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.

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:


($ in thousands)	Number of ADSs issued and issuable on exercise		Consideration
Company ADSs issued to Peak Bio Inc. shareholders		12,613,942	$	28,129
Company ADSs issuable on exercise of November 2022 Peak Investor Warrants and April 2023 Peak Investor Warrants		2,764,569		1,844
Company ADSs issuable on exercise of Peak Bio Adjusted Options		1,618,081		—
Total consideration		16,996,592	$	29,973

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 Warrants”) to purchase an aggregate of 1,577,556 ADSs at $39.18 per ADS, and (ii) warrants issued to investors (“April 2023 Peak 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 Warrants and the April 2023 Peak Warrants are not indexed to the Company’s own stock in the manner contemplated by the relevant accounting standard. Accordingly, on the Closing of the acquisition, the Company classified these 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 warrants as of November 14, 2024:


	Peak Bio Assumed Warrants
	November 2022			April 2023
Stock (ADS) price	$	2.23		$	2.23
Exercise price	$	39.18		$	2.04
Expected term (in years)		3.0			3.5
Expected volatility		86.4	%		84.1	%
Risk-free interest rate		4.3	%		4.3	%
Expected dividend yield		—			—

The Company assumed Peak Bio's outstanding stock option awards and granted options to purchase 1,618,081 ADSs as replacement awards for the Peak Bio Adjusted Options. 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%.

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.


Assets acquired
Cash and restricted cash	$	382
Prepaid expenses and other current assets		10
Acquired in-process research and development		39,180
Total assets acquired		39,572
Liabilities assumed
Accounts payable and accrued expenses		6,979
Convertible notes		700
Notes payable		659
Notes payable, related party		1,651
Deferred tax liability		8,040
Total liabilities assumed		18,029
Total assets acquired and liabilities assumed		21,543
Goodwill		8,430
Net assets acquired	$	29,973

Intangible assets of approximately $39.2 million and $8.4 million were recorded related to the value of 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.

There were no changes to the carrying value of goodwill and other intangible assets during the three months ended March 31, 2025.

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


In-Process Research and Development
AKTX 101	$	34,000
PHP 303		5,180
Total in-process research and development	$	39,180

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 12, respectively.

The following table summarizes certain of the Company's supplemental pro forma financial information for the three months ended March 31, 2024, as if the acquisition of Peak Bio had occurred as of January 1, 2024. The unaudited pro forma financial information for the three months ended March 31, 2024 reflect (i) the reversal of fair value adjustments recognized on Peak Bio's warrant liabilities and derivative liability, and (ii) the reversal of interest and accretion expense on Peak Bio's debt that was settled on the acquisition date. 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).


	Three Months Ended March 31, 2024
	As Reported			Pro Forma
Net loss	$	(5,566	)		(7,607	)