Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

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

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

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

Overview

We are an oncology company developing next-generation antibody-drug conjugates ("ADCs") designed around novel proprietary cancer-killing toxins ("payloads"). We believe these novel payloads may have the potential to transform the efficacy and safety outcomes of ADCs as cancer therapies beyond options that are currently available or in development.

ADCs are a class of cancer therapies that combine the precision targeting of antibodies with payload toxins that attack cancer cells. To date, innovation in the field of ADC therapies has focused primarily on the development of novel antibodies linked to existing classes of payload toxins. For example, there is a range of approved ADCs with antibodies that target the Her2, Trop2, CD19, CD22, CD30, Nectin-4, Tissue Factor, and FR alpha antibodies. However, there is a lack of diversity in the payload toxins to which those antibodies are conjugated to, as more than 90% of ADCs approved or in late-stage clinical development of which we are aware, utilize payloads from just two standard classes: (1) microtubule inhibitors or (2) DNA-damaging agents such as topoisomerase I inhibitors.

Our differentiated ADC discovery and development platform (our "ADC Platform") enables us to generate a range of ADC product candidates that pair our novel payloads with biologically validated antibody targets prevalent in cancer tumors. We believe that our focus on the development of ADCs that utilize our novel payloads may allow us to develop ADCs with benefits that include:

	●	more effective cancer-killing properties, or cytotoxicity;
	●	activation of the immune system to generate a greater numbers of neoepitopes than currently available ADCs, leading to activation of both B-cells and T-cells in the tumor microenvironment to generate an immune response that has the potential to continue to kill cancer cells in the tumor microenvironment and throughout the body;
	●	ability to be used in combination with checkpoint inhibitors to potentially deliver synergistic efficacy results (more than additive);
	●	sustained duration of response of tumor regression or elimination;
	●	reduced tumor resistance; and
	●	improved safety and tolerability relative to ADCs that are currently available.

Our lead product candidate is AKTX-101, a pre-clinical stage Trop2-targeting ADC that combines our novel payload PH1, a spliceosome modulator with the Trop2 antibody. Trop2 is an antigen, which is expressed differentially at higher levels in a number of solid tumor cancer types, including lung, breast, colon and urothelial, and gastric. We aim to establish AKTX-101 as a potential best-in-class Trop2-targeting ADC for the treatment of a variety of solid tumors.

We acquired the ADC Platform in connection with our acquisition of Peak Bio (the "Merger"). Prior to that time, we were primarily focused on advancing our former lead product candidates nomacopan and PAS-nomacopan (longer-acting nomacopan that is PASylated). Since the closing of the Merger, we have focused substantially all of our efforts on the discovery and pre-clinical development of ADCs and our ADC Platform. We have suspended further internal development of our legacy programs, nomacopan and PAS-nomacopan, and intend to seek strategic partners to advance their development externally. For our PHP-303 program, a program that Peak Bio had advanced prior to the closing of the Merger, we also intend to seek strategic partners to further its development externally.

Our activities since inception have consisted of performing research and development activities and raising capital.

We do not have any products available for commercial sale, and we have not generated any product revenue from our portfolio of product candidates or other sources. Our ability to generate revenue sufficient to achieve profitability, if ever, will depend on the successful development and eventual commercialization of our potential therapies, which we expect, if it ever occurs, will take a number of years. The research and development efforts require significant amounts of additional capital and adequate personnel infrastructure. There can be no assurance that our research and development activities will be successfully completed, or that our potential therapies will be commercially viable.

Recent Developments

August 2025 Financing

In August 2025, we entered into Note Purchase Agreements with certain investors and the directors of the Company (the "August 2025 Note Investors"), pursuant to which we agreed to issue unsecured promissory notes with a 20% original issuance discount (each a "August 2025 Note" and together, the "August 2025 Notes") in a private placement (the "2025 August Notes Offering") for an aggregate purchase price of $3 million, inclusive of the exchange Note Termination (as defined below). The aggregate principal amount of the August 2025 Notes issuable is $3.8 million. The August 2025 Notes mature one year from the date of issuance at which time the principal amount is due and payable. In connection with the 2025 August Notes Offering, the Company's Chairman, Dr. Hoyoung Huh, agreed to purchase an August 2025 Note with a principal amount of $1,250,000 for a purchase price of $1,000,000, with the purchase price thereof to be satisfied through his agreement to cancel and extinguish $837,433 of outstanding principal and accrued interest under a senior secured promissory note previously issued to him by Peak Bio in January 2024, which was assumed by the Company (the "Note Termination") plus cash of $162,567. Further, we agreed to amend the Series A Warrants (as defined below) previously issued in the March 2025 Private Placement to certain of the August 2025 Note Investors, at the closing of the 2025 August Notes Offering to extend expiration date from 2026 to 2030. The 2025 August Notes Offering is expected to close in two tranches in August and September 2025.

We also agreed to pay a 5% transaction fee in cash of the total gross cash proceeds of $2.2 million to Paulson Investment Company ("Paulson") in connection with the August 2025 Notes Offering.

Appointment of New President and Chief Executive Officer

On March 14, 2025, we entered into an Executive Offer of Employment Agreement (as amended by a subsequent Chief Executive Officer Letter Agreement, dated March 18, 2025) with Mr. Abizer Gaslightwala pursuant to which Mr. Gaslightwala will serve as our President and Chief Executive Officer, effective on April 21, 2025. As compensation, Mr. Gaslightwala is paid a base salary, which includes an annual cash bonus target, and is entitled to receive share-based payment compensation based on time service and the achievement of specific performance criteria.

March 2025 Private Placement

In March 2025, the Company entered into a securities purchase agreement with certain investors and all directors, pursuant to which the Company sold and issued in a private placement (the "March 2025 Private Placement") ADSs, or pre-funded warrants ("Pre-Funded Warrants") in lieu thereof, each representing 2,000 of the Company's ordinary shares (the "Shares"), and, in each case, Series A warrants to purchase ADSs ("Series A Warrants") and Series B warrants to purchase ADSs ("Series B Warrants"), the "Warrants," and together with the ADSs or Pre-Funded Warrants, the "Units"). The Series A Warrants and Series B Warrants have a one-year term and a five-year term from the date of issuance, respectively, and the number of ADSs issuable pursuant to the exercise of each Series A Warrant ranges from 1 ADS to 1.5 ADSs depending on the "tier" of investment made.

In March 2025, the Company closed its first round of financing under the March 2025 Private Placement and issued 2,238,031 ADSs, Series A Warrants to purchase up to 2,283,031 ADS, at a per unit price of $0.87 per ADS, and Series B Warrants to purchase up to 2,283,031 ADS, at a per unit price of $0.87 per ADS. In connection with this round of financing, the Company's Chairman, Dr. Hoyoung Huh, agreed to purchase $1.0 million of Units, with the purchase price thereof to be satisfied through his agreement to cancel and extinguish $1.0 million of notes previously issued to him by Peak Bio in January 2024, which were assumed by the Company (the "March 2025 Note Termination") for an equal amount of ordinary shares and warrants.

In April 2025, the Company closed its final round of financing under the March 2025 Private Placement and issued 2,704,595 ADSs, Pre-Funded Warrants to purchase up to 1,650,000 ADS at a price of $0.20 per ADS, Series A Warrants to purchase up to 6,057,405 ADS, at a per unit price of $0.87 per ADS, and Series B Warrants to purchase up to 4,354,595 ADS, at a per unit price of $0.87 per ADS.

At close of the March 2025 Private Placement, we incurred a total of approximately $0.4 million in placement agent fees with Paulson and issued 172,344 ADSs with an estimated fair value of $0.2 million. Net proceeds from the March 2025 Private Placement were approximately $5.6 million, net of the $1.0 million from the March 2025 Note Termination.

Pipeline Prioritization of the Merged Companies

In May 2024, we announced the completion of a joint portfolio prioritization review pursuant to which the anticipated combined entity, following completion of the proposed Merger (as defined below), will focus on Peak Bio's ADC platform technology. As a result, our clinical stage nomacopan program in hematopoietic stem cell transplantation-associated thrombotic microangiopathy ("HSCT-TMA") was suspended, with enrollment in our pediatric clinical study discontinued due to cost and timeline. Our pre-clinical PAS-nomacopan program in Geographic Atrophy ("GA") has also been suspended from further internal development and we are looking for an external licensing partner to continue its further development. Following the closing of the Merger on November 14, 2024, we expanded our pipeline of assets from Peak Bio with the addition of Peak Bio's proprietary ADC technology platform with novel payload and linker technologies, as well as the Peak Bio PHP-303 small molecule selective and reversible neutrophil elastase inhibitor. The ADC program includes a novel pre-clinical ADC candidate AKTX-101 targeting Trop-2 with Akari's novel payload, PH1. Akari aims to develop several ADC candidates utilizing its novel PH1 payload, a spliceosome modulator, to significantly improve the outcomes for cancer patients across a range of tumors. Further, related to our PHP-303 program, we do not invest any resources to advance this program internally and instead expect to emphasize partnering/collaboration and licensing opportunities with broad potential impact on patients.

Restructuring and Reduction-in-Force

In May 2024, we implemented a reduction-in-force (the "RIF") of approximately 67% of our total workforce, as a result of the previously announced program prioritization under which our nomacopan HSCT-TMA program was suspended. The RIF was part of an operational restructuring plan and included the elimination of certain senior management positions and was completed by the end of the second quarter of 2024. The purpose of the restructuring plan, including the RIF, was to reduce HSCT-TMA related operating costs, while supporting the execution of our long-term strategic plan. For additional information, refer to Note 14 of our unaudited condensed consolidated financial statements included in this Form 10-Q.

Merger Agreement

On November 14, 2024, we completed the previously announced business combination contemplated by the Merger Agreement with Peak Bio, pursuant to which, upon the terms and subject to the conditions thereof, Merger Sub was merged with and into Peak Bio, with Peak Bio surviving such merger as our wholly owned subsidiary.

For additional information on the Merger, refer to our Form 10-K for the fiscal year ended December 31, 2024.

Results of Operations

Three and Six Months Ended June 30, 2025 and 2024

Overview

During the three months ended June 30, 2025, our loss from operations totaled $3.1 million, a 58% decrease, compared to a loss from operations of $7.4 million for the three months ended June 30, 2024. During the six months ended June 30, 2025, our loss from operations totaled $6.6 million, a 51% decrease, compared to a loss from operations of $13.4 million for the six months ended June 30, 2024. Our total operating expenses are set forth by category in the table below:

		Three Months Ended												Six Months Ended
		June 30,												June 30,								Change
($ in thousands)		2025				2024				$ Change				2025				2024				$
Operating expenses:
Research and development		$	667			$	3,314			$	(2,647	)		$	1,480			$	5,593			$	(4,113	)
General and administrative			2,452				2,241				211				5,164				4,907				257
Merger-related costs			-				254				(254	)			-				1,298				(1,298	)
Restructuring and other costs			-				1,640				(1,640	)			-				1,640				(1,640	)
Total operating expenses		$	3,119			$	7,449			$	(4,330	)		$	6,644			$	13,438			$	(6,794	)
Loss from operations		$	(3,119	)		$	(7,449	)		$	4,330			$	(6,644	)		$	(13,438	)		$	6,794

Research and development expenses

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

During the three months ended June 30, 2025, total research and development expenses decreased by approximately $2.6 million, or 80%, as compared to the three months ended June 30, 2024. During the six months ended June 30, 2025, total research and development expenses decreased by approximately $4.1 million, or 74%, as compared to the six months ended June 30, 2024. The reduction in research and development expenses is due to the decrease of costs associated with our legacy assets nomacopan and PHP-303 as we suspended the internal development of those programs while we prioritize our research and development activities on our ADC platform and pipeline. The following sets forth research and development expenses for the three and six months ended June 30, 2025 and 2024 by category:

		Three Months Ended												Six Months Ended
		June 30,												June 30,								Change
($ in thousands)		2025				2024				$ Change				2025				2024				$
Clinical trial costs:
nomacopan HSCT-TMA clinical development (AK901)		$	44			$	450			$	(406	)		$	106			$	1,083			$	(977	)
ADC discovery and pre-clinical development			145				-				145				162				-				162
Chemistry, manufacturing and control ("CMC")			20				2,231				(2,211	)			48				2,942				(2,894	)
Other external development expenses			(63	)			290				(353	)			35				595				(560	)
Personnel costs			521				343				178				1,129				973				156
Total research and development expenses		$	667			$	3,314			$	(2,647	)		$	1,480			$	5,593			$	(4,113	)

HSCT-TMA clinical development (AK901)

These expenses include external expenses that we have incurred in connection with the development of nomacopan for the treatment of pediatric HSCT-TMA and primarily consist of payments to CROs and other vendors. The decrease in HSCT-TMA clinical development expenses of $0.4 million and $1 million, or 90% each, incurred during the three and six months ended June 30, 2025, respectively, as compared to the three and six months ended June 30, 2024, is primarily due to our decision to suspend the AK901 clinical program and find a collaborative partner for nomacopan program.

ADC discovery and pre-clinical development

These expenses include external expenses that we incurred in connection with the discovery and pre-clinical development of our ADC platform and program(s) and primarily consist of payments to external vendors and consultants. In December 2024, we announced our strategic prioritization of our ADC technology and programs and expect to incur material additional costs going forward related to this program as we plan to invest in additional ADC related discovery and pre-clinical development activities.

Chemistry, manufacturing and control ("CMC")

CMC expenses historically included external expenses incurred related to the development and manufacturing of nomacopan for use in clinical trials and pre-clinical development of PAS-nomacopan. In general, such expenses primarily consist of payments to vendors for manufacturing of drug substance (including raw materials), drug product, supplies, validation, quality assurance and other manufacturing development activities. The decrease in expenses of $2.2 million and $2.9 million, or 99% and 98%, incurred during the three and six months ended June 30, 2025, respectively, as compared to the three and six months ended June 30, 2024, is primarily due to our decision to suspend our HSCT-TMA program and instead seek an external partner for further development.

Other external development expenses

These expenses include external expenses, such as payments to contract vendors, that may be related to pre-clinical development activities, discontinued programs and unallocated expenses. During the three months ended June 30, 2025, we recovered certain expenses totaling less than $0.1 million resulting in a decrease of $0.4 million in expenses as compared to the three months ended June 30, 2024. The $0.6 million, or 94%, decrease in expenses incurred during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, is related to lower costs incurred related to pre-clinical studies and other pre-clinical development work investigating PAS-nomacopan for the treatment of GA.

Personnel costs

These expenses include compensation and related costs associated with employees, independent consultants and staffing firms. Personnel costs increased by $0.2 million, or 52%, and $0.2 million, or 16%, during the three and six months ended June 30, 2025, respectively, as compared to the three and six months ended June 30, 2024. The increase is primarily due to increases in non-cash stock-based compensation expense, partially offset by lower cash-based salaries.

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

General and administrative expenses

During the three months ended June 30, 2025, total general and administrative costs increased by approximately $0.2 million, or 9%, as compared to the three months ended June 30, 2024, primarily due to an increase in non-cash stock-based compensation expense of $0.4 million, partially offset by a decrease of approximately $0.2 million in premiums for our directors and officers insurance.

During the six months ended June 30, 2025, total general and administrative costs increased by approximately $0.3 million, or 5%, as compared to the six months ended June 30, 2024, primarily due to an increase in non-cash stock-based compensation expense of $1 million, an increase of $0.2 million in professional fees (primarily driven from Merger related financial disclosures), partially offset by a decrease of approximately $0.5 million in cash-based salaries, a decrease of approximately $0.4 million in premiums for our directors and officers insurance.

Merger-related costs

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

Merger-related costs for the three and six months ended June 30, 2024 were $0.3 million and $1.3 million, respectively. No such costs were incurred during three and six months ended June 30, 2025.

Restructuring and other costs

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

Restructuring and other costs for both of the three and six months ended June 30, 2024 were $1.6 million, including $0.3 million of non-cash share-based compensation expense. No such costs were incurred during three and six months ended June 30, 2025.

Interest income

During each of the three and six months ended June 30, 2025 and 2024, interest income was less than $0.1 million. Amounts may fluctuate from period to period due to changes in average cash balances and prevailing interest rates.

Interest expense

Interest expense primarily consists of interest incurred on the May 2024 Convertible Notes, the financing of director and officer insurance premiums and the notes assumed in the Merger, which include the April 2023 Convertible Notes, the November 2023 Note, the September 2024 Note, the 2021 Notes and the January 2024 Note. Refer to Note 6 and Note 12 of our unaudited condensed consolidated financial statements included in this Form 10-Q.

Interest expense may fluctuate from period to period due to changes in average interest-bearing loans and related interest rates.

Gain on settlement of current liabilities

During the three months ended June 30, 2025, we recognized a gain on settlement of current liabilities of $1.2 million with a former vendor.

During the six months ended June 30, 2025, we recognized a gain on settlement of current liabilities of $1.2 million which is comprised of a gain on settlement of $1.2 million with a former vendor and a less than $0.1 million gain on debt extinguishment related to a promissory note issued by Peak Bio in November 2023 and assumed by the Company in November of 2024 in the amount of $0.4 million, bearing interest at 6% per annum with a maturity date of December 31, 2024 (the "November 2023 Note").

No such gain was recognized during the three and six months ended June 30, 2024.

Change in fair value of warrant liabilities

Change in fair value of warrant liabilities represents non-cash warrant revaluation gains or losses related to the remeasurement of our liability-classified instruments, namely our September 2022 Warrants and the warrants we assumed on November 14, 2024 in connection with our acquisition of Peak Bio (the "Peak Bio Warrants"), which are more fully described in Note 4 of our condensed consolidated financial statements included in this Form 10-Q. Due to the nature of and inputs in the model used to assess the fair value of our outstanding September 2022 Warrants and Peak Bio Warrants, it is not unusual to experience significant fluctuations during each remeasurement period. These fluctuations may be due to a variety of factors, including changes in our stock price and changes in estimated stock price volatility over the remaining life of the warrants.

During the three months ended June 30, 2025 and 2024, we recorded a change in the fair value of warrant liabilities, representing a non-cash revaluation gain of approximately $0.1 million and a non-cash revaluation loss of $0.2 million, respectively. Change in thefair value of warrant liabilities and resulting warrant revaluation gain for the three months ended June 30, 2025 was driven by the decrease in our stock price during the reporting period. Changes in the fair value of the warrant liability and resulting warrant revaluation loss for the three months ended June 30, 2024 was driven primarily by the increase in our stock price during the reporting period.

During the six months ended June 30, 2025 and 2024, we recorded a change in the fair value of warrant liabilities, representing a non-cash revaluation gain of approximately $0.1 million and $0.5 million, respectively. Change in thefair value of warrant liabilities and resulting warrant revaluation gain for the six months ended June 30, 2025 was driven by the decrease in our stock price during the reporting period, offset by an extinguishment of liability related to certain September 2022 Warrants. Change in the fair value of warrant liabilities and resulting warrant revaluation gain for the six months ended June 30, 2024 was driven primarily by the decrease in our stock price and the decrease in the expected term assumption during the reporting period.

Foreign currency exchange gain (loss), net

During the three months ended June 30, 2025 and 2024, we recorded a net foreign currency exchange loss of less than $0.1 million and net foreign currency gain of approximately $0.1 million, respectively. During the six months ended June 30, 2025 and 2024, we recorded a net foreign currency exchange loss of approximately $0.2 million and $0.1 million, respectively. Exchange gains and losses can fluctuate significantly from period to period due to changes in exchange rates, as well as the volume and timing of expenditures and related payments denominated in foreign currencies.

Other expense, net

Other expense was less than $0.1 million during the six months ended June 30, 2024. During the three and six months ended June 30, 2025 and the three months ended June 30, 2024, we incurred no such expense. Other expenses are not material to our results of operations.

Net loss applicable to common shareholders

As a result of the factors discussed above, our net loss applicable to common shareholders for the three months ended June 30, 2025 was $1.9 million, compared to net loss applicable to ordinary shareholders for the three months ended June 30, 2024 of $7.6 million. Our net loss applicable to common shareholders for the six months ended June 30, 2025 was $5.6 million, compared to net loss applicable to ordinary shareholders for the six months ended June 30, 2024 of $13.1 million.

Financial Condition, Liquidity and Capital Resources

Sources of Liquidity

Since inception, we have incurred substantial losses, and we have primarily funded our operations with proceeds from the sale of equity securities, including ordinary shares, warrants and pre-funded warrants, and convertible notes. At June 30, 2025, we had $2.7 million in cash and an accumulated deficit of $252.9 million. To date, we have not generated any revenue.

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

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

Other than with respect to the August 2025 Notes Offering, we currently do not have any commitments for future external funding. We will need to raise additional funds, and we may decide to raise additional funds even before we need such funds if the conditions for raising capital are available and/or favorable. Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt or equity financings, credit facilities or by out-licensing arrangements of our product candidates. The sale of equity or convertible debt securities may result in dilution to our existing shareholders. The incurrence of indebtedness would result in increased fixed obligations and could also subject us to covenants that restrict our operations. We cannot be certain that additional funding, whether through grants, financings, credit facilities or out-licensing arrangements, will be available to us on acceptable terms, if at all. If sufficient funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to, one or more applications of our product candidates, or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain potential products that we might otherwise seek to develop or commercialize independently.

August 2025 Financing

In August 2025, the Company entered into Note Purchase Agreements with certain investors and the Company's directors (the "August 2025 Note Investors"), pursuant to which the Company agreed to issue unsecured promissory notes with a 20% original issuance discount (each a "August 2025 Note" and together, the "August 2025 Notes") in a private placement (the "August 2025 Notes Offering") for an aggregate purchase price of $3 million, inclusive of the exchange Note Termination (as defined below). The aggregate principal amount of the August 2025 Notes issuable is $3.8 million. The August 2025 Notes mature one year from the date of issuance at which time the principal amount is due and payable. In connection with the 2025 August Notes Offering, the Company's Chairman, Dr. Hoyoung Huh, agreed to purchase an August 2025 Note with a principal amount of $1,250,000 for a purchase price of $1,000,000, with the purchase price thereof to be satisfied through his agreement to cancel and extinguish $837,433 of outstanding principal and accrued interest under a senior secured promissory note previously issued to him by Peak Bio in January 2024, which was assumed by the Company (the "Note Termination") plus cash of $162,567. Further, the Company agreed to amend the Series A Warrants previously issued in the March 2025 Private Placement to certain of the August 2025 Note Investors, at the closing of the 2025 August Notes Offering to extend the expiration date from 2026 to 2030. The 2025 August Notes Offering is expected to close in two tranches in August and September 2025.

The Company also agreed to pay a 5% advisory fee in cash of the total gross cash proceeds of approximately $2.2 million to Paulson Investment Company ("Paulson") in connection with the August 2025 Notes Offering.

March 2025 Private Placement

In March 2025, the Company entered into a securities purchase agreement (the "March 2025 Private Placement") with certain investors and all directors, pursuant to which the Company sold and issued in a private placement ADSs, or pre-funded warrants ("Pre-Funded Warrants") in lieu thereof, each representing 2,000 of the Company's ordinary shares (the "Shares"), and, in each case, Series A warrants to purchase ADSs ("Series A Warrants") and Series B warrants to purchase ADSs ("Series B Warrants"), the "Warrants," and together with the ADSs or Pre-Funded Warrants, the "Units"). The Series A Warrants and Series B Warrants have a one-year term and a five-year term from the date of issuance, respectively, and the number of ADSs issuable pursuant to the exercise of each Series A Warrant ranges from 1 ADS to 1.5 ADSs depending on the "tier" of investment made.

In March 2025, the Company closed its first round of financing under the March 2025 Private Placement and issued 2,238,031 ADSs, Series A Warrants to purchase up to 2,283,031 ADS, at a per unit price of $0.87 per ADS, and Series B Warrants to purchase up to 2,283,031 ADS, at a per unit price of $0.87 per ADS. In connection with this round of financing, the Company's Chairman, Dr. Hoyoung Huh, agreed to purchase $1.0 million of Units, with the purchase price thereof to be satisfied through his agreement to cancel and extinguish $1.0 million of notes previously issued to him by Peak Bio in January 2024, which were assumed by the Company (the "March 2025 Note Termination") for an equal amount of ordinary shares and warrants.

In April 2025, the Company closed its final round of financing under the March 2025 Private Placement and issued 2,704,595 ADSs, Pre-Funded Warrants to purchase up to 1,650,000 ADS at a price of $0.20 per ADS, Series A Warrants to purchase up to 6,057,405 ADS, at a per unit price of $0.87 per ADS, and Series B Warrants to purchase up to 4,354,595 ADS, at a per unit price of $0.87 per ADS. The Company received approximately $0.3 million in advance for the Pre-funded Warrants which is reflected in other current liabilities.

At close of the March 2025 Private Placement, we incurred a total of approximately $0.4 million in placement agent fees with Paulson and issued 172,344 ADSs with an estimated fair value of $0.2 million. Net proceeds from the March 2025 Private Placement were approximately $5.6 million, net of the $1.0 million from the March 2025 Note Termination.

November 2024 Private Placement

In November 2024, we entered into a definitive purchase agreement with certain investors, Dr. Ray Prudo and Dr. Samir Patel, pursuant to which we sold and issued in a private placement an aggregate of 1,713,402 ADSs, and Series D Warrants (the "Series D Warrants") to purchase up to 1,713,402 ADSs, at a per unit price of $2.26 for aggregate gross proceeds of $3.2 million (the "November 2024 Private Placement"). The Series D Warrants have 3-year terms ranging from December 2, 2027 to June 2, 2028 and have cashless exercise provisions in limited circumstances.

At close of the November 2024 Private Placement, we incurred a total of $204,000 in placement agent fees with Paulson. Net proceeds from the November 2024 Private Placement were approximately $2.8 million after deducting placement agent fees and other expenses. In April 2025, we issued 408,000,000 ordinary shares to Paulson in lieu of $204,000 in cash payment.

May 2024 Private Placement

In May 2024, we entered into a definitive purchase agreement with certain investors, Dr. Ray Prudo and Dr. Samir Patel, pursuant to which we sold and issued in a private placement an aggregate of 4,029,754 ADSs, and May 2024 Series C Warrants (the "Series C Warrants") to purchase up to 4,029,754 ADS, at a per unit price of $1.885 per ADS and Series C Warrant for aggregate gross proceeds of approximately $7.6 million (the "May 2024 Private Placement"). The Series C Warrants have 3-year terms ranging from May 31, 2027 to June 21, 2027 and have cashless exercise provisions in limited circumstances. The Series C Warrants (other than those issued to Dr. Prudo and Dr. Patel) have an exercise price of $1.76 per ADS. The Series C Warrants issued to Dr. Prudo and Dr. Patel have an exercise price of $1.79 per ADS. Net proceeds from the May 2024 Private Placement were approximately $7.0 million after deducting placement agent fees and other expenses.

May 2024 Convertible Notes

In May 2024, we entered into unsecured convertible promissory notes (the "May 2024 Notes") with Dr. Prudo, our Chairman at the time, and our then Interim President and Chief Executive Officer and director, Dr. Patel, for an aggregate of $1.0 million in gross proceeds. The May 2024 Notes bear interest at 15% per annum, which may be increased to 17% upon the occurrence of certain events of default as described therein, and the principal and all accrued but unpaid interest is due on the date that is the earlier of (a) ten (10) business days following our receipt of a U.K. research and development tax credit from HM Revenue and Customs, and (b) November 10, 2024. Provided, however, at any time or times from the date of the note and until the tenth business day prior to closing of the acquisition, the note holders are entitled to convert any portion of the outstanding and unpaid amount, including principal and accrued interest, into our ADSs at a fixed conversion price equal to $1.59, representing the Nasdaq official closing price of our ADSs on the issuance date, subject to certain restrictions.

In October 2024, Drs. Prudo and Patel each elected to convert $125,000 of principal and accrued interest into our ADSs at a conversion price of $1.59 per ADS. These ordinary shares were issued during the six months ended June 30, 2025. The remaining unconverted aggregate principal balance of the May 2024 Notes, or $750,000, was repaid in cash with proceeds from our U.K. research and development tax credit from HM Revenue and Customs.

March 2024 Private Placement

In March 2024, we entered into a definitive purchase agreement with certain existing investors, pursuant to which we sold and issued in a private placement an aggregate of 1,320,614 ADSs at $1.48 per ADS, for aggregate gross proceeds of approximately $2.0 million (the "March 2024 Private Placement"). Net proceeds from the March 2024 Private Placement were approximately $1.7 million after deducting placement agent fees and other expenses.

Funding Requirements

As of the date of this report, our existing cash, together with committed funds from the August 2025 Financing, is sufficient to fund our operations into October 2025. While we have additional funding activities in progress to fund our operations, we will need to raise additional capital to continue to fund our operations and service our obligations in the future. If we are unable to raise additional capital when needed, we will not be able to continue as a going concern. We do not currently have any products approved for sale and do not generate any revenue from product sales. We are currently seeking and expect to continue to seek additional funding through financings of equity and/or debt securities. We may also engage in strategic research and development collaborations, pre-clinical and clinical funding arrangements, the sale or license of technology assets, and/or other strategic alternatives.

Financing may not be available to us when we need it, or on favorable or acceptable terms, or at all. We could be required to seek funds through means that may require us to relinquish rights to some of our technologies, drug candidates or drugs that we would otherwise pursue on our own. In addition, if we raise additional funds by issuing equity securities, our then existing shareholders may experience dilution. The terms of any financing may adversely affect the holdings or the rights of existing shareholders. An equity financing that involves existing shareholders may cause a concentration of ownership. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and are likely to include rights that are senior to the holders of our ordinary shares. Any additional debt or equity financing may contain terms which are not favorable to us or to our shareholders, such as liquidation and other preferences, or liens or other restrictions on our assets. As discussed in Note 11 to the consolidated financial statements included in the 2024 Form 10-K, additional equity financings may also result in cumulative changes in ownership over a three-year period in excess of 50% which would limit the amount of net operating loss and tax credit carryforwards that we may utilize in any one year.

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

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

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

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

	●	the receptivity of the capital markets to financings by biotechnology companies generally and companies with drug candidates and technologies similar to ours specifically;
	●	the receptivity of the capital markets to any in-licensing, product acquisition or other transaction we may enter into or attempt to enter into;
	●	our ability to successfully integrate operations with Peak Bio following the Merger and realize anticipated benefits of the Merger;
	●	the results of our pre-clinical and clinical development activities in our drug candidates we develop on the timelines anticipated;
	●	competitive and potentially competitive products and technologies and investors' receptivity to our drug candidates we develop and the technology underlying them in light of competitive products and technologies; and
	●	the cost, timing, and outcome of regulatory reviews.

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

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

Cash Flows

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

		Three Months Ended
		June 30,
(In thousands)		2025				2024
Net cash (used in) provided by:
Net cash (used in) operating activities		$	(5,406	)		$	(8,938	)
Net cash provided by financing activities			5,514				9,277
Effect of exchange rates on cash			4				(7	)
Net change in cash		$	112			$	332

Operating Activities. The net cash used in operating activities for the periods presented consists primarily of our net loss adjusted for non-cash charges and changes in components of working capital. The decrease in cash used in operating activities during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily due to a decrease in research and development costs and restructuring costs related to the program reprioritization and a decrease in merger-related costs incurred in connection with the Peak Bio acquisition.

Investment Activities. There were no investing activities during the six months ended June 30, 2025 and 2024.

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

	●	For the six months ended June 30, 2025, an aggregate of $5.9 million in net proceeds received from the March 2025 Private Placement, an aggregate of $0.3 million received in advance for pre-funded warrants issued in the March 2025 Private Placement, partially offset by $0.5 million of payments related to our promissory notes and $0.3 million of payments for our insurance premium financing; and
	●	For the six months ended June 30, 2024, an aggregate of $9.8 million in net proceeds received from debt and equity financings, including (i) $1.7 million in net proceeds from the March 2024 Private Placement, (ii) $1.0 million in net proceeds from the issuance of the May 2024 Notes, and (iii) $7.1 million in net proceeds from the May 2024 Private Placement, partially offset by $0.5 million in payments related to our short-term insurance premium financing arrangement.

Material Cash Requirements

Insurance Financing Obligations

In January 2025, we entered into a short-term financing arrangement with a third-party vendor to finance insurance premiums. The aggregate amount financed under this agreement was $0.5 million which is scheduled to be paid in monthly installments through November 2025.

Debt Obligations

In November 2024 as part of the Merger, we assumed convertible notes and notes payable with third parties, and notes payable with a related party, through the acquisition of Peak Bio Inc., as more fully described in Note 6 and Note 12, respectively, to our unaudited condensed consolidated financial statements appearing in this Form 10-Q. As of June 30, 2025, these obligations are expected to result in principal payments of approximately $1.6 million.

Other

We enter into a variety of agreements and financial commitments in the normal course of business. The terms generally provide us the option to cancel, reschedule and adjust our requirements based on our business needs, prior to the delivery of goods or performance of services. However, it is not possible to predict the amount of future payments under these agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement.

Critical Accounting Estimates

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

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

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

There have been no material changes to our critical accounting policies and estimates since December 31, 2024. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" of our Form 10-K, for a discussion of significant estimates and assumptions made by our management as part of the preparation of this management's discussion and analysis of financial condition and results of operations and accompanying condensed consolidated financial statements.