been done or omitted, by them as officers or employees
of the Company.
Appropriate directors and officer’s liability
insurance cover is in place in respect of all Company directors.
We are a group with a small number of employees.
We have serviced offices and we currently outsource our research, development, testing and manufacturing activities. As a result, the
group consumed 40,000 kWh of energy or less during the year ended 31 December 2021. For this reason, no disclosures concerning greenhouse
gas emissions, energy consumption and energy efficiency action are made under the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008.
Haysmacintyre LLP have indicated their willingness to continue in office
as auditor for another year. In accordance with section 489 of the Companies Act 2006, a resolution proposing that Haysmacintyre LLP be
reappointed as auditors of the Company will be put to the Annual General Meeting.
As at 31 December 2021 no other person had
reported an interest of 3% or more in the Company’s ordinary shares.
The Group is not required to implement the provisions
of the UK Corporate Governance Code (the “Code”).
Regular board meetings are held and the Executive
Directors are heavily involved in the day to day running of the business. The Board of Directors meets regularly and is responsible for
overseeing management, formulating strategy and monitoring financial performance.
The Group meets its day-to-day working capital
requirements through funding. In assessing the Company’s ability to continue as a going concern, Management has prepared financial
forecasts covering at least the next twelve months from the date of approval of the financial statements.
The Group’s forecast and projections, show
that at present, the Group has insufficient working capital to fulfil its current business plan without the Group raising additional capital.
We plan to raise additional funds from external
sources and/or from Aspire Capital with which the Group has approximately $22.0
million remaining of the total $30.0 million commitment to drawdown
in the form of equity funding as of 4 June 2022. In our assessment, the remaining availability of funds under the Aspire facility,
together with our expectation of the Group’s ability to raise capital from other fundraising sources could extend the Group’s
ability to fund operations into December 2023 without any subsequent adjustment to the preliminary forecast. The Group currently
intends to pursue other external fundraising sources within the fiscal year 2021, although securing such fundraising is subject to uncertainty.
Therefore, based on the availability of funds
under the Aspire facility, and ability to reduce both R&D and other administrative expenditure costs significantly if so required,
management believes the Group’s financial prospects are sufficient to fund future operations for at least the next twelve months.
Ultimately, the Group will require additional
capital in order to develop and commercialise our current product candidates or any product candidates that we acquire, if any, particularly
for the period beyond the next twelve months. There can be no assurance that additional funds will be available when we need them on terms
that are acceptable to us, or at all. If adequate funds are not available on a timely basis, we may be required to terminate or delay
development for one or more of our product candidates.
These matters indicate the existence of conditions
that give rise to a material uncertainty (specifically, the reliance on fundraising, which is not guaranteed, to facilitate the Group's
operating activities) which may cast significant doubt on the Group's ability to continue as a going concern. Notwithstanding these uncertainties,
the Directors have concluded that there is a reasonable expectation that the Group has the ability to continue to raise such funding and
therefore consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include
any adjustments to the carrying amounts and classifications of assets and liabilities that would result if the Group was unable to continue
as a going concern.
Events occurring after the year end and required
to be disclosed are detailed in note 20 of the notes to the financial statements.
The directors are responsible for preparing the
Annual Report and the financial statements in accordance with applicable laws and regulations.
Company law requires the directors to prepare
Group and Parent company financial statements for each financial year. Under that law the directors have elected to prepare the Group
and Parent company financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted
by the United Kingdom. Under company law the directors must not approve the financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and the Company and their profit or loss for that period.
The financial statements are required by law and
IFRS as adopted by the United Kingdom to present fairly the financial position and performance of the Group.
The directors consider that the Annual Report,
taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s
performance, business model and strategy.
Each of the directors at the time the report is
approved confirms that, as at that time:
We are a clinical-stage biopharmaceutical company
focused on developing advanced therapies for autoimmune and inflammatory diseases, specifically through the inhibition of the complement
and leukotriene pathways. Each of these systems 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.
Ticks have undergone 300 million years of natural
selection to produce inhibitors that bind tightly to key highly-conserved inflammatory mediators, are generally well tolerated in humans,
and remain fully functional when a host is repeatedly exposed to the molecule. Our molecules are derived from these inhibitors.
Our lead product candidate, nomacopan inhibits
both terminal complement activation and leukotriene B4, or LTB4. It inhibits terminal complement activation by tightly binding to C5 and
preventing its cleavage and activation by complement. It inhibits LTB4 by capturing the fatty acid within the body of the nomacopan protein.
By preventing C5 activation of complement nomacopan can stop formation of the anaphylatoxin C5a which activates cells, including granulocytes
and T and B cells, via two G protein coupled receptors, or GPCRs, and also prevents formation of the membrane attack complex, or MAC which
activates cells including endothelial cells. C5a and the MAC cause and maintain a proinflammatory and prothrombotic state. LTB4 also activates
cells via two separate GPCRs and can independently cause and maintain a proinflammatory state. The importance of nomacopan’s dual
inhibitory action is therefore twofold. First, it can prevent inflammatory and prothrombotic activities of two key pathways, and second,
the pathways can be independently activated, for example terminal complement activation can be induced by IgG, IgM, carbohydrates
and damage associated molecular patterns and LTB4 synthesis can be induced by engagement of Fc gamma receptors, cytokines, toll-like receptors,
C5a and MAC.
Nomacopan is a recombinant small protein (16,769
Da) derived from a protein originally discovered in the saliva of the Ornithodoros moubata tick, where it modulates the host immune system
to allow the parasite to feed without alerting the host to its presence or provoking an immune response.
Nomacopan has received orphan drug designation
from the U.S. Food and Drug Administration, or the FDA, for paroxysmal nocturnal hemoglobinuria, or PNH, high-risk hematopoietic stem
cell transplant-associated thrombotic microangiopathy, or HSCT-TMA, and bullous pemphigoid, or BP and from the European Medicines Agency,
or the EMA, for PNH, Guillain Barré Syndrome, or GBS and BP. Orphan drug designation provides us with certain benefits and incentives,
including a period of marketing exclusivity if marketing authorization of the drug is ultimately received for the designated indication.
The receipt of orphan drug designation status does not change the regulatory requirements or process for obtaining marketing approval
and the designation does not mean that marketing approval will be received. We intend to apply in the future for orphan drug designation
in additional indications we deem appropriate.
We have received Fast Track designation from the
FDA for the investigation of nomacopan for the treatment of pediatric HSCT-TMA and for the treatment of PNH in patients who have polymorphisms
conferring Soliris® (eculizumab) resistance and the treatment of BP. The Fast Track program was created by the FDA to facilitate the
development and expedite the review of new drugs which show promise in treating a serious or life-threatening disease and address an unmet
medical need. Drugs that receive this designation benefit from more frequent communications and meetings with the FDA to review the drug’s
development plan including the design of the proposed clinical trials, use of biomarkers and the extent of data needed for approval. Drugs
with Fast Track designation may also qualify for priority review to expedite the FDA review process, if relevant criteria are met.
Our clinical targets for nomacopan are inflammatory
diseases where the inhibition of both C5 and LTB4 are implicated, including BP, pediatric HSCT-TMA, and as well as both orphan and mass
market inflammatory conditions in the eye and lung.
Net cash used in operating activities for the
year ended 31 December 2021 was approximately $18,847,000 (2020: $16,951,000).
Net cash flow used in operating activities was primarily attributed to our ongoing research activities to support nomacopan, including
manufacturing, clinical trial and preclinical activities.
The Group requires additional funding to continue
its future operations and planned research and development activities. The directors recognise that the Group may not be able to obtain
financing on favourable terms and the terms of the Group’s finance arrangements may be dilutive. The Group may also seek additional
funding through partnership arrangements with collaborators and other third parties. These types of arrangements may require the Group
to relinquish rights to internally developed technology, product candidates or products. If the Group is unable to obtain additional funding
on a timely basis, the Group may be required to curtail or terminate some or all of its research or development programs, including some
or all of its product candidates. Additionally, the report of the Group’s statutory audit firm on its financial statements for the
period ended December 31, 2021, includes an explanatory paragraph raising substantial doubt about its ability to continue as a going
concern as a result of recurring losses from operations and net capital deficiency. The Group’s future is dependent upon its ability
to obtain financing in the future. This opinion could materially limit the Group’s ability to raise funds.
The Group plans to raise additional funds from
external sources and/or from Aspire Capital. As of 4 June 2022, $22.0
million was available for drawdown under the Company’s equity line with Aspire Capital. The availability of funds under the Aspire
facility could extend the Company’s ability to fund operations into December 2023 without any subsequent adjustment to the
preliminary forecast. Furthermore, the Company currently intends to pursue other external fundraising sources within the fiscal year 2022.
There can be no assurance that additional funds will be available when the Group needs them on terms that are acceptable, or at all.
The Company is an clinical development stage Group
with limited history of trading on which future projections can be based. There is no guarantee that the Group will succeed in growing
its current business or that the Group will be able to provideor maintain sufficient resources required for operations in the development
and introduction of its products. Many clinical development stage companies fail to achieve their business plans mainly due to lack of
being able to estimate the speed of new market entrants and the costs associated with entering markets and obtaining market share.
The Group’s drug development activities
are complex and all of the product candidates are in clinical development with a high risk of failure. It is impossible to predict when
or if any of the product candidates will prove effective or safe in humans and/or will receive regulatory approval.
Retention of key management staff is an underlying
risk of the business.
The Group is not guaranteed that any of its product
candidates will gain market acceptance amongst physicians, patients, healthcare providers, pharmaceutical companies or other customers.
The Group’s clinical trials in humans may
show that the doses or dose ratios selected based on screening, animal testing or clinical trials do not achieve the desired therapeutic
result in humans, or achieve these results only in a small part of the population. The U.S. Food and Drug Administration (“FDA”)
or other regulatory agencies in the United States and foreign jurisdictions may determine that these clinical trials do not support the
Group’s conclusion. The Group may be required to conduct additional clinical studies and provide more evidence substantiating the
safety and efficacy of the doses or dose ratios selected in a significant patient population.
Many companies, universities and research organisations
developing product candidates have greater resources and significantly greater experience in financial, research and development, manufacturing,
marketing, sales, distribution and technical regulatory matters than the Group has. These competitors could commence and complete clinical
testing of their products, obtain regulatory approval, and begin commercial-scale manufacturing of their products faster than the Group
is able to, thus resulting in a situation whereby the Group may not be able to commercialise its product candidates or achieve a competitive
position in the market.
The Group faces exposure to product liability
and other claims if its product candidates, products or processes are alleged to have caused harm. These risks are inherent in testing,
manufacturing, and marketing human therapeutic products. If the Group is sued for any injury caused by its products, product candidates
or processes, the Group’s liability could exceed its product liability insurance coverage and its total assets. Claims against the
Group, regardless of their merit or potential outcome, may also generate negative publicity or damage the Group’s ability to obtain
physician endorsement of its products or expand its business.
The Group may be unable to protect the intellectual
property relating to its product candidates, or if it infringes the rights of others, its ability to successfully commercialise its product
candidates may be harmed. The Group owns or hold licenses to a number of issued patents (foreign and foreign counterparts) and pending
patent applications. The Group’s success depends in part on its ability to obtain patent protection both in the United States and
in other territories for its product candidates, as well as the methods for treating patients in the product indications using these product
candidates. The Group’s ability to protect its product candidates from unauthorised or infringing use by third parties depends in
substantial part on its ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the
patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents,
the Group’s ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Even
if the Group’s product candidates, as well as methods for treating patients for prescribed indications using these product candidates
are covered by valid and enforceable patents and have claims with sufficient scope, disclosure and support in the specification, the patents
will provide protection only for a limited amount of time. Accordingly, rights under any issued patents may not provide the Group with
sufficient protection for a commercial advantage against competitive products or processes
The situation surrounding the COVID-19 pandemic,
including the mutation of variants, continues to remain fluid globally and we continue to manage ongoing challenges associated with the
pandemic as they relate to operations. The potential for a material impact on our business, financial condition and results of operation
remains a risk. We cannot reasonably estimate with any degree of certainty any future impact of COVID-19. Pandemics such as this can adversely
impact our business as a result of disruptions, such as travel bans, quarantines, staffing shortages, and interruptions to access the
trial sites and supply chains, which could result in material delays and complications with respect to our research and development programs
and clinical trials.
Moreover, as a result of COVID-19, there is a
general unease of conducting certain non-critical activities in medical centers. For example, while now open for enrollment, our clinical
trials have previously been halted or delayed due to COVID-19. The extent to which COVID-19 impacts operations will depend on future developments,
including the scope of any new virus mutations and outbreaks, the nature of government public health guidelines and the public’s
adherence to those guidelines, the rate of individuals becoming fully vaccinated and the public’s adherence to guidelines to receive
booster vaccinations, and the extent to which new lockdowns may be needed or are required in particular countries, including China. In
particular, the continued spread of COVID-19 globally could adversely impact our operations and workforce, including research and clinical
trials and the ability to raise capital, could affect the operations of key governmental agencies, such as the FDA, which may delay the
development of our product candidates, and could result in the inability of suppliers to deliver components or raw materials, including
drug product and drug substance, on a timely basis or at all, each of which in turn could have an adverse impact on our business, financial
condition and results of operation.
The Group finances its operations using cash generated
by the sale of equity instruments in the Group. The cash flow of the Group is monitored on a regular basis to ensure the Group has sufficient
funding to meet its capital and operational requirements.
The Group is a clinical-stage biopharmaceutical
company focused on developing advanced therapies for autoimmune and inflammatory diseases, specifically through the inhibition of the
complement and leukotriene pathways. Each of these systems has scientifically well-supported causative roles in the diseases the Group
is targeting.
The directors consider the key performance indicators
to be the research and development spend. This allows the Directors to manage the on-going activities and strategies for further development
of the Group.
The key performance indicators are measured and
reviewed on a regular basis at Board meetings and enable the Directors to communicate the performance of the Group against predetermined
targets.
When making decisions, the Directors of Akari
Therapeutics, Plc (“Akari” or the “Company”) act in the way they consider is most likely to promote the success
of the Company, for the benefit of its members as a whole, while also considering the broad range of stakeholders who interact with the
business.
Our strategy is to develop and commercialize advanced
therapies for autoimmune and inflammatory diseases.
In striving to achieve our goal to develop new
therapeutic medicines, our business touches the lives of many people. We exist in a complex and evolving regulatory and scientific environment
and as a result we have a number of key stakeholder groups. Considering the interests of our stakeholders is fundamental to the way in
which the Company operates. Our Values and Code of Ethics empower employees to make the best decisions in the interest of the Company
and our stakeholders, and help to ensure that these considerations are made not only at Board level, but throughout our organization.
Post the reporting period end, the directors of
the Company (“Directors”) have continued to take into account the Company’s stakeholders, including the potential impact
of its future activities on the community, the environment and the Company’s reputation when making decisions. The Directors also
continue to take all necessary measures to ensure the Company is acting in good faith and fairly between members and is promoting the
success of the Company for its members in the long term.
The table below serves as our Section 172
statement by setting out the key stakeholder groups, their interests and how the Company engages with them. Akari’s key stakeholders
include its investors, employees, regulatory bodies and suppliers.
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
| Stakeholder |
Why we engage |
How we engage
|
| Our Investors |
The Board and management maintain a regular and constructive dialogue with existing and potential investors to communicate the Company’s strategy and performance to promote investor confidence and ensure continued access to capital. |
• Annual
General Meetings
• Quarterly
financial results
• One-to-one
meetings by Management with analysts and institutional investors
• Investor
outreach programs including attending virtual and in-person conferences, events and roadshows
• Press
releases
• Company
website
• Social
media (e.g. LinkedIn, Twitter) |
| Our Employees |
Akari employees are key to the Company’s success and to the achievement of business objectives. We aim to be a responsible employer in our approach to employee engagement, development, performance and rewards. The health, safety and well-being of our employees is one of our primary considerations in the way we do business. Employee engagement is led primarily by the CEO, Executive Team and Chairman. |
• Market
competitive compensation and benefits aligned with role and overall performance
• Individual
development through external conferences and training opportunities
• Communication
channels between the Board, Executive Team and Akari employees
|
| Regulatory bodies |
Akari is subject to a wide range of laws, regulations, and listing requirements including the regulatory framework from FDA, EMA and other regulatory agencies, the SEC, data protection, employment, tax, environmental and health and safety legislation. |
• Company
website
• EDGAR
announcements
• Annual
Report
• Direct
contact and communications with regulators
• Compliance
updates at Board Meetings
|
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
| Stakeholder |
Why we engage |
How we engage
|
|
Our Suppliers
|
We have several key suppliers with whom we have built strong relationships. We establish communication channels to ensure our working relationship remains collaborative and forward – focused, and to create a successful and fair collaboration. |
• Building
strong working relationships with suppliers through open two-way discussions and regular meetings.
• Executing
contracts that guide expectations of both Akari and the suppliers
|
This report was approved by the Board on 5
June 2022 and signed on its behalf.
| By: |
/s/ Rachelle Jacques |
|
| Title: |
Director and Chief Executive Officer |
|
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
PART I - ANNUAL REPORT ON REMUNERATION
Information provided in this section of the Directors’ Remuneration
report is subject to audit.
Single Total Figure of Remuneration for Each Director (subject to
audit)
The following table shows the compensation paid or accrued during the
fiscal year ended 31 December 2021.
Name of
Director | |
Salary and/or
Fees ($) | | |
Taxable Benefits
($) | | |
Annual Bonus
($)(4) | | |
Long-
term
Incentive
($) | | |
Option Awards ($)(1) | | |
Pension Benefits
($) | | |
2021
Total | | |
2021
Total
Fixed | | |
2021
Total
variable | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Executive Director |
| Ray Prudo | |
| 412,000 | | |
| - | | |
| 206,000 | | |
| - | | |
| - | | |
| - | | |
| 618,000 | | |
| 412,000 | | |
| 206,000 | |
| Clive Richardson (5) | |
| 525,981 | | |
| 12,218 | (3) | |
| 206,826 | | |
| | | |
| | | |
| 52,598 | (2) | |
| 797,623 | | |
| 590,797 | | |
| 206.826 | |
| Non-Employee Director |
| James Hill, M.D. | |
| 62,752 | | |
| - | | |
| - | | |
| - | | |
| 13,547 | | |
| - | | |
| 76,298 | | |
| 76,298 | | |
| - | |
| Stuart Ungar, M.D. | |
| 49,947 | | |
| - | | |
| - | | |
| - | | |
| 13,547 | | |
| - | | |
| 63,494 | | |
| 63,494 | | |
| - | |
| David Byrne | |
| 52,143 | | |
| - | | |
| - | | |
| - | | |
| 13,547 | | |
| - | | |
| 65,689 | | |
| 65,689 | | |
| - | |
| Donald Williams | |
| 56,838 | | |
| - | | |
| - | | |
| - | | |
| 13,547 | | |
| - | | |
| 70,385 | | |
| 70,385 | | |
| - | |
| Peter Feldchreiber | |
| 49,947 | | |
| - | | |
| - | | |
| - | | |
| 13,547 | | |
| - | | |
| 63,494 | | |
| 63,494 | | |
| - | |
| Michael Grissinger | |
| 39,338 | | |
| - | | |
| - | | |
| - | | |
| 13,547 | | |
| - | | |
| 52,885 | | |
| 52,885 | | |
| - | |
(1) These amounts represent the aggregate
grant date fair value for option awards for fiscal year 2021 computed in accordance with FASB ASC Topic 718. A discussion of the assumptions
used in determining grant date fair value may be found in note 16 to our Financial Statements.
(2) Consists of company contributions to
pension scheme.
(3) Consists
of company contributions to health benefits of $8,030 and life insurance
premiums of $4,188
(4)
Bonuses are awarded on the basis of an assessment of the overall performance of the director concerned, rather than specific measures
or targets. In respect of 2021, the annual bonus payments for the Executive Directors reflect their strong personal performance
at a critical time for the business. Ray Prudo and Clive Richardson both received annual bonus payments of 100%
of the maximum available respectively, of which 100% was paid in the first
quarter of 2022. None of the awards is attributable to share price appreciation
and no discretion was exercised as a result of share price appreciation or depreciation.
(5) Mr. Richardson
resigned as Chief Executive Officer and Chief Operating Officer in March 2022.
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
The following table shows the compensation paid or accrued during
the fiscal year ended 31 December 2020.
Name of
Director | |
Salary
and/or
Fees ($) | | |
Taxable
Benefits
($) | | |
Annual
Bonus
($)(4) | | |
Long-term
Incentive
($) | | |
Option
Awards
($)(1) | | |
Pension
Benefits
($) | | |
2019
Total | | |
2019
Total
Fixed | | |
2019
Total
variable | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
| Executive Director |
| Ray Prudo | |
| 412,000 | | |
| - | | |
| 206,000 | | |
| - | | |
| - | | |
| - | | |
| 618,000 | | |
| 412,000 | | |
| 206,000 | |
| Clive Richardson | |
| 503,941 | | |
| 11,648 | (3) | |
| 214,960 | | |
| - | | |
| - | | |
| 50,394 | (2) | |
| 780,942 | | |
| 565,983 | | |
| 214,960 | |
| Non-Employee Director |
| James Hill, M.D. | |
| 62,752 | | |
| - | | |
| - | | |
| - | | |
| 19,611 | | |
| - | | |
| 82,363 | | |
| 82,363 | | |
| - | |
| Stuart Ungar, M.D. | |
| 49,947 | | |
| - | | |
| - | | |
| - | | |
| 19,611 | | |
| - | | |
| 69,558 | | |
| 69,558 | | |
| - | |
| David Byrne | |
| 52,143 | | |
| - | | |
| - | | |
| - | | |
| 19,611 | | |
| - | | |
| 71,754 | | |
| 71,754 | | |
| - | |
| Donald Williams | |
| 56,838 | | |
| - | | |
| - | | |
| - | | |
| 19,611 | | |
| - | | |
| 76,499 | | |
| 76,449 | | |
| - | |
| Peter Feldchreiber | |
| 49,947 | | |
| - | | |
| - | | |
| - | | |
| 19,611 | | |
| - | | |
| 69,558 | | |
| 69,558 | | |
| - | |
| Michael Grissinger | |
| 39,338 | | |
| - | | |
| - | | |
| - | | |
| 19,611 | | |
| - | | |
| 58,949 | | |
| 58,944 | | |
| - | |
(1) These amounts represent the aggregate
grant date fair value for option awards for fiscal year 2020 computed in accordance with FASB ASC Topic 718. A discussion of the assumptions
used in determining grant date fair value may be found in note 16 to our Financial Statements.
(2) Consists of company contributions to
pension scheme.
(3) Consists of company contributions to
health benefits of $7,288 and life insurance premiums of $4,360.
(4)
Bonuses are awarded on the basis of an assessment of the overall performance of the director concerned, rather than specific measures
or targets. In respect of 2020, the annual bonus payments for the Executive Directors reflect their strong personal performance
at a critical time for the business. Ray Prudo and Clive Richardson both received annual bonus payments of 100% of the maximum available
respectively, of which 100% was paid in the first quarter of 2021. None of the awards is attributable to share price appreciation and
no discretion was exercised as a result of share price appreciation or depreciation.
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
Incentive Plan Awards (subject to audit)
Akari operates an equity incentive plan (the
2014 Equity Incentive Plan, or 2014 Plan) under which directors receive options to acquire ordinary shares in Akari. Options awards granted
during the fiscal year ended 31 December 2021 are as follows:
| Name of Director | |
Option
Awards (1) | | |
Grant Date | |
Exercise
Price | | |
Face Value
($) (2) | | |
Option
Vesting Date | |
Option
Expiry Date |
| James Hill | |
| 1,300,000 | | |
30/06/21 | |
$ | 0.0173 | | |
$ | 22,490 | | |
30/06/22 | |
30/06/31 |
| Stuart Ungar | |
| 1,300,000 | | |
30/06/21 | |
$ | 0.0173 | | |
$ | 22,490 | | |
30/06/22 | |
30/06/31 |
| David Byrne | |
| 1,300,000 | | |
30/06/21 | |
$ | 0.0173 | | |
$ | 22,490 | | |
30/06/22 | |
30/06/31 |
| Donald Williams | |
| 1,300,000 | | |
30/06/21 | |
$ | 0.0173 | | |
$ | 22,490 | | |
30/06/22 | |
30/06/31 |
| Michael Grissinger | |
| 1,300,000 | | |
30/06/21 | |
$ | 0.0173 | | |
$ | 22,490 | | |
30/06/22 | |
30/06/31 |
| Peter Feldschreiber | |
| 1,300,000 | | |
30/06/21 | |
$ | 0.0173 | | |
$ | 22,490 | | |
30/06/22 | |
30/06/31 |
(1) Option awards are subject to time-based
vesting without performance measures or targets other than continued service until the date of vesting.
(2) These amounts represent the face value
for option awards, calculated as the number of shares awarded (assuming full vesting) multiplied by the price per share implied by the
market price per ADS, which is equal to the stated exercise price.
Director’s shareholdings (subject to
audit)
The table below shows, for each director, the
total number of ordinary shares owned (by the director and connected persons), the total number of those share options that were held
and the number of share options vested as at 31 December 2021. All share options are subject to time-based vesting without performance
measures or targets other than continued service until the date of vesting. No director exercised any share options during the year ended
31 December 2021.
| Name of Director | |
Ordinary Shares Owned | | |
Share Options | | |
Vested Share Options (1) | |
| | |
| | |
| | |
| |
| Executive Director |
| Ray Prudo (2) | |
| 871,186,700 | | |
| - | | |
| - | |
| Clive Richardson | |
| 10 | | |
| 40,771,850 | | |
| 35,771,850 | |
| Non-Employee Director |
| James Hill | |
| - | | |
| 9,100,000 | | |
| 7,800,000 | |
| Stuart Ungar | |
| 20 | | |
| 9,100,000 | | |
| 7,800,000 | |
| David Byrne | |
| - | | |
| 9,100,000 | | |
| 7,800,000 | |
| Donald Williams | |
| - | | |
| 9,850,000 | | |
| 8,550,000 | |
| Michael Grissinger | |
| - | | |
| 6,500,000 | | |
| 4,875,000 | |
| Peter Feldschreiber | |
| - | | |
| 6,500,000 | | |
| 4,875,000 | |
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
(1) All share options that were outstanding
as at 31 December 2021 use time-based vesting and are not subject to performance targets other than continued service until the
date of vesting. None of the options have been exercised.
(2) Represents the entire holdings of RPC
Pharma Limited, Praxis Trustees Limited As trustee of The Sonic Healthcare Holding Company and Dr. Ray Prudo and includes warrants
to purchase 9,210,500 ordinary shares (equivalent to 92,105 ADSs) at an exercise price of $0.03 per share (or $3.00 per ADS) which expire
on July 1, 2024 and warrants to purchase 7,500,000 ordinary shares (equivalent to 75,000 ADSs) at an exercise price of $0.02 per
share (or $2.20 per ADS) which expire on February 21, 2025. Dr. Prudo has voting and dispositive control over the ordinary
shares held by RPC Pharma Limited and owns approximately 67.8% of RPC’s outstanding shares (including option grants), including
10.6% of RPC’s outstanding shares held in trust for Dr. Ungar. Dr. Prudo disclaims beneficial ownership except to the
extent of his actual pecuniary interest in such shares.
The remainder of this Directors’ Remuneration Report is not
subject to audit.
Illustration of Total Shareholder Return
The following graph compares the cumulative total
shareholder return on Akari’s ADSs, each representing 100 ordinary shares, with that of the Nasdaq Biotech Index from the period
that Akari’s ADSs were publicly traded on The Nasdaq Capital Market through 31 December 2021. Akari selected the Nasdaq Biotech
Index because Akari’s ADSs trade on The NASDAQ Capital Market and Akari believes this indicates its relative performance against
a group consisting of more similarly situated companies.
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
Chief Executive Total Remuneration History
The table below sets out total remuneration details for the Chief
Executive Officer.
| Period | |
Single total
figure of
remuneration
($) | | |
Annual Bonus
($) | | |
Short-term
incentive
payout against
maximum (1) | | |
Option Award
($) | | |
Option
Awards
against
maximum (2) | |
| 2021 Clive Richardson (3) | |
| 525,981 | | |
| 208,826 | | |
| - | | |
| - | | |
| - | |
| 2020 Clive Richardson | |
| 503,941 | | |
| 214,960 | | |
| - | | |
| - | | |
| - | |
| 2019 Clive Richardson (4) | |
| 432,408 | | |
| 177,028 | | |
| - | | |
| - | | |
| - | |
| 2018 (David Solomon) (5) | |
| 173,611 | | |
| - | | |
| - | | |
| - | | |
| - | |
| 2017 (Gur Roshwalb and David Solomon) (5) | |
| 1,338,253 | | |
| 119,041 | (8) | |
| 100 | %(9) | |
| - | | |
| - | |
| 2016 (Gur Roshwalb) | |
| 581,250 | | |
| 187,500 | | |
| 125 | %(10) | |
| - | | |
| - | |
| 2015 (Gur Roshwalb) | |
| 7,306,951 | | |
| 86,625 | | |
| 100 | %(11) | |
| 6,863,034 | | |
| - | |
| 2014 (Gur Roshwalb) | |
| 410,564 | | |
| - | | |
| - | | |
| 60,564 | | |
| - | |
| 2013 (Gur Roshwalb) (6) | |
| 576,389 | | |
| - | | |
| - | | |
| 173,396 | | |
| - | |
| 2012 (7) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| (1) | All cash bonuses to Clive Richardson were awarded on a discretionary
annual basis. |
| (2) | All options were awarded on a discretionary
basis. |
| (3) | Clive Richardson resigned as Chief Executive
Officer and Chief Operating Officer in March 2022. |
| (4) | Clive Richardson was appointed Interim Chief
Executive on 8 May 2018 and Chief Executive Officer on 18 July 2019. |
| (5) | Dr. Roshwalb resigned as Akari’s
Chief Executive Officer on 29 May 2017 and David Solomon was appointed as Akari’s
Chief Executive Officer on 28 August 2017 and resigned 8 May 2018. |
| (6) | Dr. Roshwalb was appointed as Akari’s
Chief Executive Officer on 4 March 2013. |
| (7) | Akari was not a quoted company in 2012. |
| (8) | Includes a $50,000 signing bonus. |
| (9) | Bonus was awarded in 2017 but calculated
from Dr. Solomon’s appointment on 28 August 2017. |
| (10) | Bonus was awarded in 2016 but calculated
for a 15-month period from the date of the acquisition of Volution Immuno Pharmaceutical
SA on 18 September 2015. |
| (11) | Bonus was awarded in 2015 but calculated
for a 9-month period until the date of the acquisition of Volution Immuno Pharmaceutical
SA on 18 September 2015. |
Directors’s Remuneration Compared to
Other Employees
The table below shows the percentage change in
remuneration of each director and the parent company’s non-director employees on a full-time equivalent basis between the year
ended 31 December 2020 and the year ended 31 December 2021.
| | |
Change in Remuneration in year ended 31 December 2021 compared with
remuneration in the year ended 31 December 2020 | |
| |
| Salary
and/or Fees | | |
| Taxable
Benefits | | |
| Annual
Bonus | |
| Executive Director | |
| | | |
| | | |
| | |
| Ray Prudo | |
| 0 | % | |
| | | |
| 0 | % |
| Clive Richardson | |
| 4 | % | |
| 5 | % | |
| -4 | % |
| Non-employee Director | |
| | | |
| | | |
| | |
| James Hill, M.D. | |
| - | | |
| - | | |
| - | |
| Stuart Ungar, M.D. | |
| - | | |
| - | | |
| - | |
| David Byrne | |
| - | | |
| - | | |
| - | |
| Donald Williams | |
| - | | |
| - | | |
| - | |
| Peter Feldschreiber | |
| - | | |
| - | | |
| - | |
| Michael Grissinger | |
| - | | |
| - | | |
| - | |
| Other Employees | |
| 11 | % | |
| 44 | % | |
| 25 | % |
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
Relative Importance of Spend on Pay
The following table sets forth the total amounts
spent by the Company on remuneration for the year ended 31 December 2021 and the year ended 31 December 2020. Given that Akari
remains in the early phases of its business life cycle, the comparator chosen to reflect the relative importance of Akari’s spend
on pay is Akari’s research and development costs for the year ended 31 December 2021.
| Period | |
Year Ended
31 December 2021
($) | | |
Year Ended
31 December 2020
($) | |
| Total spend on remuneration | |
| 3,852,268 | | |
| 3,505,737 | |
| Shareholder distributions | |
| - | | |
| - | |
| Research and development costs | |
| 12,198,000 | | |
| 12,241,000 | |
Implementation of remuneration policy for year ending 31 December 2021
Our director compensation program is administered
by our board of directors with the assistance of the compensation committee. The compensation committee conducts an annual review of
director compensation and makes recommendations to the board with respect thereto.
The shareholders approved our Directors Remuneration
Policy on June 30, 2021 to provide a framework for the Directors’ compensation packages.
In addition, the Company has a non-employee director compensation policy, which was amended and restated on November 19, 2015 and
was subsequently amended on June 29, 2016, January 26, 2017, January 23, 2018, January 8, 2019 and on January 9,
2020. The Company does not intend to make any significant changes in the way that the Directors Remuneration Policy will be implemented
in 2022 compared to how it was implemented in 2021 and does not expect any deviations from the procedure for the implementation of the
Directors Remuneration Policy set out in the policy. On December 7, 2020, our Compensation Committee resolved that the cash compensation
and committee membership fees for the fiscal year 2021 would remain the same as they were for 2020. As a result, our non-employee directors
will be compensated for service on our board of directors as follows in 2021:
| |
¨ |
an annual retainer for
service on the board of directors of $39,338; |
| |
¨ |
an annual retainer for
service as a member of the compensation committee and nominating and governance committee of $5,305; |
| |
¨ |
an annual retainer for
service as a member of the audit committee of $7,500; |
| |
¨ |
for the chairman of the
compensation committee, and nominating and governance committee, an annual retainer of $10,609; |
| |
¨ |
for the chairperson of
the audit committee, an annual retainer of $17,500; |
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
The following table presents the increases in compensation (board fees and/or salaries) agreed for the upcoming fiscal year (with the
agreed increases for the year ended 31 December 2021 presented as comparative information)
| Director | |
31
December
2020 | | |
31
December
2021 | | |
Increase % | | |
31
December
2021 | | |
31
December
2022(1) | | |
Increase % |
|
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Executive Director |
| Ray Prudo | |
$ | 412,000 | | |
$ | 412,000 | | |
| 0 | % | |
$ | 412,000 | | |
$ | 412,000 | | |
| 0 | % |
| Clive Richardson(2) | |
£ | 382,306 | | |
£ | 382,306 | | |
| 0 | % | |
£ | 382,306 | | |
£ | 382,306 | | |
| 0 | % |
| Rachelle Jacques(3) | |
| | | |
| | | |
| | | |
| | | |
$ | 600,000 | | |
| | |
| Non-Employee Director |
| James Hill, M.D. | |
$ | 62,752 | | |
$ | 62,752 | | |
| 0 | % | |
$ | 62,752 | | |
$ | 62,752 | | |
| 0 | % |
| Stuart Ungar, M.D. | |
$ | 49,947 | | |
$ | 49,947 | | |
| 0 | % | |
$ | 49,947 | | |
$ | 49,947 | | |
| 0 | % |
| David Byrne | |
$ | 52,143 | | |
$ | 52,143 | | |
| 0 | % | |
$ | 52,143 | | |
$ | 52,143 | | |
| 0 | % |
| Donald Williams | |
$ | 56,838 | | |
$ | 56,838 | | |
| 0 | % | |
$ | 56,838 | | |
$ | 56,838 | | |
| 0 | % |
| Peter Feldschreiber | |
$ | 39,338 | | |
$ | 39,338 | | |
| 0 | % | |
$ | 39,338 | | |
$ | 39,338 | | |
| 0 | % |
| Michael Grissinger | |
$ | 49,947 | | |
$ | 49,947 | | |
| 0 | % | |
$ | 49,947 | | |
$ | 49,947 | | |
| 0 | % |
| (1) | All figures are estimates. Additional discretionary
bonuses may be awarded in accordance with contractual entitlement and the remuneration policy. |
| (2) | Mr. Richardson resigned as Chief Executive
Officer and Chief Operating Officer in March 2022. His annual base compensation of £382,306
will be pro-rated. |
| (3) | Ms. Jacques
was appointed as our Chief Executive Officer in March 2022. Her annual base compensation
of $600,000 will be pro-rated. |
Compensation Committee Approach to Remuneration
Matters
The
Compensation Committee is comprised of Dr. James Hill (Chairman), Dr. Stuart Ungar, and Mr. David Byrne.
Dr. James Hill, as Chairman of our Compensation Committee, reports, in respect of 2021, that the annual bonus payments for
the Executive Directors reflect their strong personal performance at a critical time for the business. Ray Prudo and Clive Richardson
both received annual bonus payments of 100% of the maximum available respectively, of which 100% was paid in the first quarter 2022.
For the year ending 31 December 2021, our Compensation Committee resolved that the cash compensation and committee membership fees
of Non-Executive Directors would remain the same as they were for 2020 to reflect the developmental stage of the Company. All members
have continued to serve until the date of this Directors’ Remuneration Report. The charter of the Committee is set forth on Akari’s
website at http://www.akaritx.com. No person other than a member of the Compensation Committee provided to the Committee advice,
or services, that materially assisted the Committee in their consideration of matters relating to the directors’ remuneration for
2021 or remuneration issues during the consideration of an individual’s nomination as a director.
Akari is committed to ongoing shareholder dialogue
and the Compensation Committee takes an active interest in shareholder views and voting outcomes.
In respect of the last resolution to approve
the Directors’ Remuneration Report at the 2020 AGM, of the 1,055,203,832 votes cast in respect of the above resolution 1,023,958,776
votes were in favour of this resolution, 12,885,200 votes were against and 18,359,856 votes abstained.
In respect of the last resolution to approve
the Directors’ Remuneration Policy at the 2020 AGM, of the 1,055,203,832 votes cast in respect of the above resolution 955,625,587
votes were in favour of this resolution, 18,166,700 votes were against and 81,411,545 votes abstained.
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
PART II
- DIRECTORS’ REMUNERATION POLICY
INFORMATION PROVIDED IN THIS SECTION OF THE DIRECTORS’
REMUNERATION REPORT IS NOT SUBJECT TO AUDIT.
This section sets out the Directors’ Remuneration
Policy (“Policy”) of Akari Therapeutics, Plc (“Akari”), which was approved by shareholders at the 20 20
Annual General Meeting of Shareholders (“AGM”). The Policy provides Akari’s compensation framework from the date of
its approval at the AGM and for a period of three years thereafter, unless changes to the Policy are required earlier and a new Policy
is put to shareholder vote.
For the avoidance of doubt, in approving the
Directors’ remuneration policy, authority is given to Akari to honour any commitments entered into with current or former Directors
(such as the payment of a pension, fees or the vesting/exercise of past share option awards) for the periods for which they apply.
Akari’s
remuneration policy seeks to provide compensation packages which will attract, motivate, reward and retain an executive team with the
right calibre of talent, experience, and skills to lead a successful future for Akari. Akari’s compensation framework is designed
to provide a competitive package in comparison to companies of similar size, complexity, maturity profile and geographic presence. Elements
of compensation packages which are subject to performance conditions as noted in the Group’s remuneration policy may include key
performance indicators (KPIs), both financial and non-financial, which are an important component of the information needed to explain
a company’s progress towards its stated goals. Other elements which are not subject to performance measures are considered an important
component of attracting and retaining UK resident employees, including Executive Directors.
The table below sets out the main elements of
Akari’s remuneration policy for its Executive Directors and seeks to explain how each element of the compensation package operates:
Policy table – Executive Directors
| Element | |
Purpose and link
to strategy | |
Operation | |
Maximum opportunity | |
Performance metrics
and recovery
provisions |
| Base salary | |
Support the recruitment and retention of Executive officers | |
• Base
salary levels are set taking into account the role, responsibilities and individuals experience
in the position, performance of the individual and Akari. • Base
salaries are typically reviewed annually | |
• There
is no prescribed maximum increase nor any requirement to increase salary at any time. • By
exception, higher increases may be made to reflect individual circumstances. These may include significant changes in the job size or
complexity and/or promotion. | |
• None,
although overall performance of the individual is considered when setting and reviewing salaries. • No
provisions for recovery or withholding of sums as this is not performance-related. |
| | |
| |
| |
| |
|
| | |
| |
| |
| |
|
| Pension | |
Encourages and enables executives to build savings for their retirement | |
• Akari
typically makes contributions to pension plans (or retirement savings plans) to match prevailing local market practices. | |
• Currently
up to 10% of salary per annum. | |
• None. • No provisions for recovery or withholding of sums as this is not performance-related. |
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
| Other Benefits | |
Provide market competitive benefits in a cost-effective way | |
• Provisions
include medical insurance, life assurance, permanent health insurance, etc. • In exceptional circumstances, such as the relocation of an executive or for a new hire, additional benefits may be provided in the form of relocation allowance and benefits. • Other benefits may be offered if considered appropriate and reasonable by the Compensation Committee. | |
• No
prescribed maximum. The cost of benefits will vary from year to year in accordance with the cost of insuring such benefits. | |
• None. • No provisions for recovery or withholding of sums as this is not performance-related. |
| | |
| |
| |
| |
|
Bonus
| |
To reward the delivery of annual targets as well as to recognise the individual contributions towards our key strategic achievements | |
• Any bonus is paid in cash typically within 60 days after the end of the financial year to which it relates. • Performance
objectives and targets are either fixed contractually or set annually and actual payout levels
are determined after the year end, based on performance against targets subject to overriding
discretion of the Compensation Committee. | |
The maximum annual bonus payable for any financial year is capped at 100% of salary, although the Compensation Committee reserves the right to vary this amount in exceptional circumstances. | |
• Where
performance conditions are attached to a bonus payment, targets are either fixed contractually
or selected by the Compensation Committee and set annually and can include key financial,
operational and/or individual objectives. All assessments of performance against target is
made by the Compensation Committee in its sole discretion. • No
provisions for recovery or withholding of sums as the performance measures are considered
adequate.
|
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
| Equity incentive plan (2014 Equity Incentive Plan) |
|
To motivate and reward long-term performance in alignment with the shareholder interests and value-creation |
|
• Awards may be made periodically
to Executive Officers in the form of options or in shares including stock appreciation rights, phantom stock awards or stock units.
• Awards typically vest over
three or four years and may be subject to phased vesting. |
|
• There is no specific maximum
set for annual equity awards.
When making awards, the Compensation Committee will take into account
internal grant guidelines, which have been set in reference to local market norms. |
|
• Where performance conditions are attached to an award, these typically include key financial, operational and/or individual objectives subject to overall Compensation Committee discretion.
• No provisions for recovery or withholding of sums as the performance measures are considered adequate. |
| |
|
|
|
|
|
|
|
|
| CSOP (UK resident employees and directors only) |
|
|
|
• Executives are eligible to participate in the all-employee CSOP Plan under the same conditions as all other employees. |
|
• Grant value of £30,000 or local market rules as amended from time to time. |
|
• None.
• No provisions for recovery
or withholding of sums as this is not performance-related. |
Policy table – Non-Executive Directors
Akari’s non-employee compensation policy
is administered by its board of directors with the assistance of the Compensation Committee. The Compensation Committee periodically reviews
non-employee director compensation policy and makes recommendations to the board.
Non-Executive Directors typically receive an annual
retainer paid in cash for their service (depending on their additional membership and chairman responsibilities) and an annual grant of
stock options but do not participate in the bonus plan to which Executive Officers are eligible, nor do they typically receive any other
performance related payment. There are no elements of the non-employee director compensation policy which are subject to performance conditions
given the necessity to maintain directors’ independence and board effectiveness in corporate governance, and accordingly there are
no provisions for recovery or withholding of sums.
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
The table below sets out some of the features
of Akari’s current non-employee director compensation policy:
| Element |
Purpose
and link to
strategy |
Operation |
Maximum
opportunity |
Performance
metrics |
| Annual
Cash Retainer Fee |
Support
the recruitment and retention of Non-Executive Directors |
• Each
Non-Executive Director serving on the Board receives an annual cash retainer, with additional
amounts payable for acting as a chairman or a member of various committees.
• In
addition, the Chairman receive an additional cash retainer.
• Annual
cash retainers are typically payable on a quarterly basis with the exception of the Executive Chairman who is paid monthly.
• A
Non-Employee Director may elect to receive annual cash payments in the form of fully-vested ordinary shares. |
• There
is no prescribed maximum increase nor any requirement to increase board fees at any time. |
• None. |
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
| Share
Options |
Strengthens the alignment to shareholders’ interests through
share ownership
|
• Directors
typically receive an annual grant of options in the form of market value options under the
2014 Equity Incentive Plan.
• These
awards typically vest in full on the date of the next AGM following the date of grant, subject to the Non-Executive Director’s
continued service on the Board, have a term of 10 years from date of grant, and vesting accelerates in the case of a change of control. |
• Normal
initial grant and annual grant of share options will be equal to 1,300,000 (or equivalent value of ADS) but the Committee reserves the
discretion to review and amend this amount. |
• None. |
The foregoing is qualified in its entirety by
Akari’s current non-employee director compensation policy, as may be amended from time to time.
Approach to recruitment compensation
Akari’s policy is to pay a fair remuneration
package for the role being undertaken and the experience of the individual to be appointed.
Akari expects remuneration packages for Executive
Directors to include base salary, targeted level of annual cash incentive, initial and ongoing equity-based awards, standard benefits
and special provisions tailored to the recruiting situation, such as: sign-on bonus, reasonable relocation support and make-whole awards
for remuneration forfeited from a prior employer (whether on account of cash bonuses, share awards, pension benefits or other forfeited
items). The Compensation Committee retains the discretion to provide additional cash, share based payment, benefits and other remuneration
where necessary or useful to recruit new Executive Directors or to secure the ongoing service of existing Executive Directors.
The remuneration package for any new Non-Executive
Director will be set in accordance with the terms of Akari’s non-employee director compensation policy then in effect. Akari expects
remuneration packages for Non-Executive Directors to include an annual retainer paid in cash for their service (depending on their additional
membership and chairman responsibilities) and an annual grant of stock options. Non-Executive Directors do not participate in the bonus
plan to which Executive Directors are eligible, nor do they typically receive any other performance related payment.
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
Director’s service contracts
Akari’s board of directors is divided into
three classes for purposes of election (Class A Directors, who serve a one year term before being subject to re-election at Akari’s
annual general meeting; Class B Directors, who serve a two year term before being subject to re-election at the annual general meeting;
and Class C Directors who serve a three year term before being subject to re-election at the annual general meeting, provided also
that in any two year period, a majority of the board must stand for re-election).
It is the Company’s policy that Executive
Directors should have contracts with an indefinite term. Directors’ notice periods are set by the compensation committee, having
regard to the need to attract and retain talent, ensure an orderly succession and enable the Company to manage its personnel while avoiding
excessive costs. Service contracts are available for inspection at Akari’s registered office or 75/76 Wimpole Street London W1G
9RT.
Policy on Payments for Loss of Office
Akari’s approach to payments to Executive
Directors in the event of termination is to take account of the individual circumstances including the reason for termination, individual
performance, contractual obligations and the terms of any option award.
Generally, Akari employment arrangements for
Executive Directors include a notice provision and continuing payment obligations as per the individual Executive Director service contracts
following termination by Akari of an Executive Director without cause or termination by the Executive Director for good reason or change
of control. Payment obligations, if any, include base salary, benefits, and all or some portion of target annual cash remuneration. Akari
may offer payment in lieu of notice if it is considered to be in the best interests of Akari.
Treatment of unvested outstanding equity awards
will be determined according to the specific nature of termination, individual contracts, and plan rules.
The Compensation Committee reserves the right
to make payments it considers reasonable under a compromise or settlement agreement, including payment or reimbursement of reasonable
legal and professional fees, and any payment or compensation (in whatever form) in respect of statutory rights under employment law in
the US, UK or other jurisdictions. Payment or reimbursement (in whatever forms) of reasonable outplacement fees may also be provided.
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
Other relevant information considered
As appropriate, the Compensation Committee considers
the pay and conditions of the broader employee workforce, as well as the Consumer Price Index and Retail Price Index, when making compensation
related decisions for the Directors. The Compensation Committee does not consult employees, other than Executive Directors, when drafting
the Directors’ remuneration policy.
The Compensation Committee also considers shareholder
feedback, so far as it relates to compensation, when reviewing of the appropriateness of its Policy. In addition, the Compensation Committee
considers potential conflicts of interest and directors do not have sole discretion over their own remuneration.
This report was approved by the board on 5
June 2022 and signed on its behalf.
| By: |
/s/ Rachelle Jacques |
|
| Title: |
Director and Chief Executive Officer |
|
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
AKARI THERAPEUTICS PLC
FOR THE YEAR ENDED 31 DECEMBER
2021
Opinion
We have audited the financial statements of Akari
Therapeutics, Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2021
which comprise the consolidated statement of comprehensive loss, the consolidated statement of financial position, the parent company
statement of financial position, the consolidated statement of changing in equity, the parent company statement of changes in equity,
the consolidated statement of cash flows, the parent company statement of cash flows and notes to the financial statements, including
a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable
law and UK adopted international accounting standards.
In our opinion, the financial statements:
• give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 31 December 2021 and of the group’s loss for the year
then ended;
• have been properly prepared in accordance
with UK adopted international accounting standards; and
• have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with
the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
An overview of the scope of our audit
As part of designing our audit, we determined
materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered areas where subjective
judgement was exercised by the directors and management, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. We also assessed the risk of management override of controls,
including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the group and the parent company, the accounting processes and controls, and the industry
in which they operate.
Our audit scope included the statutory audit
of the parent company for the year ended 31 December 2021. It excludes the parent company’s non-UK registered subsidiaries
which were audited to component materiality for the purposes of the group audit.
Key audit matters
Key audit matters are those matters that, in
our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
| Key
Audit Matter |
How
our scope addressed this matter |
Securities Purchase Agreement
Included in the Group Statement of Financial
Position are share application funds in advance of $1,120,000. These funds relate to monies received in advance of the issuance of
ADS warrants through a Securities Purchase Agreement.
Management performed an assessment of the
date at which the funds received and instruments issued should be recognised as equity within the Statement of Financial Position.
The assessment was made with reference to the substance of the legal agreement between the investors and the Group.
There is a risk that the interpretation of
this agreement is not correct and that the ADS warrants issues are not recognised as equity in the correct period.
|
Our audit work included, but was not restricted
to, the following:
• Review
of management’s assessment of how funds received in advance of the issuance of ADS warrants through a Securities Purchase Agreement
should be classified in accordance with IAS 32: Financial Instruments: Presentation;
• Review
of audit evidence to corroborate management’s assessment; and
• Review
of disclosures made in the financial statements to ensure the treatment of advanced subscription proceeds received are appropriately
outlined. |
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
AKARI THERAPEUTICS PLC (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
Our application of materiality
We apply the concept of materiality both in planning
and performing our audit, and in evaluating the effect of misstatements on our audit and on the financial statements. For the purposes
of determining whether the financial statements are free from material misstatement we define materiality as the magnitude of misstatement
that makes it probable that the economic decisions of a reasonably knowledgeable person, relying on the financial statements, would be
changed or influenced. We determined overall materiality for the Group financial statements as a whole to be US$355,000 being 1.7% of
expenditure for the year. We considered it appropriate to determine our materiality based on expenditure as we consider this to be the
key metric in assessing the financial performance and position of the Group given its primary purpose is to undertake research and development
activities. On the basis of our risk assessments, together with our assessment of the overall control environment, we apply a different
level of materiality, performance materiality, to determine the extent of our testing and this was set at 75% of the overall audit financial
statements’ materiality, being $266,250.
We agreed with management that we would report
to the Audit Committee all audit differences in excess of US$17,750 as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
Material uncertainty in relation to going
concern
We draw attention to note 1(c) in the financial
statements, which outlines considerations relating to the group’s and parent company’s ability to continue as a going concern.
The disclosure indicates that the group and parent company is reliant on additional funding to meet their liabilities as they fall due.
These circumstances indicate the existence of a material uncertainty which may cast significant doubt on the group’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have
concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
They have concluded that there is a material uncertainty which could cast significant doubt over the going concern status of the Group
due to the impact of the requirement for additional fundraising, and we agree that this is adequately disclosed in the Directors’
Report and the accounting policies.
The key risk identified was uncertainty around
the ability of the Group and Parent Company to raise funds in order to continue operations. While the Group and Parent Company have a
history of raising funds as required, past history is no guarantee that further fundraising will be successful. Future fundraising could
be delayed and the amounts arising from future fundraises are uncertain. A significant delay in the ability to raise funds would negatively
impact the group’s ability to generate cash to meet its liabilities as and when they fall due.
Our evaluation of the directors’ assessment
of the entity’s ability to continue to adopt the going concern basis of accounting included an assessment of the inherent risks
to the Group’s business model and how such risks may impact the ability to continue operations over the going concern assessment
period. We also undertook the following procedures:
| - | We
reviewed trading and fundraising activities after the reporting date and considered management’s
assessment of the Group’s and Parent Company’s prospects regarding further fundraising. |
| - | We
reviewed cash flow forecasts prepared by management and assessed their adequacy, and also
challenged the assumptions and judgements inherent within them. |
| - | We
assessed the Group’s and Parent Company’s ability to scale back operations and
reduce costs as a means of preserving cash in the twelve months from approval of the financial
statements. |
| - | We
have corroborated cash levels after the reporting date to consider whether they are in line
with forecasts and investigated the reasons for any significant discrepancies. |
| - | We
reviewed prior period budgets and forecasts against actual performance to consider management’s
ability to accurately forecast and budget. |
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
AKARI THERAPEUTICS PLC (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
Our responsibilities and the responsibilities
of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The directors are responsible for the other information.
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken
in the course of the audit:
• the information given in the strategic
report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the
financial statements; and
• the strategic report and the directors’
report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report
by exception
In the light of the knowledge and understanding
of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements
in the strategic report or the directors’ report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been
kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements
are not in agreement with the accounting records and returns; or
• certain disclosures of directors’
remuneration specified by law are not made; or
• we have not received all the information
and explanations we require for our audit.
Responsibilities of directors
As
explained more fully in the directors’ responsibilities statement set out on page 4, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors
are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances
of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
AKARI THERAPEUTICS PLC (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
Explanation as to what extent the audit was
considered capable of detecting irregularities, including fraud
Based on our understanding of the company and
industry, we identified that the principal risks of non-compliance with laws and regulations related to regulatory requirements for the
company. We considered the extent to which non-compliance might have a material effect on the financial statements. We also considered
those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, income
tax and payroll taxes.
We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that
the principal risks were related to posting inappropriate journal entries to areas subject to significant judgement and management bias
through accounting estimates. Audit procedures performed by the engagement team included:
| - | Inspecting
filings with regulators; |
| - | Discussions
with management including consideration of known or suspected instances of non-compliance
with laws and regulation and fraud; |
| - | Evaluating
management’s controls designed to prevent and detect irregularities; |
| - | Identifying
and testing journals, in particular journal entries posted with key words, by individuals
who do not usually make journals, posted around the end of the period, posted with certain
keywords, and journals posted at unusual dates or times, and; |
| - | Challenging
assumptions and judgements made by management in their critical accounting estimates. |
Because of the inherent limitations of an audit,
there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements
or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and
transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk
is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery,
collusion, omission or misrepresentation.
A
further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company's members,
as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the company's members those matters we are required to state to them in an Auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members
as a body, for our audit work, for this report, or for the opinions we have formed.
Christopher Cork (Senior Statutory Auditor)
10 Queen Street Place
For and on behalf of Haysmacintyre LLP, Statutory
Auditors
5 June 2022
10 Queen Street Place
London
EC4R 1AG
AKARI THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED 31 DECEMBER 2021
| | |
| | |
2021 | | |
2020 | |
| | |
Notes | | |
$000 | | |
$000 | |
| Research and development expenses | |
| | | |
| (12,200 | ) | |
| (12,192 | ) |
| Administrative expenses | |
| | | |
| (8,274 | ) | |
| (7,910 | ) |
| | |
| | | |
| | | |
| | |
| OPERATING LOSS | |
| 2 | | |
| (20,474 | ) | |
| (20,102 | ) |
| | |
| | | |
| | | |
| | |
| Fair value movement on liability related to options | |
| 15 | | |
| - | | |
| 557 | |
| Net finance cost | |
| 3 | | |
| (17 | ) | |
| (909 | ) |
| | |
| | | |
| | | |
| | |
| LOSS BEFORE INCOME TAX | |
| | | |
| (20,491 | ) | |
| (20,454 | ) |
| | |
| | | |
| | | |
| | |
| Income Tax Credit | |
| 4 | | |
| 2,789 | | |
| 2,857 | |
| | |
| | | |
| | | |
| | |
| loss for the YEAR | |
| | | |
| (17,702 | ) | |
| (17,597 | ) |
| | |
| | | |
| | | |
| | |
| Other Comprehensive Loss: | |
| | | |
| | | |
| | |
| Currency translation differences | |
| | | |
| (107 | ) | |
| (300 | ) |
| | |
| | | |
| | | |
| | |
| COMPREHENSIVE LOSS FOR THE YEAR | |
| | | |
| (17,595 | ) | |
| (17,897 | ) |
| | |
| | | |
| | | |
| | |
| Loss per share attributable to the ordinary equity holder of the parent: | |
| | | |
| | | |
| | |
| Basic and diluted (cents) | |
| 5 | | |
| (0.41 | ) | |
| (0.56 | ) |
All losses are derived from continuing activities
for the current and previous financial year.
The Company has elected to take the exemption
under section 408 of the Companies Act 2006 not to present the parent company income statement. Refer note 5 for the results of the parent
company.
The notes on pages 38 to 55 form an integral
part of the consolidated financial statements.
| AKARI THERAPEUTICS PLC |
COMPANY NUMBER: 05252842 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
| | |
| | |
2021
| | |
2020
(restated)
| |
| | |
Notes | | |
$000 | | |
$000 | |
| ASSETS | |
| | | |
| | | |
| | |
| Non-current assets | |
| | | |
| | | |
| | |
| Property, plant and equipment | |
| 8 | | |
| - | | |
| - | |
| Intangible Assets | |
| 7 | | |
| 23 | | |
| 27 | |
| | |
| | | |
| 23 | | |
| 27 | |
| Current assets | |
| | | |
| | | |
| | |
| Trade and Other receivables | |
| 10 | | |
| 4,976 | | |
| 3,512 | |
| Cash and cash equivalents | |
| | | |
| 9,361 | | |
| 14,056 | |
| | |
| | | |
| 14,337 | | |
| 17,568 | |
| | |
| | | |
| | | |
| | |
| TOTAL ASSETS | |
| | | |
| 14,360 | | |
| 17,595 | |
| | |
| | | |
| | | |
| | |
| EQUITY | |
| | | |
| | | |
| | |
| Capital and reserves attributable to the Company’s equity shareholders | |
| | | |
| | | |
| | |
| Called up share capital | |
| 13 | | |
| 476 | | |
| 385 | |
| Share premium | |
| 14 | | |
| 125,059 | | |
| 111,978 | |
| Capital redemption reserve | |
| 14 | | |
| 52,194 | | |
| 52,194 | |
| Other reserves | |
| 14 | | |
| (580 | ) | |
| (687 | ) |
| Merger reserve | |
| 14 | | |
| 9,128 | | |
| 9,128 | |
| Share based payment reserve | |
| 14 | | |
| 17,302 | | |
| 16,987 | |
| Reverse Acquisition reserve | |
| 14 | | |
| (20,983 | ) | |
| (20,983 | ) |
| Retained earnings | |
| 14 | | |
| (174,329 | ) | |
| (156,627 | ) |
| TOTAL EQUITY | |
| | | |
| 8,267 | | |
| 12,375 | |
| | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | | |
| | | |
| | |
| Current liabilities | |
| | | |
| | | |
| | |
| Trade and other payables | |
| 11 | | |
| 6,093 | | |
| 5,220 | |
| TOTAL LIABILITIES | |
| | | |
| 6,093 | | |
| 5,220 | |
| | |
| | | |
| | | |
| | |
| TOTAL EQUITY AND LIABILITIES | |
| | | |
| 14,360 | | |
| 17,595 | |
The financial statements were approved and authorised
for issue by the Board of Directors on 5 June 2022 and were signed below on its behalf
by:
| By: |
/s/ Rachelle Jacques |
|
| Title: |
Director and Chief Executive Officer |
|
The notes on pages 38 to 55 form an integral
part of these consolidated financial statements.
| AKARI THERAPEUTICS PLC |
COMPANY NUMBER: 05252842 |
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
| | |
| | |
2021 | | |
2020
(restated) | |
| | |
Notes | | |
$000 | | |
$000 | |
| ASSETS | |
| | | |
| | | |
| | |
| Non-current assets | |
| | | |
| | | |
| | |
| Property, plant and equipment | |
| 8 | | |
| - | | |
| - | |
| Investment in subsidiaries | |
| 9 | | |
| 20,339 | | |
| 20,339 | |
| | |
| | | |
| 20,339 | | |
| 20,339 | |
| Current assets | |
| | | |
| | | |
| | |
| Trade and Other receivables | |
| 10 | | |
| 8,826 | | |
| 7,401 | |
| Cash and cash equivalents | |
| | | |
| 9,319 | | |
| 14,014 | |
| | |
| | | |
| 18,145 | | |
| 21,415 | |
| | |
| | | |
| | | |
| | |
| TOTAL ASSETS | |
| | | |
| 38,484 | | |
| 41,754 | |
| | |
| | | |
| | | |
| | |
| EQUITY | |
| | | |
| | | |
| | |
| Capital and reserves attributable to the Company’s equity shareholders | |
| | | |
| | | |
| | |
| Called up share capital | |
| 13 | | |
| 476 | | |
| 385 | |
| Share premium | |
| 14 | | |
| 125,059 | | |
| 111,978 | |
| Capital redemption reserve | |
| 14 | | |
| 52,194 | | |
| 52,194 | |
| Merger reserve | |
| 14 | | |
| 9,128 | | |
| 9,128 | |
| Share based payment reserve | |
| 14 | | |
| 17,302 | | |
| 16,987 | |
| Retained earnings | |
| 14 | | |
| (171,590 | ) | |
| (153,976 | ) |
| TOTAL EQUITY | |
| | | |
| 32,569 | | |
| 36,696 | |
| | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | | |
| | | |
| | |
| Current liabilities | |
| | | |
| | | |
| | |
| Trade and other payables | |
| 11 | | |
| 5,915 | | |
| 5,058 | |
| TOTAL LIABILITIES | |
| | | |
| 5,915 | | |
| 5,058 | |
| | |
| | | |
| | | |
| | |
| TOTAL EQUITY AND LIABILITIES | |
| | | |
| 38,484 | | |
| 41,754 | |
As permitted by Section 408 of the Companies
Act 2006, the income statement of the parent Company is not presented as part of these financial statements. The parent Company’s
loss for the financial year was $17,614,000 (2020: loss of $17,909,000).
The financial statements were approved and authorised for issue by
the Board of Directors on 5 June 2022 and were signed below on its behalf by:
| By: |
/s/ Rachelle Jacques |
|
| Title: |
Director and Chief Executive Officer |
|
The notes on pages 38 to 55 form an integral
part of these consolidated financial statements.
AKARI
THERAPEUTICS PLC
STATEMENT
OF CHANGES IN EQUITY
FOR
THE YEAR ENDED 31 DECEMBER 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| | |
| Share
Capital
$000 | | |
| Share
Premium
$000 | | |
| Other
Reserves
$000 | | |
| Merger
Reserve
$000 | | |
| Share
Based
Payment
Reserve
$000 | | |
| Reverse
Acquisition
Reserve
$000 | | |
| Capital
Redemption
Reserve
$000 | | |
| Retained
Earnings
$000 | | |
| Total
$000 | |
| At 1 January 2020 | |
| 31,987 | | |
| 109,337 | | |
| (387 | ) | |
| 9,128 | | |
| 13,462 | | |
| (20,983 | ) | |
| - | | |
| (139,030 | ) | |
| 3,514 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Comprehensive gain/ (loss) for the year | |
| - | | |
| - | | |
| (300 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (17,597 | ) | |
| (17,897 | ) |
| Share based payments | |
| - | | |
| - | | |
| - | | |
| - | | |
| 325 | | |
| - | | |
| - | | |
| - | | |
| 325 | |
| Shares Issued | |
| 20,576 | | |
| 2,629 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 23,205 | |
| Share Buyback | |
| (50,593 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 50,593 | | |
| - | | |
| - | |
| Effect of redenomination (note 18) | |
| (1,601 | ) | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,601 | | |
| - | | |
| - | |
| Shares issued on exercise of warrants | |
| 16 | | |
| 12 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 28 | |
| Reclassification of warrants to shareholder
equity (note 15) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,200 | | |
| - | | |
| - | | |
| - | | |
| 3,200 | |
| Restated total equity at 31 December 2020 | |
| 385 | | |
| 111,978 | | |
| (687 | ) | |
| 9,128 | | |
| 16,987 | | |
| (20,983 | ) | |
| 52,194 | | |
| (156,627 | ) | |
| 12,375 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Comprehensive gain/ (loss) for the year | |
| - | | |
| - | | |
| 107 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (17,702 | ) | |
| (17,595 | ) |
| Share based payments | |
| - | | |
| - | | |
| - | | |
| - | | |
| 315 | | |
| - | | |
| - | | |
| - | | |
| 315 | |
| Shares Issued | |
| 91 | | |
| 13,081 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,172 | |
| At 31 December 2021 | |
| 476 | | |
| 125,059 | | |
| 580 | | |
| 9,128 | | |
| 17,302 | | |
| (20,983 | ) | |
| 52,194 | | |
| (174,329 | ) | |
| 8,267 | |
The notes on pages 38 to 55 form an integral
part of these consolidated financial statements.
AKARI THERAPEUTICS PLC
STATEMENT
OF CHANGES IN EQUITY
FOR
THE YEAR ENDED 31 DECEMBER 2021
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
| | |
| Share
Capital
$000 | | |
| Share
Premium
$000 | | |
| Merger
Reserve
$000 | | |
| Share
Based
Payment
Reserve
$000 | | |
| Capital
Redemption
Reserve
$000 | | |
| Retained
Earnings
$000 | | |
| Total
$000 | |
| At 1 January 2020 | |
| 31,987 | | |
| 109,337 | | |
| 9,128 | | |
| 13,462 | | |
| - | | |
| (136,067 | ) | |
| 27,847 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total comprehensive loss for the year | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (17,909 | ) | |
| (17,909 | ) |
| Share based payments | |
| - | | |
| - | | |
| - | | |
| 325 | | |
| - | | |
| - | | |
| 325 | |
| Shares Issued | |
| 20,576 | | |
| 2,629 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 23,205 | |
| Share buyback | |
| (50,593 | ) | |
| - | | |
| - | | |
| - | | |
| 50,593 | | |
| - | | |
| - | |
| Effect of redenomination (note 18) | |
| (1,601 | ) | |
| - | | |
| - | | |
| - | | |
| 1,601 | | |
| - | | |
| - | |
| Shares issued on exercise of warrants | |
| 16 | | |
| 12 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 28 | |
| Reclassification of warrants to shareholder
equity (note 15) | |
| - | | |
| - | | |
| - | | |
| 3,200 | | |
| - | | |
| - | | |
| 3,200 | |
| Restated total equity at 31 December 2020 | |
| 385 | | |
| 111,978 | | |
| 9,128 | | |
| 16,987 | | |
| 52,194 | | |
| (153,976 | ) | |
| 36,696 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total comprehensive loss for the year | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (17,614 | ) | |
| (17,614 | ) |
| Share based payments | |
| - | | |
| - | | |
| - | | |
| 315 | | |
| - | | |
| - | | |
| 315 | |
| Shares Issued | |
| 91 | | |
| 13,081 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,172 | |
| At 31 December 2021 | |
| 476 | | |
| 125,059 | | |
| 9,128 | | |
| 17,302 | | |
| 52,194 | | |
| (171,590 | ) | |
| 32,569 | |
The notes on pages 38 to 55 form an integral
part of these consolidated financial statements.
AKARI
THERAPEUTICS PLC
CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR
THE YEAR ENDED 31 DECEMBER 2021
| | |
| Note | | |
| 2021
$000 | | |
| 2020
$000 | |
| Cash flows from operating activities | |
| | | |
| | | |
| | |
| Loss before income tax | |
| | | |
| (20,491 | ) | |
| (20,454 | ) |
| Adjustments for: | |
| | | |
| | | |
| | |
| Changes in fair value of warrants | |
| | | |
| - | | |
| (557 | ) |
| Finance costs (fees settled in shares) | |
| | | |
| - | | |
| 900 | |
| Share-based payment | |
| 16 | | |
| 315 | | |
| 325 | |
| Foreign currency exchange gains | |
| | | |
| 243 | | |
| (491 | ) |
| Depreciation and amortization | |
| | | |
| 4 | | |
| 8 | |
| (Decrease)/increase in trade and other receivables | |
| | | |
| (1,742 | ) | |
| 192 | |
| Decrease/(increase) in trade and other payables | |
| | | |
| (243 | ) | |
| (246 | ) |
| Tax received | |
| | | |
| 3,067 | | |
| 3,372 | |
| Net cash flows used in operating activities | |
| | | |
| (18,847 | ) | |
| (16,951 | ) |
| | |
| | | |
| | | |
| | |
| Cash flows from financing activities | |
| | | |
| | | |
| | |
| Proceeds from issuance of ordinary shares | |
| 12 | | |
| 13,330 | | |
| 25,914 | |
| Proceeds from ordinary shares to be issued | |
| 12 | | |
| 1,120 | | |
| - | |
| Issue costs | |
| | | |
| (157 | ) | |
| (868 | ) |
| Proceeds from warrant exercise | |
| | | |
| - | | |
| 28 | |
| Cash generated from financing activities | |
| | | |
| 14,293 | | |
| 25,074 | |
| | |
| | | |
| | | |
| | |
| Exchange losses on cash and cash equivalents | |
| | | |
| (141 | ) | |
| 201 | |
| Net increase / (decrease) in cash and cash equivalents | |
| | | |
| (4,695 | ) | |
| 8,324 | |
| | |
| | | |
| | | |
| | |
| Cash and cash equivalents at beginning of period | |
| | | |
| 14,056 | | |
| 5,732 | |
| | |
| | | |
| | | |
| | |
| Cash and cash equivalents at end of period | |
| | | |
| 9,361 | | |
| 14,056 | |
The notes on pages 38 to 55 form an integral
part of these consolidated financial statements.
AKARI
THERAPEUTICS PLC
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR
THE YEAR ENDED 31 DECEMBER 2021
| | |
| Notes | | |
| 2021
$000 | | |
| 2020
$000 | |
| Cash flows from operating activities | |
| | | |
| | | |
| | |
| Loss before income tax | |
| | | |
| (20,404 | ) | |
| (20,766 | ) |
| Adjustments for: | |
| | | |
| | | |
| | |
| Changes in fair value of warrants | |
| | | |
| - | | |
| (557 | ) |
| Share based payments | |
| 16 | | |
| 315 | | |
| 325 | |
| Finance costs (fees settled in shares) | |
| | | |
| - | | |
| 900 | |
| Depreciation | |
| | | |
| - | | |
| 5 | |
| Increase in trade and other receivables | |
| | | |
| (1,703 | ) | |
| 236 | |
| (Increase)/decrease in trade and other payables | |
| | | |
| (263 | ) | |
| (291 | ) |
| Taxation received | |
| | | |
| 3,067 | | |
| 3,372 | |
| Exchange rate differences | |
| | | |
| 143 | | |
| (175 | ) |
| | |
| | | |
| | | |
| | |
| Net cash flows used in operating activities | |
| | | |
| (18,845 | ) | |
| (16,951 | ) |
| | |
| | | |
| | | |
| | |
| Cash flows from financing activities | |
| | | |
| | | |
| | |
| Proceeds from issuance of ordinary shares | |
| 12 | | |
| 13,330 | | |
| 25,914 | |
| Proceeds from ordinary shares yet to be issued | |
| 12 | | |
| 1,120 | | |
| - | |
| Issue costs | |
| | | |
| (157 | ) | |
| (868 | ) |
| Proceeds from issue of shares on warrant exercise | |
| | | |
| - | | |
| 28 | |
| | |
| | | |
| | | |
| | |
| Cash generated from financing activities | |
| | | |
| 14,293 | | |
| 25,074 | |
| | |
| | | |
| | | |
| | |
| Exchange gains on cash and cash equivalents | |
| | | |
| (143 | ) | |
| 175 | |
| | |
| | | |
| | | |
| | |
| Net decrease in cash and cash equivalents | |
| | | |
| (4,695 | ) | |
| 8,298 | |
| Cash and cash equivalents at beginning of period | |
| | | |
| 14,014 | | |
| 5,716 | |
| | |
| | | |
| | | |
| | |
| Cash and cash equivalents at end of period | |
| | | |
| 9,319 | | |
| 14,014 | |
The notes on pages 38 to 55 form an integral
part of these consolidated financial statements.
AKARI
THERAPEUTICS PLC
NOTES
TO THE FINANCIAL STATEMENTS
FOR
THE YEAR ENDED 31 DECEMBER 2021
Akari Therapeutics,
Plc is a public company limited by shares registered in England and Wales under number 5252482, with its registered office at Highdown
House, Yeoman Way, Worthing, West Sussex, BN99 3HH.
The principal accounting policies applied
in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all
the years presented, unless otherwise stated.
These consolidated financial statements
of Akari Therapeutics, Plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the
UK and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements and with those
parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements are prepared on a
historical cost conversion modified for fair value measurement as required by IFRS 9. A summary of the significant accounting policies
is set out below.
The preparation of financial statements
in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement
in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity or areas
where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 1(n).
| (b) | Basis of consolidation |
Subsidiaries are all entities
over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The subsidiaries are fully consolidated from the date on which control
is transferred to the Group and deconsolidated from the date that control ceases.
The financial statements of
the subsidiaries are prepared for the same financial year as the parent company, applying consistent
accounting policies throughout the Group. Inter-company balances and transactions, including unrealised
profits are eliminated on consolidation.
The Group financial statements consolidate
the Company’s financial statements of Akari Therapeutics, Plc and its subsidiaries (the “Group”).
The Group meets its day-to-day working
capital requirements through funding. In assessing the Company’s ability to continue as a going concern, Management has prepared
financial forecasts covering at least the next twelve months from the date of approval of the financial statements.
The Group’s forecast and projections,
show that at present, the Group has insufficient working capital to fulfil its current business plan without the Group raising additional
capital.
We
currently plan to raise additional funds from external sources and/or from Aspire Capital with which the Group has approximately $22,000,000
remaining of the total $30,000,000 commitment to drawdown in the form of equity funding as of 4 June, 2022. In our assessment,
the remaining availability of funds under the Aspire facility, together with our expectation of the Group’s ability to raise capital
from other fundraising sources could extend the Group’s ability to fund operations into December 2023 without any subsequent
adjustment to the preliminary forecast. The Group currently intends to pursue other external fundraising sources within the fiscal years
2022 and/or 2023, although securing such fundraising is subject to uncertainty.
Therefore, based on the availability
of funds under the Aspire facility, and ability to reduce both R&D and other administrative expenditure costs significantly if so
required, management believes the Group’s financial prospects are sufficient to fund future operations for at least the next twelve
months.
Ultimately, the Group will require additional
capital in order to develop and commercialise its current product candidates or any product candidates that the Group acquires, if any,
particularly for the period beyond the next twelve months. There can be no assurance that additional funds will be available when the
Group needs them on terms that are acceptable, or at all. If adequate funds are not available on a timely basis, the Group may be required
to terminate or delay development for one or more of our product candidates.
AKARI
THERAPEUTICS PLC
NOTES
TO THE FINANCIAL STATEMENTS (continued)
FOR
THE YEAR ENDED 31 DECEMBER 2021
| (c) | Going Concern (continued) |
These matters indicate the existence
of conditions that give rise to a material uncertainty (specifically, the reliance on fundraising, which is not guaranteed, to facilitate
the Group's operating activities) which may cast significant doubt on the Group's ability to continue as a going concern. Notwithstanding
these uncertainties, the Directors have concluded that there is a reasonable expectation that the Group has the ability to continue to
raise such funding and therefore consider it appropriate to prepare the financial statements on a going concern basis. The financial statements
do not include any adjustments to the carrying amounts and classifications of assets and liabilities that would result if the Group was
unable to continue as a going concern.
| (d) | Standards
and interpretations adopted during the year |
The accounting policies adopted in the
preparation of these Consolidated Financial Statements are consistent with those followed in the preparation of the Group’s audited
consolidated financial statements for the year ended 31 December 2021, which were prepared in accordance with the International Financial
Reporting Standards (“IFRS”), as adopted by the United Kingdom, updated to adopt those standards which became effective for
periods starting on or before 1 January 2020. None of the new standards have had a material impact on the Group.
Standards issued, but not yet effective
The following standards are issued,
but not yet effective. The Group intends to adopt these standards, if applicable, when they become effective. It is not expected that
these standards will have a material impact on the Group.
| |
Standard |
Effective date |
| |
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37); |
1 January 2022 |
| |
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); |
1 January 2022 |
| |
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); |
1 January 2022 |
| |
Amendments to IFRS 3: References to Conceptual Framework; |
1 January 2022 |
| |
Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current |
1 January 2023 |
| |
Disclosure of accounting policies (Amendments to IAS 1) |
1 January 2023 |
| |
Definition of accounting estimates (Amendments to IAS 8) |
1 January 2023 |
| |
Amendments to IFRS 17 Insurance contracts |
1 January 2023 |
| |
Amendments to IAS 12 Income Taxes: Deferred tax related to assets and liabilities arising from a similar transaction |
1 January 2023 |
The directors of the Company (the “Directors”)
anticipate that the application of all new and amendments to IFRS will have no material impact on the future results of the Company in
the foreseeable future.
AKARI
THERAPEUTICS PLC
NOTES
TO THE FINANCIAL STATEMENTS (continued)
FOR
THE YEAR ENDED 31 DECEMBER 2021
| 1. | ACCOUNTING POLICIES (continued) |
| (e) | Foreign currency translation |
Functional and presentation currency
Items included in the financial statements of each of the
Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional
currency”). The functional currency of Akari Therapeutics, Plc is U.S. dollars. The Group and Parent Company financial statements
are presented in U.S Dollars which is considered to the Group’s presentation currency.
Transactions and balances
Foreign currency transactions are translated
into the functional currency using the exchange rate prevailing at the date of the transactions or valuation where items are re-measured.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Group companies
The results and financial position of
all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from
the presentation currency are translated as follows:
| a) | assets and liabilities at the balance sheet date are translated at the closing rate as at that balance
sheet date; |
| b) | income and expenses for each income statement are translated at average exchange rates; and |
| c) | all resulting exchange differences are recognised in other comprehensive income. |
AKARI
THERAPEUTICS PLC
NOTES
TO THE FINANCIAL STATEMENTS (continued)
FOR
THE YEAR ENDED 31 DECEMBER 2021
| 1. | ACCOUNTING POLICIES (continued) |
Cash and cash equivalents
Cash and cash equivalents include cash
in hand and deposits held at call with banks.
Trade and other receivables
Trade and other
receivables are recognised at fair value less a provision for impairment. Bad debts are written off through the income statement when
identified. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current
assets.
Trade and other payables
Trade payables are obligations to pay
for goods or services received that have been acquired in the ordinary course of the business from suppliers. Trade payables are classified
as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Executory contracts
are recognised when both parties to the contract met their respective obligations. Trade and other payable are unsecured, non-interest
bearing and are stated at cost.
Share capital
Ordinary shares are
classified as equity. Incremental costs directly attributable to the issue of shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
| (g) | Research and development expenditure |
Research costs are expensed through the income
statement as they are incurred. Research and development expenses include, among other costs, costs incurred by outside laboratories and
other accredited facilities in connection with clinical trials and preclinical studies.
Under IAS 38, development costs
are only capitalised after technical and commercial feasibility of the asset for sale or use have been established. The company must
intend and be able to complete the asset and either use it or sell it and be able to demonstrate how the asset will generate future
economic benefit. If the company cannot distinguish between the research and the development phase, then all costs are expensed as
research costs.
| (h) | Property, plant and equipment: |
Property, plant and equipment are measured
at cost, including directly attributable costs, less accumulated depreciation and excluding day-to-day servicing expenses. The assets
residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Depreciation is calculated on a straight-line
basis over the useful life of the assets at annual rates as follows:
| Computers, peripheral and scientific equipment | |
| 33 | % |
| Office furniture and equipment | |
| 33 | % |
The Group reviews all long-lived assets
for impairment whenever events or circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of
assets to be held or used is measured by comparison of the carrying value of the asset to the future undiscounted net cash flows expected
to be generated by the asset. If such asset is considered to be impaired, the impairment recognised is measured by the amount by which
the carrying value of the asset exceeds the discounted future cash flows expected to be generated by the asset.
AKARI
THERAPEUTICS PLC
NOTES
TO THE FINANCIAL STATEMENTS (continued)
FOR
THE YEAR ENDED 31 DECEMBER 2021
| 1. | ACCOUNTING POLICIES (continued) |
Patent acquisition costs and related
capitalised legal fees are recognised at historical cost. Patents have a finite useful life and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line basis method and are amortised over the shorter of the legal or useful life. The estimated
useful life for current patents is twenty two years.
The Group expenses costs associated
with maintaining and defending patents subsequent to their issuance in the period the costs are incurred.
Investments in
subsidiary undertakings are stated at cost less provisions for impairment.
| (k) | Share-based payments and warrants |
Where share options or warrants are
awarded to directors and employees, the fair value of the options or warrants at the grant date is charged to the consolidated income
statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments
expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on
the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options and warrants granted.
As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied.
The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options
and warrants are modified before they vest, the increase in the fair value of the options and warrants, measured immediately before and
after the modification, is also charged to the consolidated income statement over the remaining vesting period.
When the options and warrants are exercised,
the company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital
(nominal value) and share premium when the options and warrants are exercised.
When share options and warrants lapse,
any amounts credited to the share-based payments reserve are released to the retained earnings reserve.
Where warrants and options issued with settlement criteria
that outside fixed for fixed criteria as outlined by IAS 32 (i.e. fixed number of shares for fixed amount of cash) the resulting fair
value of the instruments issued will be classified in financial liabilities.
| (l) | Finance income and expenses |
Interest income and expenses are recognised
using the effective interest method. It mainly comprises of changes in the fair value of financial assets and liabilities that are measured
at fair value through the income statement and exchange gains and losses which is reported on a net basis in the statement of comprehensive
loss.
AKARI
THERAPEUTICS PLC
NOTES
TO THE FINANCIAL STATEMENTS (continued)
FOR
THE YEAR ENDED 31 DECEMBER 2021
| 1. | ACCOUNTING POLICIES (continued) |
Deferred tax is
provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their
carrying values in the financial statements. The deferred tax is not accounted for if it arises from initial recognition of an asset or
liability in a transaction, other than a business combination, that at the time of the transaction does not affect either the accounting
or taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the
balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets
are recognised to the extent that it is probable that future taxable profit will be available against which temporary differences can
be utilised.
| (n) | Critical accounting estimates and judgements: |
The Group makes estimates and assumptions
concerning the future. The preparation of financial statements requires management and the Board of Directors to make estimates and judgments
that affect reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
These estimates are based on historical experience and various other assumptions that management and the Board believe are 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,
significantly impacting earnings and financial position.
Management
believes that the following areas, all of which are discussed and separately marked in the respective sections of Note 1 “Accounting
Policies,” comprise the most difficult, subjective or complex judgments it has to make in the preparation of the financial statements:
Assessment of the capitalisation of research and development expenditure, calculation and classification of share based payments
and the assessment of the carrying value of the subsidiary for impairment.
Research and Development: Under IAS
38: Intangible Assets, the Group must determine whether to recognise research costs incurred as an expense or asset. Depending on the
development stage of a project determines whether an expense can be capitalised. Difficultly can arise at determining the stage of a project.
No costs have been capitalised in the year ended 31 December 2021.
Share based payments: The Group issues
share options and warrants to employees, service providers and investors. Where share options and warrants are issued in return for services,
appropriate valuation methods are used to recognise an appropriate expense is recognised in the financial statements. These valuation
methods are subject to significant estimation as outlined in note 16. Where warrants issued to investors are classified as free-standing
liabilities, they are remeasured to fair value at each reporting date for which both judgement and estimation is required in relation
based on unobservable valuation input assumptions, resulting in a higher degree of estimation uncertainty.
Investment in subsidiary: The Parent
must continually assess the carrying value of investments in subsidiaries for indications of impairment. Indications of impairment are
considered with reference to the Group’s market capitalisation, internal assessment of the ongoing contribution of intellectual
property and any other indications of obsolescence and progress in line with the Group’s business plan.
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
2. EXPENSES BY NATURE
The operating loss is stated after charging/(crediting):
| | |
2021 | | |
2020 | |
| | |
$000 | | |
$000 | |
| Employee benefit expense (see below) | |
| 4,249 | | |
| 4,061 | |
| Depreciation | |
| - | | |
| 5 | |
| Amortisation | |
| 4 | | |
| 3 | |
| Commitment fees | |
| - | | |
| 900 | |
| Exchange (loss)/ gain | |
| 193 | | |
| 351 | |
| Auditors’ remuneration - fees
for the audit of the Group and Parent Company financial statements | |
| 44 | | |
| 41 | |
| | |
2021 | | |
2020 | |
| | |
$000 | | |
$000 | |
| Employee benefit expense | |
| | | |
| | |
| Wages and salaries | |
| 3,852 | | |
| 3,506 | |
| Social security costs | |
| 397 | | |
| 378 | |
| Retirement benefits | |
| 189 | | |
| 177 | |
| | |
| | | |
| | |
| | |
| 4,438 | | |
| 4,061 | |
| | |
| | | |
| | |
| The average number of persons (including directors)
employed by the group during the year was as follows: Office and administration | |
| 16 | | |
| 17 | |
| | |
| | | |
| | |
| Key management remuneration | |
| | | |
| | |
| Wages and salaries | |
| 1,694 | | |
| 1,678 | |
The key management is considered to
be the directors and senior management team. Details of directors’ remuneration and share based compensation can be seen within
the Directors’ Remuneration Report on pages 13 to 26.
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
3. NET
FINANCE INCOME/(LOSS)
| | |
2021 | | |
2020 | |
| | |
$000 | | |
$000 | |
| Commitment fees | |
| - | | |
| (900 | ) |
| Interest Income | |
| 11 | | |
| 13 | |
| Other | |
| (27 | ) | |
| (22 | ) |
| | |
| (16 | ) | |
| (909 | ) |
4. INCOME
TAX CREDIT
| | |
2021 | | |
2020 | |
| | |
$000 | | |
$000 | |
| Current tax: | |
| | |
| |
| Current tax on losses for the year | |
| (2,752 | ) | |
| (2,812 | ) |
| Adjustment in respect of prior years | |
| (37 | ) | |
| (45 | ) |
| | |
| (2,789 | ) | |
| (2,857 | ) |
| The tax assessed in the year is different from the standard rate of corporation tax in the UK of 19% in 2021 (2020: 19%) | |
| | | |
| | |
| The differences are explained below: | |
| | | |
| | |
| | |
| | | |
| | |
| Loss before tax | |
| (20,491 | ) | |
| (20,454 | ) |
| | |
| | | |
| | |
| Loss on ordinary activities before tax multiplied by the
standard companies’ rate of tax in the UK | |
| (3,893 | ) | |
| (3,886 | ) |
| | |
| | | |
| | |
| Effects of: | |
| | | |
| | |
| Deferred tax asset on losses not recognised | |
| 2,215 | | |
| 2,044 | |
| Expenses not deductible for tax purposes | |
| 110 | | |
| 241 | |
| Surrender of tax loses for R&D tax credit refund | |
| 1,568 | | |
| 1,601 | |
| Additional deduction for R&D tax credit | |
| (2,752 | ) | |
| (2,812 | ) |
| Adjustment in respect of prior years | |
| (37 | ) | |
| (45 | ) |
| Tax credit | |
| (2,789 | ) | |
| (2,857 | ) |
5. LOSS ATTRIBUTABLE TO THE PARENT COMPANY
The parent Company has taken advantage
of section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial statements. The parent
Company had a loss for the year of $17,614,000 (2020: $17,909,000).
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
6. BASIC AND DILUTED LOSS PER SHARE
The calculation of basic and diluted loss per share is based on the loss attributable to ordinary shareholders of $17,702,000 (2020: $17,597,000) and a weighted average number of Ordinary Shares outstanding during the year ended 31 December 2021 of 4,292,112,667 (2020: 3,159,037,588) calculated below. As a loss making group, outstanding share options are considered antidilutive and therefore basic and diluted loss per share are considered to be equal.
| | |
2021 | | |
2020 | |
| | |
$000 | | |
$000 | |
| Loss attributable to ordinary shareholders | |
| 17,702 | | |
| 17,597 | |
| | |
| | | |
| | |
| | |
| 2021 | | |
| 2020 | |
| | |
| Number | | |
| Number | |
| Weighted average number of ordinary shares | |
| | | |
| | |
| Number of shares in issue at the beginning of the year | |
| 3,847,331,923 | | |
| 2,245,865,913 | |
| Effect of shares issued during year | |
| 444,780,744 | | |
| 913,171,675 | |
| Weighted average number of ordinary shares in issue for the year | |
| 4,292,112,667 | | |
| 3,159,037,588 | |
7.
INTANGIBLE ASSETS GROUP
| | |
2021 | | |
2020 | |
| |
$000 | | |
$000 | |
| Patent acquisition costs | |
| | | |
| | |
| Cost | |
| | | |
| | |
| At 1 January | |
| 95 | | |
| 95 | |
| Additions | |
| - | | |
| - | |
| At 31 December | |
| 95 | | |
| 95 | |
| | |
| | | |
| | |
| Amortisation | |
| | | |
| | |
| At 1 January | |
| (68 | ) | |
| (65 | ) |
| Charge for the year | |
| (4 | ) | |
| (3 | ) |
| At 31 December | |
| (72 | ) | |
| (68 | ) |
| | |
| | | |
| | |
| Net Book Value | |
| | | |
| | |
| At 31 December | |
| 23 | | |
| 27 | |
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
8. PROPERTY PLANT AND EQUIPMENT
GROUP & COMPANY
| | |
2021 | | |
2020 | |
| | |
$000 | | |
$000 | |
| Office furniture and equipment | |
| | | |
| | |
| Cost | |
| | | |
| | |
| At 1 January | |
| 172 | | |
| 172 | |
| Additions | |
| - | | |
| - | |
| At 31 December | |
| 172 | | |
| 172 | |
| | |
| | | |
| | |
| Depreciation | |
| | | |
| | |
| At 1 January | |
| (172 | ) | |
| (167 | ) |
| Charge for the year | |
| - | | |
| (5 | ) |
| At 31 December | |
| (172 | ) | |
| (172 | ) |
| | |
| | | |
| | |
| Net Book Value | |
| | | |
| | |
| At 31 December | |
| - | | |
| - | |
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
9.
INVESTMENTS IN SUBSIDIARIES
| | |
Investments in
Subsidiary
Undertakings | |
| | |
$000 | |
| Company | |
| | |
| | |
| | |
| At 1 January 2020 | |
| 20,339 | |
| Additions | |
| - | |
| | |
| | |
| At 31 December 2020 | |
| 20,339 | |
| | |
| | |
| At 1 January 2021 | |
| 20,339 | |
| Additions | |
| - | |
| | |
| | |
| At 31 December 2021 | |
| 20,339 | |
The Company directly owns 100% of the issued share capital of the following subsidiaries, which have been included in the consolidated financial statements:
| | |
Principal activity | |
Country of
incorporation | |
Holdings | |
% | |
| Volution Immuno Pharmaceuticals SA | |
Development of pharmaceutical drugs | |
Switzerland | |
Ordinary | |
| 100 | |
| Celsus Therapeutics Inc. | |
Dormant | |
United States | |
Ordinary | |
| 100 | |
| Morria Biopharma Ltd. | |
Dormant | |
Israel | |
Ordinary | |
| 100 | |
| Akari Malta Limited | |
Regulatory compliance | |
Malta | |
Ordinary | |
| 100 | |
| Registered office addresses of subsidiaries: |
| Volution Immuno Pharmaceuticals SA : Place Des Eaux-Vives 6, 1207 Geneva, Switzerland |
| Celsus Therapeutics Inc: 1209 Orange Street, Wilmington, DE 19801 |
| Morria Biopharma Ltd: 1209 Orange Street, Wilmington, DE 19801 |
| Akari Malta Limited: Gasan Centre, Level 3, Mriehel By Pass, Mriehel, BKR 3000, Malta |
| |
|
|
|
|
|
|
10. TRADE
AND OTHER RECEIVABLES
| | |
Group | | |
Company | |
| | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
| | |
$000 | | |
$000 | | |
$000 | | |
$000 | |
| Due from a related party | |
| - | | |
| - | | |
| 3,856 | | |
| 3,897 | |
| Prepayments and accrued income | |
| 2,264 | | |
| 521 | | |
| 2,258 | | |
| 513 | |
| Income tax receivable | |
| 2,712 | | |
| 2,991 | | |
| 2,712 | | |
| 2,991 | |
| | |
| 4,976 | | |
| 3,512 | | |
| 8,826 | | |
| 7,401 | |
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
11. TRADE
AND OTHER PAYABLES
| | |
Group | | |
Company | |
| | |
2021 | | |
2020 | | |
2021 | | |
2020 | |
| | |
$000 | | |
$000 | | |
$000 | | |
$000 | |
| Trade
payables | |
| 1,788 | | |
| 3,380 | | |
| 1,627 | | |
| 3,232 | |
| Accrued
expenses | |
| 3,185 | | |
| 1,840 | | |
| 3,168 | | |
| 1,826 | |
| Share application
funds received in advance | |
| 1,120 | | |
| - | | |
| 1,120 | | |
| - | |
| | |
| 6,093 | | |
| 5,220 | | |
| 5,915 | | |
| 5,058 | |
12. CALLED
UP SHARE CAPTIAL
| | |
| | |
Share | |
| | |
2021 | | |
Capital | |
| |
No. of Shares | | |
($) | |
| Issued and fully paid | |
| | | |
| | |
| Akari Therapeutics, Plc | |
| | | |
| | |
| | |
| | | |
| | |
| As at 1 January 2021 | |
| 3,847,331,923 | | |
| 384,733 | |
| | |
| | | |
| | |
| Issuance of ordinary shares | |
| 912,400,000 | | |
| 91,240 | |
| Exercise of warrants | |
| | | |
| | |
| | |
| | | |
| | |
| As at 31 December 2021 | |
| 4,759,731,923 | | |
| 475,973 | |
Issue of shares
In May 2021, the Company sold to Aspire Capital
LLC a total of 117,647,100 ordinary shares of the Company for total gross proceeds of $2,000,001 under the Purchase Agreement.
In July 2021, we sold to certain accredited
and institutional investors, led by some of our existing investors, including Praxis Trustees Limited as trustee of Sonic Healthcare Holding
Company EFRBS (“Praxis Trustees Limited”) which is beneficially owned by Dr. Ray Prudo, the Company’s Chairman,
an aggregate of 7,947,529 ADSs in a private placement at $1.55 per ADS for aggregate gross proceeds of approximately $12.3 million. We
also entered into a letter agreement with Paulson Investment Company, LLC, or the Placement Agent, to serve as our placement agent in
connection with this offering. In connection with the offering, we issued to the Placement Agent unregistered warrants to purchase 398,384
ADSs at $2.32 per ADS. As at the 31 December 21, all of the 398,384 warrants were outstanding.
In December 2021, the Company entered into
securities purchase agreements with certain accredited and institutional investors, including Dr. Ray Prudo, the Company’s
Chairman, providing for the issuance of an aggregate of 4,311,019 ADSs in a registered direct placement at $1.40 per ADS for aggregate
gross proceeds of approximately $6.0 million which closed on January 5, 2022. As of December 31, 2021, the Company received
approximately $1,120,000 gross proceeds from investors which were classified as Current liabilities in the financial statements due to
termination rights by investors prior to closing of the 2021 Registered Direct which occurred on January 4 and 5, 2022. The Company
also entered into a letter agreement with Paulson Investment Company, LLC to serve as the placement agent for the Company in connection
with this offering. In connection with the offering, on January 4 and 5, 2022, the Company issued to the investors registered warrants
to purchase a total of 2,155,507 ADSs at $1.65 per ADS. The Company paid an aggregate of $542,835 in placement agent fees and expenses
and issued registered placement agent warrants to the Placement Agent to purchase an aggregate of 172,441 ADS on January 4, 2022
at $1.75 per ADS.
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
14. RESERVES
The following describes the nature and
purpose of each reserve within equity:
Share
premium - Accumulated amounts subscribed for share capital in excess of the nominal value of the share capital issued. Costs
relating to the issue of shares are offset against share premium. Issue costs incurred in the year ended 31 December 2021 offset
in share premium were $157,000 (31 December 2020: $868,000).
Retained
earnings – Includes all current and prior period losses
Other
reserves - Accounts for all other gains and losses reported by the group and not recognised elsewhere. Includes accumulated
gains and losses arising from the retranslation of the net assets of overseas entities.
Share
based payment reserve – This includes all movement for share options granted during the period.
Merger
reserve – Merger reserve represents the premium on the shares issued to acquire Volution Immuno Pharmaceuticals SA in
accordance with the provisions of S612 of the Companies Act 2006.
Reverse
acquisition reserve – The reverse acquisition reserve relates to the reverse acquisition between Celsus Therapeutics
PLC and Volution Immuno Pharmaceuticals SA on 18 September 2015.
Capital
redemption reserve – Amounts transferred from share capital on redemption of issued shares.
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
15. WARRANTS
There is no warrant liability recognised
in the year ended 31 December 2021.
In the prior year the Group accounted
for the liability warrants issued in accordance with IAS 39, “Financial Instruments: Recognition and Measurement” as a freestanding
liability instrument that is measured at fair value at each reporting date, based on its fair value, with changes in the fair values being
recognised in the Group's consolidated statement of comprehensive loss as financing income or expense. The fair value of warrants granted
was measured using the Binomial method of valuation.
| | |
Fair value of
warrant
liability | |
| | |
$000 | |
| Issuance of 2020 Paulson warrants | |
| 2,750 | |
| Reclassification of warrant to equity on exercise | |
| (8 | ) |
| Change in fair value of warrant liability | |
| (557 | ) |
| Transfer to equity following redenomination of share capital | |
| (3,200 | ) |
| As at 31 December 2020 | |
| - | |
The share capital of the Company was
redenominated on 8 December 2020 from £0.01 shares to $0.01325 shares. As a result of this redenomination, the inputs resulting
in the recognition of the derivative liability associated with placing warrants now meet the fixed for fixed criteria to be recognised
in equity. At this point the fair value of the liability of $3.2m was transferred to share based payments reserve from liabilities.
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
16. SHARE
OPTIONS
In accordance with the Company’s
2014 Equity Incentive Plan (the “Plan”), the number of shares that may be issued upon exercise of options under the Plan shall
not exceed 400,000,000 Ordinary Shares. (31 December 2020 344,747,462).
At 31 December 2021, 257,050,965 Ordinary Shares are available for future
issuance under the Plan (31 December 2020 232,098,427). The option plan is administered by the Company’s board of directors
and grants are made pursuant thereto by the compensation committee. The per share exercise price for the shares to be issued pursuant
to the exercise of an option shall be such price equal to the fair market value of the Company’s Ordinary Shares on the grant date
and set forth in the individual option agreement. Options expire ten years after the grant date and typically vest over one to four years.
| | |
2021 | | |
2020 | |
| | |
| | |
Weighted Average
Exercise Price | | |
| | |
Weighted Average
Exercise Price | |
| | |
| Number | | |
| $ | | |
| Number | | |
| $ | |
| Outstanding at the beginning of the year | |
| 112,649,035 | | |
| 0.09 | | |
| 94,349,035 | | |
| 0.10 | |
| Granted during the year | |
| 30,300,000 | | |
| 0.02 | | |
| 20,800,000 | | |
| 0.02 | |
| Forfeited/waived during the year | |
| - | | |
| - | | |
| (2,500,000 | ) | |
| 0.02 | |
| Exercised during the year | |
| - | | |
| - | | |
| - | | |
| - | |
| Total outstanding | |
| 142,949,035 | | |
| 0.07 | | |
| 112,649,035 | | |
| 0.09 | |
| Total exercisable (Vested) | |
| 97,499,035 | | |
| 0.10 | | |
| 77,667,785 | | |
| 0.12 | |
The following is a summary of the Group's
share options granted separated into ranges of exercise price:
Exercise
price
(range) ($) | |
Options
outstanding
at 31 December
2021 | | |
Weighted
average
remaining
contractual
life (years) | | |
Weighted
average
exercise
price ($) | | |
Options
exercisable at
December
31, 2021 | | |
Remaining
contractual
life for
exercisable
options (years) | | |
Weighted
average
exercise
price for
exercisable
options ($) | |
| 0.02-0.05 | |
| 107,900,000 | | |
| 7.7 | | |
| 0.02 | | |
| 62,450,000 | | |
| 6.9 | | |
| 0.02 | |
| 0.12-0.19 | |
| 18,334,629 | | |
| 4.3 | | |
| 0.15 | | |
| 18,334,629 | | |
| 4.3 | | |
| 0.15 | |
| 0.32 | |
| 16,714,406 | | |
| 3.7 | | |
| 0.32 | | |
| 16,714,406 | | |
| 3.7 | | |
| 0.32 | |
| | |
| 142,949,035 | | |
| | | |
| | | |
| 97,499,035 | | |
| | | |
| | |
Exercise
price
(range)
($) | |
Options
outstanding at 31 December
2020 | | |
Weighted average remaining contractual life (years) | | |
Weighted average exercise
price ($) | | |
Options
exercisable at 31 December
2020 | | |
Remaining
contractual
life (years for
exercisable
options) | | |
Weighted average exercise price ($) | |
| 0.02-0.05 | |
| 77,600,000 | | |
| 8.03 | | |
| 0.02 | | |
| 42,712,500 | | |
| 7.60 | | |
| 0.03 | |
| 0.12-0.19 | |
| 18,334,629 | | |
| 5.30 | | |
| 0.15 | | |
| 18,240,879 | | |
| 5.30 | | |
| 0.15 | |
| 0.32 | |
| 16,714,406 | | |
| 4.73 | | |
| 0.32 | | |
| 16,714,406 | | |
| 4.73 | | |
| 0.32 | |
| | |
| 112,649,035 | | |
| | | |
| | | |
| 77,667,785 | | |
| | | |
| | |
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
16. SHARE
OPTIONS (continued)
The Company measures compensation cost
for all share-based awards at fair value on the date of grant and recognizes compensation expense in general administrative and research
and development expenses within its Consolidated Statements of Comprehensive Loss using the straight-line method over the service period
over which it expects the awards to vest.
The Company estimates the fair value
of all time-vested options as of the date of grant using the Black-Scholes option valuation model, which was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input
of highly subjective assumptions, including the expected share price volatility, which is calculated based on the historical volatility
of peer companies. The Company uses a risk-free interest rate, based on the U.S. Treasury instruments in effect at the time of the grant,
for the period comparable to the expected term of the option. Given its limited history with share option grants and exercises, the Company
uses the “simplified” method in estimating the expected term, the period of time that options granted are expected to be outstanding,
for its grants.
The Company classifies its stock-based
payments which are settled in ordinary shares as equity-classified awards. The Company measures equity-classified awards at their grant
date fair value and does not subsequently re-measure them. Compensation costs related to equity-classified awards generally are equal
to the grant-date fair value of the award amortized over the vesting period of the award.
Below are the assumptions
used for the options granted in the year ended 31 December 2021:
| | |
2021 |
| Expected dividend yield | |
| 0% |
| Expected volatility | |
| 70.7%-83.2% |
| Risk-free interest | |
| 0.64%-1.25% |
| Expected life | |
| 5.5-6.25 years |
Below are the assumptions
used for the options granted in the year ended 31 December 2020:
| | |
2020 |
| Expected dividend yield | |
| 0% |
| Expected volatility | |
| 83.88-86.85% |
| Risk-free interest | |
| 0.38%-0.49% |
| Expected life | |
| 5.5-6.25 years |
During the year ended 31 December 21
the Group recognized $314,000 (2020: $325,000) in share-based compensation
expenses for employees and directors. At 31 December 2021, there was approximately $423,000
of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Group’s share
option plans which the company expects to recognize over 2.6 years.
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
17. FINANCIAL INSTRUMENTS
a. Classification of financial assets and liabilities:
The financial assets and financial liabilities
in the statement of financial position are classified by groups of financial instruments pursuant to IFRS 9 are:
| | |
2021 | | |
2020 | |
| | |
$000 | | |
$000 | |
| Financial assets: | |
| | | |
| | |
| Other receivables | |
| - | | |
| - | |
| | |
| | | |
| | |
| Financial liabilities: | |
| | | |
| | |
| Trade payables, share funds received in advance and other payables | |
| 5,994 | | |
| 5,139 | |
Financial
risks factors:
The Group's activities are exposed to
foreign exchange risk. The Group's comprehensive risk management plan focuses on activities and strategies that reduce adverse effects
on the financial performance of the Group to a minimum.
Foreign currency risk is the risk that
the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group's
exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities when expenses are denominated
in a different currency from the Group's functional currency. The Group believes that no reasonable change in foreign currency exchange
rates would have a material impact on the income statement or statement of changes in equity. The Group manages its foreign currency risk
by managing bank accounts that are denominated in a currency other than its respective functional currency, primarily the Great British
Pound (GBP).
Credit risk is the risk that a counterparty
will not meet its obligations under a financial instrument or supplier contract, leading to a financial loss. Financial instruments that
potentially subject the Group to concentrations of credit risk consist principally of cash and cash equivalents. Cash and cash equivalents
and short-term deposits are deposited with major banks in Europe and the United States, and invested mostly in U.S. dollars and Great
British Pounds. Such redeemed upon demand and therefore bear low risk.
The Group's financial instruments comprise
equity investments, cash and various items such as trade debtors and trade creditors that arise directly from its operations. The main
risk arising from the Groups financial instruments is liquidity risk. The Group has previously entered into derivatives with respect of
the warrant liability, this liability has been settled in the previous year.
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2021
On the 8 December 2020, Company
accounted for a redenomination of share capital from £0.01 to $0.01325 with the resulting currency
retranslation effect of $1.6m being included as non-distributable redenomination reserve. In the year ended 31 December 2021 the
Directors have re-appraised the nature of the redenomination, which included the subdivision of existing shares into ordinary and deferred
shares, followed by the cancellation of the deferred shares, and have concluded that a more appropriate presentation of the currency translation
difference should be inclusion within the capital redemption reserve which arose at the same date. The effect of the restatement in the
prior year is to increase the capital redemption reserve $1.6m and remove the redenomination reserve. There was no impact on net assets
or other comprehensive loss in any of the years presented.
| 19. | RELATED PARTY TRANSACTIONS |
The following transactions were carried
out with related parties:
Shares
Issued - The Company has issued 387,096 ADSs at $1.55 per ADS to Praxis Trustees Limited in connection with a placing for cash
during the year ended 31 December 21. Praxis Trustees Limited is a trustee of Sonic Healthcare Limited ERSB, a Company in which Ray
Prudo, the Company’s Chairman, is beneficially interested.
Office
Lease - The Company leases its offices in London from The Doctors Laboratory (“TDL”) and has incurred expenses
of approximately $146,000 plus VAT during the year ended 31 December 2021
(2020: $133,000). David Byrne, a non-employee director of the Company, is also the Chief Executive Officer of TDL and Dr. Ray Prudo,
the Company’s Executive Chairman, is also Non-Executive Chairman of the Board of Directors of TDL.
Laboratory
Testing Services - The Company has received laboratory testing services for its clinical trials provided by TDL and has incurred
expenses of approximately $102,000 plus VAT during the year ended 31 December 2021
(2020: $234,000). The Company recorded payable balances to TDL of approximately $32,000
plus VAT as of December 31, 2021 (2020: $100,000).
Consulting
- A non-employee director of the Company began providing business development consulting services in January 2018.
The Company has incurred expenses of approximately $100,000 during the year
ended December 31, 2021 (2020: $100,000), relating to these consulting services.
| 20. | POST BALANCE SHEET EVENTS |
In connection with the offering entered
into on the 29 December 2021, on January 4 and 5, 2022, the Company issued to the investors registered warrants to purchase
a total of 2,155,507 ADSs at $1.65 per ADS. The Company paid an aggregate of $542,835 in placement agent fees and expenses and issued
registered placement agent warrants to the Placement Agent to purchase an aggregate of 172,441 ADS on January 4, 2022 at $1.75 per
ADS. The warrants issued to investors and the placement agent will expire five years from issuance and are immediately exercisable.
On March 8, 2022, the Company entered
into securities purchase agreements with certain accredited and institutional investors, including Dr. Ray Prudo, the Company’s
Chairman, providing for the issuance of an aggregate of 7,440,833 ADSs in a registered direct offering at $1.20 per ADS, resulting in
gross proceeds of approximately $8.9 million. In addition, the Company issued to the investors registered warrants to purchase an aggregate
of 3,720,409 ADSs. The warrants are immediately exercisable and will expire five years from issuance at an exercise price of $1.40 per
ADS, subject to adjustment as set forth therein. The Company paid an aggregate of approximately $774,321 in placement agent fees
and expenses and issued unregistered placement agent warrants to purchase an aggregate of 297,633 ADS on the same terms as the warrants,
except that the placement agent warrants are exercisable at $1.50 per ADS.
| 21. | ULTIMATE CONTROLLING PARTY |
The directors do not believe that there
is an ultimate controlling party of the Group.
