AKARI THERAPEUTICS PLC
ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2020
Registered in England and Wales, number: 05252842
1
AKARI THERAPEUTICS PLC
CONSOLIDATED ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTENTS
Officers and professional advisers
Directors’ report
Strategic Report
Director’s Remuneration Report
Independent Auditor’s 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
1
2 – 5
6 – 12
13 – 26
27 – 30
31
32
33
34
35
36
37
Notes to the report and financial statements
38-56
AKARI THERAPEUTICS PLC
OFFICERS AND PROFESSIONAL ADVISERS
FOR THE YEAR ENDED 31 DECEMBER 2020
Directors
R Prudo-Chlebosz
C Richardson
J Hill
S Ungar
D Byrne
D Williams
M Grissinger
P Feldschreiber
Secretary
Prism Cosec Limited
Registered Office
Independent Auditors
Highdown House,
Yeoman Way,
Worthing,
West Sussex
BN99 3HH
Haysmacintyre LLP
10 Queen Street Place
London
EC4R 1AG
1
AKARI THERAPEUTICS PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
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 2020.
PRINCIPAL ACTIVITY
The principal activity of the Group is developing treatments for acute and chronic inflammation, specifically through the
inhibition of the complement and leukotriene pathways. Each of these systems has scientifically well-supported causative
roles in the diseases being targeted by the Company. Management believes that blocking early mediators of inflammation
will prevent initiation and continual amplification of the processes that cause certain 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
D Williams
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.
POLITICAL/CHARITABLE DONATIONS
There were no political or charitable contributions made by the Group during the year ended 31 December 2020 (2019:
$nil).
STAFF POLICY
The Group is committed to a policy of recruitment and promotion on the basis of aptitude and ability. Applications for
employment by disabled persons are given full and fair consideration having regard to their particular aptitudes and
abilities. Where existing employees become disabled, it is the Group’s policy, wherever possible, to provide continuing
employment under normal terms and conditions and to provide training, career development and promotion wherever
appropriate.
DIRECTORS INDEMNITY
The Company’s Articles of Association provide, subject to the provisions of UK legislation, an indemnity for directors and
officers of the Company in respect of liabilities they may incur in the discharge of their duties or in the exercise of their
powers, including any liabilities relating to the defence of any proceedings brought against them which relate to anything
done or omitted, or alleged to have been done or omitted, by them as officers or employees of the Company.
Appropriate directors and officer’s liability insurance cover is in place in respect of all Company directors.
2
AKARI THERAPEUTICS PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
GREENHOUSE GAS EMISSIONS
The Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 require quoted companies to report
on the greenhouse gas emissions for which they are responsible. We are a company with a small number of employees.
We have serviced offices and we currently outsource our research, development, testing and manufacturing activities. As
a result, we do not emit greenhouse gases from our own activities, nor do we purchase electricity, heat or steam for our
own use. (Scope 1 and scope 2 disclosures). Accordingly, there are no greenhouse gas emissions to report from the
Company’s operations, nor does it have responsibility for any other emissions. Further, for the same reason, the Company
considers that it is a ‘low energy user’ under the Streamlined Energy & Carbon Reporting regulations and therefore a
disclosure on energy and carbon emissions is not required.
AUDITORS
Haysmacintyre LLP have indicated their willingness to continue in office as auditor for another year. In accordance with
section 489 of the Companies Act 2006, a resolution proposing that Haysmacintyre LLP be reappointed as auditors of the
Company will be put to the Annual General Meeting.
SUBSTANTIAL SHAREHOLDERS
On 31 December 2020 the following shareholders held an interest of 3% or more of the ordinary share capital of the
Company:
RPC Pharma Limited (1)
PranaBio Investments, LLC (2)
Aspire Capital Fund, LLC (3)
Yasumitsu Shigeta (4)
Ordinary shares of $0.0001 % of issued share capital
21.0%
6.4%
19.3%
3.2%
809,977,100
249,238,600
758,720,200
123,006,300
(1) The principal business office of RPC Pharma Limited is c/o Landmark Fiduciare (Suisse) SA, 6 Place des Eaux-Vives, P.O. Box
3461, Geneva, V8 1211, Switzerland.
(2) Represents the entire holdings of Pranabio Investments, LLC and includes warrants to purchase 32,500,000 ordinary shares
(equivalent to 325,000 ADSs) at an exercise price of $0.03 per share (or $3.00 per ADS) which expire on July 1, 2024 and warrants
to purchase additional 30,000,000 ordinary shares (equivalent to 300,000 ADSs) at an exercise price of $0.02 per share (or $2.20
per ADS) which expire on February 21, 2025. Pranabio Investments, LLC is a Texas limited liability company. Samir R. Patel is
the managing member and has sole voting and investment power with respect to the shares.
(3) Represents the holdings of Aspire Capital Fund, LLC and includes warrants to purchase 26,315,800 ordinary shares (equivalent to
263,158 ADSs) at an exercise price of $0.03 per share (or $3.00 per ADS) which expire on July 1, 2024 and warrants to purchase
additional 58,823,500 ordinary shares (equivalent to 588,235 ADSs) at an exercise price of $0.02 per share (or $2.20 per ADS)
which expire on March 3, 2025. Aspire Capital Partners LLC (“Aspire Partners”) is the Managing Member of Aspire Capital Fund,
LLC (“Aspire Fund”). SGM Holdings Corp (“SGM”) is the Managing Member of Aspire Partners. Mr. Steven G. Martin (“Mr.
Martin”) is the president and sole shareholder of SGM, as well as a principal of Aspire Partners. Mr. Erik J. Brown (“Mr. Brown”)
is the president and sole shareholder of Red Cedar Capital Corp (“Red Cedar”), which is a principal of Aspire Partners. Mr. Christos
Komissopoulos (“Mr. Komissopoulos”) is president and sole shareholder of Chrisko Investors Inc. (“Chrisko”), which is a principal
of Aspire Partners. Mr. William F. Blank, III (“Mr. Blank”) is president and sole shareholder of WML Ventures Corp. (“WML
Ventures”), which is a principal of Aspire Partners. Each of Aspire Partners, SGM, Red Cedar, Chrisko, WML Ventures, Mr. Martin,
Mr. Brown, Mr. Komissopoulos and Mr. Blank may be deemed to be a beneficial owner of ADSs by Aspire Fund. The principal
business office of Aspire Partners is 155 North Wacker Drive, Suite 1600, Chicago IL 60606. Each of Aspire Partners, SGM, Red
Cedar, Chrisko, WML Ventures, Mr. Martin, Mr. Brown, Mr. Komissopoulos and Mr. Blank disclaims beneficial ownership of the
ADSs held by Aspire Fund.
(4) The principal business office of Yasumitsu Shigeta is XYMAX Kamiyacho Building 8/F, 5-12-13 Toranomon, Minato-ku, Tokyo
105-0001, Japan.
As at 31 December 2020 no other person had reported an interest of 3% or more in the Company’s ordinary shares.
3
AKARI THERAPEUTICS PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
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. In assessing the Company’s ability to
continue as a going concern, Management has prepared financial forecasts covering at least the next twelve months from
the date of approval of the financial statements.
The Group’s forecast and projections, show that at present, the Group has insufficient working capital to fulfil its current
business plan without the Group raising additional capital.
We plan to raise additional funds from external sources and/or from Aspire Capital with which the Group has approximately
$22,000,000 remaining of the total $30,000,000 commitment to drawdown in the form of equity funding as of 4 June 2021.
In our assessment, the remaining availability of funds under the Aspire facility, together with our expectation of the Group’s
ability to raise capital from other fundraising sources and generate cash in the form of R&D tax cash credit could extend
the Group’s ability to fund operations into June 2022 without any subsequent adjustment to the preliminary forecast. The
Group currently intends to pursue other external fundraising sources within the fiscal year 2021, although securing such
fundraising is subject to uncertainty.
Therefore, based on the availability of funds under the Aspire facility, and ability to reduce both R&D and other
administrative expenditure costs significantly if so required, management believes the Group’s financial prospects are
sufficient to fund future operations for at least the next twelve months.
Ultimately, the Group will require additional capital in order to develop and commercialise our current product candidates
or any product candidates that we acquire, if any, particularly for the period beyond the next twelve months. There can be
no assurance that additional funds will be available when we need them on terms that are acceptable to us, or at all. If
adequate funds are not available on a timely basis, we may be required to terminate or delay development for one or more
of our product candidates.
These matters indicate the existence of conditions that give rise to a material uncertainty (specifically, the reliance on
fundraising, which is not guaranteed, to facilitate the Group's operating activities) which may cast significant doubt on the
Group's ability to continue as a going concern. Notwithstanding these uncertainties, the Directors have concluded that there
is a reasonable expectation that the Group has the ability to continue to raise such funding and therefore consider it
appropriate to prepare the financial statements on a going concern basis. The financial statements do not include any
adjustments to the carrying amounts and classifications of assets and liabilities that would result if the Group was unable
to continue as a going concern.
SUBSEQUENT EVENTS
Events occurring after the year end and required to be disclosed are detailed in note 20 of the notes to the financial
statements.
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.
4
AKARI THERAPEUTICS PLC
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
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 4 June 2021 and signed on its behalf.
Clive Richardson
Director
5
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
REVIEW OF BUSINESS
We are a clinical-stage biopharmaceutical company focused on developing treatments for acute and chronic inflammation,
specifically through the inhibition of the complement and leukotriene pathways. 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 inhibits both terminal complement activation and leukotriene B4, or LTB4. It
inhibits terminal complement activation by tightly binding to C5 and preventing its cleavage and activation by complement.
It inhibits LTB4 by capturing the fatty acid within the body of the nomacopan protein. By preventing C5 activation of
complement nomacopan can stop formation of the anaphylatoxin C5a which activates cells, including granulocytes and T
and B cells, via two G protein coupled receptors, or GPCRs, and also prevents formation of the membrane attack complex,
or MAC which activates cells including endothelial cells. C5a and the MAC cause and maintain a proinflammatory and
prothrombotic state. LTB4 also activates cells via two separate GPCRs and can independently cause and maintain a
proinflammatory state. The importance of nomacopan’s (formerly Coversin) dual inhibitory action is therefore twofold.
First, it can prevent inflammatory and prothrombotic activities of two key pathways, and second, the pathways can be
independently activated, for example terminal complement activation can be induced by IgG, IgM, carbohydrates and
damage associated molecular patterns and LTB4 synthesis can be induced by engagement of Fc gamma receptors,
cytokines, toll-like receptors, C5a and MAC.
Nomacopan is a recombinant small protein (16,740 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 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 hemoglobinuria, or PNH, Guillain Barré Syndrome, or GBS,
high-risk hematopoietic stem cell transplant-associated thrombotic microangiopathy, or HSCT-TMA, and bullous
pemphigoid, or BP. 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.
We have received Fast Track designation from the FDA for the investigation of nomacopan for the treatment of patients
with moderate and severe BP, for treatment of pediatric HSCT-TMA and 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 clinical targets for nomacopan are orphan inflammatory diseases where the inhibition of both C5 and LTB4 are
implicated, including bullous pemphigoid, or BP, pediatric HSCT-TMA, and as well as inflammatory conditions in the eye
and lung including dry eye, dry AMD and COVID-19 pneumonia. Our clinical programs are in different stages of
development ranging from Phase I to Phase III.
6
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
RESULTS AND DIVIDENDS
Research and development expenses for the year ended 31 December 2020 were approximately $12,192,000 (2019:
$16,646,000). This $4,454,000 decrease is primarily due to decreased expenditure relating to clinical trials related to the
halting of the AKC study and the delay of the start of the HSCT-TMA study.
Administrative expenses for the year ended 31 December 2020 were approximately $7,910,000 (2019: $8,291,000). This
$381,000 decrease was primarily due to favorable foreign currency movements.
Net cash used in operating activities for the year ended 31 December 2020 was $16,951,000 (2019: $12,257,000). Net cash
flow used in operating activities was primarily attributed to our ongoing research activities to support nomacopan, including
manufacturing, clinical trial and preclinical activities.
Net cash provided by financing activities was $25,074,000 (2019: $$11,987,000).
Cash and cash equivalents increased to approximately $14,056,000 at 31 December 2020 (2019: $5,732,000).
The Group made a loss of $17,597,000 (2019: $21,764,000). 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 (2019: $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 statutory audit firm on its financial statements
for the period ended December 31, 2020, 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.
We plan to raise additional funds from external sources and/or from Aspire Capital. As of 3 June 2020, $22.0 million was
available for drawdown under the Company’s equity line with Aspire Capital. The availability of funds under the Aspire
facility could extend the Company’s ability to fund operations into June 2022 without any subsequent adjustment to the
preliminary forecast. Furthermore, the Company currently intends to pursue other external fundraising sources within the
fiscal year 2021. There can be no assurance that additional funds will be available when we need them on terms that are
acceptable to us, or at all.
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.
7
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
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.
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. Dov Elefant resigned as our Chief Financial Officer in September 2019. Torsten Hombeck was
appointed to serve as the Company’s Chief Financial Officer June 2020. In May 2018, David Horn Solomon resigned as
Chief Executive Officer and member of the Company’s board. 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 and became the Chief
Executive Officer in July 2019.
Retention of key management staff is an underlying risk of the business.
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.
8
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
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.
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
Impact of Coronavirus Outbreak
In late 2019, a novel strain of coronavirus, known as COVID-19, was reported in Wuhan, China. Epidemics such as this
can adversely impact our business as a result of disruptions, such as travel bans, quarantines, and interruptions to access
the trial sites and supply chains, which could result in material delays and complications with respect to our research and
development programs and clinical trials. Moreover, as a result of the COVID-19, there is a general unease of conducting
unnecessary activities in medical centers. For example, the Phase I/II clinical trial in patients with AKC study has been
halted and the opening of sites for the Phase III clinical trial in pediatric patients with HSCT-TMA was delayed until the
end of 2020. It is too early to assess the full impact of the COVID-19 outbreak on trials for nomacopan, but it has affected
and is likely to continue to affect our ability to complete recruitment in our original timeframe. The extent to which the
COVID-19s impacts our operations will depend on future developments, which are highly uncertain and cannot be
predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to
contain the COVID-19 or treat its impact. In particular, the continued spread of the COVID-19 globally could adversely
impact our operations and workforce, including our research and clinical trials and our ability to raise capital, could affect
the operations of key governmental agencies, such as the FDA, which may delay the development of our product
candidates, and could result in the inability of our suppliers to deliver components or raw materials on a timely basis or at
all, each of which in turn could have an adverse impact on our business, financial condition and results of operation.
9
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
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 – 2020: $12,192,000 (2019: $16,646,000)
Cash and cash equivalents position – 2020: $14,056,000 (2019: $5,732,000)
SECTION 172 STATEMENT
When making decisions, the Directors of Akari Therapeutics Plc (“Akari” or the “Company”) act in the way they consider
is most likely to promote the success of the Company, for the benefit of its members as a whole, while also considering the
broad range of stakeholders who interact with the business.
Our strategy is to clinically develop new drugs for orphan inflammatory diseases.
In striving to achieve our goal to develop new therapeutic medicines, our business touches the lives of many people. We
exist in a complex and evolving regulatory and scientific environment and as a result we have a number of key stakeholder
groups. Considering the interests of our stakeholders is fundamental to the way in which the Company operates. Our Values
and Code of Ethics empower employees to make the best decisions in the interest of the Company and our stakeholders,
and help to ensure that these considerations are made not only at Board level, but throughout our organization.
Post the reporting period end, the directors of the Company (“Directors”) have continued to take into account the
Company’s stakeholders, including the potential impact of its future activities on the community, the environment and the
Company’s reputation when making decisions. The Directors also continue to take all necessary measures to ensure the
Company is acting in good faith and fairly between members and is promoting the success of the Company for its members
in the long term.
The table below serves as our Section 172 statement by setting out the key stakeholder groups, their interests and how the
Company engages with them. Akari’s key stakeholders include its investors, employees, regulatory bodies and suppliers.
10
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
Stakeholder
Our Investors
Our Employees
Regulatory bodies
Why we engage
How we engage
The Board
and management
maintain a regular and constructive
dialogue with existing and potential
the
investors
Company’s
and
performance to promote investor
confidence and ensure continued
access to capital.
to communicate
strategy
to
Akari
the
staff are key
Company’s success. Fully engaged
staff lead to a more productive,
innovative and happier workplace
benefiting the performance of Akari
as a whole. Our engagement seeks
to address any employee concerns
regarding working
conditions,
health & safety,
training and
development. Engagement with our
employees is led by the CEO and
the Chairman.
regulations,
and
including
Akari is subject to a wide range of
listing
laws,
requirements
the
regulatory framework from FDA,
EMA
regulatory
agencies, the SEC, data protection,
employment,
tax, environmental
and health and safety legislation.
other
and
• Annual General Meetings
• Quarterly financial results
• One-to-one meetings by
Directors and Management
with analysts and institutional
investors
• Investor outreach programs
including attending virtual and
in-person conferences and
events and roadshows
• Press releases, webcasts
• Company website
• Competitive compensation and
reward packages
• Staff are encouraged to attend
relevant conferences and
training courses for personal &
company development
• Direct communications
structure between the Board
and the staff
• Company website
• EDGAR announcements
• Annual Report
• Direct contact and
communications with
regulators
• Compliance updates at Board
Meetings
• Consistent risk review
11
AKARI THERAPEUTICS PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
Stakeholder
Our Suppliers
Why we engage
How we engage
We have several key suppliers with
whom we have built
strong
relationships. We establish rigorous
tight communication channels to
ensure our working relationship
remains collaborative and forward
– focused, and to create a successful
and fair collaboration.
• Building strong working
relationships with suppliers
through open two-way
discussions and regular
meetings.
This report was approved by the Board on 4 June 2021 and signed on its behalf.
Clive Richardson
Director
12
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
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 2020.
Name of
Director
Salary
and Fees
($)
Taxable
Benefits
($)
Annual
Bonus
($)(4)
Long-
term
Incentive
($)
Option
Awards
($)(1)
Pension
Benefits
($)
2020
Total
2020
Total
Fixed
2020
Total
variable
Executive Director
Ray Prudo
412,000
-
206,000
Clive Richardson
503,941
11,648
(3)
214,960
Non-Employee Director
James Hill, M.D.
62,752
Stuart Ungar,
M.D.
49,947
David Byrne
52,143
Donald Williams
56,838
Peter
Feldchreiber
Michael
Grissinger
49,947
39,338
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,611
19,611
19,611
19,611
19,611
19,611
-
618,000 412,000
206,000
50,394
(2)
780,942 565,983
214,960
-
-
-
-
-
-
82,363
82,363
69,558
69,558
71,754
71,754
76,499
76,449
69,558
69,558
58,949
58,944
-
-
-
-
-
-
(1) These amounts represent the aggregate grant date fair value for option awards for fiscal year 2020 computed in accordance with FASB ASC Topic
718. A discussion of the assumptions used in determining grant date fair value may be found in note 16 to our Financial Statements.
(2) Consists of company contributions to pension scheme.
(3) Consists of company contributions to health benefits of $7,288 and life insurance premiums of $4,360.
(4) Bonuses are awarded on the basis of an assessment of the overall performance of the director concerned, rather than specific measures or targets. In
respect of 2020, the annual bonus payments for the Executive Directors reflect their strong personal performance at a critical time for the business. Ray
Prudo and Clive Richardson both received annual bonus payments of 100% of the maximum available respectively, of which 100% was paid in the first
quarter of 2021. None of the awards is attributable to share price appreciation and no discretion was exercised as a result of share price appreciation or
depreciation.
13
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
The following table shows the compensation paid or accrued during the fiscal year ended 31 December 2019.
Name of
Director
Salary
and
Fees ($)
Taxable
Benefits
($)
Annual
Bonus
($)(4)
Long-
term
Incentive
($)
Option
Awards
($)(1)
Pension
Benefits
($)
2019
Total
2019
Total
Fixed
2019
Total
variable
Executive Director
Ray Prudo
400,000
-
200,000
Clive
Richardson
432,408
9,798 (3)
177,208
Non-Employee Director
James Hill,
M.D.
62,752
Stuart Ungar,
M.D.
49,947
David Byrne
52,143
Donald
Williams
Peter
Feldchreiber
Michael
Grissinger
56,838
49,947
39,338
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
600,000
400,000
200,000
43,241
(2)
662,475
485,447
177,028
17,259
17,259
17,259
17,259
17,259
17,259
-
-
-
-
-
-
80,011
80,011
67,206
67,206
69,402
69,402
74,097
74,097
67,206
67,206
56,597
56,597
-
-
-
-
-
-
(1) These amounts represent the aggregate grant date fair value for option awards for fiscal year 2019 computed in accordance with FASB ASC Topic
718. A discussion of the assumptions used in determining grant date fair value may be found in note 16 of our Financial Statements.
(2) Consists of company contributions to pension scheme.
(3) Consists of company contributions to health benefits of $7,401 and life insurance premiums of $2,397.
(4) Bonuses are awarded on the basis of an assessment of the overall performance of the director concerned, rather than specific measures or targets.
In respect of 2020, the annual bonus payments for the Executive Directors reflect their strong personal performance at a critical time for the business.
Ray Prudo and Clive Richardson both received annual bonus payments of 100% of the maximum available respectively, of which 100% was deferred
in cash until the completion of certain operational activities planned for fiscal year 2020. None of the awards is attributable to share price appreciation
and no discretion was exercised as a result of share price appreciation or depreciation.
.
14
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Incentive Plan Awards (subject to audit)
Akari operates an equity incentive plan (the 2014 Equity Incentive Plan, or 2014 Plan) under which directors receive
options to acquire ordinary shares in Akari. Options awards granted during the fiscal year ended 31 December 2020 are
as follows:
Name of Director Option
Awards
(1)
Grant Date
Exercise
Price
Face Value
($) (2)
Option
Vesting Date
Option
Expiry Date
James Hill
1,300,000
30/06/2020
$0.0218
19,611
30/06/2021
30/06/2030
Stuart Ungar
1,300,000
30/06/2020
$0.0218
19,611
30/06/2021
30/06/2030
David Byrne
1,300,000
30/06/2020
$0.0218
19,611
30/06/2021
30/06/2030
Donald Williams
1,300,000
30/06/2020
$0.0218
19,611
30/06/2021
30/06/2030
Michael Grissinger
1,300,000
30/06/2020
$0.0218
19,611
30/06/2021
30/06/2030
Peter Feldschreiber
1,300,000
30/06/2020
$0.0218
19,611
30/06/2021
30/06/2030
(1) Option awards are subject to time-based vesting without performance measures or targets other than continued service until the date of vesting.
(2) These amounts represent the face value for option awards, calculated as the number of shares awarded (assuming full vesting) multiplied by the price
per share implied by the market price per ADS, which is equal to the stated exercise price.
Director’s shareholdings (subject to audit)
The table below shows, for each director, the total number of ordinary shares owned (by the director and connected
persons), the total number of those share options that were held and the number of share options vested as at 31 December
2020. All share options are subject to time-based vesting without performance measures or targets other than continued
service until the date of vesting. No director exercised any share options during the year ended 31 December 2020.
Name of Director
Ordinary Shares Owned
Share Options
Vest Share Options (1)
Executive Director
Ray Prudo (2)
Clive Richardson
Non-Employee Director
James Hill
Stuart Ungar
David Byrne
Donald Williams
Michael Grissinger
Peter Feldschreiber
832,477,100
-
-
10
-
20
-
-
-
-
40,771,850
29,646,850
7,800,000
7,800,000
7,800,000
8,550,000
5,200,000
5,200,000
15
6,500,000
6,500,000
6,500,000
7,250,000
3,250,000
3,250,000
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
(1) All share options that were outstanding as at 31 December 2020 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 and Dr. Ray Prudo and includes warrants to purchase 9,210,500 ordinary shares (equivalent
to 92,105 ADSs) at an exercise price of $0.03 per share (or $3.00 per ADS) which expire on July 1, 2024 and warrants to purchase additional 7,500,000
ordinary shares (equivalent to 75,000 ADSs) at an exercise price of $0.02 per share (or $2.20 per ADS) which expire on February 21, 2025. Dr. Prudo
has voting and dispositive control over the ordinary shares held by RPC Pharma Limited and owns approximately 67.8% of RPC’s outstanding shares
(including option grants), including 10.6% of RPC’s outstanding shares held in trust for Dr. Ungar. Dr. Prudo disclaims beneficial ownership except to
the extent of his actual pecuniary interest in such shares
The remainder of this Directors’ Remuneration Report is not subject to audit.
Illustration of Total Shareholder Return
The following graph compares the cumulative total shareholder return on Akari’s ADSs, each representing 100 ordinary
shares, with that of the Nasdaq Biotech Index from the period that Akari’s ADSs were publicly traded on The Nasdaq
Capital Market through 31 December 2020. 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.
16
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Chief Executive Total Remuneration History
The table below sets out total remuneration details for the Chief Executive Officer.
Period
Annual Bonus
Single total
figure of
remuneration
$
2020 Clive Richardson
2019 Clive Richardson (9)
2018 (Davids Solomon) (1)
2017 (Gur Roshwalb and
David Solomon) (1)
2016 (Gur Roshwalb)
2015 (Gur Roshwalb)
2014 (Gur Roshwalb)
2013 (Gur Roshwalb) (2)
2012 (3)
503,941
432,408
173,611
1,338,253
581,250
7,306,951
410,564
576,389
-
214,960
177,028
-
119,041 (5)
187,500
86,625
-
-
-
Short-term
incentive
payout against
maximum (10)
-
-
-
100% (6)
Option Award
($)
-
-
-
-
Option
Awards
against
maximum (4)
-
-
-
-
125% (7)
100% (8)
-
-
-
-
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.
(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
Includes a $50,000 signing bonus.
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.
(9) Clive Richardson was appointed Interim Chief Executive on 8 May 2018 and Chief Executive Officer on 18 July 2019.
(10) All cash bonuses to Clive Richardson were awarded on a discretionary annual basis.
Directors’s Remuneration Compared to Other Employees
The table below shows the percentage change in remuneration of each director and the parent company’s non-director
employees on a full-time equivalent basis between the year ended 31 December 2019 and the year ended 31 December
2020.
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
Other Employees
Change in Remuneration in year ended 31 December 2020 compared with
remuneration in the year ended 31 December 2019
Salary and Fees
Taxable Benefits
Annual Bonus
3%
17%
-
-
-
-
-
-
23%
17
19%
-
-
-
-
-
-
(9%)
3%
21%
-
-
-
-
-
-
8%
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Relative Importance of Spend on Pay
The following table sets forth the total amounts spent by the Company on remuneration for the year ended 31 December
2020 and the year ended 31 December 2019. 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 2020.
Period
Total spend on remuneration
Shareholder distributions
Research and development costs
Year Ended
31 December 2020
$
3,505,737
-
12,241,000
Year Ended
31 December 2019
$
3,094,347
-
16,646,000
Implementation of remuneration policy for year ending 31 December 2020
Our director compensation program is administered by our board of directors with the assistance of the compensation
committee. The compensation committee conducts an annual review of director compensation and makes recommendations
to the board with respect thereto.
The shareholders approved our Directors Remuneration Policy on June 30, 2020 to provide a framework for the Directors’
compensation packages. In addition, the Company has a non-employee director compensation policy, which was amended
and restated on November 19, 2015 and was subsequently amended on June 29, 2016, January 26, 2017, January 23, 2018,
January 8, 2019 and on January 9, 2020. The Company does not intend to make any significant changes in the way that the
Directors Remuneration Policy will be implemented in 2021 compared to how it was implemented in 2021 and does not
expect any deviations from the procedure for the implementation of the Directors Remuneration Policy set out in the policy.
On December 7, 2020, our Compensation Committee resolved that the cash compensation and committee membership fees
for the fiscal year 2021 would remain the same as they were for 2020. As a result, our non-employee directors will be
compensated for service on our board of directors as follows in 2021:
an annual retainer for service on the board of directors of $39,338;
an annual retainer for service as a member of the compensation committee and nominating and
governance committee of $5,305;
an annual retainer for service as a member of the audit committee of $7,500;
for the chairman of the compensation committee, and nominating and governance committee, an annual
retainer of $10,609;
for the chairperson of the audit committee, an annual retainer of $17,500;
The following table presents the salary increases agreed for the upcoming fiscal year (with the agreed increases for the year
ended 31 December 2020 presented as comparative information)
18
AKARI THERAPEUTICS, PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Director
Executive Director
31
December
2019
31
December
2020
Increase %
31
December
2020
31
December
2021
Increase %
Ray Prudo (2)
$400,000
$412,000
Clive Richardson (3)
£337,428
£382,306
3%
13%
$412,000
$412,000
£382,306
£382,306
Non-Employee Director
James Hill, M.D.
$62,752
$62,752
Stuart Ungar, M.D.
$49,947
$49,947
David Byrne
$52,143
$52,143
Donald Williams
$56,838
$56,838
Peter Feldschreiber
$39,338
$39,338
Michael Grissinger
$49,947
$49,947
0%
0%
0%
0%
0%
0%
$62,752
$62,752
$49,947
$49,947
$52,143
$52,143
$56,838
$56,838
$39,338
$39,338
$49,947
$49,947
0%
0%
0%
0%
0%
0%
0%
0%
(1) Additional discretionary bonuses may be awarded in accordance with contractual entitlement and the remuneration policy.
(2) 2019-2020 increase represents an increase in line with inflation.
(3) 2019-2020 increase represents an increase in line with Mr. Richardson’s increased duties as Chief Executive Officer.
Compensation Committee Approach to Remuneration Matters
The Compensation Committee is comprised of Dr. James Hill (Chairman), Dr. Stuart Ungar, and Mr. David Byrne. Dr.
James Hill, as Chairman of our Compensation Committee, reports, in respect of 2020, that the annual bonus payments for
the Executive Directors reflect their strong personal performance at a critical time for the business. Ray Prudo and Clive
Richardson both received annual bonus payments of 100% of the maximum available respectively, of which 100% was
paid in the first quarter 2021. For the year ending 31 December 2021, our Compensation Committee resolved that the cash
compensation and committee membership fees of Non-Executive Directors would remain the same as they were for 2020
to reflect the developmental stage of the Company. All members have continued to serve until the date of this Directors’
Remuneration Report. The charter of the Committee is set forth on Akari’s website at http://www.akaritx.com. No person
other than a member of the Compensation Committee provided to the Committee advice, or services, that materially
assisted the Committee in their consideration of matters relating to the directors’ remuneration for 2020 or remuneration
issues during the consideration of an individual’s nomination as a director.
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.
In respect of the last resolution to approve the Directors’ Remuneration Report at the 2020 AGM, of the 1,055,203,832
votes cast in respect of the above resolution 1,023,958,776 votes were in favour of this resolution, 12,885,200 votes were
against and 18,359,856 votes abstained.
In respect of the last resolution to approve the Directors’ Remuneration Policy at the 2020 AGM, of the 1,055,203,832
votes cast in respect of the above resolution 955,625,587 votes were in favour of this resolution, 18,166,700 votes were
against and 81,411,545 votes abstained.
19
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
PART II - DIRECTORS’ REMUNERATION POLICY
INFORMATION PROVIDED IN THIS SECTION OF THE DIRECTORS’ REMUNERATION REPORT IS
NOT SUBJECT TO AUDIT.
This section sets out the Directors’ Remuneration Policy (“Policy”) of Akari Therapeutics, Plc (“Akari”), which was
approved by shareholders at the 2020 Annual General Meeting of Shareholders (“AGM”). The Policy provides Akari’s
compensation framework from the date of its approval at the AGM and for a period of three years thereafter, unless
changes to the Policy are required earlier and a new Policy is put to shareholder vote.
For the avoidance of doubt, in approving the Directors’ remuneration policy, authority is given to Akari to honour any
commitments entered into with current or former Directors (such as the payment of a pension, fees or the vesting/exercise
of past share option awards) for the periods for which they apply.
Akari’s remuneration policy seeks to provide compensation packages which will attract, motivate, reward and retain an
executive team with the right calibre of talent, experience, and skills to lead a successful future for Akari. Akari’s
compensation framework is designed to provide a competitive package in comparison to companies of similar size,
complexity, maturity profile and geographic presence. Elements of compensation packages which are subject to
performance conditions as noted in the Group’s remuneration policy may include key performance indicators (KPIs), both
financial and non-financial, which are an important component of the information needed to explain a company’s progress
towards its stated goals. Other elements which are not subject to performance measures are considered an important
component of attracting and retaining UK resident employees, including Executive Directors.
The table below sets out the main elements of Akari’s remuneration policy for its Executive Directors and seeks to explain
how each element of the compensation package operates:
Policy table – Executive Directors
Element
Base salary
Purpose and link
to strategy
Support the
recruitment and
retention of
Executive officers
Pension
Encourages
and
enables executives
to build savings for
their retirement
Operation
Maximum opportunity
• Base salary levels are
set taking into
account the role,
responsibilities and
individuals
experience in the
position, performance
of the individual and
Akari.
• Base salaries are
typically reviewed
annually
• There is no prescribed
maximum increase nor
any requirement to
increase salary at any
time.
• By exception, higher
increases may be made
to reflect individual
circumstances. These
may include significant
changes in the job size
or complexity and/or
promotion.
Performance metrics
and
recovery
provisions
• None, although
overall performance
of the individual is
considered when
setting and reviewing
salaries.
• No provisions for
recovery or
withholding of sums
as this is not
performance-related.
• Akari typically
• Currently up to 10% of
• None.
salary per annum.
makes contributions
to pension plans (or
retirement savings
plans) to match
prevailing local
market practices.
• No provisions for
recovery or
withholding of sums
as this is not
performance-related.
20
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Other Benefits
market
Provide
competitive
benefits in a cost-
effective way
Bonus
To
the
reward
delivery of annual
targets as well as to
recognise
the
individual
contributions
towards our key
strategic
achievements
• No prescribed
• None.
maximum. The cost of
benefits will vary from
year to year in
accordance with the
cost of insuring such
benefits.
• No provisions for
recovery or
withholding of sums
as this is not
performance-related.
The maximum annual
bonus payable for any
financial year is capped at
100% of salary, although
the Compensation
Committee reserves the
right to vary this amount
in exceptional
circumstances.
• Where performance
conditions are
attached to a bonus
payment, targets are
either fixed
contractually or
selected by the
Compensation
Committee and set
annually and can
include key financial,
operational and/or
individual objectives.
All assessments of
performance against
target is made by the
Compensation
Committee in its sole
discretion.
• No provisions for
recovery or
withholding of sums
as the performance
measures are
considered adequate.
• Provisions include
medical insurance,
life assurance,
permanent health
insurance, etc.
• In exceptional
circumstances, such
as the relocation of
an executive or for a
new hire, additional
benefits may be
provided in the form
of relocation
allowance and
benefits.
• Other benefits may
be offered if
considered
appropriate and
reasonable by the
Compensation
Committee.
• 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.
21
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
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
• There is no
• Where
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.
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.
performance
conditions are
attached to an
award, these
typically include
key financial,
operational and/or
individual
objectives subject
to overall
Compensation
Committee
discretion.
• No provisions for
recovery or
withholding of
sums as the
performance
measures are
considered
adequate.
CSOP (UK resident
employees
and
directors only)
• Executives are
• Grant value of
• None.
£30,000 or local
market rules as
amended from
time to time.
eligible to
participate in the
all-employee
CSOP Plan under
the same
conditions as all
other employees.
• No provisions for
recovery or
withholding of
sums as this is not
performance-
related.
Policy table – Non-Executive Directors
Akari’s non-employee compensation policy is administered by its board of directors with the assistance of the
Compensation Committee. The Compensation Committee periodically reviews non-employee director compensation
policy and makes recommendations to the board.
Non-Executive Directors typically receive an annual retainer paid in cash for their service (depending on their additional
membership and chairman responsibilities) and an annual grant of stock options but do not participate in the bonus plan to
which Executive Officers are eligible, nor do they typically receive any other performance related payment. There are no
elements of the non-employee director compensation policy which are subject to performance conditions given the
necessity to maintain directors’ independence and board effectiveness in corporate governance, and accordingly there are
no provisions for recovery or withholding of sums.
22
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
The table below sets out some of the features of Akari’s current non-employee director compensation policy:
Element
Purpose and link to
strategy
Operation
Maximum
opportunity
Performance
metrics
Annual
Retainer Fee
Cash
Support the
recruitment and
retention of Non-
Executive Directors
• None.
• There is no
prescribed
maximum increase
nor any
requirement to
increase salary at
any time.
• 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.
23
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Share Options
Strengthens the
alignment to
shareholders’
interests through
share ownership
• Normal initial
• None.
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.
• 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.
The foregoing is qualified in its entirety by Akari’s current non-employee director compensation policy, as may be amended
from time to time.
Approach to recruitment compensation
Akari’s policy is to pay a fair remuneration package for the role being undertaken and the experience of the individual to
be appointed.
Akari expects remuneration packages for Executive Directors to include base salary, targeted level of annual cash incentive,
initial and ongoing equity-based awards, standard benefits and special provisions tailored to the recruiting situation, such
as: sign-on bonus, reasonable relocation support and make-whole awards for remuneration forfeited from a prior employer
(whether on account of cash bonuses, share awards, pension benefits or other forfeited items). The Compensation
Committee retains the discretion to provide additional cash, share based payment, benefits and other remuneration where
necessary or useful to recruit new Executive Directors or to secure the ongoing service of existing Executive Directors.
The remuneration package for any new Non-Executive Director will be set in accordance with the terms of Akari’s non-
employee director compensation policy then in effect. Akari expects remuneration packages for on-Executive Directors to
include an annual retainer paid in cash for their service (depending on their additional membership and chairman
responsibilities) and an annual grant of stock options. Non-Executive Directors do not participate in the bonus plan to
which Executive Officers are eligible, nor do they typically receive any other performance related payment.
24
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Director’s service contracts
Akari’s board of directors is divided into three classes for purposes of election (Class A Directors, who serve a one year
term before being subject to re-election at Akari’s annual general meeting; Class B Directors, who serve a two year term
before being subject to re-election at the annual general meeting; and Class C Directors who serve a three year term before
being subject to re-election at the annual general meeting, provided also that in any two year period, a majority of the board
must stand for re-election).
It is the Company’s policy that Executive Directors should have contracts with an indefinite term. Directors’ notice periods
are set by the compensation committee, having regard to the need to attract and retain talent, ensure an orderly succession
and enable the Company to manage its personnel while avoiding excessive costs. Service contracts are available for
inspection at Akari’s registered office or 75/76 Wimpole Street London W1G 9RT.
Policy on Payments for Loss of Office
Akari’s approach to payments to Executive Directors in the event of termination is to take account of the individual
circumstances including the reason for termination, individual performance, contractual obligations and the terms of any
option award.
Generally, Akari employment arrangements for Executive Directors include a notice provision and continuing payment
obligations as per the individual Executive Director service contracts following termination by Akari of an Executive
Director without cause or termination by the Executive Director for good reason or change of control. Payment obligations,
if any, include base salary, benefits, and all or some portion of target annual cash remuneration. Akari may offer payment
in lieu of notice if it is considered to be in the best interests of Akari.
Treatment of unvested outstanding equity awards will be determined according to the specific nature of termination,
individual contracts, and plan rules.
The Compensation Committee reserves the right to make payments it considers reasonable under a compromise or
settlement agreement, including payment or reimbursement of reasonable legal and professional fees, and any payment or
compensation (in whatever form) in respect of statutory rights under employment law in the US, UK or other jurisdictions.
Payment or reimbursement (in whatever forms) of reasonable outplacement fees may also be provided.
25
AKARI THERAPEUTICS PLC
DIRECTORS’ REMUNERATION REPORT (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Other relevant information considered
As appropriate, the Compensation Committee considers the pay and conditions of the broader employee workforce, as well
as the Consumer Price Index and Retail Price Index, when making compensation related decisions for the Directors. The
Compensation Committee does not consult employees, other than Executive Directors, when drafting the Directors’
remuneration policy.
The Compensation Committee also considers shareholder feedback, so far as it relates to compensation, when reviewing
of the appropriateness of its Policy. In addition, the Compensation Committee considers potential conflicts of interest and
directors do not have sole discretion over their own remuneration.
This report was approved by the board on 4 June 2021 and signed on its behalf.
Clive Richardson
26
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
AKARI THERAPEUTICS PLC
FOR THE YEAR ENDED 31 DECEMBER 2020
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 2020 which comprise the consolidated statement of comprehensive loss, the consolidated
statement of financial position, the parent company statement of financial position, the consolidated statement of changing
in equity, the parent company statement of changes in equity, the consolidated statement of cash flows, the parent company
statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The
financial reporting framework that has been applied in their preparation is applicable law and 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 2020 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 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.
Material uncertainty in relation to going concern
We draw attention to note 1(c) in the financial statements, which outlines considerations relating to the group’s and parent
company’s ability to continue as a going concern. The disclosure indicates that the group and parent company is reliant on
additional funding to meet their liabilities as they fall due. These circumstances indicate the existence of a material
uncertainty which may cast significant doubt on the group’s ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in
the preparation of the financial statements is appropriate. They have concluded that there is a material uncertainty which
could cast significant doubt over the going concern status of the Group due to the impact of the requirement for additional
fundraising, and we agree that this is adequately disclosed in the Directors’ Report and the accounting policies.
The key risk identified was uncertainty around the ability of the Group and Parent Company to raise funds in order to
continue operations. While the Group and Parent Company have a history of raising funds as required, past history is no
guarantee that further fundraising will be successful. Future fundraising could be delayed and the amounts arising from
future fundraises are uncertain. A significant delay in the ability to raise funds would negatively impact the group’s ability
to generate cash to meet its liabilities as and when they fall due.
Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting
included an assessment of the inherent risks to the Group’s business model and how such risks may impact the ability to
continue operations over the going concern assessment period. We also undertook the following procedures:
- We reviewed trading and fundraising activities after the reporting date and considered management’s assessment
of the Group’s and Parent Company’s prospects regarding further fundraising.
- We reviewed cash flow forecasts prepared by management and assessed their adequacy, and also challenged the
assumptions and judgements inherent within them.
- We assessed the Group’s and Parent Company’s ability to scale back operations and reduce costs as a means of
preserving cash in the twelve months from approval of the financial statements.
- We have corroborated cash levels after the reporting date to consider whether they are in line with forecasts and
investigated the reasons for any significant discrepancies.
- We reviewed prior period budgets and forecasts against actual performance to consider management’s ability to
accurately forecast and budget.
27
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
AKARI THERAPEUTICS PLC (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
An overview of the scope of our audit
Our audit scope included all components and was performed to component materiality. Our audit work therefore covered
100% of Group loss and total Group assets and liabilities. It was performed to the materiality levels set out below.
Key audit matters
Except for the matter described in the material uncertainty related to going concern section, we have determined that there
are no other key audit matters to be communicated in our report.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements
on our audit and on the financial statements. For the purposes of determining whether the financial statements are free from
material misstatement we define materiality as the magnitude of misstatement that makes it probable that the economic
decisions of a reasonably knowledgeable person, relying on the financial statements, would be changed or influenced. We
determined overall materiality for the Group financial statements as a whole to be US$360,000 being 1.7% of expenditure
for the year. We considered it appropriate to determine our materiality based on expenditure as we consider this to be the
key metric in assessing the financial performance and position of the Group given its primary purpose is to undertake
research and development activities. On the basis of our risk assessments, together with our assessment of the overall
control environment, we apply a different level of materiality, performance materiality, to determine the extent of our
testing and this was set at 75% of the overall audit financial statements’ materiality, being $270,000.
We agreed with management that we would report to the Audit Committee all audit differences in excess of US$18,000 as
well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the
Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial
statements.
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.
28
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
AKARI THERAPEUTICS PLC (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 4, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud are: to identify and assess the risks of material misstatement of the financial
statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement
due to fraud, through designing and implementing appropriate responses; and to respond appropriately to fraud or suspected
fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with
both those charged with governance of the entity and management. Audit procedures performed by the engagement team
included:
-
Inspecting correspondence with regulators, including receiving confirmation from legal service providers of no
known instances of non-compliance;
- Discussions with management including consideration of known or suspected instances of non-compliance with
laws and regulation and fraud;
- Evaluating management’s controls designed to prevent and detect irregularities;
-
Identifying and testing journals, in particular journal entries posted with significant or round sum values and those
that significantly impact the reported loss;
- Challenging assumptions and judgements made by management in their critical accounting estimates, and;
- We assessed whether the Group’s control environment is adequate for the size and operating model of such a
Group.
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.
29
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF
AKARI THERAPEUTICS PLC (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are
required to state to them in an Auditor's report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit
work, for this report, or for the opinions we have formed.
Christopher Cork (Senior Statutory Auditor)
For and on behalf of Haysmacintyre LLP, Statutory Auditors
04 June 2021
10 Queen Street Place
London
EC4R 1AG
30
AKARI THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
FOR THE YEAR ENDED 31 DECEMBER 2020
Research and development expenses
Administrative expenses
Notes
2020
$000
(12,192)
(7,910)
2019
$000
(16,646)
(8,291)
OPERATING LOSS
2
(20,102)
(24,937)
Fair value movement on liability related to options
Net finance cost
15
3
557
(909)
199
(15)
LOSS BEFORE INCOME TAX
(20,454)
(24,753)
Income Tax Credit
LOSS FOR THE YEAR
4
2,857
2,989
(17,597)
(21,764)
Other Comprehensive (Loss)/Income:
Currency translation differences
(300)
4
COMPREHENSIVE LOSS FOR THE YEAR
(17,897)
(21,760)
Loss per share attributable to the ordinary equity holder
of the parent:
Basic and diluted (cents)
5
(0.56)
(1.189)
All losses are derived from continuing activities for the current and previous financial year.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent
company income statement. Refer note 5 for the results of the parent company.
The notes on pages 38 to 56 form an integral part of the consolidated financial statements.
31
AKARI THERAPEUTICS PLC
COMPANY NUMBER: 05252842
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
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
Capital Redemption reserve
Other reserves
Redenomination reserve
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
8
7
10
13
14
14
14
14
14
14
14
14
12
11
2020
2019
Restated*
Notes
$000
$000
1 January
2019
Restated*
$000
20
33
53
9,846
5,968
15,814
-
27
27
3,512
14,056
17,568
5
30
35
4,218
5,732
9,950
17,595
9,985
15,867
385
111,978
50,593
(687)
1,601
9,128
16,987
(20,983)
(156,627)
12,375
31,987
109,337
-
(387)
-
9,128
13,462
(20,983)
(139,030)
3,514
23,651
106,239
-
(391)
-
9,128
12,413
(20,983)
(117,266)
12,791
-
5,220
5,220
1,015
5,456
6,471
-
3,076
3,076
TOTAL EQUITY AND LIABILITIES
17,595
9,985
15,867
(*Please refer note 18 for restatement)
The financial statements were approved and authorised for issue by the Board of Directors on 4 June 2021 and were
signed below on its behalf by:
Clive Richardson
Director
The notes on pages 38 to 56 form an integral part of these consolidated financial statements.
32
AKARI THERAPEUTICS PLC
COMPANY NUMBER: 05252842
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
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
Capital redemption reserve
Redenomination reserve
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
2020
2019
Restated*
Notes
$000
$000
1 January
2019
Restated*
$000
8
9
10
13
14
14
14
14
14
14
12
11
-
20,339
20,339
7,401
14,014
21,415
5
20,339
20,344
8,152
5,716
13,868
20
20,339
20,359
13,867
5,914
19,781
41,754
34,212
40,140
385
111,978
50,593
1,601
9,128
16,987
(153,976)
36,696
31,987
109,337
-
-
9,128
13,462
(136,067)
27,847
23,651
106,239
-
-
9,128
12,413
(114,278)
37,153
-
5,058
5,058
1,015
5,350
6,365
-
2,987
2,987
TOTAL EQUITY AND LIABILITIES
41,754
34,212
40,140
(*Please refer note 18 for restatement)
As permitted by Section 408 of the Companies Act 2006, the income statement of the parent Company is not
presented as part of these financial statements. The parent Company’s loss for the financial year was $17,909,000
(2019: loss of $21,789,000).
The financial statements were approved and authorised for issue by the Board of Directors on 4 June 2021 and were
signed below on its behalf by:
Clive Richardson
Director
The notes on pages 38 to 56 form an integral part of these consolidated financial statements.
33
AKARI THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Share
Share
Capital
Premium
$000
$000
Other
Reserve
s
$000
Redenomination Merger
Share
Based
Payment
Reverse
Acquis-
ition
Capital
Redemption
Retained
Reserve
Reserve Reserve Reserve
Reserve
Earnings
$000
$000
$000
$000
$000
$000
At 1 January 2019
23,651
106,030
Correction of error*
Restated total equity at the beginning of the financial year
-
23,651
209
106,239
Comprehensive gain/ (loss) for the year
Share based payments
Shares Issued
At 31 December 2019
-
-
-
-
8,336
2,835
31,987
109,074
(387)
Correction of error*
Restated total equity at 31 December 2019
-
31,987
263
109,337
Comprehensive gain/ (loss) for the year
Share based payments
Shares Issued
Share Buyback
Effect of redenomination
Shares issued on exercise of warrants
Reclassification of warrants to shareholder equity (note 15)
At 31 December 2020
(*Please refer note 18 for restatement)
-
-
20,576
(50,593)
(1,603)
16
-
-
-
2,629
-
12
-
(391)
-
(391)
4
-
-
-
(387)
(300)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,601
-
-
9,128
12,413
(20,983)
-
9,128
-
12,413
-
(20,983)
-
-
-
-
1,049
-
-
-
-
9,128
13,462
(20,983)
-
9,128
-
13,462
-
(20,983)
-
-
-
-
-
-
-
-
325
-
-
-
-
3,200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,593
-
-
-
385
111,978
(687)
1,601
9,128
16,987
(20,983)
50,593
(156,627)
Total
$000
13,376
(585)
12,791
(116,472)
(794)
(117,266)
(21,764)
(21,760)
-
-
(139,030)
-
(139,030)
1,049
11,171
3,251
263
3,514
(17,597)
(17,897)
-
-
-
-
-
-
325
23,205
-
-
28
3,200
12,375
The notes on pages 38 to 56 form an integral part of these consolidated financial statements.
34
AKARI THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
Share
Capital
$000
Share
Premium
$000
Redenomination Merger
Reserve
$000
Reserve
$000
Share
Based
Payment
Reserve
$000
Capital
Redemption
Reserve
$000
Retained
Earnings
$000
Total
$000
At 1 January 2019
Correction of error*
23,651
106,030
-
209
Restated total equity at the beginning of the financial year
23,651
106,239
Total comprehensive loss for the year
Share based payments
Shares Issued
At 31 December 2019
Correction of error*
Restated total equity at 31 December 2019
Total comprehensive loss for the year
Share based payments
Shares Issued
Share buyback
Effect of redenomination
Shares issued on exercise of warrants
Reclassification of warrants to shareholder equity (note 15)
At 31 December 2020
(*Please refer note 18 for restatement)
-
-
8,336
-
-
2,835
31,987
109,074
-
31,987
263
109,337
-
-
20,576
(50,593)
(1,601)
16
-
385
-
-
2,629
-
-
12
-
111,978
The notes on pages 38 to 56 form an integral part of these consolidated financial statements.
-
-
-
-
-
-
-
-
-
-
-
-
-
1,601
-
-
1,601
9,128
12,413
-
-
9,128
12,413
-
-
-
-
1,049
-
9,128
13,462
-
9,128
-
13,462
-
-
-
-
-
-
-
-
-
-
-
-
9,128
-
3,200
16,987
-
-
-
-
-
-
-
-
-
-
(113,484)
37,738
(794)
(585)
(114,278)
37,153
(21,789)
-
-
(21,789)
1,049
11,171
(136,067)
27,584
-
(136,067)
263
27,847
(17,909)
(17,909)
-
-
50,593
-
-
-
50,593
-
-
-
-
-
-
(153,976)
325
23,205
-
-
28
3,200
36,696
35
AKARI THERAPEUTICS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
Cash flows from operating activities
Loss before income tax
Adjustments for:
Changes in fair value of warrants
Finance costs (fees settled in shares)
Share-based payment
Foreign currency exchange gains
Depreciation and amortization
Increase in trade and other receivables
Decrease/(increase) in trade and other payables
Tax credit
Tax received
Net cash flows used in operating activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Issue costs
Proceeds from warrant exercise
Cash generated from financing activities
Exchange losses on cash and cash equivalents
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
2020
$000
2019
Restated*
$000
(20,454)
(24,753)
(557)
900
325
(491)
8
(2,665)
(246)
2,857
3,372
(16,951)
25,914
(868)
28
25,074
201
8,324
5,732
(199)
-
1,049
(30)
18
(2,796)
2,382
2,988
8,423
(12,918)
13,268
(620)
-
12,648
34
(236)
5,968
Cash and cash equivalents at end of period
14,056
5,732
(*Please refer note 18 for restatement)
The notes on pages 38 to 56 form an integral part of these consolidated financial statements.
36
AKARI THERAPEUTICS PLC
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
Cash flows from operating activities
Loss before income tax
Adjustments for:
Changes in fair value of warrants
Share based payments
Finance costs (fees settled in shares)
Depreciation
Increase in trade and other receivables
(Increase)/decrease in trade and other payables
Tax credit
Taxation received
Exchange rate differences
2020
$000
2019
Restated*
$000
(20,766)
(24,778)
(557)
325
900
5
(2,621)
(291)
2,857
3,372
(175)
(199)
1,049
-
15
(2,707)
2,363
2,990
8,423
(30)
Net cash flows used in operating activities
(16,951)
(12,874)
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Issue costs
Proceeds from issue of shares on warrant exercise
25,914
(868)
28
13,268
(620)
-
Cash generated from financing activities
25,074
12,648
Exchange gains on cash and cash equivalents
175
28
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
8,298
5,716
(198)
5,914
Cash and cash equivalents at end of period
14,014
5,716
(*Please refer note 18 for restatement)
The notes on pages 38 to 56 form an integral part of these consolidated financial statements.
37
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1.
(a)
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 modified for fair value measurement as required by IFRS 9. A summary of the significant
accounting policies is set out below.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates
are significant to the consolidated financial statements are disclosed in note 1(n).
(b)
Basis of consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. The subsidiaries are fully consolidated from the date on
which control is transferred to the Group and deconsolidated from the date that control ceases.
The financial statements of the subsidiaries are prepared for the same financial year as the parent company,
applying consistent accounting policies throughout the Group. Inter-company balances and transactions,
including unrealised profits are eliminated on consolidation.
The Group financial statements consolidate the Company’s financial statements of Akari Therapeutics Plc and its
subsidiaries (the “Group”).
(c)
Going Concern
The Group meets its day-to-day working capital requirements through funding. In assessing the Company’s ability
to continue as a going concern, Management has prepared financial forecasts covering at least the next twelve
months from the date of approval of the financial statements.
The Group’s forecast and projections, show that at present, the Group has insufficient working capital to fulfil its
current business plan without the Group raising additional capital.
We plan to raise additional funds from external sources and/or from Aspire Capital with which the Group has
approximately $22,000,000 remaining of the total $30,000,000 commitment to drawdown in the form of equity
funding as of 4 June, 2021. In our assessment, the remaining availability of funds under the Aspire facility, together
with our expectation of the Group’s ability to raise capital from other fundraising sources and generate cash in the
form of R&D tax cash credit could extend the Group’s ability to fund operations into June 2022 without any
subsequent adjustment to the preliminary forecast. The Group currently intends to pursue other external
fundraising sources within the fiscal year 2021, although securing such fundraising is subject to uncertainty.
Therefore, based on the availability of funds under the Aspire facility, and ability to reduce both R&D and other
administrative expenditure costs significantly if so required, management believes the Group’s financial prospects
are sufficient to fund future operations for at least the next twelve months.
Ultimately, the Group will require additional capital in order to develop and commercialise our current product
candidates or any product candidates that we acquire, if any, particularly for the period beyond the next twelve
months. There can be no assurance that additional funds will be available when we need them on terms that are
acceptable to us, or at all. If adequate funds are not available on a timely basis, we may be required to terminate
or delay development for one or more of our product candidates.
38
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
(c)
Going Concern (continued)
These matters indicate the existence of conditions that give rise to a material uncertainty (specifically, the reliance
on fundraising, which is not guaranteed, to facilitate the Group's operating activities) which may cast significant
doubt on the Group's ability to continue as a going concern. Notwithstanding these uncertainties, the Directors
have concluded that there is a reasonable expectation that the Group has the ability to continue to raise such
funding and therefore consider it appropriate to prepare the financial statements on a going concern basis. The
financial statements do not include any adjustments to the carrying amounts and classifications of assets and
liabilities that would result if the Group was unable to continue as a going concern.
(d)
Standards and interpretations adopted during the year
The Company has not early applied the following new and amendments to IFRS that have been issued but are not
yet effective:
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) (effective for periods
commencing on or after 1 January 2022);
IFRS 17: Insurance Contracts (effective for periods commencing on or after 1 January 2023);
•
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) (effective for
periods commencing on or after 1 January 2022);
• Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS
41) (effective for periods commencing on or after 1 January 2022); and
• References to Conceptual Framework (Amendments to IFRS 3) (effective for periods commencing on or
after 1 January 2022).
The directors of the Company (the “Directors”) anticipate that the application of all new and amendments to IFRS
will have no material impact on the future results of the Company in the foreseeable future.
(e)
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (the “functional currency”). The functional currency
of Akari Therapeutics Plc is U.S. dollars. The Group and Parent Company financial statements are presented in
U.S Dollars which is considered to the Group’s presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the
date of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised in the income statement.
Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary
economy) that have a functional currency different from the presentation currency are translated as follows:
a) assets and liabilities at the balance sheet date are translated at the closing rate as at that balance sheet date;
b)
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
39
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
(f)
Financial instruments
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks.
Trade and other receivables
Trade and other receivables are recognised at fair value less a provision for impairment. Bad debts are written off
through the income statement when identified. If collection is expected in one year or less, they are classified as
current assets. If not, they are presented as non-current assets.
Trade and other payables
Trade payables are obligations to pay for goods or services received that have been acquired in the ordinary course
of the business from suppliers. Trade payables are classified as current liabilities if payment is due within one year
or less. If not, they are presented as non-current liabilities. Executory contracts are recognised when both parties
to the contract met their respective obligations. Trade and other payable are unsecured, non-interest bearing and
are stated at cost.
Liabilities at fair value through the profit and loss
The Group's liability related to options and warrants related to equity 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. Further detail on the treatment of liability relating to options is
explained in note 15.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
(g)
Research and development expenditure
Research costs are expensed through the income statement as they are incurred. Research and development
expenses include, among other costs, costs incurred by outside laboratories and other accredited facilities in
connection with clinical trials and preclinical studies.
Under IAS 38, development costs are only capitalised after technical and commercial feasibility of the asset for
sale or use have been established. The company must intend and be able to complete the asset and either use it or
sell it and be able to demonstrate how the asset will generate future economic benefit. If the company cannot
distinguish between the research and the development phase, then all costs are expensed as research costs.
(h)
Property, plant and equipment:
Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated
depreciation and excluding day-to-day servicing expenses. The assets residual values and useful lives are
reviewed, and adjusted if appropriate, at the end of each reporting period.
Depreciation is calculated on a straight-line basis over the useful life of the assets at annual rates as follows:
Computers, peripheral and scientific equipment
Office furniture and equipment
- 33%
- 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.
40
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
(i)
Intangible assets
(j)
(k)
Patent acquisition costs and related capitalised legal fees are recognised at historical cost. Patents have a finite
useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line
basis method and are amortised over the shorter of the legal or useful life. The estimated useful life for current
patents is twenty two years.
The Group expenses costs associated with maintaining and defending patents subsequent to their issuance in the
period the costs are incurred.
Investments
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.
Where warrants and options issued with settlement criteria that outside fixed for fixed criteria as outlined by IAS
32 (i.e. fixed number of shares for fixed amount of cash) the resulting fair value of the instruments issued will be
classified in financial liabilities.
(l)
Finance income and expenses
Interest income and expenses are recognised using the effective interest method. It mainly comprises of changes
in the fair value of financial assets and liabilities that are measured at fair value through the income statement and
exchange gains and losses which is reported on a net basis in the statement of comprehensive loss.
41
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
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: Assessment of the capitalisation of research and development
expenditure, calculation and classification of share based payments and the assessment of the carrying value of
the subsidiary for impairment.
Research and Development: Under IAS 38: Intangible Assets, the Group must determine whether to recognise
research costs incurred as an expense or asset. Depending on the development stage of a project determines
whether an expense can be capitalised. Difficultly can arise at determining the stage of a project.
Share based payments: The Group issues share options and warrants to employees, service providers and investors.
Where share options and warrants are issued in return for services, appropriate valuation methods are used to
recognise an appropriate expense is recognised in the financial statements. These valuation methods are subject to
significant estimation as outlined in note 16. Where warrants issued to investors are classified as free-standing
liabilities, they are remeasured to fair value at each reporting date for which both judgement and estimation is
required in relation based on unobservable valuation input assumptions, resulting in a higher degree of estimation
uncertainty.
Investment in subsidiary: The Parent must continually assess the carrying value of investments in subsidiaries for
indications of impairment. Indications of impairment are considered with reference to the Group’s market
capitalisation, internal assessment of the ongoing contribution of intellectual property and any other indications of
obsolescence and progress in line with the Group’s business plan.
42
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
2.
EXPENSES BY NATURE
The operating loss is stated after charging/(crediting):
2020
$000
2019
$000
Employee benefit expense (see below)
Depreciation
Amortisation
Commitment fees
Exchange (loss)/ gain
Auditors’ remuneration
- fees for the audit of the Group and Parent Company financial statements
3,884
5
3
900
351
41
3,469
15
4
-
(67)
31
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
2020
$000
2019
$000
3,506
378
3,884
3,094
375
3,469
17
16
1,678
1,528
The key management is considered to be the directors and senior management team. Details of directors’
remuneration and share based compensation can be seen within the Directors’ Remuneration Report on pages 13 to
26.
43
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
3.
NET FINANCE INCOME/(LOSS)
2020
$000
2019
$000
Commitment fees
Interest Income
Other
4.
INCOME TAX CREDIT
Current tax:
Current tax on losses for the year
Adjustment in respect of prior years
(900)
13
(22)
(909)
2020
$000
(2,812)
(45)
(2,857)
-
5
(20)
(15)
2019
$000
(3,505)
516
(2,989)
The tax assessed in the year is different from the standard rate of
corporation tax in the UK of 19% in 2020 (2019: 19%)
The differences are explained below:
Loss before tax
(20,454)
(24,753)
Loss on ordinary activities before tax multiplied by the standard
companies’ rate of tax in the UK
(3,886)
(4,703)
Effects of:
Deferred tax asset on losses not recognised
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
2,044
241
1,601
(2,812)
(45)
(2,857)
2,397
309
1,997
(3,505)
516
(2,989)
5.
LOSS ATTRIBUTABLE TO THE PARENT COMPANY
The parent Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own
profit and loss account in these financial statements. The parent Company had a loss for the year of $17,909,000
(2019: $21,789,000).
44
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
6.
BASIC AND DILUTED LOSS PER SHARE
The calculation of basic and diluted loss per share is based on the loss attributable to ordinary shareholders of
$17,597,000 (2019: $21,764,000 ) and a weighted average number of Ordinary Shares outstanding during the year
ended 31 December 2020 of 3,159,037,588 (2019: 1,830,998,609) calculated below. As a loss making group,
outstanding share options are considered antidilutive and therefore basic and diluted loss per share are considered
to be equal.
2020
$000
2019
$000
Loss attributable to ordinary shareholders
17,597
21,764
Weighted average number of ordinary shares
Number of shares in issue at the beginning of the year
Effect of shares issued during year
Weighted average number of ordinary shares in issue for the year
7.
INTANGIBLE ASSETS
GROUP
Patent acquisition costs
Cost
At 1 January
Additions
At 31 December
Amortisation
At 1 January
Charge for the year
At 31 December
Net Book Value
At 31 December
2020
Number
2019
Number
2,245,865,913
913,171,675
3,159,037,588
1,580,693,413
250,305,196
1,830,998,609
2020
$000
2019
$000
95
-
95
(65)
(3)
(68)
95
-
95
(62)
(3)
(65)
27
30
45
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
8.
PROPERTY PLANT AND EQUIPMENT
GROUP & COMPANY
Office furniture and equipment
Cost
At 1 January
Additions
At 31 December
Depreciation
At 1 January
Charge for the year
At 31 December
Net Book Value
At 31 December
2020
$000
2019
$000
172
-
172
(167)
(5)
(172)
172
-
172
(152)
(15)
(167)
-
5
46
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
9.
INVESTMENTS IN SUBSIDIARIES
Company
At 1 January 2019
Additions
At 31 December 2019
At 1 January 2020
Additions
At 31 December 2020
Investments in
Subsidiary
Undertakings
$000
20,339
-
20,339
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:
Volution Immuno
Pharmaceuticals SA
Celsus Therapeutics Inc.
Morria Biopharma Ltd.
Akari Malta Limited
Principal activity
Country of
incorporation
Holdings
Development of
pharmaceutical drugs
Dormant
Dormant
Regulatory
compliance
Switzerland
Ordinary
United States
Israel
Malta
Ordinary
Ordinary
Ordinary
%
100
100
100
100
Registered office addresses of subsidiaries:
Volution Immuno Pharmaceuticals SA : Place Des Eaux-Vives 6, 1207 Geneva, Switzerland
Celsus Therapeutics Inc: 1209 Orange Street, Wilmington, DE 19801
Morria Biopharma Ltd: 1209 Orange Street, Wilmington, DE 19801
Akari Malta Limited : Gasan Centre, Level 3, Mriehel By Pass, Mriehel, BKR 3000, Malta
10. TRADE AND OTHER
RECEIVABLES
Due from a related party
Prepayments and accrued income
Income tax receivable
(*Please refer to note 18 for restatement)
Group
2020
$000
2019
Restated*
$000
Company
2020
$000
2019
Restated*
$000
-
521
2,991
3,512
-
713
3,505
4,218
3,897
513
2,991
7,401
3,975
672
3,505
8,152
11. TRADE AND OTHER PAYABLES
Group
2020
$000
2019
$000
Company
2020
$000
2019
$000
Trade payables
Accrued expenses
1,228
4,228
5,456
3,232
1,826
5,058
1,130
4,220
5,350
3,380
1,840
5,220
47
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
12.
NON-CURRENT LIABILITIES
Group
Company
2020
$000
-
-
2019
$000
1,015
1,015
2020
$000
-
-
2019
$000
1,015
1,015
Warrants (Note 15)
Purchase of own shares
13.
CALLED UP SHARE CAPITAL
Issued and fully paid
Akari Therapeutics Plc
As at 1 January 2020
Issuance of ordinary shares
Issuance of share capital for entering into 2020 Purchase
Agreement with Aspire Capital
Issue of deferred shares via subdivision
Cancellation of deferred shares
Issuance of share capital upon conversion of deferred shares
Exercise of warrants
As at 31 December 2020
No of shares
Share
Capital
$
2,245,865,913
31,987,016
1,559,455,100
20,051,809
40,760,900
523,778
3,847,331,913
(3,847,331,913)
10
1,250,000
-
(52,193,811)
-
15,941
3,847,331,923
384,733
Pursuant to the resolution passed at the general meeting of the Company on 8 December 2020 for the purpose of
changing the nominal value of the Company’s ordinary shares from £0.01 to $0.0001, the Company issued
3,847,331,913 deferred shares of $0.01315. The Deferred Shares were created for technical reasons of company
law and did not increase the aggregate value of share capital. The Deferred Shares were purchased by the Company
8 December 2020 in accordance with their terms of issue for aggregate consideration of $0.01 and immediately
cancelled. The aggregate nominal value at cancellation was $50,592,414.
In January 2020, the Company issued 65,000,000 ordinary shares of £0.01 in connection with an Aspire facility
drawdown at $0.017 for gross proceeds of $1,108,350.
In February 2020, the Company issued 562,029,600 ordinary shares of £0.01 at $0.017 for gross proceeds of
$9,500,000.
In May 2020, the Company issued 75,000,000 ordinary shares of £0.01 in connection with an Aspire facility
drawdown at $0.017 for gross proceeds of $1,305,480.
In June 2020, the Company issued 396,666,700 ordinary shares of £0.01 in connection with an Aspire facility
drawdown at $0.02 for gross proceeds of $7,946,424.
In October 2020, the Company issued 460,758,800 ordinary shares of £0.01 in connection with an Aspire facility
drawdown at $0.013 for gross proceeds of $6,000,001.
The share capital of the Company was redenominated on 8 December 2020 from £0.01 shares to $0.01325 shares,
the resulting foreign currency effect of $1.6m has been transferred to the redenomination reserve.
48
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
14.
RESERVES
The following describes the nature and purpose of each reserve within equity:
Share premium - Accumulated amounts subscribed for share capital in excess of the nominal value of the share
capital issued. Costs relating to the issue of shares are offset against share premium. Issue costs incurred in the
year ended 31 December 2020 offset in share premium were $868,000 (31 December 2019: $620,000).
Retained earnings – Includes all current and prior period losses
Other reserves - Accounts for all other gains and losses reported by the group and not recognised elsewhere.
Includes accumulated gains and losses arising from the retranslation of the net assets of overseas entities.
Share based payment reserve – This includes all movement for share options granted during the period.
Merger reserve – Merger reserve represents the premium on the shares issued to acquire Volution Immuno
Pharmaceuticals SA in accordance with the provisions of S612 of the Companies Act 2006.
Reverse acquisition reserve – The reverse acquisition reserve relates to the reverse acquisition between Celsus
Therapeutics PLC and Volution Immuno Pharmaceuticals SA on 18 September 2015.
Capital redemption reserve – Amounts transferred from share capital on redemption of issued shares.
Redenomination reserve – non-distributable reserve into which amounts may be transferred following
a redenomination of share capital from one currency to another.
49
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
15.
WARRANTS
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.
Issuance of 2019 Paulson warrants
Change in fair value of warrant liability
Balance at 31 December 2019
Issuance of 2020 Paulson warrants
Reclassification of warrant to equity on exercise
Change in fair value of warrant liability
Transfer to equity following redenomination of share capital
As at 31 December 2020
Fair value of
warrant
liability
$000
1,214
(199)
1,015
2,750
(8)
(557)
(3,200)
-
The share capital of the Company was redenominated on 8 December 2020 from £0.01 shares to $0.01325 shares.
As a result of this redenomination, the inputs resulting in the recognition of the derivative liability associated with
placing warrants now meet the fixed for fixed criteria to be recognised in equity. At this point the fair value of the
liability of $3.2m was transferred to share based payments reserve from liabilities.
Warrants to service providers and investors
On July 3, 2019, the Company sold to certain institutional investors, accredited investors and an existing
shareholder, RPC Pharma Ltd., an affiliated entity of Dr. Ray Prudo, the Company’s Chairman, an aggregate of
2,368,392 ADSs in a registered direct offering at $1.90 per ADS, resulting in gross proceeds of approximately
$4.5 million. The Company also entered into a letter agreement with Paulson Investment Company, LLC (the
“Placement Agent”) to serve as the placement agent for the Company in connection with this offering. In
connection with the sale of the ADSs in this registered direct offering, the Company issued to the investors
unregistered warrants to purchase an aggregate of 1,184,213 ADSs in a private placement (“Investor Warrants”).
The Investor Warrants are immediately exercisable and will expire five years from issuance at an exercise price
of $3.00 per ADS, subject to adjustment as set forth therein. Subject to certain conditions, the Company has the
option to “call” the exercise of the warrants from time to time after any 10-consecutive trading day period during
which the daily volume weighted average price of the ADSs exceeds $4.50. The Company paid to the Placement
Agent an aggregate of $337,496 in placement agent fees and expenses and issued unregistered warrants to the
Placement Agent to purchase an aggregate of 177,629 ADS (“Placement Agent Warrants”) on the same terms as
the Investor Warrants, except that the Placement Agent Warrants are exercisable at $2.85 per ADS and expire on
June 28, 2024. Both the Investor Warrants and the Placement Agent Warrants (together the “Paulson Warrants”)
may be exercised on a cashless basis if six months after issuance there is no effective registration statement
registering the ADSs underlying the warrants. Pursuant to the cashless exercise provision, the warrant holder must
make an additional payment to the Company equal to the nominal value of an ADS (i.e., £1) per warrant ADS
actually to be issued pursuant to the cashless exercise. The total number of Paulson Warrants issued in connection
with this registered direct offering amounted to 1,361,842, all of which were outstanding as of December 31, 2020
(31 December 2019: 1,361,842).
50
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
15.
WARRANTS (continued)
The fair value at the date of grant was $1,213,800. A fair value revaluation gain was recognised during the year
of $132,632 (31 December 2019 :$199,000. The fair value of the warrants prior to be reclassified at the 8
December 2020 was $882,365 (31 December 2019: $1,015,000).
On February 13, 2020, February 19, 2020, February 20, 2020 and February 28, 2020, the Company entered into
securities purchase agreements with certain accredited and institutional investors, including Dr. Ray Prudo, the
Company’s Chairman, providing for the issuance of an aggregate of 5,620,296 ADSs in a private placement at
$1.70 per ADS for aggregate gross proceeds of approximately $9.5 million (the “2020 Private Placements”). The
Company also entered into a letter agreement with Paulson Investment Company, LLC to serve as the placement
agent for the Company in connection with this offering. In connection with the offering, on February 21, 2020
and March 3, 2020, the Company issued to the investors unregistered warrants to purchase a total of 2,810,136
ADSs at $2.20 per ADS (“2020 Investor Warrants”). On March 3, 2020, the Company also issued 449,623 ADSs
to the Placement Agent at $2.55 per ADS (“2020 Placement Warrants”). The 2020 Investor warrants and the 2020
Placement Warrants (together the “2020 Warrants”) will expire five years from issuance and are immediately
exercisable, subject to adjustment as set forth therein. The Company paid to the Placement Agent an aggregate of
$808,362 in placement agent fees and expenses. The 2020 Warrants may be exercised on a cashless basis if six
months after issuance there is no effective registration statement registering the ADSs underlying the warrants.
Pursuant to the cashless exercise provision, the warrant holder must make an additional payment to the Company
equal to the nominal value of an ADS (i.e., $0.0001) per warrant ADS actually to be issued pursuant to the cashless
exercise. The total amount of the 2020 Warrants issued in connection with the 2020 Private Placements amounted
to 3,259,759. 3,247,259 of these warrants were outstanding as of December 31, 2020 (31 December 2019: nil).
The ratio to be used when converting ADS to ordinary shares in the Company is approximately ADS 1 to 100
ordinary shares.
The fair value at the date of grant was $2,749,369. The movements in the provision during the year ended 31
December 2020 included a fair value revaluation gain that was recognised of $424,178 (31 December 2019: nil)
$7,875 (31 December 2019: nil) was transferred to equity on exercise of 12,500 warrants The fair value of the
warrants prior to being reclassified at the 8 December 2020 was $2,317,316 (31 December 2019 $1,015,000).
During the twelve months ended 31 December 31, 2020 (31 December 2019: nil), 12,500 warrants to purchase
Ordinary Shares were exercised and no warrants expired.
51
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
16
SHARE OPTIONS
In accordance with the Company’s 2014 Equity Incentive Plan (the “Plan”), the number of shares that may be issued
upon exercise of options under the Plan shall not exceed 344,747,462 Ordinary Shares. (31 December 2019
183,083,207). At 31 December 2020, 232,098,427 Ordinary Shares are available for future issuance under the Plan.
(31 December 2019 88,734,172). 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.
Outstanding at the beginning of the
year
Granted during the year
Forfeited/waived during the year
Exercised during the year
Total outstanding
Total exercisable (Vested)
Number
94,349,035
20,800,000
(2,500,000)
-
112,649,035
77,667,785
2020
Weighted Average
Exercise Price
$
Number
2019
Weighted Average
Exercise Price
$
0.10
0.02
0.02
-
0.09
0.12
94,096,998
7,800,000
(7,547,963)
-
94,349,035
58,992,785
0.12
0.02
0.23
-
0.10
0.15
The following is a summary of the Group's share options granted separated into ranges of exercise price:
Exercise
price
(range) ($)
Options
outstanding
at 31
December
2020
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise
price ($)
Options
exercisable
at
December
31, 2020
0.02-0.05
0.12-0.19
0.32
77,600,000
18,334,629
16,714,406
112,649,035
8.03
5.30
4.73
0.02
0.15
0.32
42,712,500
18,240,879
16,714,406
77,667,785
Remaining
contractual
life for
exercisable
options
(years)
Weighted
average
exercise
price for
exercisable
options ($)
7.60
5.30
4.73
0.03
0.15
0.32
Exercise
price
(range)
($)
0.0175-
0.05
0.12-0.19
0.32
Options
outstanding
at 31
December
2019
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise
price ($)
Options
exercisable
at 31
December
2019
Remaining
contractual
life (years for
exercisable
options)
Weighted
average
exercise
price ($)
59,300,000
18,334,629
16,714,406
94,349,035
8.54
6.30
5.72
0.02
0.15
0.32
24,975,000
17,303,379
16,714,406
58,992,785
8.29
6.29
5.72
0.03
0.16
0.32
52
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
16
SHARE OPTIONS (continued)
The Company measures compensation cost for all share-based awards at fair value on the date of grant and
recognizes compensation expense in general administrative and research and development expenses within its
Consolidated Statements of Comprehensive Loss using the straight-line method over the service period over which
it expects the awards to vest.
The Company estimates the fair value of all time-vested options as of the date of grant using the Black-Scholes
option valuation model, which was developed for use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective
assumptions, including the expected share price volatility, which is calculated based on the historical volatility of
peer companies. The Company uses a risk-free interest rate, based on the U.S. Treasury instruments in effect at the
time of the grant, for the period comparable to the expected term of the option. Given its limited history with share
option grants and exercises, the Company uses the “simplified” method in estimating the expected term, the period
of time that options granted are expected to be outstanding, for its grants.
The Company classifies its stock-based payments 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 share-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.
Below are the assumptions used for the options granted in the year ended 31 December 2020:
Expected dividend yield
Expected volatility
Risk-free interest
Expected life
2020
0%
83.88-86.85%
0.38%-0.49%
5.5-6.25 years
Below are the assumptions used for the options granted in the year ended 31 December 2019:
Expected dividend yield
Expected volatility
Risk-free interest
Expected life
2019
0%
75.40%
1.76%
5.5 years
During the year the Group recognized $325,000 (2019: $1,049,000) in share-based compensation expenses for
employees and directors. At 31 December 2020, there was approximately $394,000 of unrecognized compensation
cost related to unvested share-based compensation arrangements granted under the Group’s share option plans.
53
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
17. FINANCIAL INSTRUMENTS
a.
Classification of financial assets and liabilities:
The financial assets and financial liabilities in the statement of financial position are classified by groups of financial
instruments pursuant to IFRS 9 are:
Financial assets:
Other receivables
2020
$000
-
2019
$000
-
Financial liabilities:
Trade payables, other payables, warrants and other long-term liabilities
3,232
1,586
Financial risks factors:
The Group's activities are exposed to foreign exchange risk. The Group's comprehensive risk management plan focuses
on activities and strategies that reduce adverse effects on the financial performance of the Group to a minimum.
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
redeemed upon demand and therefore bear low risk.
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 previously entered into derivatives with respect of the warrant liability, this liability
has been settled in the year.
54
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
18. RESTATEMENT
The Company accounted for the 2018 Purchase Agreement with Aspire Capital as a Put Option Equity Contract. As
a result, the value of the 2018 Commitment Shares were classified as a (deferred) cost of raising equity and recorded
as deferred financing costs and included in current assets. The Company had previously amortised the deferred
financing costs proportionally as it has sold shares to Aspire and recognised the prorated costs in Share premium.
Subsequently, it was determined that, because the ultimate floor price, which is effectively the nominal value of the
ADS which is denominated in GBP, the number of shares issuable under the contract is impacted by foreign currency
and that due to this variation the instrument failed to satisfy the fixed for fixed criteria under IAS 32 that enabled
this to be accounted for a cost to share premium. The result is that commitment shares are considered a transaction
cost under IAS 32 and as such should be reclassified to the profit and loss as an expense in line with the treatment
of the put option equity contract as a liability.
In connection with the reclassification, legal fees of $209,000 associated with the agreement were initially included
as a cost against share premium, when the transaction was recorded in equity have also been reclassified to the profit
and loss.
The effect of these restatements an increase to the loss incurred for the year ended 31 December 2018, presented as
an increase of retained losses of $794,000 at 1 January 2019, and a decrease to other receivables of $585,000 and
an increase to share premium of $209,000.
The originally presented financial statement for the year ended 31 December 2019 included $263,000 as a debit
against share premium and a decrease of the deferred financing assets. As this asset has been reversed as part the
$585,000 of our initial prior period adjustment, we are required to increase assets by $263,000 and increase share
premium to offset this movement.
The errors have been corrected by restating each of the affected financial statement line items for the prior periods
as follows (in thousands of $):
Statement of
Financial Position
(Extract)
1 Jan 19
Increase/
(Decrease)
1 Jan 19
(Restated)
31-Dec-19
Increase/
(Decrease)
31 Dec 19
(Restated)
Share premium account
Retained Loss
Other receivables
106,030
(116,472)
10,431
209
(794)
(585)
106,239
(114,278)
9,846
108,865
(138,236)
4,540
472
(794)
(322)
109,337
(139,030)
4,218
There is no impact to the statements of comprehensive income presented.
19. RELATED PARTY TRANSACTIONS
The following transactions were carried out with related parties:
Office Lease - The Company leases its offices in London from The Doctors Laboratory (“TDL”) and has incurred
expenses of approximately $133,000 plus VAT during the year ended December 31, 2020 (2019: $134,000). David
Byrne, a non-employee director of the Company, is also the Chief Executive Officer of TDL and Dr. Ray Prudo, the
Company’s Executive Chairman, is also Non-Executive Chairman of the Board of Directors of TDL.
Laboratory Testing Services - The Company has received laboratory testing services for its clinical trials provided
by TDL and has incurred expenses of approximately $234,000plus VAT during the year ended December 31, 2020
(2019: $186,000). The Company recorded payable balances to TDL of approximately $100,000plus VAT as of
December 31, 2020 (2019: $119,000), .
Consulting - A non-employee director of the Company began providing business development consulting services
in January 2018. The Company has incurred expenses of approximately $100,000 during the year ended
December 31, 2020 (2019: $100,000), relating to these consulting services.
55
AKARI THERAPEUTICS PLC
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2020
20. POST BALANCE SHEET EVENTS
In May 2021, the Company sold to Aspire Capital LLC a total of 1,176,471 ordinary shares of the Company for total
gross proceeds of $2,000,001 under the Purchase Agreement.
21. ULTIMATE CONTROLLING PARTY
The ultimate controlling party of the Group is RPC Pharma Ltd who holds a 21% stake in the Group.
56