Akari Therapeutics Plc

Note 1. Description of Business

Business Overview

Akari Therapeutics, Plc, (the “Company” or “Akari”) is incorporated in the United Kingdom. The Company is developing next-generation antibody-drug conjugates, or ADCs, through its proprietary technology platform that enables Akari to generate a range of ADC candidates and optimize them to target a range of cancers. Since the Company’s acquisition of Peak Bio in November 2024, Akari has focused substantially all of its efforts on the ADC platform and pipeline of novel anti-cancer payloads with mechanisms of action that differ from existing therapies and the application of those payloads against clinically validated targets. Through its platform, the Company aims to establish a pipeline of ADC candidates that target and kill cancer cells and stimulate the immune system, or bifunctional ADCs, all while overcoming the limitations inherent in existing therapies. The Company’s activities since inception have consisted of performing research and development activities and raising capital.

The Company is subject to a number of risks similar to those of preclinical and clinical stage companies, including dependence on key individuals, uncertainty of product development and generation of revenues, dependence on outside sources of capital, risks associated with clinical trials of products, dependence on third-party collaborators for research and development operations, need for marketing authorization of products, risks associated with protection of intellectual property, and competition with larger, better-capitalized companies.

To fully execute its business plan, the Company will need, among other things, to complete its research and development efforts, preclinical and regulatory activities, and clinical trials. These activities may take several years and will require significant operating and capital expenditures in the foreseeable future. There can be no assurance that these activities will be successful. If the Company is not successful in these activities it could delay, limit, reduce or terminate its preclinical studies or other discovery and research activities.

Agreement and Plan of Merger with Peak Bio Inc.

On March 4, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Peak Bio, Inc. (“Peak Bio”) and Pegasus Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Akari (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions thereof, Merger Sub will be merged with and into Peak Bio (the “acquisition”), with Peak Bio surviving the Acquisition as a wholly-owned subsidiary of Akari.

On November 14, 2024, the Company completed the acquisition under the Merger Agreement (“Closing”), pursuant to which, Merger Sub merged with and into Peak Bio, with Peak Bio surviving the acquisition as a wholly owned subsidiary of Akari.

At the Closing, the Company issued a total of 12,613,942 Akari American Depositary Shares (“Akari ADSs” or “ADSs”) which reflected the conversion of each issued and outstanding share of Peak Bio Common Stock into the right to receive Akari ADSs representing a number of Akari Ordinary Shares equal to 0.2935 (the “Exchange Ratio”). The Exchange Ratio was calculated in accordance with the terms of the Merger Agreement and is such that the total number of shares of Akari ADSs issued in connection with the acquisition is approximately 48.4% of the outstanding shares of Akari on a fully diluted basis.

At the Closing, each warrant to purchase capital stock of Peak Bio (“Peak Warrant”) that was outstanding immediately prior to the Closing was converted into warrants to purchase a number of Akari Ordinary Shares or Akari ADSs, as determined by Akari (each, an “Adjusted Warrant”), on substantially similar terms and conditions as were applicable to such Peak Warrant immediately prior to the Closing. The number of Akari Ordinary Shares (or the number of Akari Ordinary Shares underlying Akari ADSs, as applicable) subject to each Adjusted Warrant is equal to the number of shares of Peak Bio Common Stock issuable upon exercise of such Peak Warrant immediately prior to the Closing multiplied by the Exchange Ratio, with any fractional Akari Ordinary Shares or Akari ADSs rounded down to the nearest whole Akari Ordinary Share or Akari ADS, as applicable, and the exercise price with respect to each Akari Ordinary Share (or each Akari Ordinary Share underlying Akari ADSs, as applicable) underlying such Adjusted Warrant equal to the exercise price of such Peak Warrant immediately prior to the Closing divided by the Exchange Ratio.

Further, at the Closing, each option to acquire shares of Peak Bio Common Stock (“Peak Option”) that was outstanding and unexercised immediately prior to the Closing, whether or not vested, was assumed and converted into an option to purchase a number of Akari ordinary shares or Akari ADSs, as determined by Akari (each, an “Adjusted Option”). The number of Akari Ordinary Shares (or the number of Akari Ordinary Shares underlying Akari ADSs, as applicable) subject to the Adjusted Option is equal to the product of (i) the total number of shares of Peak Common Stock subject to such Peak Option immediately prior to the Closing multiplied by (ii) the Exchange Ratio, with any fractional Akari Ordinary Shares or Akari ADSs rounded down to the nearest whole Akari Ordinary Share or Akari ADS, as applicable, and the exercise price per share of each Adjusted Option equal to the exercise price of such Peak Option immediately prior to the Closing divided by the Exchange Ratio.

Liquidity and Financial Condition

The Company follows the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205-40,Presentation of Financial Statements—Going Concern, which requires management to assess the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued.

The Company has incurred substantial losses and negative cash flows since inception and had an accumulated deficit of $264.5 million as of December 31, 2025. The Company’s cash balance of $5.2 million as of December 31, 2025 is not sufficient to fund its operations for the one-year period after the date these consolidated financial statements are issued. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in research and development. The Company is subject to a number of risks and uncertainties similar to those of other companies of the same size within the biotechnology industry, such as uncertainty of preclinical research outcomes, uncertainty of additional funding, and history of operating losses. Substantial additional financing will be needed by the Company to fund its operations. Management is currently evaluating different strategies to obtain the required funding for future operations. These strategies may include but are not limited to: private placements and/or public offerings of equity and/or debt securities, and strategic research and development collaborations and/or similar arrangements. There can be no assurance that these future funding efforts will be successful.

Nasdaq Continued Listing Rules

On November 24, 2025, the Company received a letter (“Letter”) from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Capital Market (“Nasdaq”) indicating that the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) because the bid price for the Company’s American Depositary Shares (“ADS”) had closed below $1.00 per share (the “Minimum Bid Requirement”) for the previous thirty consecutive business days. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company had 180 calendar days from the date of such notice, or until May 25, 2026, to regain compliance with the Minimum Bid Requirement. To regain compliance, the bid price for the Company’s ADS must have closed at $1.00 per share or more for a minimum of ten consecutive business days. In the event the Company does not regain compliance by May 25, 2026, the Company may then be eligible for additional 180 days if it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period. If the Company does not qualify for the second compliance period or fails to regain compliance during the second compliance period, then Nasdaq will notify the Company of its determination to delist the Company’s ADSs, at which point the Company will have an opportunity to appeal the delisting determination to a Hearings Panel.

The Company intends to monitor the closing bid price of its ADSs and may, if appropriate, consider implementing available options, including, but not limited to, implementing a ratio change of its ADSs, to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules.

If the Company continues to not be in compliance or it fails to meet any of the other Nasdaq continuing listing requirements, its ADSs may be subject to delisting, and the Company may become subject to delisting proceedings.

Par Value Change

Effective December 15, 2025, shareholders approved to sub-divide each of the ordinary shares with a par value of $0.0001 into one ordinary share with a par value $0.000000005 and 19,999 deferred shares with a par value $0.000000005 (the “Deferred Shares”), with such shares having the rights and being subject to the restrictions as set out in the new Articles of Association. As a result, the number of outstanding ordinary shares of the Company remained unchanged and there were 1,429,517,750,998,477 Deferred Shares created. The deferred shares were repurchased and cancelled, and the Company issued 10 ordinary shares in connection with a buyback agreement. The rights attached to the ordinary shares, with a par value of $0.000000005 (including voting and dividend rights and rights on a return of capital) are identical in all respects to the previously outstanding ordinary shares with a par value of $0.0001. The Deferred Shares have limited rights and are effectively valueless. There is no direct effect on the value of an ADS.

Note 2. Summary of Significant Accounting Policies

Basis of presentation – The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and assumes that the Company will continue to operate as a going concern.

Principles of consolidation – The consolidated financial statements include the accounts of the Company, Celsus Therapeutics, Inc., a Delaware corporation, Volution Immuno Pharmaceuticals SA, a private Swiss company, Akari Malta Limited, a private Maltese company, Peak Bio, Inc, a Delaware corporation, Peak Bio Co., Ltd, a private Republic of Korea corporation, and Peak Bio, Inc., a California corporation, each wholly-owned subsidiaries. All intercompany transactions have been eliminated.

Foreign currency – The functional currency of the Company is U.S. dollars, as that is the currency of the primary economic environment in which the Company operates as well as the currency in which it has been financed.

The reporting currency of the Company is U.S. dollars. The Company translates its non-U.S. operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded as foreign currency translation adjustments, a component of accumulated other comprehensive loss. Gains or losses from foreign currency transactions are included in foreign currency exchange gains/(losses), net.

Use of estimates – The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets, liabilities, expenses and related disclosures. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the valuation of share-based awards, the valuation of warrant liabilities, the valuation of goodwill and indefinite-lived intangible assets, research and development prepayments, accruals and related expenses, and the valuation allowance for deferred income taxes. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed considering changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

Segment information – The Company manages its operations as a single operating segment, or reporting unit, for the purposes of assessing performance, making operating decisions and allocating resources, resulting in a single reportable segment. The Company has determined that its Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The Company’s CODM reviews the Company’s financial information on a consolidated basis for purposes of allocating resources and assessing financial performance. All of the Company’s tangible assets are held in the United States. See Note 13, Segment Information, for additional details.

**Concentration of credit risk –**Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash. The Company generally maintains balances in various operating accounts at financial institutions in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Fair value measurements – Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820,Fair Value Measurements and Disclosures (“ASC 820”) establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each reporting period. The fair value hierarchy also requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying values of the Company’s cash, prepaid expenses and other current assets, accounts payable and accrued expenses, notes payable (related and non-related), convertible notes payable (related and non-related), other current and non-current liabilities approximate their fair values due to the short-term nature of these assets and liabilities. The Company’s liability-classified warrants are recorded at their estimated fair value. See Note 6.

**Business combinations –**The Company includes the results of operations of the acquired business in the consolidated financial statements prospectively from the acquisition date. The Company allocates the purchase consideration to the assets acquired and liabilities assumed in the acquired entity based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed in the acquired entity is recorded as goodwill. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which isone year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Transaction expenses are recognized separately from the business combination and are expensed as incurred. These charges primarily include direct third-party professional fees for advisory and consulting services and other incremental costs related to the acquisition.

Cash – The Company considers all highly-liquid investments with original maturities of 90 days or less at the time of acquisition to be cash equivalents. The Company hadno cash equivalents as of December 31, 2025 or 2024.

**Prepaid expenses –**Payments made prior to the receipt of goods or services are capitalized until the goods or services are received.

**Other current assets **– Other current assets as of December 31, 2025 and 2024 were principally comprised of Value Added Tax (“VAT”) receivables.

**Restricted cash **– Restricted cash of $60,000 as of December 31, 2025 and 2024 is a restricted bank account established to secure the Company’s credit cards.

****Other intangible assets– The Company recognized other intangible assets comprised of in-process research and development (“IPR&D”) in connection with its acquisition of Peak Bio (Note 3), which closed on November 14, 2024.

The fair value of acquired IPR&D was capitalized and accounted for as an indefinite-lived intangible asset and is not subject to amortization. The Company assesses IPR&D assets for impairment at least annually, on December 31, or if events or changes in circumstances indicate that it is more likely than not that the assets are impaired. Once the associated R&D efforts are completed, the carrying value of the acquired IPR&D is reclassified as a finite-lived asset and amortized over its useful life. Incremental R&D costs incurred subsequent to the acquisition are expensed as incurred.

The Company may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the IPR&D asset is less than its carrying amount. For IPR&D, the qualitative assessment focuses on key inputs, assumptions and rationale utilized in the establishment of the fair value. If the Company concludes that it is more likely than not that the fair value of the IPR&D asset is less than its carrying value, or if the Company elects to bypass the qualitative assessment, a quantitative impairment test is performed.

The quantitative test compares the fair value of the IPR&D asset with its carrying amount. When the carrying value of the IPR&D asset exceeds its fair value, an impairment charge is recorded in current earnings for the excess of the asset’s carrying value over its fair value. The estimated fair value of the IPR&D asset is determined using the multi-period excess earnings method. The estimation of the fair value of the IPR&D asset requires significant management judgment with respect to forecasted gross revenues (including upfront and milestone revenue and royalty revenue based on forecasted product sales), revenue and expense growth rates, probability of clinical trial success and obtaining regulatory approval, and the selection and use of an appropriate discount rate. The estimates of the fair value of each intangible asset are based on the best information available as of the date of the assessment. The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge.

During the quarter ended September 30, 2025, the Company performed a qualitative assessment and determined that a change in the Company’s allocation of resources triggered a quantitative analysis for the Company’s PHP 303 IPR&D asset. As a result of the quantitative impairment test, the Company determined that its PHP 303 IPR&D asset was impaired*.* As a result, an impairment loss of $5.2 million was recorded in the consolidated statement of operations.

As of December 31, 2025, the Company prepared a quantitative assessment of its AKTX 101 IPR&D asset and determined there was no impairment of this asset.

Goodwill– The Company recognized goodwill, which represents the excess of the purchase price paid over the fair value of the identifiable net assets acquired and liabilities assumed in connection with its acquisition of Peak Bio (Note 3), which closed on November 14, 2024. As of December 31, 2025 and 2024, the goodwill amount was $8.4 million.

Goodwill is not amortized but is evaluated for impairment in accordance with ASC 350,Intangibles—Goodwill and Other(“ASC 350”).

The Company tests goodwill for impairment at least annually, on December 31, or more frequently if events or changes in circumstances indicate that the carrying value of a reporting unit may be less than its carrying value. Goodwill is tested for impairment at the reporting unit level. If goodwill and another asset from the same reporting unit are tested for impairment simultaneously, the other asset shall be tested for impairment before goodwill.

The Company may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In performing the qualitative assessment, the Company considers relevant events and circumstances, including (i) overall financial performance, including recent fundraising activities (ii) industry and market conditions in which the Company operates, (iii) changes in management or strategy, (iv) macroeconomic conditions, and (v) changes in the fair market value of the Company’s ADSs and market capitalization. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, or if the Company elects to bypass the qualitative assessment, a quantitative impairment test is performed. The quantitative test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess, limited to the total amount of goodwill allocated to that reporting unit. The estimated fair value of the reporting unit is determined using theadjusted net assets method. The estimation of the fair value of a reporting unit requires significant management judgment with respect to control premium, forecasted gross revenues (including upfront and milestone revenues and royalty revenues from product sales), probability of clinical trial success and obtaining regulatory approval, revenue and expense growth rates, and the selection and use of an appropriate discount rate. The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment. The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests.

The Company determined that it has one reporting unit for the purposes of assessing performance, making operating decisions and allocating resources, resulting in a single reportable segment, or reporting unit. As of December 31, 2025, the Company prepared a quantitative assessment and determined there wasno impairment of goodwill.

Accrued expenses – As part of the process of preparing the consolidated financial statements, the Company estimates accrued expenses. This process involves identifying services that third parties have performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred on these services as of each balance sheet date in the Company’s consolidated financial statements. Examples of estimated accrued expenses include contract service fees in conjunction with pre-clinical development, professional service fees and contingent liabilities. In connection with these service fees, the Company’s estimates are most affected by its understanding of the status and timing of services provided relative to the actual services incurred by the service providers. If the Company does not identify certain costs that have been incurred, or it under or over-estimates the level of services or costs of such services, the Company’s reported expenses for a reporting period could be understated or overstated. The date on which certain services commence, the level of services performed on or before a given date, and the cost of services are often subject to the Company’s estimation and judgment. The Company makes these judgments based upon the facts and circumstances known to it in accordance with U.S. GAAP. See Note 5.

Convertible notes and notes payable – The Company accounts for convertible promissory notes in accordance with ASC Topic 470-20,Debt with Conversion and Other Options(“ASC 470-20”) and has not elected the fair value option as provided for within ASC Topics 815 and 825. Accordingly, the Company evaluated the embedded conversion and other features within convertible notes and notes payable to determine whether any of the embedded features should be bifurcated from the host instrument and accounted for as a derivative at fair value. Based on management’s evaluation, the Company determined that none of the embedded features were required to be bifurcated and accounted for separately.

Warrant liabilities – The Company accounts for ordinary share or ADS warrants as either equity instruments, liabilities or derivative liabilities in accordance with ASC Topic 480,Distinguishing Liabilities from Equity (“ASC 480”) and/or ASC Topic 815,Derivatives and Hedging (“ASC 815”), depending on the specific terms of the warrant agreement. Liability-classified warrants are recorded at their estimated fair values at issuance and are remeasured each reporting period until they are exercised, terminated, reclassified or otherwise settled. Changes in the estimated fair value of liability-classified warrants are recorded in “change in fair value of warrant liabilities” in the Company’s consolidated statements of operations and comprehensive loss. Equity-classified warrants are recorded within “additional paid-in capital” in the Company’s consolidated statements of shareholders’ equity (deficit) at the time of issuance and are not subject to remeasurement.

In connection with the sale of the ADSs in the September 2022 Registered Direct Offering, the Company issued to the investors registered Series A warrants (“Series A Warrants”) to purchase an aggregate of 755,000 ADSs at $17.00 per ADS and registered Series B warrants (“Series B Warrants”) to purchase an aggregate of 755,000 ADSs at $17.00 per ADS (collectively, the “September 2022 Warrants”).The Company determined that the September 2022 Warrants are not indexed to the Company’s own stock in the manner contemplated by ASC 815-40-15,Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock. Accordingly, the Company classifies the September 2022 Warrants as a derivative liability in its consolidated balance sheets. In September 2024, all outstanding Series A Warrants expired unexercised.

In connection with the acquisition of Peak Bio, the Company assumed warrants issued to investors to purchase an aggregate of 1,577,566 ADSs at $39.18 per ADS (“November 2022 Peak Bio Warrants”) and an aggregate of 1,187,013 ADSs at $2.04 per ADS (“April 2023 Peak Bio Warrants”). The Company determined that the November 2022 Peak Bio Investor Warrants and the April 2023 Peak Bio Investor Warrants are not indexed to the Company’s own stock in the manner contemplated by ASC 815-40-15,Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock. Accordingly, the Company classifies the assumed warrants as derivative liabilities in its consolidated balance sheets.

Research and development expenses – Costs associated with research and development are expensed as incurred unless there is an alternative future use in other research and development projects. Research and development expenses include, among other costs, salaries and personnel–related expenses, fees paid for contract research services, fees paid to clinical research organizations, costs incurred by outside laboratories, manufacturers and other accredited facilities in connection with clinical trials and preclinical studies.

Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. The Company records expenses related to clinical studies and manufacturing development activities based on its estimates of the services received and efforts expended pursuant to contracts with multiple contract research organizations and manufacturing vendors that conduct and manage these activities on its behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven cash flows. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical study milestones. In amortizing or accruing service fees, the Company estimates the time period over which services will be performed, enrollment of subjects, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the Company’s estimate, the Company will adjust the accrued or prepaid expense balance accordingly.

The Company accounts for research and development tax credits at the time its realization becomes probable as a credit to research and development expenses in the consolidated statements of operations and comprehensive loss.

Merger-related expenses – Merger-related expenses include direct expenses incurred in connection with the acquisition of Peak Bio and are comprised primarily of legal and professional fees and other incremental costs directly associated to the acquisition.

Restructuring and other expenses – In May 2024, the Company implemented a reduction-in-force of approximately 67% of its total workforce as a result of the recently announced program prioritization under which the Company’s nomacopan HSCT-TMA program was suspended. The reduction-in-force was part of an operational restructuring plan (the “May 2024 Plan”) which included the elimination of certain senior management positions and was completed in the third quarter of 2024. The purpose of the restructuring plan, including the reduction-in-force, was to reduce HSCT-TMA related operating costs, while supporting the execution of the Company’s long-term strategic plan. As of December 31, 2025, the Company does not expect to incur additional restructuring-related expenses related to the May 2024 Plan.

The following table presents the restructuring reserve and accrual activity for the years ended December 31, 2025 and 2024:

Stock-based compensation expense – The Company measures all stock-based awards granted to employees, directors and non-employees based on the estimated fair value on the date of grant and recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective awards. Forfeitures are accounted for as they occur. The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

The fair value of each restricted ordinary share award is determined on the date of grant based on the fair value of the Company’s ordinary shares on that same date. The fair value of each share option grant is determined on the date of grant using the Black-Scholes option pricing model, which requires inputs based on certain assumptions, including the expected stock price volatility, the expected term of the award, the risk-free interest rate, and expected dividends (See Note 8). The Company estimates its expected stock price volatility based on the historical volatility of its ADSs, considering the expected term of the options. The expected term of the Company’s options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is based on the fact that the Company has never paid cash dividends on ordinary shares and does not expect to pay any cash dividends in the foreseeable future.

Leases – The Company accounts for its leases in accordance with ASC 842,Leases. In accordance with ASC 842, the Company records a right-of-use (“ROU”) asset and corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheet and are recognized on a straight-line basis over the lease term. As of December 31, 2025 and 2024, the Company did not have any leases with a term longer than twelve months. Accordingly, no ROU assets and corresponding lease liabilities are included in the Company’s consolidated balance sheets as of December 31, 2025 or 2024.

Income taxes – The Company accounts for income taxes in accordance with the accounting rules that require an asset and liability approach to accounting for income taxes based upon the future expected values of the related assets and liabilities. Deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and for tax loss and credit carry forwards and are measured using the expected tax rates estimated to be in effect when such basis differences reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company follows the provisions of ASC 740 “Accounting for Uncertainty in Income Taxes” (“ASC 740”), which prescribes recognition thresholds that must be met before a tax position is recognized in the financial statements and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Under ASC 740, an entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not” threshold. Interest and penalties related to uncertain tax positions are recognized as general and administrative expense. At December 31, 2025 and 2024, the Company had no uncertain tax positions.

Comprehensive income (loss) - Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company’s other comprehensive loss is comprised of foreign currency translation adjustments.

**Net loss per share **– Basic net income (loss) per ordinary share is computed by dividing net income (loss) available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, which includes ordinary shares underlying pre-funded warrants, as such warrant is exercisable, in whole or in part, for nominal cash consideration with no expiration date. Diluted net income (loss) per ordinary share is computed by dividing the diluted net income (loss) available to ordinary shareholders by the weighted average number of ordinary shares, including potential dilutive ordinary shares assuming the dilutive effect as determined using the treasury stock method.

For periods in which the Company has reported net losses, diluted net loss per ordinary share is the same as basic net loss per ordinary share, since dilutive ordinary shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss for each of the years ended December 31, 2025 and 2024.

The following potential dilutive securities, presented based on amounts outstanding at the end of each reporting period, have been excluded from the calculation of diluted net loss per share because including them would have had an anti-dilutive impact:

**Loss contingencies, legal matters **– Akari is involved from time to time in various claims, proceedings, and litigation, including those described in Note 11. The Company establishes reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.

**New accounting pronouncements **– From time to time, new accounting pronouncements are issued by the FASB and rules are issued by the SEC that the Company has or will adopt as of a specified date. Unless otherwise noted, management does not believe that any other recently issued accounting pronouncements issued by the FASB or guidance issued by the SEC had, or is expected to have, a material impact on the Company’s present or future consolidated financial statements.

Recently Issued (Not Yet Adopted) Accounting Standards

In February 2024, the FASB issued ASU 2024-03,Income Statement Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The objective of ASU 2024-03 is to require entities to provide enhanced disclosures of income statement expenses through disaggregation of specific expense captions. ASU 2024-03 is effective for public companies starting in annual periods beginning after December 15, 2026 and in interim periods beginning after December 15, 2027. The Company is currently evaluating ASU 2024-03 and the impact of the disclosures to its consolidated financial statements.

Recently Adopted Accounting Standards

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The objective of ASU 2023-09 is to enhance disclosures related to income taxes, including specific thresholds for inclusion within the tabular disclosure of income tax rate reconciliation and specified information about income taxes paid, net of refunds received, disaggregated by federal, state, and foreign jurisdictions. ASU 2023-09 is effective for public companies starting in annual periods beginning after December 15, 2024. The amendments have been applied on a prospective basis. Refer to Note 12, Income Taxes, for additional details.

Note 3. Peak Bio Acquisition

In connection with the November 14, 2024 acquisition of Peak Bio, the Company issued a total of 12,613,942 Akari ADSs which reflected the conversion of each issued and outstanding share of Peak Bio Common Stock into the right to receive Akari ADSs representing a number of Akari Ordinary Shares equal to 0.2935 (the “Exchange Ratio”). The Exchange Ratio was calculated in accordance with the terms of the Merger Agreement and is such that the total number of shares of Akari ADSs issued in connection with the acquisition is approximately 48.4% of the outstanding shares of Akari on a fully diluted basis.

At the Closing, each Peak Warrant and Peak Option was converted into an Adjusted Warrant and Adjusted Option to purchase a number of Akari Ordinary Shares or Akari ADSs, based on the Exchange Ratio. The Adjusted Warrants and the Adjusted Options have substantially similar terms and conditions as were applicable to such Peak Warrants and Peak Options immediately prior to the Closing.

Consideration Paid

The following table summarizes the total consideration paid pursuant to the Merger Agreement, which was based on the closing market price of Akari’s ADS as of the November 14, 2024 acquisition date:

The fair value of the 12,613,942 ADS issued in connection with the acquisition is based on the closing price of the Company’s ADSs on the Closing Date multiplied by the number of ADSs issued.

In connection with the acquisition of Peak Bio, the Company assumed (i) warrants issued to investors (“November 2022 Peak Bio Warrants”) to purchase an aggregate of 1,577,556 ADSs at $39.18 per ADS, and (ii) warrants issued to investors (“April 2023 Peak Bio Warrants”) to purchase an aggregate of 1,187,013 ADSs at $2.04 per ADS. The assumed Peak Bio warrants are fully vested and thus are included in the consideration transferred.

The Company determined that the November 2022 Peak Bio Warrants and the April 2023 Peak Bio Warrants are not indexed to the Company’s own stock in the manner contemplated by the relevant accounting guidance. Accordingly, on the Closing of the acquisition, the Company classified the assumed Peak Bio warrants as derivative liabilities in its consolidated balance sheets.

The estimated fair value of the Adjusted Warrants of $1.8 million at the acquisition closing date was calculated using the Black Scholes Option Pricing Model. The following assumptions were used to determine the fair value of the assumed Peak Bio warrants as of November 14, 2024:

The Company assumed Peak Bio’s outstanding stock option awards to purchase 1,618,081 ADSs. The Company determined the Peak Bio Adjusted Options were not probable of vesting prior to the consummation of the Merger Agreement. For this reason, the fair value of the replacement awards was not included as consideration transferred in the business combination. Instead, the entire fair value of the adjusted options will be recognized as compensation cost in the post-combination period. The estimated fair value of the Adjusted Options of $1.8 million at the acquisition closing date was calculated using the Black Scholes Option Pricing Model. The valuation assumptions used in the Black Scholes Option Pricing Model include the Company’s stock price on the date of closing of $2.23, volatility ranging from 84.1% to 86.4%, an expected dividend yield of 0.0%, an expected term ranging from 0.20 years to 5.32 years, and a risk-free interest rate ranging from 4.3% to 4.6%.

Total Assets Acquired and Liabilities Assumed

The acquisition of Peak Bio has been accounted for as a business combination using the acquisition method of accounting. The fair value of the purchase price was allocated to the assets acquired and liabilities assumed at their respective fair values. Management estimated the fair value of the IPR&D intangible assets using a multi-period excess earnings method. The significant assumptions used in the valuation are the probability of clinical trial success and obtaining regulatory approval, forecasted gross sales from up-front and milestone payments, royalties and product sales, and the discount rate reflecting the Company’s weighted average cost of capital. This acquisition method requires, among other things, that assets acquired, and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

The following table summarizes the final fair values of assets acquired and liabilities assumed as of the acquisition date (in thousands):

Intangible assets of approximately $39.2 million and $8.4 million were recorded related to the value of acquired IPR&D from Peak Bio’s therapeutic pipeline, consisting of two separate pipelines supported by intellectual property, and goodwill, respectively. The recognized goodwill is attributable primarily to the expected synergies and other benefits from the merger and the deferred tax liability associated with the Company’s acquired IPR&D, which is not deductible for income tax purposes.

The fair value of IPR&D intangible assets were as follows (in thousands):

The Company assumed convertible notes and notes payable with third parties, and notes payable with a related party, which are described in Note 6 and Note 9, respectively.

Merger-related expenses, which were comprised primarily of regulatory, financial advisory and legal fees, totaled $3.3 million for the year ended December 31, 2024 and were included in the consolidated statements of operations and comprehensive loss. The Company issued Paulson Investment Company LLC (“Paulson”) an advisory fee in connection with the acquisition equal to 243,000,000 ordinary shares or 121,500 ADS equivalents for a value of $270,945, based on the closing price of the Company’s ADS on the Closing Date multiplied by the number of ADS issued.

Peak Bio’s operating results were consolidated with the Company’s beginning on November 14, 2024. Therefore, the consolidated results of operations for the year ended December 31, 2024 may not be comparable to the same period in 2023. Peak Bio’s results of operations included in the Company’s consolidated results of operations from the acquisition date to December 31, 2024 are presented in the table below (in thousands):

Pro Forma Financial Information (Unaudited)

The following table summarizes certain of the Company’s supplemental pro forma financial information for the year ended December 31, 2024, as if the acquisition of Peak Bio had occurred as of January 1, 2024. The unaudited pro forma financial information for the year ended December 31, 2024 reflect (i) the reversal of a gain recognized on Peak Bio’s office lease termination and corresponding impairment of its right to use asset, (ii) the reversal of fair value adjustments recognized on Peak Bio’s warrant liabilities and derivative liability, and (iii) the reversal of interest and accretion expense on Peak Bio’s debt that was settled on the acquisition date. For the year ended December 31, 2024, transaction costs incurred by the Company and Peak Bio were $3.2 million. The unaudited pro forma financial information is for comparative purposes only and is not necessarily indicative of what would have occurred had the acquisition been made at that date or of results which may occur in the future (in thousands).

Note 4. Intangible Assets

The Company’s IPR&D and goodwill are tested for impairment at least annually, or more frequently if impairment indicators are present.

During the quarter ended September 30, 2025, the Company performed a qualitative assessment and determined that a change in the Company’s allocation of resources triggered a quantitative analysis for the Company’s PHP 303 IPR&D asset. As a result of the quantitative impairment test, the Company determined that its PHP 303 IPR&D asset was impaired*.*As a result, we recorded an impairment charge of $5.18 million related to the Company’s PHP 303 asset due to reprioritization of resources to our ADC platform, no further development plans and inability to find a collaborative partner to date for this program.

As of December 31, 2025, the Company prepared a quantitative assessment of its AKTX 101 IPR&D asset and determined there was no impairment of this asset.

The following table presents information about the Company’s IPR&D assets:

There wereno changes in the carrying value of goodwill during the years ended December 31, 2025 and 2024.

Note 5. Accrued Expenses

Accrued expenses consisted of the following:

Note 6. Convertible Notes and Notes Payable

September 2024 Note Payable

In November 2024, the Company assumed a promissory note issued by Peak Bio in September 2024 in the amount of $0.3 million (the “September 2024 Note”) to its former California landlord. Due to the short-term nature of the September 2024 Note, the Company concluded that its carrying value approximated its fair value as of November 14, 2024. The note bears no interest and ispayable over twenty equal monthly installments beginning on November 1, 2024 and expiring on June 1, 2026.

As of December 31, 2025 and December 31, 2024, the outstanding balance on the September 2024 Note was less than $0.1 million and $0.3 million, respectively.

November 2023 Note Payable

In November 2024, the Company assumed a promissory note issued by Peak Bio in November 2023 in the amount of $0.4 million (the “November 2023 Note”) bearing interest at 6% per annum with a maturity date of December 31, 2024. Due to the short-term nature of the November 2023 Note, the Company concluded that its carrying value approximated its fair value as of November 14, 2024.

As of December 31, 2024, the principal balance of $0.4 million plus accrued interest of less than $0.1 million, presented within accrued expenses in the Company’s consolidated balance sheets, was due for payment. On February 28, 2025, the Company signed a Settlement Agreement and Release in the amount of $325,000 for full satisfaction of the outstanding principal and accrued interest owed on the November 2023 Notes. The payment of $325,000 was made on March 6, 2025 and the Company recognized a gain on debt extinguishment of less than $0.1 million, which is reflected in the gain on settlement of current liabilities in the statements of operations for the year ended December 31, 2025.

The Company did not recognize any interest expense during the year ended December 31, 2025.

April 2023 Convertible Notes

In November 2024, the Company assumed convertible promissory notes issued by Peak Bio in April 2023 in the principal amount of a total of $0.7 million (the “April 2023 Convertible Notes”). The April 2023 Convertible Notes permitted the holder to convert the outstanding principal and accrued interest at any time at a price of $2.04 per ADS (representing $0.00102 per underlying Ordinary Share of the Company), after giving effect to the Exchange Ratio. Due to the short-term nature of the April 2023 Convertible Notes, the Company concluded that its carrying value approximated its fair value as of the Closing on November 14, 2024. The April 2023 Convertible Notes were due on October 31, 2024 and bore interest at a default rate of 10% per annum.

The Company evaluated the embedded conversion and other features within the April 2023 Convertible Notes to determine whether any of the embedded features should be bifurcated from the host instrument and accounted for as a derivative at fair value. Based on management’s evaluation, the Company determined that the April 2023 Convertible Notes were not issued at a substantial premium and none of the embedded features were required to be bifurcated and accounted for separately.

On September 19, 2025, the Company entered into a letter agreement (the “April 2023 Convertible Notes and Warrants Amendment”) with the holders of the April 2023 Convertible Notes to (i) extend the maturity date of the April 2023 Convertible Notes to August 31, 2026, (ii) amend the conversion price of the April 2023 Convertible Notes to $0.81 per ADS (representing $0.000405 per underlying Ordinary Share) and permit the holders of the April 2023 Convertible Notes to voluntarily convert, in whole or in part, the outstanding principal and accrued but unpaid interest on the April 2023 Convertible Notes into ADSs at any time, (iii) extend the expiration date of warrants held by the April 2023 Convertible Note holders (“April 2023 Peak Bio Convertible Noteholder Warrants”) from April 28, 2028 to August 31, 2030, and (iv) amend the exercise price of the April 2023 Peak Bio Warrants to $0.81 per ADS (representing $0.000405 per underlying Ordinary Share). In connection with the April 2023 Convertible Notes and Warrants Amendment, the Company paid the holders an aggregate of $81,700, representing all interest accrued on the April 2023 Convertible Notes through September 30, 2025.

The Company accounted for April 2023 Convertible Notes and Warrants Amendment as a debt extinguishment in accordance with ASC 470. As the present value of the future cash flows was substantially different than the net carrying value of the original debt, a loss on debt extinguishment of less than $0.1 million was recognized. The discount of less than $0.1 million is being amortized as interest expense over the term of the convertible notes using the effective interest method.

In November 2024, in connection with the acquisition of Peak Bio, the April 2023 Peak Bio Convertible Noteholder Warrants were accounted for as a liability, as the April 2023 Peak Bio Convertible Noteholder Warrants were not considered indexed to the Company’s own stock in the manner contemplated by ASC 815-40-15,Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock. Following the April 2023 Convertible Notes and Warrants Amendment on September 19, 2025, the Company determined that the amended April 2023 Peak Bio Convertible Noteholder Warrants for the issuance of 342,420 ADSs (equivalent to 684,840,000 Ordinary Shares) met the requirements to be considered indexed to the Company’s own stock and therefore were reclassified to equity. The fair value of the warrant liability, immediately prior to the modification, was $109,700 at the reclassification date. The Company determined the fair value of the April 2023 Peak Bio Convertible Noteholder Warrants after the modification, using a Black Scholes Option Pricing Model was $191,800 based on a stock price of $0.81, expected volatility of 86%, a risk-free rate of 3.68% and an expected term of 5 years. The change in fair value of $82,100 was recognized as additional paid in capital.

The Company recognized interest expense of less than $0.1 million during the year ended December 31, 2024 and interest expense, including amortization of the discount of less than $0.1 million, during the year ended December 31, 2025. As of December 31, 2025 and 2024, accrued interest on the April 2023 Notes of less than $0.1 million is presented within “Accrued expenses” in the Company’s consolidated balance sheets.

Refer to Note 9 for convertible notes, related party.

August 2025 Notes

In August 2025, the Company issued unsecured promissory notes with a 20% original issuance discount (each a “August 2025 Note” and together, the “August 2025 Notes”) to certain investors, including the Company’s directors. In connection with the issuance and sale of the August 2025 Notes, the Company agreed to extend the expiration date of Series A warrants held by August 2025 Note investors, previously issued in the March 2025 Private Placement (as defined in Note 7) (the “Series A Warrants”), by 48 months from the original date of expiration (the “Warrant Amendment Agreements”).

The Company closed the August 2025 Note Offering with investors and Company directors in three tranches and issued August 2025 Notes with an aggregate purchase price of $3,011,000 and an aggregate principal amount of $3,763,750, of which the Company issued August 2025 Notes with an aggregate purchase price of $1,500,000 and an aggregate principal amount of $1,875,000 to third party investors. The August 2025 Notes have maturity dates ranging from August 15, 2026 through September 26, 2026, depending on the date of issuance, at which time the principal amount is due and payable. The terms of the August 2025 Notes provided for accelerated payment of the outstanding principal amount in the event of a default as defined in the August 2025 Note (the Accelerated Payment Feature”). The Company determined that the Accelerated Repayment Feature is subject to bifurcation under the guidance in ASC 815 as redemption features at a discount. The fair value of the derivative liability related to the Accelerated Repayment Feature was immaterial as the probability that the Company will trigger an event of default was deemed minimal.

The Company also entered into Warrant Amendment Agreements with the recipients of such August 2025 Notes, which extended the expiration date of the Series A Warrants to purchase 4,891,272 ADSs held by third party investors to April 25, 2030.

At the close of the August 2025 Note Offering, the Company incurred a total of approximately $0.1 million in placement agent fees with Paulson Investment Company, LLC, which were accounted for as debt issuance costs.

The amended Series A Warrants were accounted for in accordance with ASC 815 with the change in fair value, as a result of the amendment, being recognized first as a loss on debt extinguishment to the extent of the purchase price and the remainder as a debt issuance cost. The aggregate fair value of the Series A Warrants at issuance date using a Black Scholes Option Pricing Model was $2.1 million based on a stock price of $1.11, expected volatility of 93%, a risk-free rate of 3.82% and an expected term of 0.6 years. The aggregate fair value of the Series A Warrants at the amendment date using a Black Scholes Option Pricing Model was $3.9 million based on a stock price of $1.11, expected volatility of 88%, a risk-free rate of 3.70% and an expected term of 4.6 years, resulting in a change in fair value of $1.9 million from the issuance date. The Company recognized a loss on debt issuance, which is recorded in loss on debt extinguishment on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2025, of $0.4 million and the remaining $1.5 million was accounted for as a debt issuance cost.

At the issuance date, debt issuance costs were capitalized and were being amortized as interest expense over the term of the notes using the effective interest method. The Company recorded amortization of debt issuance costs of $0.5 million in interest expense from date of issuance through the date of note cancellation, December 17, 2025.

On December 17, 2025, the Company entered into note cancellation and exchange agreements (each, an “Exchange Agreement”) with each holder of the August 2025 Notes to exchange the total outstanding principal amount of $1,875,000 for (i) Pre-Funded Warrants to purchase up to an aggregate of 4,828,740 ADSs (“Note Exchange Pre-Funded Warrants”) and (ii) unregistered note exchange warrants to purchase up to an aggregate of 4,828,740 ADSs (“Note Exchange Warrants”). The Pre-Funded Warrants have an exercise price of $0.00001 per ADS, will be immediately exercisable following the Shareholder Approval (defined below), and will not expire until fully exercised. The Note Exchange Warrants are exercisable commencing on the Shareholder Approval Date for a term of five years following the Shareholder Approval Date and have an exercise price of $0.3883 per ADS.

The Company accounted for the note cancellation and Exchange Agreements as a debt extinguishment in accordance with ASC 470. The aggregate fair value of the Note Exchange Pre-Funded Warrants and the Note Exchange Warrants at issuance date using a Black Scholes Option Pricing Model was $2.0 million based on a stock price of $0.25, expected volatility of 93%, a risk-free rate of 3.70% and an expected term of 5 years.

As the present value of the future cash flows was substantially different than the net carrying value of the original debt, a loss of approximately $1.6 million was recognized as a loss on debt extinguishment in the consolidated statements of operations.

The Company determined that the Note Exchange Prefunded Warrants and the Note Exchange Warrants met all the criteria for equity classification. Accordingly, each of the Note Exchange Prefunded Warrants and the Note Exchange Warrants were recorded as a component of additional paid-in capital.

Refer to Note 9 for notes payable, related party.

Note 7. Shareholders’ Equity

Ordinary Shares

On December 15, 2025, the Company’s shareholders approved an increase to the number of authorized Ordinary Shares, par value $0.000000005 (the “Ordinary Shares”). The Company can issue up to 600,000,000,000 Ordinary Shares plus 161,963,201,733 Ordinary Shares previously granted under previous allotments. All previously unallocated authorized shares were revoked. Accordingly, as of December 31, 2025, the Company was authorized to issue up to 761,963,201,733 Ordinary Shares. As of December 31, 2024, the Company was authorized to issue up to 245,035,791,523 ordinary shares.

Currently, each ADS represents 2,000 ordinary shares (the “ADS Ratio”). All ADS and per ADS amounts in the accompanying consolidated financial statements reflect the ADS Ratio.

White Lion Ordinary Share Purchase and Registration Rights Agreements

On August 29, 2025, the Company entered into an Ordinary Share Purchase Agreement (the “ELOC Purchase Agreement”) and a Registration Rights Agreement (the “White Lion RRA”) with White Lion Capital, LLC, a Delaware limited liability company (“White Lion”). Pursuant to the ELOC Purchase Agreement, the Company had the right, but not the obligation, to require White Lion to purchase, from time to time, up to $25,000,000 in aggregate gross purchase price of newly issued Ordinary Shares, which may be exchanged for ADSs, subject to certain limitations and conditions set forth in the ELOC Purchase Agreement.

The Company does not have a right to commence any sales of Ordinary Shares to White Lion under the ELOC Purchase Agreement until all conditions to the Company’s right to commence sales, as set forth in the ELOC Purchase Agreement, have been satisfied, including that a registration statement covering the resale of such shares is declared effective by the SEC and the final form of prospectus is filed with the SEC. Over the period ending on the earlier of (i) the date on which the Purchaser shall have purchased Ordinary Shares pursuant to the ELOC Purchase Agreement for an aggregate purchase price equal to the Commitment Amount or (ii) August 29, 2028 (the “Commitment Period”), subject to the conditions of the ELOC Purchase Agreement, the Company will control the timing and amount of any sales of Ordinary Shares to the Purchaser. Actual sales of Ordinary Shares to the Purchaser under the ELOC Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the ADSs, and determinations made by the Company as to appropriate levels and sources of funding.

The purchase price of the Ordinary Shares that the Company elects to sell to the Purchaser pursuant to the ELOC Purchase Agreement will be determined based on the type of Purchase Notice issued, as follows:

In no event may the Company issue to the Purchaser under the ELOC Purchase Agreement more than 13,039,369,358 Ordinary Shares (the “Exchange Cap”), which equals 19.99% of the Company’s outstanding Ordinary Shares as of the Execution Date, unless the Company obtains shareholder approval to issue shares in excess of the Exchange Cap or the average price paid for all Ordinary Shares issued under the agreement is equal to or greater than the Minimum Price (as defined in the ELOC Purchase Agreement). In any event, the ELOC Purchase Agreement provides that the Company may not issue or sell any Ordinary Shares if such issuance or sale would breach any applicable Nasdaq rules.

The ELOC Purchase Agreement prohibits the Company from directing the Purchaser to purchase any Ordinary Shares if those shares, when aggregated with all other Ordinary Shares then beneficially owned by the Purchaser (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended), would result in the Purchaser beneficially owning more than 4.99% of the outstanding Ordinary Shares (the “Beneficial Ownership Limitation”), which may be increased to 9.99% at the Purchaser’s discretion upon 61 days’ prior written notice.

As consideration for the Purchaser’s execution of the ELOC Purchase Agreement, the Company will pay a document preparation fee of $15,000, to be deducted from the proceeds related to the first Purchase Notice, and cash commitment fees of $37,500 when aggregate Purchase Notices exceed $500,000 and $87,500 (or $125,000 if $1,000,000 is reached first) when aggregate Purchase Notices exceed $1,000,000. Additionally, if the Company fails to close at least $625,000 in purchases by the 180th day after the Registration Statement’s effective date, the Company will issue ADSs, represented by Ordinary Shares, equivalent to $75,000 divided by the lowest traded ADS price during a 10-day period preceding that date (the “Commitment Shares”).

Concurrently with the ELOC Purchase Agreement, the Company and the Purchaser entered into a Registration Rights Agreement, dated August 29, 2025 (the “Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement on Form S-1 (or any successor form) with the SEC within thirty (30) calendar days following August 29, 2025, to register the resale of the maximum number of Registrable Securities (including the Ordinary Shares, Commitment Shares, and ADSs representing such shares) permitted by applicable SEC rules.

The ELOC Purchase Agreement was accounted for as a standby equity purchase agreement under ASC 815 as it includes an embedded put option and an embedded forward option. The put option is recognized on inception, and the forward option is recognized upon issuance of notice for the sale of the Company’s Common Stock. The fair value of the derivative liability related to the embedded put option (“White Lion Derivative Liability) was $100,000 at the inception of the agreement. The fair value of the White Lion Derivative Liability was determined using a Monte Carlo simulation based on the projected stock price of $0.76, expected volatility of 97%, risk-free rate of 3.52% and discounted at 71.3% for the probability of the Company timely filing all SEC documents and meeting the NASDAQ listing requirements.

At December 31, 2025, the White Lion Derivative Liability was remeasured and had a fair value of $230,000, which was based on the projected stock price of $0.29, expected volatility of 102.5%, risk-free rate of 3.46% and discounted at 71.3% for the probability of the Company timely filing all SEC documents and meeting the NASDAQ listing requirements.

As of December 31, 2025, the Company had no outstanding purchase notices issued to White Lion.

December 2025 Registered Direct Offering

In December 2025, the Company closed a registered direct offering (the “December 2025 Registered Direct Offering”) with institutional and non-institutional investors providing for the issuance and sale of 19,057,418,000 ordinary shares (9,528,709 ADSs) of the Company and series G warrants (“Series G Warrants”) to purchase up to 19,057,418,000 ordinary shares (9,528,709 ADSs). The combined purchase price per each ADS and accompanying Series G was $0.3883 resulting in aggregate gross proceeds of $3.7 million. The Series G Warrants are exercisable at a price of $0.3883 per ADS. The Series G Warrants are exercisable commencing on the effective date (the “Shareholder Approval Date”) of shareholder approval of the issuance of the ADSs issuable upon exercise of the Series G Warrants and the Pre-Funded Warrants (the “Shareholder Approval”) and will have a 5-year term from the Shareholder Approval Date. The Shareholder Approval Date was March 2, 2026. Concurrent with the closing of the December 2025 Registered Direct Offering, the Company entered into a side letter with one non-institutional investor pursuant to which the Company agreed to issue 1,030,130,000 ordinary shares (515,065 ADSs) and Series G Warrants to purchase 1,030,130,000 ordinary shares (515,065 ADSs), not included in the total closing amount above, upon receipt of subscription amount of approximately $0.2 million, which such subscription amount was received on January 15, 2026. The closing of this subsequent issuance occurred on January 30, 2026.

At close of the December 2025 Registered Direct Offering, the Company paid Ladenburg Thalmann & Co. Inc., as placement agent for the December 2025 Registered Direct Offering, $479,560 and issued warrants to purchase 1,008,600,000 ordinary shares (504,300 ADSs) at an exercise price of $0.4854 per ADS and a term expiring on December 16, 2030 (the “December 2025 Placement Agent Warrants”). The estimated fair value of the December 2025 Placement Agent Warrants on the issuance date was approximately $0.1 million.

Net proceeds from the December 2025 Registered Direct Offering were approximately $3.1 million after deducting placement agent fees and other expenses.

The Company determined that the Series G Warrants and the December 2025 Placement Agent Warrants met all of the criteria for equity classification. Accordingly, upon closing of the December 2025 Registered Direct Offering, each of the Series G Warrants and the December 2025 Placement Agent Warrants were recorded as a component of additional paid-in capital.

December 2025 Private Placement

In December 2025, the Company entered into a definitive purchase agreement with directors of the Company, pursuant to which the Company sold and issued in a private placement Pre-Funded Warrants to purchase up to 5,127,426,000 ordinary shares (2,563,713 ADSs), and Series G Warrants to purchase up to 5,127,426,000 ordinary shares (2,563,713 ADSs), at a per unit price of $0.4041 for aggregate gross proceeds of approximately $1.0 million (the “December 2025 Private Placement”).

The Pre-Funded Warrants have an exercise price of $0.00001 per ADS, will be immediately exercisable following the Shareholder Approval, and will not expire until fully exercised. The Series G Warrants are exercisable commencing on the Shareholder Approval Date for a term of five years following the Shareholder Approval Date and have an exercise price of $0.4041 per ADS.

The Company determined that the Pre-Funded Warrants and the Series G Warrants met all of the criteria for equity classification. Accordingly, upon closing of the December 2025 Private Placement, each of the Pre-Funded Warrants and the Series G Warrants were recorded as a component of additional paid-in capital.

October 2025 Registered Direct Offering

In October 2025, the Company closed a registered direct offering (the “October 2025 Registered Direct Offering”) with institutional investors providing for the issuance and sale of 6,250,000,000 (3,125,000 ADSs) of the Company, series E Warrants (“Series E Warrants”) to purchase up to 6,250,000,000 (3,125,000 ADSs), and series F warrants (“Series F Warrants”) to purchase up to 6,250,000,000 (3,125,000 ADSs). The combined purchase price per each ADS and accompanying Series E Warrant and Series F Warrant was $0.80 resulting in aggregate gross proceeds of $2.5 million. The Series E Warrants and Series F Warrants are exercisable at a price of $0.98 per ADS and expire December 15, 2030 and June 15, 2028, respectively.

At close of the October 2025 Registered Direct Offering, the Company paid Ladenburg Thalmann & Co. Inc., as placement agent for the October 2025 Registered Direct Offering, $262,500 and issued warrants to purchase 125,000 ADSs at an exercise price of $1.00 per ADS and a term expiring on October 14, 2030 (the “October 2025 Placement Agent Warrants”). The estimated fair value of the October 2025 Placement Agent Warrants on the issuance date was approximately $0.1 million.

Net proceeds from the October 2025 Registered Direct Offering were approximately $2.0 million after deducting placement agent fees and other expenses.

The Company determined that the Series E Warrants, the Series F Warrants and the October 2025 Placement Agent Warrants met all of the criteria for equity classification. Accordingly, upon closing of the October 2025 Registered Direct Offering, each of the Series E Warrants, the Series F Warrants and the October 2025 Placement Agent Warrants were recorded as a component of additional paid-in capital.

March 2025 Private Placement

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

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

In April 2025, the Company closed its final round of financing under the March 2025 Private Placement and issued 2,704,595 ADSs, Pre-Funded Warrants to purchase up to 1,650,000 ADS at an exercise price of $0.20 per ADS, Series A Warrants to purchase up to 6,057,404 ADS, at an exercise price of $0.87 per ADS, and Series B Warrants to purchase up to 4,354,595 ADS, at an exercise price of $0.87 per ADS. The Company received approximately $0.3 million in advance for the potential exercise of the Pre-funded Warrants which is reflected in other current liabilities.

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

The Company determined that the Series A Warrants, the Series B Warrants, and the Prefunded Warrants met all the criteria for equity classification. Accordingly, upon closing of the March 2025 Private Placement, each of the Series A Warrants, the Series B Warrants, and the Prefunded Warrants were recorded as a component of additional paid-in capital.******

Merger with Peak Bio, Inc.

On November 14, 2024, the Company completed its previously announced strategic combination with Peak Bio (Note 3). In connection with the acquisition, the Company issued 25,227,884,000 ordinary shares and assumed (i) November 2022 Peak Warrants to purchase an aggregate of 1,577,566 ADSs at $39.18 per ADS, and (ii) April 2023 Peak Warrants to purchase an aggregate of 1,187,013 ADSs at $2.04 per ADS.

November 2024 Private Placement

In November 2024, the Company entered into a definitive purchase agreement with certain investors, Dr. Prudo and Dr. Patel, pursuant to which the Company sold and issued in a private placement an aggregate of 3,426,804,000 ordinary shares (1,713,402 ADSs), and Series D Warrants (the “Series D Warrants”) to purchase up to 1,713,402 ADSs, at a per unit price of $2.26 for aggregate gross proceeds of $3.2 million (the “November 2024 Private Placement”). The Series D Warrants have 3-year terms ranging from December 2, 2027 to June 2, 2028 and have cashless exercise provisions in limited circumstances.

At close of the November 2024 Private Placement, the Company incurred $204,000 in placement agent fees with Paulson Investment Company, LLC (“Paulson”). Net proceeds from the November 2024 Private Placement were approximately $2.8 million after deducting placement agent fees and other expenses. In April 2025, the Company issued 408,000,000 ordinary shares (204,000 ADSs) to Paulson in lieu of $204,000 in cash payment.

The Company determined that the Series D Warrants met all of the criteria for equity classification. Accordingly, upon closing of the November 2024 Private Placement, each of the Series D Warrants was recorded as a component of additional paid-in capital.

May 2024 Private Placement

In May 2024, the Company entered into a definitive purchase agreement with certain investors, Dr. Prudo and Dr. Patel, pursuant to which the Company sold and issued in a private placement an aggregate of 8,059,508,000 ordinary shares (4,029,754 ADSs), and Series C Warrants (the “Series C Warrants”) to purchase up to 4,029,754 ADS, at a per unit price of $1.885 per ADS and Series C Warrant for aggregate gross proceeds of approximately $7.6 million (the “May 2024 Private Placement”). The Series C Warrants have 3-year terms ranging from May 31, 2027 to June 21, 2027 and have cashless exercise provisions in limited circumstances. The Series C Warrants (other than those issued to Dr. Prudo and Dr. Patel) have an exercise price of $1.76 per ADS. The Series C Warrants issued to Dr. Prudo and Dr. Patel have an exercise price of $1.79 per ADS. Net proceeds from the May 2024 Private Placement were approximately $7.0 million after deducting placement agent fees and other expenses.

At close of the May 2024 Private Placement, the Company issued to Paulson, as placement agent for the May 2024 Private Placement, warrants to purchase 332,380 ADSs at an exercise price of $1.885 per ADS and a term expiring on May 31, 2029 (the “May 2024 Placement Agent Warrants”). The estimated fair value of the May 2024 Placement Agent Warrants on the issuance date was approximately $0.4 million.

The Company determined that the Series C Warrants and May 2024 Placement Agent Warrants met all of the criteria for equity classification. Accordingly, upon closing of the May 2024 Private Placement, each of the Series C Warrants and May 2024 Placement Agent Warrants was recorded as a component of additional paid-in capital.

March 2024 Private Placement

In March 2024, the Company entered into a definitive purchase agreement with certain existing investors, pursuant to which the Company sold and issued in a private placement an aggregate of 2,641,228,000 ordinary shares (1,320,614 ADSs) at $1.48 per ADS, for aggregate gross proceeds of approximately $2.0 million (the “March 2024 Private Placement”). Net proceeds from the March 2024 Private Placement were approximately $1.7 million after deducting placement agent fees and other expenses.

At close of the March 2024 Private Placement, the Company issued to Paulson, as placement agent for the March 2024 Private Placement, warrants to purchase 132,061 ADSs at an exercise price of $1.85 per ADS (representing 125% of the purchase price per ADS sold in the March 2024 Private Placement) and a term expiring on March 27, 2029 (the “March 2024 Placement Agent Warrants”). The estimated fair value of the March 2024 Placement Agent Warrants on the issuance date was approximately $0.2 million.

The Company determined that the March 2024 Placement Agent Warrants met all of the criteria for equity classification. Accordingly, upon closing of the March 2024 Private Placement, each of the March 2024 Placement Agent Warrants was recorded as a component of additional paid-in capital.

Warrants

In connection with various financing transactions, the Company has issued warrants to purchase the Company’s ordinary shares represented by ADSs. The Company accounts for such warrants as equity instruments or liabilities, depending on the specific terms of the warrant agreement. See Note 2 for further details on the accounting policy related to the Company’s warrants.

The following table summarizes the Company’s outstanding warrants as of December 31, 2025 and 2024:

The following table summarizes the Company’s warrants ADS activity, with each ADS representing 2,000 Ordinary Shares, for the year ended December 31, 2025:

Note 8. Stock-Based Compensation

2023 Equity Incentive Plan

On June 30, 2023, the Company’s shareholders approved the 2023 Equity Incentive Plan (the “2023 Plan”), which provides for the grant of stock options, both incentive stock options and nonqualified stock options, stock, with and without vesting restrictions, restricted stock units (“RSUs”) and stock appreciation rights, to be granted to employees, directors and consultants.

On June 30, 2025, the Company’s shareholders approved an increase in the number of ordinary shares available for the grant of awards under the 2023 Plan by 11,026,000,000 to an aggregate of 19,174,713,522 Ordinary Shares, inclusive of awards granted under the previously approved 2014 Equity Incentive Plan (“2014 Plan”) that may be forfeited, cancelled, or expire unexercised.

As of December 31, 2025,9,084,764,210 ordinary shares were available for future issuance under the 2023 Plan.

The 2023 and 2014 Plans provide that they be administered by the compensation committee of the board of directors. The exercise price for stock option awards may not be less than 100% of the fair market value of the Company’s ordinary shares on the date of grant and the term of awards may not be greater thanten years. The Company determines the fair value of its ordinary shares based on the quoted market price of its ADSs. Vesting periods are determined at the discretion of the compensation committee.

2014 Equity Incentive Plan

Under the 2014 Plan, the Company was authorized to grant stock options, restricted stock units and other awards, to employees, members of the board of directors and consultants. Upon effectiveness of the 2023 Plan, no further awards are available to be issued under the 2014 Plan.

Peak Bio Long Term Incentive Plan

On November 14, 2024, the Company assumed the Peak Bio Long Term Incentive Plan. Upon closing of the acquisition, no further awards are available to be issued under the Peak Bio Long Term Incentive Plan. Any awards, forfeited, expired or cancelled shall not increase the number of ordinary shares available for the grant of awards under the 2023 Plan. As of December 31, 2025, the Company had stock options to purchase up to 3,003,024,000 ordinary shares under the Peak Bio Long Term Incentive Plan.

Stock Options

The following is a summary of the Company’s stock option ADS activity, with each ADS representing 2,000 Ordinary Shares, for the year ended December 31, 2025:

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s ADSs for those options that had exercise prices lower than the fair value of the Company’s ordinary shares.

The weighted-average grant-date fair value per ADS of options granted during each of the years ended December 31, 2025 and 2024 was $1.11 and $1.53, respectively.

Option Valuation

The weighted-average assumptions that the Company used to determine the fair value of share options granted were as follows, presented on a weighted average basis:

Performance-Based Stock Options

As of December 31, 2025, the Company had performance-based stock options (“PSOs”) for the purchase of an aggregate of 375,000 ADSs of the Company outstanding, which were granted to consultants. Vesting of PSOs granted to consultants is based upon attainment of certain research and licensing agreements. All PSOs are subject to continuous service by the executives. The probability of vesting is reviewed each reporting period and management has concluded that the PSOs have not vested until the performance conditions have been satisfied. Therefore, the PSOs remain unvested and outstanding as of December 31, 2025. The Company has not recognized stock-based compensation expense associated with these performance awards during the year ended December 31, 2025. As of December 31, 2025, total unrecognized compensation cost related to these performance-based stock options awards was $0.3 million, which will be recognized if the awards are deemed to be probable of vesting.

Restricted Stock Units

The 2023 Plan provides for the award of restricted stock units (“RSUs”). RSUs are granted to employees that are subject to time-based vesting conditions that lapse between one year andfour years from date of grant, assuming continued employment. Compensation cost for time-based RSUs, which vest only on continued service, is recognized on a straight-line basis over the requisite service period based on the grant date fair of the RSU’s, which is derived from the closing price of the Company’s ADS’s on the date of grant.

The following table summarizes the Company’s restricted stock ADS activity for the year ended December 31, 2025:

The fair value of time-based RSUs that vested during the years ended December 31, 2025 and 2024 was less than $0.1 million and $0.5 million, respectively.

As of December 31, 2025,6,277 ADSs (12,554,000 ordinary shares) underlying vested time-based RSUs were pending issuance. As of December 31, 2024, there were no ADSs underlying vested time-based RSUs.

Stock-Based Compensation Expense

The Company classifies stock-based compensation expense in the statement of operations in the same manner in which the award recipients’ payroll costs are classified or in which the award recipients’ service payments are classified. Total stock-based compensation expense attributable to stock-based payments made to employees, consultants and directors included in operating expenses in the Company’s consolidated statements of operations and comprehensive loss for the years ended December 31, 2025 and 2024, was as follows:

As of December 31, 2025, total unrecognized compensation cost related to unvested stock options and time-based RSUs was $3.8 million, which is expected to be recognized over a weighted average period of 2.7 years.

Note 9. Related Party Transactions

Notes Payable, Related Party

Dr. Huh Notes

Pursuant to the acquisition of Peak Bio, which closed on November 14, 2024, the Company assumed certain notes payable due to Dr. Huh, the Company’s Chairman of the Board. The Company assumed two notes in the amount of a total of $0.9 million, which were entered into in May and August 2021 (the “2021 Notes”) and had a one-year maturity date from date of issuance. The 2021 Notes carried an interest rate of 1.0% per annum. The Company also assumed a note in the amount of $0.75 million, which was entered into in January 2024 (the “January 2024 Note”) and had an original maturity date of January 23, 2025 which was extended to December 31, 2025 on April 1, 2025. The January 2024 Note carried an interest rate of 15% per annum.

In March 2025, in connection with the March 2025 Private Placement (Note 7), Dr. Huh’s 2021 Notes including accrued interest, and a portion of his January 2024 Note, aggregating to $1.0 million were cancelled, extinguished and paid in full for an equal amount of Ordinary Shares and warrants of the Company.

In September 2025, in connection with the August 2025 Notes Offering (see below), Dr. Huh agreed to purchase an August 2025 Note with a principal amount of $1,250,000 for a purchase price of $1,000,000, with the purchase price thereof to be satisfied through his agreement to cancel and extinguish $837,433 of outstanding principal and accrued interest under January 2024 Note plus cash of $162,567. The Company accounted for the cancellation and extinguishment in exchange for the issuance of the August 2025 Note as a debt extinguishment in accordance with ASC 470. As the present value of the future cash flows was substantially different than the net carrying value of the original debt, a loss of approximately $0.5 million was recognized.

The Company recognized interest expense of less than $0.1 million during the year ended December 31, 2025.

As of December 31, 2025 and December 31, 2024, the outstanding principal and accrued interest on the 2021 Notes and the January 2024 Note was $0 and $1.651 million, respectively. As of each of December 31, 2025 and 2024, accrued interest of $0 and $0.1 million, respectively, is presented within accrued expenses in the consolidated balance sheets.

August 2025 Notes, Related Party

In August 2025, the Company issued notes to the Company’s directors with the same terms as the August 2025 Notes (as described in Note 7) with an aggregate purchase price of $1,511,000 and an aggregate principal amount of $1,888,750, inclusive of a note exchange with the Company’s Chairman, Dr. Hoyoung Huh, as outlined above. The Notes have maturity dates ranging from August 15, 2026 through August 18, 2026, at which time the principal amount is due and payable.

The Company also entered into Warrant Amendment Agreements with the recipients of such August 2025 Notes, which extended the expiration date of certain Series A Warrants held by such investors to purchase 1,928,569 ADSs to March 6, 2030 and 44,642 ADSs to April 25, 2030.

The amended Series A Warrant were accounted for in accordance with ASC 815 with the change in fair value, as a result of the amendment, being recognized as a debt issuance cost. The aggregate fair value of the warrants at issuance date using a Black Scholes Option Pricing Model was $0.6 million based on a weighted average stock price of $0.98, weighted average expected volatility of 83%, a weighted average risk-free rate of 4.12% and an expected term of 0.6 years. The aggregate fair value of the warrants at the amendment date using a Black Scholes Option Pricing Model was $1.4 million based on a weighted average stock price of $0.98, weighted average expected volatility of 88%, a weighted average risk-free rate of 3.85% and an expected term of 4.6 years, resulting in a change in fair value of $0.8 million from the issuance date.

At the issuance date, the change in fair value of the amended Series A Warrants was capitalized and is being amortized as interest expense over the term of the notes using the effective interest method. The Company recorded amortization of debt issuance costs of $0.1 million in interest expense from date of issuance through the date of note cancellation, December 17, 2025.

On December 17, 2025, the Company entered into Exchange Agreements with each holder of the August 2025 Notes to exchange the total outstanding principal amount of $1,888,750 for (i) Pre-Funded Warrants to purchase up to an aggregate of 4,673,963 ADSs (“Note Exchange Pre-Funded Warrants”) and (ii) unregistered note exchange warrants to purchase up to an aggregate of 4,673,963 ADSs (“Note Exchange Warrants”). The Pre-Funded Warrants have an exercise price of $0.00001 per ADS, will be immediately exercisable following the Shareholder Approval, and will not expire until fully exercised. The Note Exchange Warrants are exercisable commencing on the Shareholder Approval Date for a term of five years following the Shareholder Approval Date and have an exercise price of $0.4041 per ADS.

The Company accounted for the note cancellation and Exchange Agreements as a debt extinguishment in accordance with ASC 470. The aggregate fair value of the Note Exchange Pre-Funded Warrants and the Note Exchange Warrants at issuance date using a Black Scholes Option Pricing Model was $2.0 million based on a stock price of $0.25, expected volatility of 93%, a risk-free rate of 3.70% and an expected term of 5 years.

As the present value of the future cash flows was substantially different than the net carrying value of the original debt, a loss of approximately $0.6 million was recognized in loss on debt extinguishment in the consolidated statement of operations.

The Company determined that the Note Exchange Prefunded Warrants and the Note Exchange Warrants met all the criteria for equity classification. Accordingly, each of the Note Exchange Prefunded Warrants and the Note Exchange Warrants were recorded as a component of additional paid-in capital.

Convertible Notes, Related Party

On May 10, 2024, the Company entered into unsecured convertible promissory notes (the “May 2024 Notes”) with Dr. Ray Prudo, the Company’s Chairman at the time, and its then Interim President and Chief Executive Officer and director, Dr. Samir Patel, for an aggregate of $1.0 million in gross proceeds. The May 2024 Notes bear interest at 15% per annum, which may be increased to 17% upon the occurrence of certain events of default as described therein, and the principal and all accrued but unpaid interest is due on the date that is the earlier of (a) ten (10) business days following the Company’s receipt of a U.K. research and development tax credit from HM Revenue and Customs, and (b) November 10, 2024. Provided, however, at any time or times from the date of the note and until the tenth business day prior to closing of the acquisition, the note holders are entitled to convert any portion of the outstanding and unpaid amount, including principal and accrued interest, into Company ADSs at a fixed conversion price equal to $1.59, representing the Nasdaq official closing price of the Company’s ADSs on the issuance date, subject to certain restrictions. In October 2024, the aggregate principal balance of $750,000, was repaid in cash with proceeds from the Company’s U.K. research and development tax credit from the U.K. HM Revenue and Customs. Drs. Prudo and Patel each elected to convert the $125,000 of remaining principal and accrued interest into the Company’s ADSs at a conversion price of $1.59 per ADS. These Ordinary Shares were issued to Drs. Prudo and Patel on April 30, 2025.

During the years ended December 31, 2025 and 2024, the Company recognized interest expense of $0 and less than $0.1 million, respectively. As of December 31, 2025 and 2024, the outstanding principal and accrued interest, presented within accrued expenses, on the May 2024 Notes was $0 and $0.3 million, respectively.

Interim CEO Agreement

On May 31, 2024, the Company and Dr. Samir Patel entered into an Interim Chief Executive Officer Agreement, effective as of May 1, 2024 (the “Interim CEO Agreement”). Pursuant to the Interim CEO Agreement, Dr. Patel served as the Company’s Interim President and Chief Executive Officer as an independent contractor on an at-will basis. The Interim CEO Agreement could be terminated by the Company immediately for any reason. As the sole compensation for services provided under the Interim CEO Agreement, Dr. Patel was paid $50,000 per month in the form of fully vested Ordinary Shares. On September 16, 2024, the Company entered into an amendment to the Interim CEO Agreement (the “CEO Amendment Agreement”), effective July 1, 2024, to revise Dr. Patel’s compensation in connection with the services as Interim President and Chief Executive Officer. Pursuant to the CEO Amendment Agreement, in lieu of receiving the stated monthly compensation of $50,000 in the form of fully vested Ordinary Shares, Dr. Patel is paid in the form of fully vested non-qualified stock options to purchase Ordinary Shares (“NQSO”), with the number of ADSs underlying each such monthly NQSOs grant to be equal to two times the number determined by dividing (i) $50,000 by (ii) the closing price of the Company’s ADSs on the Nasdaq Capital Market on the last day of each month (or partial month) Dr. Patel has served as the Company’s Interim President and Chief Executive Officer.

On December 12, 2024, the Company’s board of directors approved the appointment of Dr. Samir Patel to President and Chief Executive Officer, effective December 16, 2024. There were no changes to Dr. Patel’s revised compensation under the CEO Amendment Agreement described above, following Dr. Patel’s appointment as President and Chief Executive Officer on December 16, 2024. On April 21, 2025, Dr. Patel stepped down as President and Chief Executive Officer.

During the year ended December 31, 2025, the Company recognized $0.3 million in non-cash stock-based compensation pursuant to the CEO Amendment Agreement, pertaining to NQSOs granted to Dr. Patel to purchase 400,896 ADSs at a weighted average exercise price of $1.17 per ADS.

During the year ended December 31, 2024, the Company recognized approximately $0.3 million in non-cash stock-based compensation costs pursuant to the Interim CEO Agreement, as amended, pertaining to (i) NQSOs granted to Dr. Patel to purchase 206,684 ADSs at an exercise price of $1.47 per ADS with a grant date fair value of approximately $0.3 million, and (ii)45,698 fully vested ADSs granted to Dr. Patel.

The Doctors Laboratory

The Company leases office space for its U.K. headquarters in London from The Doctors Laboratory (“TDL”), an entity with a common director, and had incurred expenses of approximately $0.1 million plus VAT during each of the years ended December 31, 2025 and 2024, respectively. The Company also received certain administrative services provided by TDL and incurred expenses of approximately $0.1 million during each of the years ended December 31, 2025 and 2024. The Company recorded payable balances owed to TDL of $0 and less than $0.1 million as of December 31, 2025 and 2024, respectively.

Other

In November 2024, the Company assumed an amount due to an entity in which the Company’s Chairman, Dr. Hoyoung Huh, is a director. As of December 31, 2025 and December 31, 2024, the amounts due totaled less than $0.1 million and are included in accounts payable in the consolidated balance sheets.

Note 10. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s financial liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such values:

The Company’s Level 3 liabilities consist of the September 2022 Warrants, the November 2022 Peak Bio Warrants and the April 2023 Peak Bio Warrants, which were determined to be liability-classified instruments, and a derivative liability related to the ELOC Purchase Agreement (described in Note 7). There were no transfers between Level 1, Level 2, and Level 3 during the years ended December 31, 2025 and 2024.

Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the activity in the warrant liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) during the years ended December 31, 2025 and 2024:

Liability-Classified Warrants

The fair value of the warrant liabilities is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the September 2022 Series A Warrants, the September 2022 Series B Warrants, the November 2022 Peak Bio Warrants and the April 2023 Bio Peak Warrants was determined using the Black-Scholes Option Pricing Model, which uses various assumptions, including (i) fair value of the Company’s ADSs, (ii) exercise price of the warrant, (iii) expected term of the warrant, (iv) expected volatility and (v) expected risk-free interest rate.

Below are the assumptions used for the fair value calculations of liability classified warrants as of December 31, 2025 and 2024:

Derivative Liability

The derivative liability related to the ELOC Purchase Agreement (described in Note 7) is valued using the Monte Carlo simulation model and as such is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. The significant unobservable inputs used to determine the fair value were the projected volume weighed average share price at each trading date, and the use of the maximum draw down potential. The fair value of the ELOC Purchase Agreement derivative liability at inception of the agreement was $100,000. The fair value of the ELOC Purchase Agreement on December 31, 2025 was $230,000 based on the projected stock price of $0.29, expected volatility of 102.5%, risk-free rate of 3.46% and discounted at 71.3% for the probability of the Company timely filing all SEC documents and meeting the NASDAQ listing requirements.

Note 11. Commitments and Contingencies

Leases

The Company currently leases office space for both our U.S. headquarters on a short-term basis. The lease for our U.K. headquarters, located in London, was vacated in May 2025. The Company leased its U.S. headquarters virtual office, located in Boston, Massachusetts, on a month-to-month basis through September 30, 2025. In October 2025, the Company moved its U.S. headquarters virtual office to Tampa, Florida. The Company also leases laboratory space, located in San Francisco, California, on a month-to-month basis and is cancellable anytime with 60 days’ notice. The Company is not party to any material lease agreements.

For each of the years ended December 31, 2025 and 2024, the Company incurred rent expense of less than $0.1 million and $0.2 million, respectively.

Employee Benefit Plans

The Company adopted an employee benefit plan under Section 401(k) of the Internal Revenue Code for its U.S.-based employees. The plan allows employees to make contributions up to a specified percentage of their compensation. Under the plan, the Company matches 100% of employees’ contributions up to 5% of annual eligible compensation contributed by each employee, subject to Internal Revenue Code limitations.

The Company also adopted a defined contribution pension scheme which allows for U.K. employees to make contributions and provides U.K. employees with a Company contribution of 10% of compensation, subject to U.K. law.

For each of the years ended December 31, 2025 and 2024, the Company charged less than $0.1 million to operating expenses, which related to the Company’s contributions to employee benefit plans.

Bayer Acquisition Agreement

In November 2024, the Company assumed an assignment, license, development and commercialization agreement dated March 17, 2017 with Bayer (the “Bayer Acquisition Agreement”), to acquire from Bayer all right, title and interest in and to PHP-303, including each and every invention and any priority rights relating to its patents.

Under the Bayer Acquisition Agreement, the Company is committed to pay certain development and regulatory milestones up to an aggregate amount of $23,500,000 and high single digit royalties based on the sale of products developed based on the licensed compound. Royalties will be payable on a licensed product-by-licensed product and country-by-country basis until the later of ten years after the first commercial sale of such licensed product in such country and expiration of the last patent covering such licensed product in such country that would be sufficient to prevent generic entry.

Either party may terminate the Bayer Acquisition Agreement upon prior written notice for the other party’s material breach that remains uncured for a specified period of time or insolvency. Bayer agreed not to assert any Bayer intellectual property rights that were included in the scope of the Bayer Acquisition Agreement against the Company.

The Company incurred zero expenses under this agreement as no milestones have been achieved since inception, and no products were sold from inception through December 31, 2025.

In May 2025, a former employee of Peak Bio CA, Inc. subsidiary filed a claim stating that they are entitled to certain discretionary bonuses from 2022 totalling less than $0.1 million. The Company denies the former employee’s claim and intends to defend itself.

In December 2024, the Company received demand letters from two individuals formerly serving the Company as consultants outlining claims relating to wrongful termination. The wrongful termination claims included claims for unpaid consulting fees, consulting fees owed due to improper termination notice, unpaid bonuses, severance, and the accelerated vesting of outstanding restricted stock unit awards as of the termination date. On March 3, 2025 and on May 30, 2025, the Company signed separate Settlement Agreements and Mutual Releases with each of such former consultants. The agreements require the Company to make a payment totalling $0.4 million in equal monthly installments with the last installment being payable November 2025. In addition, the agreements allowed for the terms of the previously awarded restricted stock units to continue to govern, including the continued vesting of the restricted stock units. Accordingly, during the year ended December 31, 2025, the Company issued 125,911 ADSs (representing 251,822,000 Ordinary Shares) on vesting of these restricted stock awards. As of December 31, 2025, there was no balance due under these Settlement Agreements.

On November 21, 2024, “Sabby” Volatility Warrant Master Fund Ltd. (“Sabby”) filed a lawsuit against the Company in New York state court for alleged breach of contract. Sabby alleges that it validly exercised a warrant issued to Sabby in September 2022 and alleges that the Company breached the warrant by not honoring Sabby’s exercise request. On May 7, 2025, the Company and Sabby entered into a Settlement Agreement pursuant to which the Company agreed to issue 272,450 ADSs (representing 544,900,000 Ordinary Shares) to Sabby, which were issued on June 13, 2025.

Accounts Payable Settlements

During the year ended December 31, 2025, the Company entered into settlement agreements with vendors for the settlement of outstanding payables. This resulted in a $3.0 million gain on settlement of current liabilities, which is reflected in the consolidated statements of operations.

On April 4, 2025, the Company issued 204,000 ADS (representing 408,000,000 Ordinary Shares) to Paulson for the settlement of outstanding placement agent fees earned in connection with a private placement in November 2024.

Note 12. Income Taxes

The components of net loss before income tax are as follows:

The components of income tax expense are as follows:

The following table presents a reconciliation of the Company’s statutory federal rate and our effective tax rate, after the adoption of ASU 2023-09 on a prospective basis, for the year ended December 31, 2025:

The following table presents a reconciliation of the Company’s statutory federal rate and our effective tax rate, prior to the adoption of ASU 2023-09, for the year ended December 31, 2024:

Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities were as follows:

As of December 31, 2025, the Company had cumulative U.K., U.S. federal, various U.S. state, and South Korea net operating loss carryforwards (“NOLs”) of approximately $153.2 million, $47.2 million, $76.6 million, and $91.6 million, respectively, available to reduce U.K., U.S. federal, U.S. state, and South Korea taxable income, respectively. The U.K. NOLs do not expire. Of the $47.2 million of U.S. federal NOLs, $46.3 million have an unlimited carryforward and the remaining NOLs are subject to expiration through 2038. Of the $76.6 million of U.S. state NOLs, $1.1 million have an unlimited carryforward and the remaining NOLs are subject to expiration through 2045. The South Korea NOLs are subject to expiration through 2039.

In connection with the Company’s acquired IPR&D assets, the Company recognized a deferred tax liability of $8.0 million because the Company does not have sufficient indefinite-lived deferred tax assets to fully offset the indefinite-lived deferred tax liability. During the year ended December 31, 2025, the Company recorded an income tax benefit of $1.1 million in connection with the impairment loss on one of the Company’s IPR&D assets as described in Note 4.

A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Based on the weight of the available evidence, which includes our historical operating losses and forecast of future losses, we provided a valuation allowance against the U.S. federal, state, and foreign deferred tax assets resulting from the tax losses and credits carried forward.

During the years ended December 31, 2025 and 2024, the Company’s valuation allowance increased by $3.0 million and $18.1 million, respectively.

Utilization of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due to an ownership change limitation as provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. In the event that we have a change of ownership, utilization of the net operating loss and tax credit carryforwards may be restricted.

As of December 31, 2025 and 2024, there were no known domestic or foreign uncertain tax positions, and the Company has not identified any tax positions for which it is reasonably possible that a significant change will occur during the next 12 months. The Company’s position is to record penalties and interest on any uncertain tax position, if any, to general and administrative expense in the consolidated statements of operations.

Research and development credits

The Company conducts extensive research and development activities and may benefit from the U.K. research and development tax relief regime, whereby the Company can receive an enhanced U.K. tax deduction on its research and development activities. Qualifying expenditures comprise of chemistry and manufacturing consumables, employment costs for research staff, clinical trials management, and other subcontracted research expenditures. When the Company is loss-making for a period, it can elect to surrender taxable losses for a refundable tax credit. The losses available to surrender are equal to the lower of the sum of the research and development qualifying expenditure and enhanced tax deduction and the Company’s taxable losses for the period with the tax credit for December 31, 2025 available at a rate of 14.5%. The credit therefore gives a cash flow advantage to the Company at a lower rate than would be available if the enhanced losses were carried forward and relieved against future taxable profits.

The Company accounts for research and development tax credits at the time its realization becomes probable (Note 2). Due to the uncertainty of the approval of these tax credit claims and the potential that an election for a tax credit in the form of cash is not made, the Company did not record a receivable for the 2025 tax year as of December 31, 2025.

Note 13. Segment Information

The Company manages its operations as a single operating segment for the purpose of assessing performance, making operating decisions and allocating resources, resulting in a single reportable segment. The Company has determined that its CODM is its Chief Executive Officer. The Company’s CODM reviews the Company’s financial information on a consolidated basis for the purpose of allocating resources and assessing financial performance.

The Company has assembled a portfolio of preclinical product candidates that aim to develop next-generation precision bi-functional ADCs for the treatment of cancer. The Company has not generated any revenue since its inception and does not expect to generate any revenue from the sale of products in the near future. The Company primarily incurs expenses in connection with the research and development of its product candidates as well as general and administrative costs consisting of salaries and related costs for personnel in executive, finance and administrative functions, as well as consulting, restructuring and merger-related expenses.

The key measure of segment profit or loss that the CODM uses to allocate resources and assess performance is the Company’s consolidated net loss, as reported on the consolidated statements of operations and comprehensive loss. In addition, the CODM is regularly provided the following significant segment expense categories which are reviewed against budgeted expectations to assist in resource allocation decision-making:

Assets regularly provided to the CODM are consistent with those reported on the consolidated balance sheets with particular emphasis on the Company’s available liquidity, including its cash and restricted cash.

Note 14. Subsequent Events

On March 17, 2026, the Company announced a change of the ratio of its ADSs to ordinary shares, par value $0.000000005 per share, from one ADS representing 2,000 ordinary shares to a new ratio of one ADS representing 80,000 ordinary shares (the “ADS Ratio Change”). The ADS Ratio Change is expected to be effective on or after March 31, 2026.