AKARI THERAPEUTICS PLC
CONSOLIDATED ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2018
Registered Number: 05252842
AKARI THERAPEUTICS PLC
CONSOLIDATED ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
CONTENTS
Officers and professional advisers
Directors’ report
Strategic Report
Director’s Remuneration Report
Independent Auditors’ report to the shareholders of Akari Therapeutics Plc
Consolidated statement of comprehensive loss
Consolidated statement of financial position
Parent company statement of financial position
Consolidated statement of changes in equity
Parent company statement of changes in equity
Consolidated statement of cash flows
Parent company statement of cash flows
Page
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2 – 3
4 – 10
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20-22
23
24
25
26
26
27
28
Notes to the report and financial statements
29-43
AKARI THERAPEUTICS PLC
OFFICERS AND PROFESSIONAL ADVISERS
FOR THE YEAR ENDED 31 DECEMBER 2018
Directors
Secretary
Registered Office
Independent Auditors
R Prudo-Chlebosz
C Richardson
J Hill
S Ungar
D Byrne
R Ward (resigned 19 September 2018)
D Williams
D Solomon (resigned 8 May 2018)
M Grissinger
P Feldschreiber
SLC Corporate Services Limited (resigned 20 August 2018)
Prism Cosec Limited
D Elefant
Elder House St George’s Business Park
207 Brooklands Road,
Weybridge,
Surrey,
KT13 0TS
Haysmacintyre LLP
10 Queen Street Place
London
EC4R 1AG
1
AKARI THERAPEUTICS PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
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 2018.
PRINCIPAL ACTIVITY
The principal activity of the Group is developing inhibitors of acute and chronic inflammation, specifically the complement
system, the eicosanoid or leukotriene system and the bioamine system for the treatment of rare and orphan diseases.
DIRECTORS
The directors who served the company during the year and up to the date of signing the Annual Report were as follows:
R Prudo-Chlebosz
C Richardson
J Hill
S Ungar
D Byrne
R Ward (resigned 19 September 2018)
D Williams
D Solomon (resigned 8 May 2018)
M Grissinger
P Feldschreiber
SUPPLIER PAYMENT POLICY
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.
CORPORATE GOVERNANCE
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 formulating strategy, monitoring financial performance and
approving material items of expenditure.
GOING CONCERN
The Group meets its day-to-day working capital requirements through funding. The Group’s forecast and projections, show
that at present, the Group has insufficient working capital to fulfil its current business plan for the next twelve months from
the date of approval of the financial statements without the Group raising additional capital. However, the Group also has
the option to revise its plan including reducing the scale of its operations and pace of development, to reduce discretionary
costs to ensure its cost and liabilities are met from existing working capital resources. Therefore, having reviewed the
Group’s forecast and projections, and having made appropriate enquiries, the Directors have a reasonable expectation that
the Group has sufficient funding and adequate resources to continue operationally for at least 12 months from the date of
this Annual Report. The Group therefore continues to adopt the going concern basis for the preparation of the consolidated
financial statements.
2
AKARI THERAPEUTICS PLC
DIRECTORS’ REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
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 EU. 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 the profit or loss of the Group for that period.
The Group financial statements are required by law and IFRS as adopted by the EU to present fairly the financial position and
performance of the Group; the Companies Act 2006 provides in relation to such financial statements that references in the
relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.
The Parent company financial statements are required by law to give a true and fair view of the state of affairs of the Parent
company.
In preparing these financial statements the directors are required to:
•
•
•
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether they have been prepared in accordance with IFRS as adopted by the EU subject to any material
departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and
the parent company will continue in business.
•
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time
the financial position of the Group and Parent company and to enable them to ensure that the financial statements comply
with the Companies Act 2006 and Article 4 of the IAS Regulation. They have general responsibility for taking such steps
as are reasonably open to safeguard the assets of the Group and Parent company and to prevent and detect fraud and
other irregularities.
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.
DISCLOSURE OF INFORMATION TO AUDITORS
So far as each of the directors is aware at the time the report is approved:
•
•
there is no relevant audit information of which the Group’s auditors are unaware; and
the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit
information and to establish that the auditors are aware of that information
This report was approved by the board on 30 May 2019 and signed on its behalf.
Clive Richardson
Director
3
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
REVIEW OF BUSINESS
We are a clinical-stage biopharmaceutical company focused on developing inhibitors of acute and chronic inflammation,
specifically the complement system, the eicosanoid or leukotriene system and the bioamine system for the treatment of
rare and orphan diseases. Each of these systems has scientifically well-supported causative roles in the diseases being
targeted by us. 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 (Coversin), which is a second-generation complement inhibitor, acts on
complement component-C5, preventing release of C5a and formation of C5b–9 (also known as the membrane attack
complex, or MAC), and independently also inhibits leukotriene B4, or LTB4, activity, both elements that are co-located as
part of the immune/inflammatory response. Nomacopan (Coversin) is a recombinant small protein (16,740 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 (Coversin) has received orphan drug status from the U.S. Food and Drug Administration, or the FDA, and the
European Medicines Agency, or the EMA, for paroxysmal nocturnal haemoglobinuria, or PNH, and Guillain Barré
Syndrome, or GBS. Orphan drug designation provides us with certain benefits and incentives, including a period of
marketing exclusivity if regulatory approval 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.
On 29 March 2017, we received notice from the U.S. Food and Drug Administration (FDA) of fast track designation for
the investigation of nomacopan (Coversin) for the treatment of PNH in patients who have polymorphisms conferring
Soliris® (eculizumab) resistance. 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 initial clinical targets for nomacopan (Coversin) are PNH and atypical Hemolytic Uremic Syndrome, or aHUS. We
are also targeting patients with polymorphisms of the C5 molecule which interfere with correct binding of eculizumab, a
C5 inhibitor currently approved for PNH and aHUS treatment, making these patients resistant to treatment with that drug.
In addition to disease targets where complement dysregulation is the key driver, we are also targeting a range of
inflammatory diseases where the inhibition of both C5 and LTB4 are implicated, including bullous pemphigoid (a blistering
disease of the skin), or BP, and atopic keratoconjunctivitis, or AKC.
Other compounds in our pipeline include engineered versions of nomacopan (Coversin) that potentially decrease the
frequency of administration, improve potency, or allow for specific tissue targeting, as well as new proteins targeting LBT4
alone, as well as bioamine inhibitors (for example, anti-histamines). In general, these inhibitors act as ligand binding
compounds, which may provide additional benefit versus other modes of inhibition. For example, off-target effects are less
likely with ligand capture. One example of this benefit is seen with LTB4 inhibition through ligand capture. LTB4 acts to
amplify the inflammatory signal by bringing and activating white blood cells to the area of inflammation. Compounds that
have targeted the production of leukotrienes will inhibit both the production of pro-inflammatory as well as anti-
inflammatory leukotrienes—often diminishing the potential benefit of the drug on the inflammatory system. Nomacopan
(Coversin) has demonstrated that, by capturing LTB4, it is limited to disrupting the white blood cell activation and
attraction aspects, without interfering with the anti-inflammatory benefits of other leukotrienes.
4
AKARI THERAPEUTICS PLC
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
REVIEW OF BUSINESS (continued)
Nomacopan (Coversin) is much smaller than typical antibodies currently used in therapeutic treatment. Nomacopan
(Coversin) can be self-administered by subcutaneous injection, much like an insulin injection, which we believe will
provide considerable benefits in terms of patient convenience. We believe that the subcutaneous formulation of nomacopan
(Coversin) as an alternative to intravenous infusion may accelerate patient uptake if nomacopan (Coversin) is approved by
regulatory authorities for commercial sale. Patient surveys contracted by us suggest that many patients would prefer to self-
inject daily than undergo intravenous infusions. Additionally, nomacopan (Coversin)’s bio-physical properties allow it to
be potentially used in a variety of formulations, some of which may enable therapeutic use via topical or inhaled routes of
administration.
Further information about our business can be found in our Annual Report on Form 20-F filed with the Securities and
Exchange Commission, or SEC, on 23 April 2019.
On 27 April 2017, we issued a press release stating that Edison Investment Research Ltd., or Edison, has withdrawn its
report issued 26 April 2017 titled “Akari’s nomacopan (Coversin) matches Soliris in Phase II”, or the “Edison Report”,
because it contains material inaccuracies, including without limitation, with respect to our interim analysis of our ongoing
Phase II PNH trial of nomacopan (Coversin). Investors were cautioned not to rely upon any information contained in the
Edison Report and instead were directed to our press release issued on 24 April 2017 that discusses the interim analysis of
our then ongoing Phase II PNH trial and other matters. Our Board of Directors established an ad hoc special committee of
the Board to review the involvement, if any, of our personnel with the Edison Report, which was later retracted. Edison
was retained by the Company to produce research reports about us. While that review was pending, Dr. Gur Roshwalb, a
former Chief Executive Officer, was placed on administrative leave and Dr. Ray Prudo in his role as Executive Chairman
temporarily assumed Dr. Roshwalb’s duties in his absence. Following that review, we determined that the Edison Report
was reviewed and approved by Dr. Roshwalb, in contravention of Company policy. On 29 May 2017, Dr. Roshwalb
submitted his resignation as Chief Executive Officer and member of our Board of Directors, effective immediately.
On 12 May 2017, a putative securities class action captioned Derek Da Ponte v. Akari Therapeutics, PLC, Gur Roshwalb,
and Dov Elefant (Case 1:17-cv-03577) was filed in the U.S. District Court for the Southern District of New York against
us, a former Chief Executive Officer and our Chief Financial Officer. The plaintiff asserted claims alleging violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, or the Exchange Act, based primarily on our press releases
or statements issued between April 24, 2017 and 11 May 2017 concerning the Phase II PNH trial of nomacopan (Coversin)
and the Edison Report about us and actions taken by us after the report was issued. The purported class covers the period
from 30 March 2017 to 11 May 2017. The complaint seeks unspecified damages and costs and fees. On 19 May 2017, an
almost identical class action complaint captioned Shamoon v. Akari Therapeutics, PLC, Gur Roshwalb, and Dov Elefant
(Case 1:17-cv-03783) was filed in the same court. On 11-12 July 2017, candidates to be lead plaintiff filed motions to
consolidate the cases and appoint a lead plaintiff. On 10 August 2017, the court issued a stipulated order: (i) consolidating
the class actions under the caption In re: Akari Therapeutics, PLC Securities Litigation (Case 1:17-cv-03577); and (ii)
setting out schedule for plaintiffs to file a consolidated amended complaint and defendants to respond thereto. By order
dated 7 September 2017, the court appointed lead plaintiffs for the class and lead plaintiffs’ counsel. On 6 November 2017,
lead plaintiffs filed a consolidated amended complaint, or the CAC. While the CAC contains similar substantive allegations
to the initial complaints, it adds two additional defendants, Ray Prudo and Edison Investment Research Ltd., and the
purported class period was changed to 24 April 2017 through 30 May 2017. On 10 January 2018, at a hearing regarding
the defendants’ impending motions to dismiss the CAC, the Court gave plaintiffs permission to file a second consolidated
amended complaint, or the SCAC and established a briefing schedule for defendants’ motions to dismiss the SCAC.
Pursuant to that schedule, plaintiffs’ SCAC was filed on 31 January 2018. All briefing on the motions to dismiss was
completed on 20 April 2018. On 8 June 2018, the parties entered into a memorandum of understanding to settle plaintiffs’
claims for a total payment of $2.7 million in cash and on 26 July 2018, plaintiffs filed a notice with the Court voluntarily
dismissing Edison from the action. On 3 August 2018, the remaining parties executed and filed a stipulation and agreement
of settlement (the terms of which were consistent with the memorandum of understanding). On 7 August 2018, the Court
granted plaintiffs’ motion for preliminary approval of the settlement, and on 28 November 2018, following a hearing with
the parties, the court ordered final approval of the settlement. Plaintiffs subsequently moved to distribute the settlement
funds to the class, and the Court granted plaintiffs’ motion on 4 February 2019. We recorded the $2.7 million SCAC
litigation settlement loss in the consolidated statement of comprehensive loss in the year ended 31 December 2018, which
is the period in which the lawsuits were originally filed. The $2.7 million SCAC settlement liability was recorded as a loss
contingency in accrued expenses in our consolidated balance sheets as of 31 December 2018. On 24 August 2018, we
5
AKARI THERAPEUTICS PLC
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
REVIEW OF BUSINESS (continued)
received a $2.7 million payment from our directors’ and officers’ liability insurance provider, the sum of which was paid
to an escrow account for the benefit of the settlement class on 27 August 2018. This was recorded as a gain in the
consolidated statements of comprehensive loss during the third quarter of 2018.
Separately, Edison sought indemnification from us pursuant to its contract with us, including reimbursement of all legal
expenses that Edison incurs in connection with the securities class action (to which, as discussed above, Edison was added
as a defendant on 6 November 2017) and lost profits from customer relationships that Edison claims it lost as a result of
the retraction of the Edison Report. The parties have finalized and consummated a settlement and the settlement payment
has been made.
We voluntarily reported to the SEC the circumstances leading to the withdrawal of the Edison Report and the outcome of
our special committee’s investigation. In response, the SEC requested certain documents from us with respect to the matters
we reported. We have been cooperating with the SEC’s requests for information. On 5 June 2018, we received a subpoena
from the SEC, which requested further documents and information primarily related to our Phase II clinical trial of
nomacopan (Coversin) in connection with an investigation of us that the SEC is conducting. We are in the process of
responding to the subpoena and will continue to cooperate with the SEC.
RESULTS AND DIVIDENDS
Research and development expenses for the year ended 31 December 2018 were approximately $15,589,000 (2017:
$23,285,000). This 33% or $7,696,000 decrease was primarily due to lower expenses of approximately $7,400,000 for
manufacturing as we had previously manufactured clinical trial material for supply through 2019.
We expect our clinical expenses to increase in the future as we conduct additional trials to support the development of
nomacopan (Coversin), and advance other product candidates into pre-clinical and clinical development.
Administrative expenses for the year ended 31 December 2018 were approximately $10,897,000 (2017: $11,799,000). This
8% or $902,000 decrease was primarily due to lower expenses of approximately $1,084,000 for personnel expenses,
$1,015,000 for stock-based non-compensation expense and $256,000 for recruiting offset by higher expenses of
approximately $501,000 for professional fees, $409,000 for rent expense, $397,000 for insurance, and $143,000 for other
miscellaneous expenses.
We expect our general and administrative expenses to increase due to increased legal, accounting and professional fees
associated with being a publicly reporting company in the United States and rental expense associated with offices in the
United States and London to support the Company’s operations and anticipated growth.
Litigation settlement gain for the year ended 31 December 2018 was $2,700,000. This relates to the receipt of funds from
our insurance carrier in 2018 used to settle our securities class action lawsuit which was accrued for in 2017.
Other income for the year ended 31 December 2018 was approximately $286,000 (2017: expenses of $142,000). This
change was primarily attributed to approximately $82,000 of foreign exchange gains in 2018 as compared to foreign
exchange losses of $340,000 in 2017.
Net cash used in operating activities for the year ended 31 December 2018 was $22,536,000 (2017: $31,594,000). Net cash
flow used in operating activities was primarily attributed to our ongoing research activities to support nomacopan
(Coversin), including manufacturing, clinical trial and preclinical activities.
Net cash provided by investing activities for the year ended 31 December 2018 was $0 (2017: $9,985,000). In 2017 this
was cash provided by investment activities derived from the maturities of short-term investments.
Net cash provided by financing activities was $306,000 (2017: $15,672,000).
6
AKARI THERAPEUTICS PLC
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
RESULTS AND DIVIDENDS (continued)
Cash and cash equivalents decreased to approximately $5,968,000 at 31 December 2018 (2017: $28,249,000).
The Group made a loss of $19,950,000 (2017: $29,239,000). The loss for the Group is in line with the expected
performance and the Directors are satisfied with the results for the year.
No dividends were paid during the year (2017: $Nil) and the directors do not propose a final dividend.
PRINCIPAL RISKS AND UNCERTAINTIES
Financing
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 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 independent registered public accounting firm
on its financial statements for the period ended December 31, 2018, 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.
Early stage development
The Group is an early stage development 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 provide
or maintain sufficient resources required for operations in the development and introduction of its products. A large
majority of early stage development 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.
Drug development
The Group’s approach to drug development is complex and all of the product candidates are in an early stage of
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 or will receive regulatory approval.
Further common challenges for similar companies and the Group is to:
• Find a stable active product or formulation without extensive clinical trials and substantial additional
costs or create adequate assay for the products for formulation or clinical testing purposes;
• Manufacture, and/or formulate sufficient amounts of its product candidates or upscale or optimise such
synthesis so as to enable efficient production of scale;
• Find safe and effective doses and dose ratios for its product candidates without extensive clinical trials
and substantial additional costs;
• Obtain sufficient supply or quality of product candidates supply or materials to produce product
candidates or other materials necessary to conduct clinical trials; and
• Establish manufacturing capabilities or enter into agreements with third parties to supply materials to
make product candidates, or manufacture clinical trial drug supplies.
7
AKARI THERAPEUTICS PLC
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Departure of and search for executive officers
The Group’s success depends on its ability to hire and retain the services of its current executive officers, directors, principal
consultants and others. In addition, the Group has established relationships with universities and research institutions which
have historically provided, and continue to provide, us with access to research laboratories, clinical trials, facilities and
patients. The loss of the services of any of these individuals or institutions has had and could have a material adverse effect
on the Group’s business. On 8 May 2018, David Horn Solomon resigned as Chief Executive Officer and member of the
Company’s board. Dr. Solomon’s resignation followed the results of an investigation conducted, with the assistance of an
independent law firm, which revealed that Dr. Solomon incurred personal charges on the Company’s corporate credit cards
in violation of Company policy. Clive Richardson, who was then serving as the Company’s Chief Operating Officer, was
appointed to serve as the Company’s Interim Chief Executive Officer while we seek a permanent Chief Executive Officer.
Previously, in December 2017 the Company’s former Chief Legal & Compliance Officer was terminated without cause
and in May 2017 the Company’s former Chief Executive Officer who preceded David Horn Solomon also resigned. The
Group faces significant competition for executives with the qualifications and experience it is seeking. There can be no
assurances concerning the timing or outcome of the Group’s search for a new permanent Chief Executive Officer or any
other executive officer.
SEC Investigation
As described above, the Group is currently subject to an SEC investigation. The Group cannot predict what, if any, actions
the SEC may take or the timing or duration of the investigation. If the Group were to conclude that enforcement action is
appropriate, the Group could be required to pay civil penalties and fines, and the SEC could impose other sanctions against
the Group or against our current and former officers and directors. In addition, the Group’s board of directors, management
and employees may expend a substantial amount of time on the SEC investigation, diverting resources and attention that
would otherwise be directed toward our operations and implementation of Group business strategy, all of which could
materially adversely affect the Group’s business, financial condition, results of operations or cash flows. Furthermore,
while the SEC has informed the Group that the investigation should not be construed as an indication by the SEC or its
staff that any violation of law has occurred, nor as a reflection upon any person, entity or security, publicity surrounding
the foregoing, or any SEC enforcement action or settlement as a result of the SEC’s investigation, even if ultimately
resolved favorably for the Group, could have an adverse impact on the Group’s reputation, business, financial condition,
results of operations or cash flows.
Market acceptance
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 early 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 long-term clinical studies and provide more evidence substantiating the safety and
effectiveness of the doses or dose ratios selected in a significant patient population.
Intense competition from powerful competitors
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.
8
AKARI THERAPEUTICS PLC
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Product liability exposure
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.
Intellectual Property
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 countries 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
More detailed information about the risks and uncertainties affecting us is contained under the heading "Risk Factors"
included in our Annual Report on Form 20-F filed with the SEC on 23 April 2019 and in other filings that we have made
and may make with the SEC in the future.
9
AKARI THERAPEUTICS PLC
STRATEGIC REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
FINANCIAL INSTRUMENTS
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.
RESEARCH AND DEVELOPMENT
The Group is a clinical-stage biopharmaceutical company focused on developing inhibitors of acute and chronic
inflammation, specifically the complement system, the eicosanoid system or leukotriene system and the bioamine system
for the treatment of rare and orphan diseases.
KEY PERFORMANCE INDICATORS
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.
Key financial performance indicators:
Research and Development spend - $15,589,000 (2017: $23,285,000)
Cash and cash equivalents position - $5,968,000 (2017: $28,249,000)
This report was approved by the board on 30 May 2019 and signed on its behalf.
Clive Richardson
Director
10
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
PART I - ANNUAL REPORT ON REMUNERATION
Information provided in this section of the Directors’ Remuneration report is subject to audit.
Single Total Figure of Remuneration for Each Director (subject to audit)
The following table shows the compensation paid or accrued during the fiscal year ended 31 December 2018.
Name of Director
Salary
and
Fees ($)
Taxable
Benefits
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)(1)
Pension
Benefits
($)
2018 Total
($)
Executive Director
Ray Prudo (2)
David Solomon (3)
Clive Richardson
Non-Employee Director
James Hill, M.D.
Stuart Ungar, M.D.
David Byrne
Donald Williams
Robert Ward (6)
Peter Feldschreiber
Michael Grissinger (7)
212,180
183,371
354,405
-
4,261
9,793 (4)
106,090
-
131,755
58,792
48,492
48,492
53,642
36,396
35,890
35,890
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
253,123
-
-
34,683 (5)
318,270
187,632
783,759
16,869
16,869
16,869
25,003
-
49,304
49,304-
-
-
-
-
-
-
-
75,661
65,361
65,361
78,645
39,396
85,194
85,194
(1) These amounts represent the aggregate grant date fair value for option awards for fiscal year 2018 computed in accordance with FASB ASC Topic
718. A discussion of the assumptions used in determining grant date fair value may be found in Akari’s Financial Statements, included in Akari’s Annual
Report on Form 20-F for the year ended 31 December 2018.
(2) Consists of company contributions to 401K plan or pension scheme.
(3) Dr Soloman was appointed as our Chief Executive Officer on 28 August 2017 and resigned as Chief Executive Officer on 8 May 2018.
(4) Consists of company contributions to health benefits of $7,633 and life insurance premiums of $2,160.
(5) Consists of company contributions to a pension plan.
(6) Mr. Ward resigned as a director on 19 September 2018.
(7) Mr. Feldschreiber and Mr. Grissinger were appointed as a director on 23 January 2018.
The following table shows the compensation paid or accrued during the fiscal year ended 31 December 2017.
Name of Director
Salary
and Fees
($)
Taxable
Benefits
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)(1)
Pension
Benefits
($)
2017 Total
($)
Executive Director
Ray Prudo (2)
David Solomon (3)
Gur Roshwalb, M.D.
(4)
Clive Richardson
Non-Employee Director
James Hill, M.D.
Stuart Ungar, M.D.
David Byrne
Donald Williams
Robert Ward
206,000
173,611
193,263
332,507
-
4,129
13,620
(5)
9,793 (6)
103,000
119,041
-
135,991
56,840
46,690
46,555
51,765
45,451
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
654,459
-
-
-
-
309,000
951,240
206,883
113,272
32,650 (7)
624,213
42,983
42,983
42,983
42,983
42,983
-
-
-
-
-
99,823
89,673
89,538
94,748
88,434
(1) These amounts represent the aggregate grant date fair value for option awards for fiscal year 2017 computed in accordance with FASB ASC Topic
718. A discussion of the assumptions used in determining grant date fair value may be found in Akari’s Financial Statements, included in Akari’s Annual
Report on Form 20-F for the year ended 31 December 2017.
(2) Dr. Prudo is party to a non-executive contract although he performs executive duties on behalf of Akari.
11
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
(3) Dr Solomon was appointed as our Chief Executive Officer on 28 August 2017 and resigned as chief Executive Officer on 8 May 2018
(4) Dr. Roshwalb resigned as Chief Executive Officer on 29 May 2017.
(5) Consists of company contributions to health benefits.
(6) Consists of company contributions to health benefits of $7,633 and life insurance premiums of $2,160.
(7) Consists of company contributions to a pension plan.
Incentive Plan Awards (subject to audit)
Akari operates an equity incentive plan (the 2014 Equity Incentive Plan, or 2014 Plan) under which directors receive
options to acquire ordinary shares in Akari. Options awards granted during the fiscal year ended 31 December 2018 are
as follows:
Name of Director
James Hill, M.D
Stuart Ungar, M.D
David Byrne
Donald Williams
Donald Williams
Peter Feldschreiber
Peter Feldschreiber
Michael Grissinger
Michael Grissinger
Option
Awards(1)
1,300,000
1,300,000
1,300,000
1,300,000
750,000
1,300,000
1,300,000
1,300,000
1,300,000
(1) Option awards are subject to time-based vesting.
Grant Date
Exercise Price
Option Awards ($) (2)
19/9/2018
19/9/2018
19/9/2018
19/9/2018
16/11/2018
23/1/2018
19/09/2018
23/1/2018
19/09/2018
$0.0208
$0.0208
$0.0208
$0.0208
$0.0175
$0.0347
$0.0208
$0.0347
$0.0208
16,869
16,869
16,869
16,869
8,134
32,435
16,869
32,435
16,869
(2) These amounts represent the aggregate grant date fair value for option awards for fiscal year 2018 computed in accordance with FASB ASC Topic
718. A discussion of the assumptions used in determining grant date fair value may be found in Akari’s Financial Statements, included in Akari’s Annual
Report on Form 20-F for the year ended 31 December 2018.
Director’s shareholdings (subject to audit)
The table below shows, for each director, the total number of ordinary shares owned, the total number of share options held
and the number of share options vested within 60 days of 31 March 2019. No director exercised any share options during
the year ended 31 December 2018.
Name of Director
Executive Director
Ray Prudo
Clive Richardson
Non-employee Director
James Hill, M.D
Stuart Ungar, M.D
David Byrne
Donald Williams
Peter Feldschreiber
Michael Grissinger
Ordinary Shares
Owned
782,345,600 (2)
-
-
-
-
-
-
-
Share Options
Vested Share Options
(1)
-
40,771,850
5,200,000
5,200,000
5,200,000
5,950,000
2,600,000
2,600,000
-
15,362,869
3,900,000
3,900,000
3,900,000
3,466,666
325,000
325,000
(1) All share options that were outstanding as at 31 December 2018 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. Dr. Prudo has voting and dispositive control over the ordinary shares held by RPC Pharma
Limited and owns approximately 71% of RPC’s outstanding shares (including option grants), including 10.64% 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.
12
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
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 2018. 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.
Chief Executive Total Remuneration History
The table below sets out total remuneration details for the Chief Executive Officer.
Period
2018 (David Solomon) (1)
2017 (Gur Roshwalb and
David Solomon) (1)
2016 (Gur Roshwalb)
2015 (Gur Roshwalb)
2014 (Gur Roshwalb)
2013 (Gur Roshwalb) (2)
2012 (3)
Single total
figure of
remuneration
$
Annual
Bonus
173,611
1,338,253
-
119,041 (5)
581,250
7,306,951
410,564
576,389
-
187,500
86,625
-
-
-
Short-term
incentive
payout
against
maximum
-
100% (6)
125% (7)
100% (8)
-
-
-
Option Awards
($)
Option
Awards
against
maximum (4)
-
-
-
6,863,034
60,564
173,396
-
-
-
-
-
-
-
-
(1) 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.
(2) Dr. Roshwalb was appointed as Akari’s Chief Executive Officer on 4 March 2013.
(3) Akari was not a quoted company in 2012.
(4) All options were awarded on a discretionary basis on an annual basis.
(5)
(6) Bonus was awarded in 2017 but calculated from Dr. Solomon’s appointment on 28 August 2017.
Includes a $50,000 signing bonus.
13
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
(7) 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.
(8) 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.
Chief Executive Officer’s Remuneration Compared to Other Employees
The table below shows the percentage change in remuneration of the Chief Executive Officer and Akari’s employees as a
whole between the year ended 31 December 2017 and the year ended 31 December 2018.
Basic Salary
Annual bonus
Taxable benefits
Relative Importance of Spend on Pay
Percentage increase in remuneration
in year ended 31 December 2018
compared
with remuneration in the year ended
31 December 2017
CEO
3%
(28%)
5%
All employees
23%
(13%)
24%
The following table sets forth the total amounts spent by the Company on remuneration for the year ended 31 December
2018 and the year ended 31 December 2017. 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 as
shown in its Annual Report on Form 20-F for the year ended 31 December 2018. The Company acquired Volution Immuno
Pharmaceuticals SA on 18 September 2015 and as a result spending has increased.
Period
Total spend on remuneration
Shareholder distributions
Research and development costs
Year Ended
31 December 2018
$
3,547,493
-
11,795,000
Year Ended
31 December 2017
$ (1)
4,608,190
-
23,285,279
(1)
Increase was due to increase in headcount and initiation of clinical trials
Implementation of remuneration policy for year ending 31 December 2019
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 Renumeration Policy on 14 July 2017 to provide a framework for the Director’s
compensation package. In addition, the Company has a non-employee director compensation policy, which was amended
and restated on 19 November 2015 and was subsequently amended on 29 June 2016, 26 January 2017 and on 23 January
2018. On 8 January 2019, our board approved a 3% increase in cash compensation and increased committee membership
fees. As a result, our non-employee directors will be compensated for service on our board of directors as follows in 2019:
•
•
•
•
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;
14
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
•
for the chairperson of the audit committee, an annual retainer of $17,500
The following table presents the salary increases agreed for the upcoming fiscal year
Director
Executive Director
Ray Prudo
David Solomon (3)
Clive Richardson (4)
Non-employee Director
James Hill, M.D
Stuart Ungar, M.D
David Byrne
Donald Williams
Peter Feldschreiber
Michael Grissinger
31
December
2018
31 December
2019 (1)
Increase
%
$212,180
$515,000
£259,560
$400,000
-
£337,428
$58,792
$48,492
$48,492
$53,642
$35,890
$35,890
$62,752
$49,947
$52,143
$56,838
$39,338
$49,947
89% (2)
-
30% (2)
7% (5)
3% (6)
8% (5)
6% (7)
39% (8)
10% (9)
(1) Additional discretionary bonuses may be awarded in accordance with contractual entitlement and the remuneration policy.
(2) Represents an increase in line with their increased duties as Executive Chairman and Interim Chief Executive Officer.
(3) Dr. Solomon was appointed Chief Executive Officer on 28 August 2017 and his salary is on annualised basis. Dr Solomon resigned 8 May 2018.
(4) On 8 May 2018, Mr Richardson was appointed interim Chief Executive Officer.
(5) Represents an increase of 3% for board and compensation committee fees in line with inflation with the exception of the increase in audit committee
fees from $5,150 to $7,500.
(6) Represents an increase in line with inflation.
(7) Represents an increase of 3% for board fees in line with inflation with the exception of the increase in audit committee chairman fees from $15,450
to $17,500.
(8) Represents an increase in line with inflation. Dr. Feldschreiber joined the board on 23 January 2018 and became chairman of the nominating and
governance committee in 2019.
(9) Represents an increase in line with inflation. Mr. Grissinger joined the board on 23 January 2018.
Compensation Committee Approach to Remuneration Matters
The Compensation Committee is comprised of Dr. James Hill (Chairman), Dr. Stuart Ungar, and Mr. David Byrne. 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.
Statement of Voting at AGM
Akari is committed to ongoing shareholder dialogue and the Compensation Committee takes an active interest in
shareholder views and voting outcomes.
15
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
PART II - DIRECTORS’ REMUNERATION POLICY
INFORMATION PROVIDED IN THIS SECTION OF THE DIRECTORS’ REMUNERATION REPORT IS
NOT SUBJECT TO AUDIT.
This Directors’ Remuneration Policy (“Policy”) of Akari Therapeutics, Plc (“Akari”) was approved by shareholders at the
2017 Annual General Meeting of Shareholders (“AGM”). The Policy provides a framework for execution of Akari’s
compensation framework from the date of its approval at the 2017 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).
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.
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
Base salary
Purpose and
link to
strategy
Support the
recruitment
and retention
of Executive
Officers
Operation
Maximum
opportunity
Performance
metrics
• Base salary levels are set
taking into account the
role, responsibilities and
individual’s experience in
the position, performance
of the individual and Akari.
• Base salaries are typically
reviewed annually.
• There is no
• None, although
overall
performance of the
individual is
considered when
setting and
reviewing salaries.
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.
Pension
Other
Benefits
Encourages
and enables
executives to
build savings
for their
retirement
Provide
market
competitive
benefits in a
cost-effective
way
• Akari typically makes
contributions to pension
plans (or retirement savings
plans) to match prevailing
local market practices.
• Provisions include medical
insurance, life assurance,
permanent health
insurance, etc.
• In exceptional
circumstances, such as the
16
• Currently up to 10%
of salary per annum.
• None.
• No prescribed
• None.
maximum. The cost
of benefits will vary
from year to year in
accordance with the
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
cost of insuring such
benefits.
• 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.
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.
• 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.
Bonus
To reward the
delivery of
annual targets
as well as to
recognise the
individual
contributions
towards our
key strategic
achievements
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 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.
• Where performance
conditions are
attached to an
award, these
typically include
key financial,
operational and/or
individual
objectives subject
to overall
Compensation
Committee
discretion.
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
• None.
£30,000 or local
market rules as
amended from time
to time.
17
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
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.
The table below sets out some of the features of Akari’s current non-employee director compensation policy:
Element
Annual Cash
Retainer Fee
Purpose and
link to
strategy
Support the
recruitment
and retention
of Non-
Executive
Directors
Share
options
Strengthens
the alignment
to
shareholders’
interests
through share
ownership
Operation
Maximum
opportunity
Performance
metrics
• None.
• There is no
prescribed
maximum increase
nor any
requirement to
increase salary at
any time.
• None.
• 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.
• 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.
• 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.
18
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
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.
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).
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 expects that employment arrangements for any Executive Director will 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 could 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.
Other relevant information considered
As appropriate, the Compensation Committee considers the pay and conditions of the broader employee workforce when
making compensation related decisions for the Directors.
The Compensation Committee also considers shareholder feedback, so far as it relates to compensation, when reviewing
of the appropriateness of its Policy.
This report was approved by the board on 30 May 2019 and signed on its behalf.
Clive Richardson
Director
19
INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDER OF
AKARI THERAPEUTICS PLC
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 2018 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 changes
in equity, the parent company statement of changes in equity, the consolidated statement of cash flow, the parent company
statement of cash flow 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 International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
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 2018 and of
the group’s loss for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; 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 SME 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.
Materiality uncertainty relating to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the
disclosures made in note 1.(c) of the financial statements concerning the group’s ability to continue as a going concern.
The disclosures indicate that in the short term the group would require additional funding to meet its 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. The financial statements do not include any adjustments that would result if the
company or group was unable to continue as a going concern.
We have identified going concern as a key audit matter based on our assessment of the significance of the risk and the
effect on our audit strategy.
Our audit procedures in response to this key audit matter included the following:
• We reviewed post year end trading activity and discussed with management.
• We reviewed the cash flow forecast prepared by management and challenged management on the assumptions and
judgements made.
• We assessed the company’s ability to scale back operations and reduce costs should cash levels become low in the
twelve months from the signing of the accounts.
• We considered the adequacy of the securities purchase agreement with Aspire Capital Fund, LLC which provides that,
upon the terms and subject to the conditions and limitations set forth therein. Aspire Capital is committed to purchase
up to an aggregate of $20 million of the Group’s ADS over the 30 month period of the purchase agreement.
20
INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDER OF
AKARI THERAPEUTICS PLC (continued)
Key audit matters
In addition to the matter described in the material uncertainty relating to going concern section, 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 the matter was addressed
Management
Controls
Override
of
• We considered all areas requiring judgement, tested journal entries and incorporated unpredictability
into our testing procedures.
Our application of materiality
The scope and focus of our audit was influenced by our assessment and application of materiality. We define materiality
as the magnitude of misstatement that could reasonably be expected to influence the readers and the economic decisions
of the users of the financial statements. We use materiality to determine the scope of our audit and the nature, timing and
extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements
as a whole. We considered expenditure and expenditure growth to be the main focus for the readers of the financial
statements, accordingly this consideration influenced our judgement of materiality. Based on our professional judgement,
we determined materiality for the group to be $400,000. This value was derived from a benchmark of 2% of expenditure.
On the basis of our risk assessments, together with our assessment of the overall control environment, our judgement was
that performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the company was
75% of materiality, namely $300,000
An overview of the scope of our audit
Our audit approach is based on obtaining and maintaining a thorough understanding of the group’s business, structure and
scope in order to undertake a risk based audit approach. This approach requires us to identify relevant and appropriate key
and significant risks of misstatement and determine the most appropriate tailored responses to this risk assessment. The
extent of our work is determined by the level of risk in each area and our assessment of materiality as discussed above.
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.
21
INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDER OF
AKARI THERAPEUTICS PLC (continued)
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 2, 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.
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.
Ian Cliffe (Senior statutory auditor)
for and on behalf of Haysmacintyre LLP,
Statutory Auditors
10 Queen Street Place
London
EC4R 1AG
Date: 30 May 2019
22
AKARI THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED 31 DECEMBER 2018
Research and development expenses
Administrative expenses
Contingent costs
OPERATING LOSS
Net finance income/(loss)
LOSS BEFORE INCOME TAX
Income Tax Expense
LOSS FOR THE YEAR
Other Comprehensive (Loss)/Income:
Currency translation differences
COMPREHENSIVE LOSS FOR THE YEAR
Notes
3
4
2018
$000
(15,589)
(10,897)
2,700
---------------
(23,786)
286
---------------
(23,500)
3,550
---------------
(19,950)
=======
(155)
---------------
(20,105)
=======
2017
$000
(23,285)
(11,799)
(2,700)
---------------
(37,784)
(142)
---------------
(37,926)
8,687
---------------
(29,239)
=======
44
---------------
(29,195)
=======
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 29 to 43 form an integral part of the consolidated financial statements.
23
AKARI THERAPEUTICS PLC
COMPANY NUMBER: 05252842
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018
ASSETS
Non-current assets
Property, plant and equipment
Intangible Assets
Current assets
Trade and Other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Capital and reserves attributable to the Company’s
equity shareholders
Called up share capital
Share premium
Other reserves
Merger reserve
Share based payment reserve
Reverse Acquisition reserve
Retained earnings
TOTAL EQUITY
LIABILITIES
Non Current Liabilities
Other long term liabilities
Current liabilities
Trade and other payables
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
2018
$000
2017
$000
7
6
9
12
13
13
13
13
13
13
11
10
20
33
---------------
53
10,431
5,968
---------------
16,399
---------------
16,452
=======
23,651
106,030
(391)
9,128
12,413
(20,983)
(116,472)
---------------
13,376
---------------
56
36
---------------
92
9,395
28,249
---------------
37,644
---------------
37,736
=======
22,928
105,863
(236)
9,128
10,764
(20,983)
(96,522)
---------------
30,942
---------------
-
48
3,076
---------------
3,076
---------------
16,452
=======
6,746
---------------
6,794
---------------
37,736
=======
The financial statements were approved and authorised for issue by the Board of Directors on 30 May 2019
and were signed below on its behalf by:
Clive Richardson
Director
The notes on pages 29 to 43 form an integral part of these consolidated financial statements.
24
AKARI THERAPEUTICS PLC
COMPANY NUMBER: 05252842
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2018
ASSETS
Non-current assets
Property, plant and equipment
Investment in subsidiaries
Current assets
Trade and Other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY
Capital and reserves attributable to the Company’s
equity shareholders
Called up share capital
Share premium
Merger reserve
Share based payment reserve
Retained earnings
TOTAL EQUITY
LIABILITIES
Non Current Liabilities
Other long term liabilities
Current liabilities
Trade and other payables
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
2018
$000
2017
$000
7
8
9
12
13
13
13
13
11
10
20
20,339
---------------
20,359
14,452
5,914
---------------
20,366
---------------
40,725
=======
23,651
106,030
9,128
12,413
(113,484)
---------------
37,738
---------------
56
20,339
---------------
20,395
13,379
28,147
---------------
41,526
---------------
61,921
=======
22,928
105,863
9,128
10,764
(93,401)
---------------
55,282
---------------
-
48
2,987
---------------
2,987
---------------
40,725
=======
6,591
---------------
6,639
---------------
61,921
=======
The financial statements were approved and authorised for issue by the Board of Directors on 30 May 2019
and were signed below on its behalf by:
Clive Richardson
Director
The notes on pages 29 to 43 form an integral part of these consolidated financial statements.
25
AKARI THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2018
Share
Capital
$000
Share
Other Merger
Premium Reserves Reserve
$000
$000
$000
Share
Based
Payment
Reserve
$000
Reverse
Acquis-
ition
Reserve
$000
Retained
Loss
$000
Total
$000
At I January 2017
18,341
94,778
(280)
9,128
8,029
(20,983)
(67,283)
41,730
Comprehensive gain/ loss for the
year
Share based payments
Shares Issued
At 31 December 2017
Comprehensive gain/ (loss) for
the year
Share based payments
Shares Issued
At 31 December 2018
-
-
44
-
-
-
(29,239)
(29,195)
-
4,587
--------------
22,928
=======
-
11,085
--------------
105,863
=======
-
-
--------------
(236)
=======
-
-
--------------
9,128
=======
2,735
-
--------------
10,764
=======
-
-
--------------
(20,983)
=======
-
-
--------------
(96,522)
=======
2,735
15,672
--------------
30,942
=======
-
-
(155)
-
-
-
(19,950)
(20,105)
-
723
--------------
23,651
=======
-
167
--------------
106,030
=======
-
--------------
(391)
=======
-
-
--------------
9,128
=======
1,649
-
--------------
12,413
=======
-
-
--------------
(20,983)
=======
-
-
--------------
(116,472)
=======
1,649
890
--------------
13,376
=======
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
Share
Capital
$000
Share
Premium
$000
Merger
Reserve
$000
Share Based
Payment
Reserve
$000
Retained
Loss
$000
Total
$000
At I January 2017
18,341
94,778
9,128
8,029
(64,231)
66,045
Total comprehensive loss for the year
Share based payments
Shares Issued
At 31 December 2017
Total comprehensive loss for the year
Share based payments
Shares Issued
At 31 December 2018
-
-
4,587
--------------
22,928
=======
-
-
723
--------------
23,651
=======
-
-
11,085
--------------
105,863
=======
-
-
167
--------------
106,030
=======
-
-
-
--------------
9,128
=======
-
-
-
--------------
9,128
=======
-
2,735
-
--------------
10,764
=======
-
1,649
-
--------------
12,413
=======
(29,170)
-
-
--------------
(93,401)
=======
(20,083)
-
-
--------------
(113,484)
=======
(29,170)
2,735
15,672
--------------
55,282
=======
(20,083)
1,649
890
--------------
37,738
=======
The notes on pages 29 to 43 form an integral part of these consolidated financial statements.
26
AKARI THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
Cash flows from operating activities
Loss before income tax
Adjustments for:
Changes in fair value of warrants
Share-based payment
Foreign currency exchange gains
Depreciation and amortisation
Trade and other receivables
Trade and other payables
Other liabilities
Net cash flows used in operating activities
Cash flow from investing activities
Purchase of property and equipment
Maturities of short-term investments
Net cash from (used) investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Issue costs
Cash generated from financing activities
Exchange losses on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2018
$000
2017
$000
(23,500)
(37,926)
1,649
(105)
39
3,099
(3,670)
(48)
------------
(22,536)
-
-
------------
-
891
(585)
------------
306
(51)
(22,281)
28,249
------------
5,968
========
(35)
2,735
93
42
807
2,698
(8)
------------
(31,594)
(37)
10,022
------------
9,985
17,400
(1,728)
------------
15,672
(55)
(5,992)
34,241
------------
28,249
========
The notes on pages 29 to 43 form an integral part of these consolidated financial statements.
27
AKARI THERAPEUTICS PLC
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2018
Cash flows from operating activities
Loss before income tax
Adjustments for:
Changes in fair value of warrants
Share based payments
Depreciation
Trade and other receivables
Trade and other payables
Other liabilities
Net cash flows used in operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Maturities of short-term investments
Net cash from (used) in investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Issue costs
Cash generated from financing activities
2018
$000
2017
$000
(23,633)
(37,857)
-
1,649
36
3,063
(3,604)
(48)
------------
(22,537)
-
-
------------
-
891
(585)
------------
306
(35)
2,735
39
897
2,603
(8)
------------
(31,626)
(37)
10,022
------------
9,985
17,400
(1,728)
------------
15,672
Exchange gains on cash and cash equivalents
(2)
1
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
(22,233)
28,147
------------
5,914
========
(5,968)
34,115
------------
28,147
========
The notes on pages 29 to 43 form an integral part of these consolidated financial statements.
28
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1.
(a)
(b)
(c)
ACCOUNTING POLICIES
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.
Basis of preparation
These consolidated financial statements of Akari Therapeutics Plc have been prepared in accordance with
International Financial Reporting Standards (IFRS) 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. A summary of the more important 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).
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”).
Going Concern
For the year ended 31 December 2018 the Group reported a loss of $20,105,000 and expects to continue to incur
substantial losses over the next several years during its development phase. To fully execute its business plan,
the Company will need, among other things, to complete its research and development efforts and clinical and
regulatory activities. These activities may take several years and will require significant operating and capital
expenditures in the foreseeable future. There can be no assurance that these activities will be successful. If the
Company is not successful in these activities or there is not a favourable resolution of the SEC investigation it
could delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development
activities. To fund its capital needs, the Company plans to raise funds through equity or debt financings or other
sources, such as strategic partnerships and alliance and licensing arrangements, and in the long term, from the
proceeds from sales.
On September 26 2018, the Group entered into a securities purchase agreement (the “Purchase Agreement”) with
Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), which provides that, upon the
terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up
to an aggregate of $20.0 million of the Company’s American Depository Shares over the 30-month term of the
Purchase Agreement.
Therefore, having reviewed the group’s forecast and projections, and having made appropriate enquiries, the
Directors have a reasonable expectation that the Group has sufficient funding and adequate resources to continue
operationally for at least 12 months from the date of this Annual Report. The Group therefore continues to adopt
the going concern basis for the preparation of the consolidated financial statements. The financial statements do
not include the necessary adjustments required should the Group cease to be a going concern.
29
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
1.
(d)
ACCOUNTING POLICIES (continued)
Standards and interpretations adopted during the year
The adoption of the following mentioned amendments in the current year have not had a material impact on the
Group’s and Company’s financial statements:
Amendment to IAS 7 Statement of Cash Flows: Disclosure initiative
Amendment to IAS 12 Income Taxes: Recognition of deferred tax assets
for unrealised losses
EU effective date–
periods beginning on
or after
1 January 2018
1 January 2018
At the date of approval of these annual report and accounts, certain new standards, amendments and
interpretations to existing standards became effective, as they had not been previously adopted by the Group.
Information on new standards, amendments and interpretations that are relevant to the Group’s annual report
and accounts is provided below. Certain other new standards and interpretations have been issued but are not
expected to have a material impact on the Group's annual report and accounts.
IFRS 9 “Financial Instruments”
In the current year, the Group has applied IFRS 9 “Financial Instruments” (as revised in July 2014) and the
related consequential amendments to other IFRS Standards that are effective for an annual period that begins on
or after 1 January 2018.The IASB have released IFRS 9 following completion of the project to replace IAS 39
‘Financial Instruments: Recognition and Measurement’. The new standard introduces extensive changes to IAS
39’s guidance on the classification and measurement of financial assets and introduces a new ‘expected credit
loss’ model for the impairment of financial assets. IFRS 9 also provides new guidance on the application of
hedge accounting. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018 and has
been endorsed by the European Union. The Group’s management has performed an impact assessment of the
effects of IFRS 9 on the 2018 figures and there are no material changes to the Group’s annual report and
accounts.
IFRS 15, ‘Revenue from Contracts with Customers’
In the current year, the Group has applied IFRS 15 “Revenue from Contracts with Customers” (as amended in
April 2016) which is effective for reporting periods beginning on or after 1 January 2018. IFRS 15 presents new
requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’, and
several revenue-related Interpretations. The new standard establishes a control-based revenue recognition model
and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to
account for arrangements with multiple performance obligations, variable pricing, customer refund rights,
supplier repurchase options, and other common complexities.
This standard has been endorsed by the European Union. The Group’s management has performed an impact
assessment of the effects of IFRS 15 on the 2018 figures and there is no material change to the statement of
comprehensive income as presented.
(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.
30
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
1.
ACCOUNTING POLICIES (continued)
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)
c) all resulting exchange differences are recognised in other comprehensive income.
income and expenses for each income statement are translated at average exchange rates; and
(f)
Financial instruments
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities on the balance sheet.
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.
The Group's liability related to options and warrants related to equity and debt financing and are recognised on
the balance sheet at their fair value, with changes in the fair value accounted for in the statement of comprehensive
loss and included in financing income or expenses.
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.
31
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
2.
ACCOUNTING POLICIES (continued)
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.
(i)
Intangible assets:
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.
(j)
(k)
Investments
Investments in subsidiary undertakings are stated at cost less provisions for impairment.
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.
(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.
(l) Operating lease agreements
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified
as operating leases. Payments made on operating leases are charged to the income statement on a straight line
basis over the period of the lease.
32
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
1.
ACCOUNTING POLICIES (continued)
(m) Deferred taxation
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: valuation of intangible and other non-current assets, deferred
taxation, and collecting trade receivables.
(o) Business combinations:
Business combinations on or after 1 January 2004 are accounted for under IFRS 3 (“Business combinations”)
using the purchase price method. Any excess of the cost of business combinations over the group’s interest in the
net fair value of the identifiable assets, liabilities and contingent liabilities is recognised in the balance sheet as
goodwill.
After initial recognition, goodwill is not amortised but is stated at cost less any accumulated impairment loss, with
the carrying value being reviewed for impairment, at least annually and whenever events or changes in
circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill is allocated to the related cash generating units monitored by
management. Where the recoverable amount of the cash generating unit is less than its carrying amount, including
goodwill, an impairment loss is recognised in the income statement.
Intangible assets are tested annually for impairment and other non-current assets are tested where an indication of
impairment arises. The assessment of impairment is made by comparing the carrying amount of cash generating
units (including any associated goodwill) to the higher of their value in use and their fair value. Value in use
represents the net present value of future discounted cash flows.
Any impairment of non-current assets are recognised in the income statement.
33
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
2.
EXPENSES BY NATURE
Employee benefit expense (see below)
Depreciation
Amortisation
Exchange (loss)/ gain
Auditors’ remuneration
- audit fees
- other services
Employee benefit expense
Wages and salaries
Social security costs
The average number of persons (including directors)
employed by the group during the year was as follows:
Office and administration
Key management remuneration
Wages and salaries
2018
$000
3,841
36
3
82
35
-
=======
2018
$000
3,547
294
--------------
3,841
=======
22
=======
1,641
=======
2017
$000
4,224
39
3
(340)
21
2
======
2017
$000
3,840
384
--------------
4,224
=======
21
=======
3,410
=======
The key management is considered to be the directors and senior management team. Details of directors’
remuneration can be seen within the Directors’ Remuneration Report on pages 11 to 19.
3.
NET FINANCE INCOME/(LOSS)
Change in value of liability related to warrants
Net foreign exchange gains (losses)
Interest Income
Interest Expense
Other taxes
2018
$000
-
82
222
-
(18)
---------------
286
=======
2017
$000
35
(340)
175
(9)
(3)
---------------
(142)
=======
34
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
4.
INCOME TAX EXPENSE
Current tax:
Current tax on losses for the year
Adjustment in respect of prior years
The tax assessed in the year is different from the standard rate of
corporation tax in the UK of 19% in 2018 and 19.25% in 2017.
The differences are explained below:
Loss before tax
Loss on ordinary activities before tax multiplied by the standard
companies’ rate of tax in the UK
Effects of:
Losses carried forward
Expenses not deductible for tax purposes
Surrender of tax loses for R&D tax credit refund
Additional deduction for R&D tax credit
Adjustment in respect of prior years
Tax credit
2018
$000
(3,540)
(10)
-------------
(3,550)
=======
(23,500)
=======
(4,490)
2,436
49
1,106
(2,641)
(10)
--------------
(3,550)
=======
2017
$000
(4,711)
(3,976)
-------------
(8,687)
=======
(37,926)
=======
(7,301)
3,937
542
1,462
(3,351)
(3,976)
--------------
(8,687)
=======
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 $20,083,000
(2017: $29,170,000).
35
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
6.
INTANGIBLE ASSETS
GROUP
Cost
At 1 January 2018
Additions
At 31 December 2018
Amortisation
At 1 January 2018
Charge for the year
At 31 December 2018
Net Book Value
At 31 December 2018
At 31 December 2017
Patent
acquisition costs
$000
95
-
---------------
95
---------------
(59)
(3)
---------------
(62)
---------------
33
=======
36
=======
7.
PROPERTY PLANT AND EQUIPMENT
GROUP & COMPANY
Office furniture
and equipment
$000
Cost
At 1 January 2018
Additions
At 31 December 2018
Depreciation
At 1 January 2018
Charge for the year
At 31 December 2018
Net Book Value
At 31 December 2018
At 31 December 2017
172
-
---------------
172
---------------
(116)
(36)
---------------
(152)
---------------
20
=======
56
=======
36
Total
$000
95
-
----------------
95
---------------
(59)
(3)
---------------
(62)
---------------
33
=======
36
=======
Total
$000
172
-
---------------
172
---------------
(116)
(36)
---------------
(152)
---------------
20
=======
56
=======
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
8.
INVESTMENTS IN SUBSIDIARIES
Company
At 1 January 2018
Additions
At 31 December 2018
Investments in
Subsidiary
Undertakings
$000
20,339
-
----------
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
Celsus Therapeutics Inc.
Morria Biopharma Ltd.
Development of
pharmaceutical drugs
Dormant
Dormant
Switzerland
Ordinary
United States
Israel
Ordinary
Ordinary
%
100
100
100
37
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
9.
TRADE AND OTHER
RECEIVABLES
Trade and other receivables
Prepayments and accrued income
Income tax receivable
2018
$000
585
1,286
8,560
-----------
10,431
=====
Group
Company
2017
$000
23
685
8,687
-----------
9,395
=====
2018
$000
4,590
1,414
8,448
----------
14,452
=====
2017
$000
4,015
677
8,687
----------
13,379
=====
10.
TRADE AND OTHER PAYABLES
Group
Company
Trade payables
Accrued expenses
2018
$000
1,586
1,490
---------------
3,076
=======
2017
$000
1,961
4,785
---------------
6,746
=======
2018
$000
1,607
1,380
-------------
2,987
======
2017
$000
1,836
4,755
-------------
6,591
======
11.
NON CURRENT LIABILITIES
Group
Company
Warrants (note 14)
Deferred rent liability
2018
$000
-
-
-------------
-
======
2017
$000
48
-------------
48
======
2018
$000
-
-
-------------
-
======
12.
CALLED UP SHARE CAPITAL
No of shares
2017
$000
-
48
------------
48
======
Share
Capital
$
Issued and fully paid
Akari Therapeutics Plc
As at 1 January 2018
Issued during the year
As at 31 December 2018
1,525,693,393
55,000,020
-------------------------
1,580,693,413
==============
22,927,534
723,743
------------------------
23,651,277
============
38
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
13.
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.
Retained loss – 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.
14. WARRANTS
Upon completion of the reverse acquisition, the Company assumed certain warrants that were issued in connection
with several private placements by the Company and certain investors where it sold ordinary shares and warrants.
Some of the issued warrants contain non-standard anti-dilution clauses.
As of 18 September 2015, the reverse acquisition date, warrants to purchase 5,617,977 ordinary shares had full
ratchet anti-dilution protection (which would be triggered by a share or warrant issuance at less than $0.1958 price
share or exercise price per share). The issuance of ordinary shares in connection with the financing triggered the
full ratchet anti-dilution protection resulting in an additional 188,303 ordinary shares issuable upon exercise of such
warrants for a total of 5,806,280 and reducing the exercise price to $0.18945. The warrants expired on 4 April 2018.
As of 31 December 2018, the fair value of the warrants was $0 (2007: $0).
The Group accounts 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.
Warrants to service providers and investors -
At December 31, 2018 there were no warrants outstanding. During the twelve months ended December 31, 2018,
399,160 warrants to purchase Ordinary Shares expired.
39
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
15
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 183,083,207 Ordinary Shares. At December 31, 2018,
88,986,209 Ordinary Shares are available for future issuance under the Plan. 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.
The following is a summary of the Group's share options granted separated into ranges of exercise price:
Exercise
price
(range)
Options
outstanding
as of 31
December
2018
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise
price
Options
exercisable
as of 31
December
2018
Remaining
contractual
life (years for
exercisable
options
Weighted
average
exercise
price
0.02-0.05
0.12-0.19
0.32
0.75-2.00
54,300,000
18,834,629
20,782,369
180,000
94,096,998
9.39
7.32
6.72
4.43
0.03
0.15
0.32
1.62
7,187,500
14,936,711
16,968,654
180,000
39,272,865
8.54
7.29
6.72
4.43
0.05
0.16
0.32
1.62
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 as either liability-classified awards or as equity-classified awards.
The Company re-measures liability-classified awards to fair value at each balance sheet date until the award is
settled. The Company measures equity-classified awards at their grant date fair value and does not subsequently re-
measure them. The Company has classified its stock-based payments, which are settled in ordinary shares as equity-
classified awards, and share-based payments that are settled in cash as liability-classified awards. 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. The liability for liability-classified awards generally is equal to the fair value of the
award as of the balance sheet date multiplied by the percentage vested at the time. The Company charges (or credits)
the change in the liability amounts from one balance sheet date to another to stock-based compensation expense.
40
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
15
SHARE OPTIONS (continued)
Below are the assumptions used for the options granted in the year ended 31 December 2018:
Expected dividend yield
Expected volatility
Risk-free interest
Expected life
2018
0%
70.52%-82.23%
2.49%-3.13%
5.50-6.25 years
During the year the Group recognized $1,649,000 in share-based compensation expenses for employees and
directors. At 31 December 2018, there was approximately $1,665,000 of unrecognized compensation cost related
to unvested share-based compensation arrangements granted under the Group’s share option plans.
16. 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:
Financial assets:
Other receivables
Financial liabilities:
Trade payables, other payables, warrants and other long term liabilities
Financial risks factors:
2018
$000
2017
$000
585
=======
1,586
=======
23
=======
2,009
=======
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.
1.
Foreign currency risk:
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).
2.
Credit risk:
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
deposits may be in excess of insured limits and are not insured in other jurisdictions. Generally, these deposits may be
redeemed upon demand and therefore bear low risk.
41
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
16. FINANCIAL INSTRUMENTS (continued)
3.
Market 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 not entered into any derivative transactions.
17. OPERATING LEASE COMMITMENTS
The future minimum lease payable under non-cancelable office operating lease are as follows:
2019
Total
London
$000
33
----------
33
=====
United States
$000
0
----------
0
=====
18. RELATED PARTY TRANSACTIONS
The following transactions were carried out with related parties:
Office Lease - A non-employee director of the Company is also the CEO of The Doctors Laboratory (“TDL”). The
Company leases its UK office space from TDL and has incurred expenses of approximately $139,000 and $141,000
plus VAT during the years ended December 31, 2018 and 2017, respectively.
19. POST BALANCE SHEET EVENTS
On March 29, 2019, the Company sold to Aspire Capital 5,000,000 Ordinary Shares of the Company for $0.0346
per share (equivalent to $3.46 per ADS) for gross proceeds of $173,000. On May 20, 2019, the Company sold to
Aspire Capital 10,000,000 Ordinary Shares of the Company for $0.0261 per share (equivalent to $2.61 per ADS)
for gross proceeds of $261,000. On May 23, 2019, the Company sold to Aspire Capital 10,000,000 Ordinary Shares
of the Company for $0.0234 per share (equivalent to $2.34 per ADS) for gross proceeds of $234,000.
20.
STANDARDS ISSUED BUT NOT YET EFFECTIVE
At the date of approval of these financial statements, the Group has not applied the following new and revised
IFRS Standards that have been issued but are not yet effective and, in some cases, had not yet been adopted by the
EU:
IFRS 16 “Leases”
The IASB has published IFRS 16 ‘Leases’, completing its long-running project on lease accounting. The new
Standard, which is effective for accounting periods beginning on or after 1 January 2019, requires lessees to
account for leases ‘on-balance sheet’ by recognising a ‘right-of-use’ asset and a lease liability. The date of initial
application of IFRS 16 for the Group will be 1 January 2019. It will affect most companies that report under IFRS
and are involved in leasing, and will have a substantial impact on the annual report and accounts of lessees of
property and high value equipment. This standard has been endorsed by the European Union.
The Group’s management has carried out an impact review of the implementation of IFRS 16 and has decided it
will apply the modified retrospective adoption method in IFRS 16, and, therefore, will only recognise leases on
the balance sheet as at 1 January 2019. In addition, it has decided to measure right-of-use assets by reference to
the measurement of the lease liability on that date. This will ensure there is no immediate impact to net assets on
that date.
42
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2018
20.
STANDARDS ISSUED BUT NOT YET EFFECTIVE (continued)
The Group has assessed the lease commitments the Company holds, as since no lease committed is longer than a
year, there is no IFRS 16 impact, assuming the Group’s lease commitments remain at this level.
Other
The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material
impact on the group.
The following is a list of other new and amended standards which, at the time of writing, had been issued by the
IASB but which are effective in future periods. The amount of quantitative and qualitative detail to be given about
each of the standards will, much like the amount of detail to be given about IFRS 16, depend on each entity’s own
circumstances.
• Amendments to IFRS 9 Prepayment Features with Negative Compensation (effective 1 January 2019)
• Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures (effective 1 January 2019)
•
IFRIC 23 “Uncertainty over income tax treatments”, effective 1 January 2019;
• Annual Improvements to IFRSs 2015-2017 Cycle (IFRS 3 Business Combinations and IFRS joint
Arrangements, IAS 12 Income Taxes, and IAS 23 Borrowing Costs) (effective 1 January 2019)
• Amendments to IAS 19: Plan amendments, curtailment on settlement (effective 1 January 2019)
•
IFRS 17 Insurance Contracts (effective 1 January 2021)
21. ULTIMATE CONTROLLING PARTY
The ultimate controlling party of the Group is RPC who holds a 49% stake in the Group.
43