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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2023~~2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number: 001-39951

Peak Bio, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	85-2448157
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4900 Hopyard Road., Suite 100 Pleasanton, CA	94588
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (925) 463-4800

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    Common Stock, par value $0.0001 per share

    PKBO

    OTC Pink

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~June~~August 2423, 2024, the registrant had 23,124,888 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Deficit	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2926
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4337
Item 4.	Controls and Procedures	4437
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	4539
Item 1A.	Risk Factors	4539
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4539
Item 3.	Defaults Upon Senior Securities	4539
Item 4.	Mine Safety Disclosures	4539
Item 5.	Other Information	4539
Item 6.	Exhibits	4539
Signatures		4640

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PEAK BIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,2023			December 31,2022
	March 31			December 31
	2024			2023
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	94,435		$	654,892
Cash	$	68,612		$	381,649
Derivative asset		—			13,000
Prepaid expenses and other current assets		1,489,142			1,992,458
Prepaid expenses and other current assets		1,164,672			2,562,901
Total current assets		1,557,754			2,374,107
Total current assets		1,259,107			3,230,793
Property and equipment, net		121,263			153,108
Property and equipment, net		185,394			376,648
Restricted cash		60,000			60,000
Restricted cash		60,000			239,699
Other noncurrent assets		9,200			9,200
Operating lease right-of-use asset		—			3,681,072
Total assets	$	1,748,217		$	2,596,415
Noncurrent assets		5,000			1,500
Total assets	$	1,509,501		$	7,529,712
Liabilities and deficit
Current liabilities
Accounts payable	$	5,~~683~~785,~~722~~212		$	35,~~618~~862,~~026~~435
Accrued expenses		3,~~120~~930,~~281~~651			23,~~038~~576,~~291~~768
Operating lease liability		4,~~349~~524,~~383~~012			~~720~~4,~~577~~439,235
Insurance financing payable		—			921,576
Insurance financing note		315,997			631,993
Derivative liability		~~165~~688,~~000~~255			~~166~~361,~~000~~704
Convertible note payable		3,368,345			1,374,698
Promissory note		350,000			350,000
Convertible note payable, related party		1,120,557			—
Convertible notes		3,479,638			2,872,131
Related party loan		901,370			1,961,953
Convertible notes, related party		1,551,637			1,527,078
Total current liabilities		18,708,658			10,801,121
Related party loans		1,651,370			901,370
Operating lease liability, net of current portion		—			3,507,268
Total current liabilities		22,276,772			20,522,714
Warrant liability		135,410			525,000
Other noncurrent liabilities		—			230,650
Other noncurrent liabilities		230,650			790,800
Total liabilities		22,276,772			20,753,364
Total liabilities		19,074,718			15,624,189
Commitments and contingencies (Note 8)
Equity (deficit)
Stockholders' Deficit
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; none issued and outstanding		—			—
Common stock, par value of $0.0001 per share; 60,000,000 shares authorized; 22,632,843 shares issued and outstanding as of September 30, 2023, and 21,713,248 shares issued and 19,782,747 shares outstanding as of December 31, 2022, respectively.		2,263			1,978
Common stock, par value of $0.0001 per share; 60,000,000 shares authorized; 23,124,888 shares issued and outstanding as of March 31, 2024 and December 31, 2023		2,312			2,312
Additional paid-in capital		19,~~948~~949,~~075~~103			1719,~~219~~918,~~593~~594
Accumulated deficit		(3740,~~646~~606,~~039~~184	)		(2538,~~345~~171,~~566~~483	)
Accumulated other comprehensive income		~~130~~126,~~484~~214			2993,~~518~~628
Total deficit		(17,565,217	)		(8,094,477	)
Total stockholders' deficit		(20,528,555	)		(18,156,949	)
Total liabilities and deficit	$	1,509,501		$	7,529,712
Total liabilities and stockholders' deficit	$	1,748,217		$	2,596,415

See accompanying notes to the unaudited condensed consolidated financial statements.

PEAK BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	For the three monthsended September 30,						For the nine monthsended September 30,
	For the Three Months Ended, March 31
	2023			2022			2023			2022
	2024			2023
Revenue
Grant revenue	$	~~278,831~~—		$	~~192~~13,~~547~~854		$	~~292,685~~		$	~~346,413~~
Total revenue		~~278,831~~—			~~192~~13,~~547~~854			~~292,685~~			~~346,413~~
Operating expenses
Research and development		~~552~~70,~~988~~269			~~868~~713,~~410~~106			~~1,637,247~~			~~3,443,147~~
General and administrative		12,~~756~~134,~~801~~559			13,~~010~~004,~~010~~823			~~7,060,681~~			~~3,543,018~~
Impairment loss on operating lease right-of-use asset		—			—			3,513,999			—
Impairment loss on operating right-of-use asset		—			3,513,999
Total operating expenses		2,~~309~~204,~~789~~828			17,~~878~~231,~~420~~928			~~12,211,927~~			~~6,986,165~~
Loss from operations		(2,030,958	)		(1,685,873	)		(11,919,242	)		(6,639,752	)
Operating loss		(2,204,828	)		(7,218,074	)
Other (expense) income
Other income (expense)
Interest income		32			6			29			~~2,108~~
Interest expense		(1323,~~219,999~~140	)		(~~617~~61,386	)		~~(2,279,933~~	)		~~(4,622~~	)
Fair value adjustment to convertible note		—			(87,220	)		—			(87,220	)
Change in fair value of warrant liability		—			525,000
Fair value adjustment to warrant liability		2,218,040			—			2,030,182			—
Change in fair value of derivative liability		(114,709	)		(12,000	)
Fair value adjustment to derivative		1,397,379			—			837,146			—
Cancellation of trade liability		207,967			—
Other (expense) income		~~46,122~~7			~~19,092~~(380	)		~~45,713~~			~~342,281~~
Loss on extinguishment of debt		—			—			(1,014,368	)		—
Total other income (expense), net		(229,873	)		451,240
Total other (expense) income, net		2,441,545			(68,739	)		(381,231	)		252,547
Net loss	$	(2,434,701	)	$	(6,766,834	)
Income (loss) before income tax expense		410,587			(1,754,612	)		(12,300,473	)		(6,387,205	)
Other comprehensive income (loss):
Income tax benefit		—			41,700			—			51,000
Foreign currency translation		32,586			71,576
Net income (loss)	$	410,587		$	(1,712,912	)	$	(12,300,473	)	$	(6,336,205	)
Total comprehensive loss	$	(2,402,115	)	$	(6,695,258	)
Other comprehensive income (loss):
Basic and diluted weighted average shares outstanding		23,124,888			19,837,782
Foreign currency translation		19,124			35,963			101,066			(28,623	)
Basic and diluted net loss per share	$	(0.11	)	$	(0.34	)
Total comprehensive income (loss)	$	429,711		$	(1,676,949	)	$	(12,199,407	)	$	(6,364,828	)
Basic weighted average shares outstanding		21,638,096			17,162,742			20,586,905			17,199,290
Basic net income (loss) per share	$	0.02		$	(0.10	)	$	(0.59	)	$	(0.37	)
Basic and diluted weighted average shares outstanding		35,966,820			17,162,742			20,586,905			17,199,290
Basic and diluted net income (loss) per share	$	0.01		$	(0.10	)	$	(0.59	)	$	(0.37	)

See accompanying notes to the unaudited condensed consolidated financial statements.

PEAK BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

(Unaudited)

	Common Stock
	Shares		Amount		Additional Paid-In Capital		AccumulatedOtherComprehensiveIncome (Loss)			Accumulated Deficit			Total Stockholders'Deficit
Balance, December 31, 2021		17,162,742	$	1,716	$	6,428,837	$	88,443		$	(8,454,264	)	$	(1,935,268	)
Capital contribution from parent		—		—		1,363,974		—			—			1,363,974
Foreign currency translation		—		—		—		(25,540	)		—			(25,540	)
Net income (loss)		—		—		—		—			(2,100,435	)		(2,100,435	)
Balance, March 31, 2022		17,162,742	$	1,716	$	7,792,811	$	62,903		$	(10,554,699	)	$	(2,697,269	)
Issuance of common stock		132,302		13		1,152,150		—			—			1,152,163
Foreign currency translation		—		—		—		(39,046	)		—			(39,046	)
Share-based compensation		—		—		165,777		—			—			165,777
Net income (loss)		—		—		—		—			(2,522,858	)		(2,522,858	)
Balance, June 30, 2022		17,295,044	$	1,729	$	9,110,738	$	23,857		$	(13,077,557	)	$	(3,941,233	)
Foreign currency translation		—		—		—		35,963			—			35,963
Share-based compensation		—		—		158,571		—			—			158,571
Net income (loss)		—		—		—		—			(1,712,911	)		(1,712,911	)
Balance, September 30, 2022		17,295,044	$	1,729	$	9,269,309	$	59,820		$	(14,790,468	)	$	(5,459,610	)
Balance, December 31, 2022		19,782,747	$	1,978	$	17,219,593	$	29,518		$	(25,345,566	)	$	(8,094,477	)
Issuance of common stock as a financing fee		412,763		41		249,959		—			—			250,000
Issuance of common stock under White Lion Purchase Agreement as a financing fee		412,763		41		249,959		—			—			250,000
Share-based compensation		—		—		165,007		—			—			165,007
Foreign currency translation		—		—		—		71,576			—			71,576
Net income (loss)		—		—		—		—			(6,766,833	)		(6,766,833	)
Net loss		—		—		—		—			(6,766,834	)		(6,766,834	)
Balance, March 31, 2023		20,195,510	$	2,019	$	17,634,559	$	101,094		$	(32,112,~~399~~400	)	$	(14,374,~~727~~728	)
Issuance of common stock upon exercise of warrants		666,667	$	67	$	644,194	$	—		$	—		$	644,261
Balance, December 31, 2023		23,124,888	$	2,312	$	19,918,594	$	93,628		$	(38,171,483	)	$	(18,156,949	)
Extinguishment of related party debt		—		—		211,643		—			—			211,643
Share-based compensation		—		—		30,509		—			—			30,509
Share-based compensation		—		—		133,437		—			—			133,437
Foreign currency translation		—		—		—		32,586			—			32,586
Foreign currency translation		—		—		—		10,366			—			10,366
Net loss		—		—		—		—			(2,434,701	)		(2,434,701	)
Net income (loss)		—		—		—		—			(5,944,227	)		(5,944,227	)
Balance, March 31, 2024		23,124,888	$	2,312	$	19,949,103	$	126,214		$	(40,606,184	)	$	(20,528,555	)
Balance, June 30, 2023		20,862,177	$	2,086	$	18,623,833	$	111,460		$	(38,056,626	)	$	(19,319,247	)
Issuance of common stock		729,000	$	73	$	105,244	$	—		$	—		$	105,317
Issuance of common stock upon exercise of warrants		1,041,666		104		1,142,203		—			—			1,142,307
Share-based compensation		—		—		76,795		—			—			76,795
Foreign currency translation		—		—		—		19,024			—			19,024
Net income (loss)		—		—		—		—			410,587			410,587
Balance, September 30, 2023		22,632,843	$	2,263	$	19,948,075	$	130,484		$	(37,646,039	)	$	(17,565,217	)

See accompanying notes to the unaudited condensed consolidated financial statements.

PEAK BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the nine months ended September 30,
	For the Three Months Ended March 31,
	2023			2022
	2024			2023
Cash flows from operating activities
Net loss	$	(122,~~300~~434,~~473~~701	)	$	(6,~~336~~766,~~205~~834	)
Adjustment to reconcile net loss to net cash used in operating activities
Share-based compensation		~~375~~30,~~239~~509			~~432~~165,~~362~~007
Depreciation		~~111~~31,~~759~~845			~~122~~41,~~525~~409
Impairment loss on operating lease right-of-use asset		3,513,999			—
Accretion of discount on convertible notes payable		159,149			40,797
Loss on disposal of equipment		79,495			—
Change in fair value of warrant liability		—			(525,000	)
Change in fair value of warrant liability		(2,030,182	)		—
Change in fair value of derivative liability		114,709			12,000
Change in fair value of derivative		(837,146	)		—
Cancellation of trade liability		(207,967	)		—
Change in fair value of convertible note payable		—			87,220
Issuance of shares for financing fee		—			250,000
Loss on extinguishment of debt		1,014,368			—
Impairment loss on operating right-of-use-asset		—			3,513,999
Issuance of shares for financing fee		250,000			—
Loss on disposal of equipment		—			79,495
Amortization of right-of-use lease asset		~~167,073~~—			~~570~~167,~~103~~073
Accretion of convertible notes payable		2,151,136			—
Changes in operating assets and liabilities
Prepaid expenses and other current assets		1502,~~396,410~~733			84764,~~218~~112
Deferred offering costs		—			(655,142	)
Accounts payable		166,763			1,237,995
Other noncurrent assets		(3,500	)		—
Accrued expenses and other current liabilities		365,161			212,920
Accounts payable		2,098,290			1,821,639
Operating lease liability		84,777			(72,898	)
Accrued expenses and other current liabilities		1,162,728			317,476
Other noncurrent liabilities		(230,650	)		(560,150	)
Operating lease liability		121,538			(55,634	)
Net cash used in operating activities		(1,417,672	)		(1,440,075	)
Other noncurrent liabilities		(560,150	)		(175,066	)
Net cash used in operating activities		(3,289,416	)		(3,786,504	)
Cash flows from investing activities
Purchase of property and equipment		—			(128,454	)
Net cash used in investing activities		—			(128,454	)
Cash flows from financing activities
Proceeds from issuance of common shares		105,317			1,152,163
Proceeds from issuance of April 2023 Convertible Notes, net of issuance costs		—			1,240,020
Proceeds from exercise of warrants		1,025,000			—
Proceeds from issuance of December 2023 Convertible Notes, net of issuance costs		674,160			—
Proceeds from convertible notes payable		2,195,034			1,250,000
Repayment of Insurance Financing Note		(315,997	)		(345,591	)
Payment of debt issuance costs		(125,803	)		—
Proceeds from Founder Loans		—			250,000
Proceeds from net shareholder contributions		—			1,250,298
Proceeds from Secured Founder Loan		750,000			—
Repayment of insurance financing payable		(921,576	)		—
Net cash provided by financing activities		1,108,163			1,144,429
Proceeds from related party loan		250,000			523,044
Net decrease in cash		(309,509	)		(295,646	)
Net cash provided by financing activities		2,527,972			4,175,505
Effect of exchange rate changes on cash		(3,528	)		25,232
Net (decrease) increase in cash and cash equivalents		(761,444	)		260,547
Cash and restricted cash, beginning of year		441,649			894,591
Effect of exchange rate changes on cash and cash equivalents		21,288			(28,623	)
Cash and restricted cash, end of year	$	128,612		$	624,177
Cash and cash equivalents, beginning of year		894,591			442,477
Cash and cash equivalents, end of year	$	154,435		$	674,401
Components of cash, cash equivalents and restricted cash
Cash and cash equivalents		94,435			437,401
Cash		68,612			564,177
Restricted cash		60,000			~~237~~60,000
Total cash, cash equivalents and restricted cash		~~154~~128,~~435~~612			~~674~~624,~~401~~177
Supplemental disclosures of non-cash financing activities:
Cash paid for interest	$	50,947		$	—
Cash paid for taxes	$	—		$	—
Non-cash investing and financing activities:
Exchange of related party loans for convertible notes, related party	$	1,130,775		$	—
Exchange of April 2023 Convertible Note for December 2023 Convertible Note	$	250,600		$	—
Fair value of warrants issued with convertible notes, related party	$	786,967		$	—
Fair value of warrants issued with convertible notes	$	1,615,194		$	—
Fair value of derivative issued with convertible notes	$	849,146
Fair value of warrants exercised and reclassified to additional paid in capital	$	761,568
Operating lease liabilities arising from obtaining right-of-use assets	$	—		$	4,189,492
Related party loan entered into for settlement of accrued expenses	$	—		$	400,000

See accompanying notes to the unaudited condensed consolidated financial statements.

PEAK BIO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Description of the Business

Peak Bio, Inc., together with its ~~consolidated~~fully-owned subsidiaries, Peak Bio Co. Ltd (“Peak Bio Ltd”) and Peak Bio CA, Inc. (the “Company” or “Peak Bio”), is a clinical-stage biotechnology company focused on discovering, developing and delivering innovative therapies for multiple therapeutic areas. The Company has established a portfolio of potential therapies focused on cancer and immunological diseases. The Company’s pipeline includes the PH-1 ADC Platform for oncology, PHP-303 program for genetic disease, liver disease and inflammation, specifically for Alpha-1 antitrypsin deficiency (AATD) and acute respiratory distress syndrome (ARDS) including COVID-19. ~~The Company’s pipeline also includes PH-1 ADC Platform for oncology.~~

The accompanying condensed consolidated financial statements and notes have been prepared to include certain assets and liabilities of pH Pharma Co., Ltd (now Peak Bio Co., Ltd. or “Peak Bio”) (sometimes referred to as “pH Pharma Ltd” prior to the Spin-Off described below), on the basis described within Note 2, with certain wholly-owned subsidiaries of Peak Bio, that were included following the Spin-Off as follows: Ph Pharma, Inc, as well as certain assets and liabilities allocated to Peak Bio, including the PHP- 303 and PH-1 ADC Platform programs.

The spin-off (the “Spin-Off”) of certain assets of pH Pharma Co., Ltd. was completed on March 1, 2022, prior to the execution of the Business Combination Agreement (as defined below) with Ignyte Acquisition Corp. (“Ignyte”), with Peak Bio retaining the PHP-303 and PH-1 ADC Platform programs. Historically and throughout the periods presented, the PHP-303 and PH-1 ADC Platform programs have been owned by pH Pharma Co., Ltd and its subsidiaries (prior to the change of its name to Peak Bio Co., Ltd.).

As of September 30, 2023, the Company’s wholly owned subsidiary was Peak Bio Co., Ltd., organized under the laws of the Republic of Korea, and its subsidiary Peak Bio CA, Inc., organized under the laws of California.

Business Combination

On November 1, 2022 (the “Closing Date”), the Company completed the transactions contemplated by that certain business combination agreement, dated as of April 28, 2022 (the “Business Combination Agreement”), by and among Ignyte Acquisition Corp. (“Ignyte”), Ignyte Korea Co., Ltd., a corporation organized under the laws of the Republic of Korea (“Korean Sub”), and Peak Bio Co., Ltd. At the closing of the transactions, (i) the stockholders of Peak Bio Co., Ltd. transferred their respective shares of common stock to Korean Sub in exchange for shares of Ignyte common stock, and (ii) in the course of such share swap, Korean Sub distributed the shares of Peak Bio Co., Ltd. common stock to Ignyte in consideration of Ignyte common stock (which was in-turn delivered to the stockholders of Peak Bio Co., Ltd. as described in (i) above ((i) and (ii), collectively, the “Share Swap”). Upon consummation of the Share Swap, Peak Bio Co., Ltd. became a direct wholly-owned subsidiary of Ignyte. The transactions contemplated by the Business Combination Agreement are referred to herein as the “Business Combination.” Upon the closing of the Business Combination, Ignyte as the registrant changed its name to “Peak Bio, Inc.”

Risks and Uncertainties

The Company relies, and expects to continue to rely, on a small number of vendors to provide services, supplies and materials related to its research and development programs. These research and development programs could be adversely affected by a significant interruption in these services or the availability of materials. Results of operations may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond the Company’s control. The Company’s business could be impacted by, among other things, downturns in the financial markets or in economic conditions, inflation, increases in interest rates, and geopolitical instability, such as the military conflicts in Ukraine and the Israel-Hamas war. The Company cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact the Company’s business.

Akari Merger Agreement

On March 4, 2024, wethe Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Akari Therapeutics, Plc, a public company limited by shares incorporated in England and Wales (“Akari”), and Pegasus Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Akari (“Merger Sub”), pursuant to which, Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Akari.

7Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company’s Common Stock will be converted into the right to receive Akari American Depositary Shares (“Akari ADSs”) representing a number of Akari ordinary shares, par value $0.0001 per share (the “Akari Ordinary Shares”), equal to an exchange ratio calculated in accordance with the Merger Agreement (the “Exchange Ratio”), each such share duly and validly issued against the deposit of the requisite number of Akari Ordinary Shares in accordance with the Deposit Agreement (as defined in the Merger Agreement). The Exchange Ratio will be calculated such that the total number of shares of Akari ADSs to be issued as merger consideration for the Company’s Common Stock will be expected to be, upon issuance, approximately 50% of the outstanding shares of Akari ADSs (provided, certain adjustments to this ratio will be made in respect of the net cash, as determined in accordance with the Merger Agreement, of each of Peak Bio and Akari at the close of business one business day prior to the anticipated consummation of the Merger).

~~which,~~At ~~upon~~ the ~~terms~~Effective Time, each warrant and ~~subject~~option to purchase capital stock of the ~~conditions~~Company ~~thereof,~~outstanding ~~Merger~~immediately ~~Sub~~prior to the Effective Time will be ~~merged~~exchanged ~~with~~for ~~and~~a ~~into~~warrant ~~Peak~~or ~~Bio~~option ~~(the~~to ~~“Merger”),~~purchase ~~with~~a ~~Peak~~number ~~Bio~~of ~~surviving~~Akari ~~the~~ordinary ~~Merger~~shares asor aAkari ~~wholly-owned~~ADSs, ~~subsidiary~~as ofdetermined by Akari, based on the Exchange Ratio.

Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of Common Stock (other than (x) shares of Common Stock held by us as treasury stock, or shares of Common Stock owned by Akari, Merger Sub or any direct or indirect wholly-owned subsidiaries of Akari and (y) Dissenting Shares (as defined in the Merger Agreement)), will be converted into the right to receive Akari American Depositary Shares (“Akari ADSs”) representing a number of Akari ordinary shares, par value $0.0001 per share (the “Akari Ordinary Shares”), equal to an exchange ratio calculated in accordance with the Merger Agreement (the “Exchange Ratio”), each such share duly and validly issued against the deposit of the requisite number of Akari Ordinary Shares in accordance with the Deposit Agreement (as defined in the Merger Agreement). The Exchange Ratio will be calculated such that the total number of shares of Akari ADSs to be issued as merger consideration for the Peak Common Stock will be expected to be, upon issuance, approximately 50% of the outstanding shares of Akari ADSs (provided, certain adjustments to this ratio will be made in respect of the net cash, as determined in accordance with the Merger Agreement, of each of Peak Bio and Akari at the close of business one business day prior to the anticipated consummation of the Merger). The Merger Agreement provides that, under certain circumstances, additional Akari ADSs may be issued to the holders of shares of Peak Common Stock following the consummation of the Merger equal to an exchange ratio calculated in accordance with the Merger Agreement (the “Additional Exchange Ratio”).

At the Effective Time, each warrant to purchase capital stock of Peak Bio (“Peak Warrant”) outstanding immediately prior to the Effective Time will be converted into and exchangeable for 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 subject to substantially similar conditions as were applicable to such Peak Warrant immediately prior to the Effective Time, except (i) for terms rendered inoperative by reason of the transactions contemplated by the Merger Agreement, (ii) as provided in the following sentence and (iii) such amendments to the terms of the Adjusted Warrants as are necessary to comply with applicable Law (as defined in the Merger Agreement). The number of Akari Ordinary Shares (or the number of Akari Ordinary Shares underlying Akari ADSs, as applicable) subject to each Adjusted Warrant will be equal to the number of shares of Peak Common Stock issuable upon exercise of such Peak Warrant immediately prior to the Effective Time 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 will be equal to the exercise price of such Peak Warrant immediately prior to the Effective Time divided by the Exchange Ratio. The grant of the Adjusted Warrants will be effected as of the Effective Time, or as soon thereafter as is reasonably practicable, taking into account Parent’s administrative procedures. The Adjusted Warrants will be further adjusted, if applicable, to give effect to the impact of the Additional Exchange Ratio.

Each option to acquire shares of Peak Common Stock (“Peak Option”) that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, will be 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 will be equal to the product of (i) the total number of shares of Peak Common Stock subject to such Peak Option immediately prior to the Effective Time 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 will be equal to the exercise price of such Peak Option immediately prior to the Effective Time divided by the Exchange Ratio. The Adjusted Options will be further adjusted, if applicable, to give effect to the impact of the Additional Exchange Ratio.

Voting Agreements

Concurrently with the Merger Agreement, wethe Company and Akari entered into voting and support agreements (the “Voting Agreements”) with certain stockholders of ~~Peak~~the ~~Bio~~Company (the “Peak Stockholders”) and certain shareholders of Akari (the “Akari Shareholders” and, together with the Peak Stockholders, the “Supporting Holders”). The Supporting Holders have agreed to, among other things, vote their shares in favor of the Merger Agreement and the Merger or the issuance of Akari Ordinary Shares in connection therewith, as applicable, in accordance with the recommendation of the respective boards of directors of Peak Bio and Akari.

8Risks and Uncertainties

~~the~~The ~~recommendation~~Company ofis ~~the~~subject ~~respective~~to ~~boards~~a number of ~~directors~~risks similar to other companies in its industry, including competition from larger pharmaceutical and biotechnology companies, delays in research and development activities due to lack of ~~Peak~~financial ~~Bio~~resources and ~~Akari~~dependence on key personnel.

~~Bylaws~~Results ~~Amendment~~of operations may be adversely affected by various factors that could cause economic uncertainty and volatility in the financial markets, many of which are beyond the Company’s control. The Company’s business could be impacted by, among other things, downturns in the financial markets or in economic conditions, inflation, increases in interest rates, and geopolitical instability, such as the military conflicts in Ukraine and the Israel-Hamas war. While the Company has not been impacted by the abovementioned risks and uncertainties to date, the Company cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact the Company’s business.

In connection with the execution of the Merger Agreement, on March 3, 2024, our Board approved an amendment to our Amended and Restated Bylaws (the “Bylaws Amendment”), which became effective immediately. The Bylaws Amendment requires that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or stockholder (including a beneficial owner) of the Company or the Company’s stockholders, (iii) any action asserting a claim against any director, officer, employee or stockholder (including a beneficial owner) of the Company arising under any provision of the Delaware General Corporation Law (“DGCL”) or the bylaws or the certificate of incorporation of the Company, or (iv) any action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware (or if the Court of Chancery for the State of Delaware does not have jurisdiction, a state court located within the State of Delaware or, if no state court located within the State of Delaware has subject matter jurisdiction, the federal district court for the District of Delaware). In addition, the Bylaws Amendment provides that unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any claim or cause of action arising under the Securities Act of 1933, as amended.7

Going Concern

~~Since~~The ~~inception, the~~ Company has incurred ~~significant~~ net losses since inception, and has an accumulated deficit of $40.6 million as of March 31, 2024. The Company incurred net losses of $122.34 million and $6.38 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, respectively. ~~The Company had not initially been capitalized with sufficient funding to conduct its operations.~~ Since ~~the~~April ~~Company~~1, ~~had no available cash or credit facilities~~2024, the Company ~~was~~raised ~~dependent~~aggregate ~~upon~~gross ~~Peak~~proceeds ~~Bio~~of ~~Co.,~~approximately ~~Ltd~~$3.5 ~~(formerly~~million pHfrom ~~Pharma Ltd) and its affiliates to provide services and funding to support~~ the ~~operations~~issuance of ~~the~~May ~~Company~~2024 ~~through~~Convertible ~~the~~Notes ~~closing~~(see ofNote ~~the Business Combination~~14). The Company expects to incur significant expenses and operating losses for the foreseeable future as it continues its efforts to identify product candidates and seek regulatory approvals within its portfolio.

The Company will need additional ~~capital~~financing to fund its ~~planned~~ongoing activities and to close the Merger with Akari. The Company ~~plans~~may to raise this additional funding through the sale of equity, debt ~~financings~~financing or other capital sources, asincluding ~~detailed~~potential incollaborations ~~Note~~with ~~14. The Company may be unable to raise additional funds or enter into such~~ other ~~arrangements~~companies ~~when needed on favorable terms,~~ or ~~at all. There can be no assurances that~~ other ~~sources~~strategic oftransactions ~~financing~~and ~~would~~funding beunder ~~available.~~government ~~Due to these uncertainties, there is substantial doubt about the Company’s ability to continue as a going concern~~contracts.

The Company may be unable to raise additional funds or enter into other arrangements when needed on favorable terms, or at all. There can be no assurances that other sources of financing will be available. Due to these uncertainties, there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or classification of liabilities that might result from the outcome of the uncertainties discussed above.

~~The~~On ~~Company’s~~January ~~future~~6, ~~operations~~2023, ~~are~~the ~~highly~~Company ~~dependent~~received on a ~~combination~~determination ofletter ~~factors,~~(the ~~including~~“Determination (iLetter”) from the ~~timely~~Panel ~~and~~to ~~successful~~delist ~~completion~~the ofCompany’s ~~additional~~common ~~financing~~stock and ~~the~~warrants ~~Akari~~from ~~Merger~~Nasdaq. asNasdaq ~~discussed~~suspended ~~above;~~trading ~~(ii)~~in ~~the~~Company’s ~~success~~common ofstock ~~its research~~ and ~~development~~warrants ~~programs;~~effective ~~(iii)~~at the ~~development~~open of ~~competitive~~business ~~therapies~~on byJanuary ~~other~~10, ~~biotechnology~~2023. Following ~~and~~the ~~pharmaceutical~~suspension ~~companies;~~from ~~(iv)~~Nasdaq, the Company’s ~~ability~~securities toare ~~manage~~trading ~~growth~~on of the ~~organization;~~OTC ~~(v) the Company~~Markets’s ~~ability~~“OTC toPink ~~protect~~Market” ~~its~~tier, ~~proprietary~~which ~~technology;~~in ~~and~~turn ~~ultimately~~impacted ~~(vi) regulatory approval and market acceptance of~~ the Company’'s ~~product~~ability ~~candidates~~to raise capital.

Summary of Significant Accounting Policies

For the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, there have been no changes to the significant accounting policies as disclosed in Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 (the “~~2022~~2023 Consolidated Financial Statements”).

Unaudited Financial Information

The Company’s unaudited condensed consolidated financial statements included herein have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). All intercompany balances and transactions have been eliminated in consolidation.

9In the Company’s opinion, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the financial position and results of operations for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure.

~~Basis~~The ofunaudited ~~Presentation~~condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on August 5, 2024 (the “2023 Form 10-K”).

The accompanying consolidated ~~financial~~balance ~~statements~~sheet ~~have~~as of December 31, 2023 has been ~~prepared~~derived infrom ~~accordance~~the ~~with~~audited ~~accounting~~balance ~~principles~~sheet ~~generally~~as ~~accepted~~of December 31, 2023 contained in the ~~United~~Company’s ~~States~~2023 ~~(“U~~Form 10-K.S. ~~GAAP”)~~Results ~~and~~of operations for interim periods are ~~comprised~~not necessarily indicative of the ~~Company’s~~result ~~activities~~of ~~distributed~~operations ~~across~~for ~~multiple~~a ~~legal~~full ~~entities~~year.

Basis of Presentation Prior to April 1, 2022

These consolidated financial statements were extracted from the accounting records of pH Pharma Ltd. on a carve-out basis prior to April 1, 2022. The historical results of operations, financial position, and cash flows may not be indicative of what such results of operations, financial position, and cash flows would have been had the Company been a separate standalone entity, nor are they indicative of what the results of operations, financial position and cash flows may be in the future. The accompanying carve-out consolidated financial statements reflect assets, liabilities, revenue, and expenses that are directly attributable to the Company, including the assets, liabilities, revenue and expenses of the PHP-303 and PH-1 ADC Platform programs.

Basis of Presentation After April 1, 2022

The Spin-Off resulted in Peak Bio retaining the PHP-303 and PH-1 ADC Platform programs. Historically and throughout the periods presented, the PHP-303 and PH-1 ADC Platform programs have been owned by pH Pharma Co., Ltd and its subsidiaries (prior to the change of its name to Peak Bio Co., Ltd.). The PHP-303 and PH-1 ADC Platform programs have historically operated as a part of pH Pharma Co., Ltd and not as a separate stand-alone entity or group. The Spin-Off resulted in Peak Bio retaining approximately 90% of the equity outstanding in pH Pharma Co., Ltd., consisting of 8,283,613 shares of common stock and 693,000 stock options, before giving effect to the exchange ratio of 2.0719.

As of April 1, 2022, as a result of the Spin-Off, the Company concluded that all the assets and liabilities of the newly created Peak Bio legal entity were contributed by the parent company pH Pharma Ltd. No other assets or liabilities were considered to be attributable to Peak Bio or that would be transferred to Peak Bio upon the completion of the Business Combination, eliminating the necessity to allocate a portion of pH Pharma Ltd.’s assets and liabilities to Peak Bio on a carve-out basis. Therefore, there was no longer a need to allocate assets and liabilities, as well as expenses, from the parent company for the consolidated financial statements.

Basis of Presentation After Consummation of Business Combination Agreement

The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP (the “Reverse Recapitalization”). Under this method of accounting, Ignyte is treated as the “acquired” company and Peak Bio Co., Ltd. is treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Peak Bio issuing stock for the net assets of Ignyte, accompanied by a recapitalization.

The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Peak Bio. At the closing date, and subject to the terms and conditions of the Business Combination Agreement, each share of Peak Bio's common stock, par value $0.0001 per share, was converted into common stock equal to 2.0719 (the "Exchange Ratio"). The shares and corresponding capital amounts and losses per share, prior to the Business Combination, have been retroactively restated based on shares reflecting the Exchange Ratio established in the Business Combination.

Reclassification

During the nine months ended September 30, 2022, the Company reclassified interest income from interest expense resulting in an increase in interest income of $2,108 and a corresponding decrease in interest expense of

Use of Estimates

The preparation of ~~unaudited~~ condensed consolidated financial statements in conformity with USU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed ~~financial~~consolidated statements and the reported amounts of expenses during the reporting period. Significant estimates include but are not limited to stock-based compensation expense, warrant liability and discount rates used to establish operating lease liability. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial ~~statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from those estimates.~~

~~Net Income (Loss) Per Share~~8

~~The~~statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include but are not limited to fair value of the Company’s ~~computes~~stock, ~~basic~~stock-based ~~net~~compensation ~~income(loss)~~expense, ~~per~~warrant ~~share~~liability, ~~attributable~~derivative liability, and discount rates used to ~~common~~establish ~~stockholders~~operating bylease ~~dividing~~liability. ~~net~~Making ~~income~~estimates ~~(loss)~~requires ~~attributable~~management to ~~the~~exercise ~~common~~significant ~~stockholders~~judgment. byIt is at least reasonably possible that the ~~weighted-average~~estimate ~~number~~of the effect of ~~common~~a ~~shares~~condition, ~~outstanding~~situation ~~for~~or set of circumstances that existed at the ~~period~~date of the unaudited condensed consolidated financial statements, ~~without~~which ~~consideration~~management ~~for~~considered ~~potentially~~in ~~dilutive~~formulating ~~securities~~its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from those estimates.

~~The~~Restricted ~~Company~~Cash computes diluted net income(loss) per common share after giving consideration to all potentially dilutive common shares, including warrants and options to purchase common stock, outstanding during the period determined using the treasury-stock and if-converted methods, except where the effect of including such securities would be antidilutive. The Company’s convertible notes, options and warrants could, potentially, be exercised or converted into common shares and then share in the earnings of the Company.

~~For~~Restricted ~~the~~cash ~~three~~as ~~months~~of ~~ended~~March ~~September 30~~31, ~~2023,~~2024 ~~certain~~and ~~convertible~~December ~~notes~~31, ~~and~~2023 ~~warrants~~consists toof ~~purchase~~$60,000 ~~common~~in ~~stock~~a atrestricted anbank ~~exercise~~account ~~price~~established ofto ~~$0.01~~secure ~~were included in~~ the ~~calculation~~Company’s ofcredit ~~diluted earnings per share~~cards.

~~For~~Impairment the three months ended September 30, 2022 and the nine months ended September 30, 2023 and 2022, options and warrants were excluded when calculating diluted (loss) income per share because such inclusion would be anti-dilutive for the periods presented. As a result, diluted (loss) income per share is the same as basic (loss) income per share for the periods presented. The following table sets forth the potentially dilutive securities that have been excluded from the calculation of ~~diluted net loss per share because to include them would be anti~~Long-~~dilutive~~lived ~~(in common stock equivalent shares):~~ Assets

	September 30,		December 31
	2023		2022
Stock options to purchase common stock		1,734,184		1,750,967
Warrants to purchase common stock		9,911,397		5,867,045
November 2022 Convertible Notes to convert for common stock		13,836,679		—
April 2023 Convertible Notes to exchange for common stock		5,684,248		—

Long-lived assets consist primarily of property and equipment, and operating right-of-use assets. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset is not recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value would be assessed using discounted cash flows or other appropriate measures of fair value. No impairment losses were recognized during the three months ended March 31, 2024. The Company recognized an impairment loss on its operating right-of-use assets, totaling $3,513,999 during the three months ended March 31, 2023 (see Note 7).

~~Recently~~Net ~~Issued~~Loss ~~Accounting~~Per ~~Standards~~ Share

InThe ~~June~~Company ~~2016,~~computes ~~the~~basic ~~FASB~~net ~~issued~~loss ~~ASU~~per ~~No.~~share ~~2016-13,~~attributable ~~Financial~~to ~~Instruments-Credit~~common ~~Losses:~~stockholders ~~Measurement~~by ofdividing ~~Credit~~net ~~Losses~~loss onattributable ~~Financial~~to ~~Instruments~~common ~~(“ASU~~stockholders ~~2016-13”).~~by ~~ASU~~the ~~2016~~weighted-13average ~~requires~~number ~~measurement and recognition~~ of ~~expected~~common ~~credit~~shares ~~losses~~outstanding for ~~financial assets. In April 2019,~~ the ~~FASB issued clarification to ASU 2016-13 within ASU 2019-04~~period, ~~Codification~~without ~~Improvements~~consideration ~~to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, or ASU 2016-13. The guidance is effective~~ for ~~fiscal~~potentially ~~years~~dilutive ~~beginning after December 15, 2022~~securities. ~~The adoption of ASU No. 2016-13 on January 1, 2023 did not have a material effect on the Company's financial statements.~~

InThe ~~August~~Company ~~2020,~~computes ~~the~~diluted ~~FASB~~net ~~issued~~loss ~~ASU~~per ~~2020-06,~~share ~~“Debt—Debt~~after ~~with~~giving ~~Conversion~~consideration ~~and~~to ~~Other~~all ~~Options~~potentially ~~(Subtopic~~dilutive ~~470-20)~~common ~~and~~shares ~~Derivatives~~resulting ~~and~~from ~~Hedging—Contracts~~the inexercise ~~Entity’s~~of ~~Own~~options ~~Equity~~and ~~(Subtopic~~warrants ~~815-40): Accounting for Convertible Instruments~~ and ~~Contracts~~the inconversion anof ~~Entity’s~~convertible ~~Own Equity” (“ASU 2020-06”)~~notes, ~~which~~outstanding ~~simplifies~~during the ~~accounting~~period ~~for~~determined ~~convertible~~using ~~instruments~~the bytreasury-stock ~~removing~~and ~~major separation models required under current U.S. GAAP. ASU 2020~~if-06converted ~~removes~~methods, ~~certain~~as ~~settlement~~applicable, ~~conditions~~except ~~that~~where ~~are required for equity contracts to qualify for~~ the ~~derivative~~effect ~~scope~~of ~~exception,~~including ~~which will permit more equity contracts to qualify for~~ such ~~exception~~securities ~~and~~would ~~simplifies~~be ~~the diluted earnings per share calculation in certain areas~~antidilutive. ~~ASU 2020-06 is effective for public business entities~~

11The December 2023 Convertible Notes (see Note 10) are contingently convertible notes and are not included for purposes of calculating the number of diluted shares outstanding as the number of dilutive shares is based on a non-market based conversion contingency that had not been met in the reporting periods presented herein.

~~pursuant~~For ~~to the rules and regulations of the Securities and Exchange Commission, or the SEC. In the Company’s opinion, the information furnished reflects~~ all ~~adjustments,~~periods ~~all of which are of a normal and recurring nature~~presented, ~~necessary~~there ~~for~~is ano ~~fair~~difference ~~presentation~~in of the ~~financial~~number ~~position and results~~ of ~~operations~~shares ~~for~~used ~~the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued~~ to ~~provide~~calculate ~~additional~~basic ~~evidence~~and ~~relative~~diluted toshares ~~certain~~outstanding ~~estimates~~as orinclusion ~~to identify matters that require additional disclosure. The results~~ of ~~operations for interim periods are not necessarily indicative of results to be expected for~~ the ~~full~~potentially ~~year~~dilutive orsecurities ~~any~~would ~~other interim period. These unaudited condensed consolidated financial statements should~~ be ~~read in conjunction with the audited financial statements and related notes for the year ended December 31, 2022~~antidilutive.

~~$2,108.~~ The ~~reclassification~~following ~~had~~table nosets ~~impact~~forth onthe ~~total~~potentially ~~operating~~dilutive ~~costs,~~securities ~~loss~~that have been excluded from ~~operations,~~the calculation of diluted net loss, ~~earnings~~ per share orbecause ~~total~~to ~~deficit.~~include them would be anti-dilutive (in common stock equivalent shares):

that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2020-06 on its financial statements and financial statement disclosures effective January 1, 2024. The Company does not expect the adoption of ASU 2020-06 to have a material effect on the Company's consolidated financial statements.


	March 31,		December 31,
	2024		2023
Common stock options		1,363,108		1,698,754
Common stock warrants		9,419,352		9,419,352
April 2023 Convertible Notes convertible into common stock		5,127,945		5,493,515

~~Management~~Recently ~~does~~Adopted ~~not~~Accounting ~~believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.~~Standards

~~Assets~~In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. This ASU modified the disclosure and presentation requirements primarily through enhanced disclosures of significant segment expenses and clarified that single reportable segment entities must apply Topic 280 in its entirety. This guidance is effective for the Company for the year beginning January 1, 2024, with early adoption permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statement. The Company adopted ASU 2023-07 on January 1, 2024 and the adoption did not have a

~~Prepaid expenses and other assets~~9

~~Prepaid~~material ~~expenses~~effect ~~and~~on ~~other~~the ~~assets~~Company’s ~~consist~~consolidated offinancial ~~the~~statements. ~~following:~~

	September 30,		December 31
	2023		2022
Prepaid expenses	$	839,841	$	2,317,925
Other receivables		324,831		244,976
Total prepaid expenses and other assets	$	1,164,672	$	2,562,901

In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies the accounting for convertible instruments by removing major separation models required under current U.S. GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for such exception and simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2020-06 on January 1, 2024 and the adoption did not have a material effect on the Company’s consolidated financial statements.

~~Other~~Recently ~~receivables~~Issued ~~primarily~~Accounting ~~consists~~Standards ofNot ~~funds~~Yet receivable from government grants. The Company reviews receivables for collectability whenever events or changes in circumstances indicate the carrying amount of the asset is not recoverable. No losses on recoverability were recognized during the three and nine months ended September 30, 2023 and 2022. Adopted

~~Property~~In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and ~~Equipment~~disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for all public entities for fiscal years beginning after December 15, 2024. Early adoption is permitted and should be applied either prospectively or retrospectively. The Company plans to adopt ASU 2023-09 and related updates on January 1, 2025. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

~~Property~~There ~~and~~were ~~equipment~~no ~~consist~~other ofrecently issued but not yet effective accounting pronouncements that will have a material effect on the ~~following:~~accompanying unaudited condensed consolidated financial statements.

	September 30,			December 31
	2023			2022
Lab equipment	$	682,209		$	682,209
Leasehold improvements		41,578			41,578
Computer and office equipment		25,380			120,774
Computer software		3,725			3,725
Gross property and equipment	$	752,892		$	848,286
Less: accumulated depreciation		(567,498	)		(471,638	)
Net property and equipment	$	185,394		$	376,648

Prepaid and other current assets

~~Depreciation~~Prepaid ~~expense was $34,521~~ and ~~$41,949~~other ~~for~~current ~~the~~assets ~~three~~consist ~~months~~of ~~ended September 30, 2023 and 2022, respectively. Depreciation expense was $111,759 and $122,525 for~~ the ~~nine~~following: ~~months ended September 30, 2023 and 2022, respectively.~~


	March 31,		December 31,
	2024		2023
Prepaid directors and officers insurance current policies	$	855,914	$	1,222,734
Prepaid directors and officers insurance run-off policies		605,383		638,404
Other prepaid expenses		27,845		56,128
Other receivables		—		75,192
Prepaid and other current assets	$	1,489,142	$	1,992,458

Accrued Expenses

Accrued expenses consist of the following:

	September 30,		December 31
	March 31,		December 31,
	2023		2022
	2024		2023
Professional fees	$	56,097	$	608,846
Professional Fees	$	54,643	$	43,552
Employee compensation costs, including amounts due to current and former officers and directors (Note 6)		2,859,030		1,364,142
Accrued compensation		3,559,656		3,322,454
Other liabilities		205,154		65,303
Other		316,352		210,762
Total accrued expenses and other current liabilities	$	3,120,281	$	2,038,291
Total accrued expenses	$	3,930,651	$	3,576,768

12As of March 31, 2024, $3,231,112 of compensation due to current and former directors and officers is included in accrued compensation. As of December 31, 2023, $3,038,399 of compensation was due to current and former directors and officers, of which $2,807,749 was included in accrued expenses and $230,650 was included in other noncurrent liabilities.

Other noncurrent liabilities of $230,650 as of December 31, 2023, are related to the founder and director's forwent salary under an employment contract dated January 2022, that is repayable through February 2025. Amounts repayable within one year are classified as accrued expenses and amounts repayable in more than one year are recognized as noncurrent liabilities. As of March 31, 2024, no amounts related to the January 2022 employment contract were included in noncurrent liabilities.

Share-Based Compensation

~~For~~The Company’s Long Term Incentive Plan (the ~~three~~“Plan”) ~~months~~became ~~ended~~effective ~~September~~on 30November 1, ~~2023~~2022. ~~and~~Pursuant ~~2022~~to the Plan, ~~share-based~~4,150,470 ~~compensation~~shares ~~expense~~of ~~was~~Common ~~$0.1~~Stock ~~million~~have ~~and~~been ~~$0.2~~reserved ~~million,~~for ~~respectively.~~issuance ~~For~~under the ~~nine~~Plan. ~~months~~Under ~~ended~~the ~~September~~provisions 30of the Plan, ~~2023~~the ~~and~~stock ~~2022,~~options ~~share-based~~shall ~~compensation~~be ~~expense~~granted ~~was~~at ~~$0.4~~an ~~million~~exercise ~~and~~price ~~was~~per ~~$0.4~~share ~~million,~~equal ~~respectively.~~to Asat ofleast ~~September~~the ~~30,~~fair ~~2023,~~market ~~there~~value ~~was~~of ~~$0.2~~the ~~million~~shares of ~~unrecognized~~common ~~compensation~~stock ~~cost~~on ~~related~~the todate ~~unvested~~of grant stock~~-based~~ ~~compensation~~options ~~arrangements~~and ~~that~~would isgenerally ~~expected~~have toa beterm ~~recognized~~of ~~over~~10 ayears. ~~weighted~~Stock ~~average~~options ~~period~~currently outstanding under the Plan generally vest on the second-year anniversary date of ~~0.3~~grant ~~years~~and exercisable at any time after the grant date.

The following table summarizes the stock option activity:

	Number of Options			Weighted-average exercise price per share		Weighted average remaining contractual term (in years)		Aggregate intrinsic value
Outstanding at December 31, 2022		1,750,967		$	5.36		2.9	$	486,097
Outstanding at December 31, 2023		1,698,754		$	5.28		1.9	$	—
Granted		—		$	—
Cancelled/Forfeited		(16335,~~783~~646	)	$	80.0551
Exercised		—		$	—
Outstanding at September 30, 2023		1,734,184		$	5.34		2.3	$	—
Outstanding at March 31, 2024		1,363,108		$	6.46		2.2	$	—
Exercisable at September 30, 2023		1,525,334		$	4.97		1.8	$	—
Exercisable at March 31, 2024		1,363,108		$	6.46		2.2	$	—

~~The~~In ~~following~~February ~~table~~2023, ~~summarizes~~the ~~information~~Company ~~related~~extended the term of 335,646 vested options to ~~share-based~~allow ~~compensation~~the ~~expense~~exercise ~~recognized~~of inthese options for an additional one year period. As a result, the ~~condensed~~Company ~~consolidated~~recorded ~~statements~~an expense of ~~operations~~$16,782 included in general and ~~comprehensive~~administrative ~~loss~~expenses ~~related~~during tothe three months ended March 31, 2023. The fair value was determined using a Black-Scholes option pricing model with the ~~equity~~following ~~awards~~weighted average assumptions:

		Three months ended September 30,					Nine months ended September 30,
	Three Months Ended March 31,
		2023			~~2022~~		~~2023~~		~~2022~~
Research and development		$	36,535		$	108,428	$	237,408	$	316,452
Expected volatility			79.3	%
General and administrative			40,260			50,143		137,831		115,910
Risk-free interest rate			4.66	%
Total equity-based compensation		$	76,795		$	158,571	$	375,239	$	432,362
Expected term (in years)			1.0
Expected dividend yield			0	%

In ~~February~~For ~~2023,~~ the ~~Company~~three ~~extended~~months ~~the~~ended ~~term~~March of31, ~~certain~~2024 ~~outstanding~~and ~~options~~2023, ~~to allow~~ the ~~exercise~~share-based ofcompensation ~~these~~expense ~~options~~was ~~for~~$30,509 anand ~~additional~~$165,007, ~~one year period~~respectively. ~~The~~ ~~fair~~As ~~value~~ of ~~the~~March ~~stock~~31, ~~options~~2024, isthere ~~estimated~~was onno ~~the~~unrecognized ~~date~~compensation ofcost ~~grant~~ and ~~modification~~all ~~using~~issued aand ~~Black-Scholes~~outstanding ~~option~~stock ~~pricing~~options ~~model~~were ~~with~~exerciseable. ~~the following weighted average assumptions:~~

	Nine months ended September 30,
	2023			2022
Expected volatility		79.3	%		75.1	%
Risk-free interest rate		4.66	%		1.81	%
Expected term (in years)		1.0			7.0
Expected dividend yield		0	%		0	%

The following table summarizes information related to share-based compensation expense recognized in the unaudited condensed consolidated statements of operations and comprehensive loss related to the equity awards:


	Three Months Ended March 31,
	2024		2023
Research and development	$	19,027	$	102,488
General and administrative		11,482		62,519
Total equity-based compensation	$	30,509	$	165,007

Related Party Transactions and Shared Service Costs

~~Transactions~~On March 1, 2022, the Company and pH Pharma Co., Ltd entered into ~~between~~an administrative services and facilities agreement whereby pH Pharma Co., Ltd would perform services, functions and responsibilities for the Company. ~~and~~Under the agreement, the Company paid pH Pharma Co., Ltd ~~prior~~$100,000 toper ~~April~~month through August 30, 2022 and $15,000 per month from September 1, 2022 ~~were~~through ~~included~~February ~~within~~28, 2023 based on the ~~condensed~~estimated ~~consolidated~~value ~~financial~~of ~~statements~~the ~~and~~services ~~are~~to ~~considered~~be ~~related~~performed. ~~party~~Additionally, ~~transactions~~the ~~and~~Company ~~have~~reimbursed ~~been~~pH ~~adjusted~~Pharma toCo., ~~additional~~Ltd ~~paid~~$3,000 per month in ~~capital~~lease ~~within~~payments from March 1, 2022 through February 28, 2023. At December 31, 2023, the ~~condensed~~balance payable to pH Pharma Co., Ltd under this agreement was $309,534, which was included in accounts payable in the consolidated balance ~~sheets~~sheet. On January 31, 2024, the Company and ~~statements~~pH Pharma Co., Ltd entered into a settlement agreement, settled the outstanding debt for a one-time payment of ~~cash~~$85,000, ~~flows~~resulting asin ~~they~~$207,967 ~~represent~~recognized anduring ~~investment~~three tomonths ended March 31, 2024 in cancellation of trade liability, and terminated the ~~Company~~administrative services and facilities agreement. The ~~components~~Company ofrecognized $0 and $36,357 expenses under the ~~net~~administrative ~~transfers~~services ~~from~~and pHfacilities ~~Pharma~~agreement ~~Ltd~~for asthe ofthree ~~September~~months 30ended March 31, ~~2022~~2024 ~~are~~and as2023, ~~follows:~~respectively.

13On April 1, 2024, the Company and pH Pharma Co., Ltd entered into an administrative services agreement whereby pH Pharma Co., Ltd will perform investor relations services, functions and responsibilities on behalf of the Company in the Republic of Korea. Under the agreement, the Company is obligated to pay pH Pharma Co., Ltd. a one-time fee of $230,000 for the services performed from January 1, 2024 through April 30, 2024 and a monthly fee of $10,000 per month for services rendered from May 1, 2024 through July 31, 2024. At March 31, 2024, the amounts accrued to pH Pharma Co., Ltd under this agreement totaled $172,500, included in accounts payable in the unaudited condensed consolidated balance sheets. The Company recognized $172,500 expense under this administrative services agreement for the three months ended March 31, 2024.

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2022		September 30, 2022
Corporate allocations
Research and development	$	—	$	482,160
Selling, general and administrative		—		72,345
Accounts payable and general financing activities		—		809,469
Net increase in contributions from member	$	—	$	1,363,974

On March 1, 2022, the Company and pH Pharma Ltd entered into an administrative services and facilities agreement whereby pH Pharma Ltd will perform services, functions and responsibilities for the Company. Under the agreement, the Company paid pH Pharma Ltd $100,000 per month through August 30, 2022 and paid $15,000 from September 1, 2022 through February 28, 2023 based on the estimated value of the level of service to be performed. Additionally, the Company will pay pH Pharma Ltd $3,000 per month in lease payments. At September 30, 2023 and December 31, 2022, the Company recorded a liability to accounts payable of $297,421 and $426,673 related to this agreement.

At September 30, 2023 and December 31, 2022, the Company recorded a liability of $2,692,429 and $1,885,843 for unpaid compensation due to current and former directors and officers of which $2,461,779 and $1,095,043 respectively, is included in accrued expenses and $230,650 and $790,800 respectively, is included in other non-current liabilities. The balance included in other non-current liabilities relates to the founder and director's employment contract dated January 2022 for forwent salary that is repayable over four years (as described below). Amounts repayable within one year are classified as accrued expenses and amounts repayable in more than one year are recognized as non-current liabilities.

Employment Agreements

In January 2022, the Company entered into an employment agreement with its founder and director. The effective date of the employment agreement was February 1, 2022, and was subject to the completion of the Business Combination. As part of the agreement, the Company agreed to repay its founder and director $1.5 million in forwent salary over a period of four years. Further, the employment agreement provides for the payment of success fees in connection with future business or corporate development transactions (licensing, product development and acquisitions).

In March 2022, the Company entered into an employment agreement with its chief operating officer which was subject to the completion of the Business Combination. The agreement provides for a success fee payment upon consummation of the business combination with Ignyte in the amount of $250,000 and the payment of success fees in connection with future business or corporate development transactions (licensing, product development and acquisitions). As of September 30, 2023, this success fee remains unpaid and included in accrued expenses.

Leases

OnIn ~~January~~October 12021, ~~2022,~~ the Company ~~adopted~~entered ~~ASC~~into ~~842~~a ~~using~~lease ~~the~~for ~~modified~~laboratory ~~retrospective~~and ~~transition~~office ~~approach~~facilities ~~allowed~~in ~~under~~Palo ~~ASU~~Alto, ~~2018-11~~California ~~which~~(the ~~releases~~“Palo ~~companies~~Alto ~~from presenting comparative periods and related disclosures under ASC 842~~Lease”). The ~~Company~~Palo ~~adopted~~Alto ~~the~~Lease ~~standard~~expires ~~under~~in ~~the~~April ~~modified~~2027 ~~retrospective approach~~ and ~~the~~has ~~effective~~a ~~date~~five-year isrenewal asoption. ofBase ~~the~~rent ~~initial~~for ~~application.~~this ~~Consequently,~~lease ~~financial~~is ~~information~~approximately ~~was not updated~~$89,000 ~~and~~monthly ~~the~~with ~~disclosures~~annual ~~required~~escalations ~~under~~of ~~ASU~~3%. ~~2016-02~~Pursuant ~~are~~to ~~not~~the ~~provided~~terms ~~for~~of ~~dates~~the ~~and periods prior to January 1~~lease, ~~2022.~~the ~~The~~ Company isreceived ~~party~~from tothe ~~one~~lessor ~~operating~~approximately ~~lease~~$300,000 for ~~office~~tenant ~~and laboratory space~~improvements. ~~The~~ ~~Company does not have any finance leases.~~ The Company ~~has~~is ~~elected~~required to ~~apply~~repay ~~the short-term lease exception to all leases of one year or less. As of September 30, 2023,~~ this ~~exception~~amount ~~does~~over ~~not~~the ~~apply~~remaining toterm ~~any~~ of the ~~operating~~lease ~~leases~~with ~~for~~7% ~~office and laboratory space~~interest. ~~Further,~~The ~~the~~ Company has applied the guidance in ASC 842 ~~to our corporate office~~ and ~~laboratory leases and~~ has determined that ~~these~~this lease should be classified as an operating ~~leases. Consequently, as a result of the adoption of ASC 842, we recognized a ROU~~ lease ~~asset of approximately $4~~.2 million with a corresponding lease liability of approximately $4.4 million based on the present value of the minimum rental payments of such leases. In accordance with ASC 842, the beginning balance of the ROU lease asset was reduced by the existing deferred rent liability at inception of approximately $241,000.

In ~~October~~March ~~2021~~2023, the Company ~~entered~~vacated, ~~into~~and returned possession of, the premises to the lessor. As a result, the Company recognized a loss of $3,513,999 on the abandonment of its operating right-of-use asset during the three months ended March 31, 2023. The Company made no payments on the lease starting on January 1, 2023 through March 31, 2024. In February 2023, the landlord filed a lawsuit against the Company claiming compensation for ~~laboratory~~damages ~~and~~resulting ~~office~~from ~~facilities~~the breach of the lease. On June 3, 2024, the landlord was awarded a default judgment against the Company for $796,773; however, the Company is still in ~~Palo~~the ~~Alto~~process of negotiating a settlement with the landlord and the lease has not been terminated. Accordingly, ~~California~~the lease obligation is classified as a current liability in the Company's balance sheet.

14Rent expense for the three months ended March 31, 2024 and 2023 was $101,618 and $272,489, respectively. Interest expense for the three months ended March 31, 2024 and 2023 was $84,777 and $104,213, respectively.

that expires in April 2027 with a five-year renewal option and opened a secured letter of credit with a third-party financial institution in lieu of a security deposit for $177,000. Base rent for this lease is approximately $89,000 monthly with annual escalations of 3%. In March 2023, the Company vacated the premises and returned possession of the premises to the landlord in April 2023. The full amount of the security deposit has been applied to back rent and the Company is still responsible for the outstanding payments under the lease. The Company recognized a $3.5 million impairment loss on operating lease right of use asset for the nine months ended September 30, 2023.

Rent expense for the three months ended September 30, 2023 and 2022 was $0.1 million and $0.2 million, respectively. Rent expense for the nine months ended September 30, 2023 and 2022 was $0.4 million and $0.9 million, respectively.

Quantitative information regarding the Company’s leases for the three and nine months ended September 30, 2023 and 2022 is as follows:

	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Operating cash flows paid for amounts included in the measurement of lease liabilities	$	-		$	66,265		$	177,111		$	207,807
Operating lease liabilities arising from obtaining right of use assets	$	-		$	-		$	-		$	4,189,492
Weighted-average remaining lease terms (years)		3.6			5.0			3.6			5.0
Weighted-average discount rate		10.0	%		10.0	%		10.0	%		10.0	%
Interest expense recognized on operating lease liability	$	94,804		$	112,908		$	298,649		$	341,917

Future lease payments under noncancelable leases are as follows at September 30, 2023:

	OperatingLease
2023 (remaining three months)	$	979,745
2024		1,189,454
2025		1,223,029
2026		1,257,612
2027		422,107
Thereafter		—
Total future minimum lease payments	$	5,071,947
Less: imputed interest		(722,564	)
Total future minimum lease payments	$	4,349,383

Commitments and Contingencies

From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of ~~September~~March 3031, ~~2023~~2024, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations, except as discussed in Note 7. At each reporting period, the Company evaluates known claims to determine whether a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Legal fees are expensed as incurred.

Bayer Acquisition Agreement

In March 2017, the Company entered into an assignment, license, development and commercialization agreement (the “Bayer Acquisition Agreement”) with Bayer, 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 March 31, 2024.

Debt

Related Party Loans

InFounder August 2021, the Company received proceeds from a loan in the amount of approximately $1.5 million from its founder and director. The loan, which was scheduled to mature on July 31, 2022, bears interest at a rate of 1.0% per annum. The loan is evidenced by a promissory note dated August 6, 2021, which contains customary Loans

In May 2021, the Company received proceeds from a loan in the amount of approximately $750,000 from its chairman and founding chief executive officer, Dr. Hoyoung Huh (“the Founder”). The loan, which was scheduled to mature on May 31, 2022, bore interest at a rate of 1.0% per annum. The loan could be prepaid by the Company at any time prior to maturity with no prepayment penalties.

In August 2021, the Company received proceeds from the additional loan in the amount of approximately $750,000 from the Founder (together with the May 2021 loan, “Founder Loans”). The loan, which was scheduled to mature on July 31, 2022, bore interest at a rate of 1.0% per annum. The loan could be prepaid by the Company at any time prior to maturity with no prepayment penalties.

The Company made a $150,000 payment on the Founder Loans in December 2022. On April 28, 2023, the Company settled $448,940 of the principal and $26,830 of accrued interest through the issuance of the April 2023 Convertible Notes, related party (see below).

As of March 31, 2024 and December 31, 2023, the outstanding balance was $901,060 under the Founder Loans, included in the related party loans on the unaudited condensed consolidated balance sheet. The interest expense on the Founder Loans totaled $0 and $3,586 for the three months ended March 31, 2024 and 2023, respectively.

Secured Founder Loan

In January 2024, the Company received proceeds from a Senior Secured Promissory Note (the “Secured Founder Loan”) in the amount of $750,000 from the Founder. In accordance with the terms of the Secured Founder Loan, the Company, together with its subsidiaries, also entered into a Security Agreement with the Founder (the “Security Agreement”). The Secured Note has a maturity date on January 23, 2025 and carries an interest rate of 15% per annum. As security for payment of the Secured Note, the Security Agreement grants and assigns to the Founder the security interest in all of the assets of the Company and its subsidiaries.

The interest expense on the Secured Founder Loan totaled $20,959 and $0 for the three months ended March 31, 2024 and 2023, respectively.

Promissory Note

On November 1, 2022, the Company issued $1,512,500 in convertible notes (the “November 2022 Convertible Notes”). The convertible notes accrued interest at a rate of 8% per annum and had the maturity date of October 31, 2023, provided however that the Company agreed to make mandatory prepayments on this note (which were first be applied to accrued interest and then to principal) from time to time in amounts equal to 15% of the gross proceeds received by the Company from any equity lines, forward purchase agreements or other equity financings consummated by Company prior to the maturity date. The November 2022 Convertible Notes were convertible at the maturity date at the option of the holder in all or part of the principal and/or accrued interest into shares of common stock of the Company at a per share conversion price equal to 90% of the volume weighted

average price of a share of common stock of the Company for the five trading days immediately prior to the maturity date. The Company determined that the conversion upon maturity represented an embedded derivative that was subject to bifurcation and separate accounting with the change in the fair value recorded as other expense during each reporting period under the guidance in Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”) (the “November 2022 Convertible Note Liability”). The fair value of the November 2022 Convertible Note Liability at the issuance date was estimated at $165,000. The Company allocated the proceeds from the November 2022 Convertible Note first to the embedded derivative with the remaining proceeds allocated to the notes, which resulted in a discount on the convertible notes of $165,000 which was amortized to interest expense over the term of the convertible notes.

On November 1, 2023, the Company entered into an amendment to the November 2022 Convertible Notes whereby the principal amount of the notes was reduced from $1,512,500 to $650,000, the interest was reduced to 6% per annum, the maturity was extended to December 31, 2024 and the conversion terms were removed. Further, the amendment required the Company to make a payment of $300,000 by December 31, 2023, which was made in December 2023. The remaining balance of $378,622 including the accrued interest through the maturity date, is due on December 31, 2024. The amendment to the November 2022 Convertible Notes was accounted as an exchange into a promissory note (the “Promissory Note”) under the trouble debt restructuring (“TDR”) guidance in ASC Subtopic 470-60, Debt – Troubled Debt Restructurings by Debtors (“ASC 470-60”). Under the TDR guidance, the Company recognized a gain on debt extinguishment of $998,878 for the year ended December 31, 2023.

As of March 31, 2024 and December 31, 2023, the outstanding balance on the Promissory Note was $378,622, including principal of $350,000 and $28,622 in accrued interest.

The interest expense on November 2022 Convertible Note totaled $0 and $47,827, including amortization of the discount of $47,827, for the three months ended March 31, 2024 and 2023, respectively.

April 2023 Convertible Notes

On April 28, 2023, the Company entered into separate subscription agreements (the “2023 Convertible Note and Warrant Subscription Agreements”) under which the Company issued the convertible promissory notes in the principal amount of $2,195,034 (the “April 2023 Convertible Notes”) and 3,658,390 warrants for the Company’s common stock (the “2023 Convertible Note Warrants”). The April 2023 Convertible Notes bear interest at a rate of 6% per annum until their maturity date of October 28, 2023 and a default rate of 10% per annum thereafter. As at December 31, 2023 and March 31, 2024, the April 2023 Convertible Notes are in default. The April 2023 Convertible Notes are convertible at any time from the issuance date at the option of the holder into the Company’s common stock at $0.60 per share (the “April 2023 Conversion Feature”). The 2023 Convertible Note Warrants have the five year term and are exercisable at any time from the issuance date at the exercise price of $0.60 per share.

In connection with the issuance of the Convertible Notes and the Convertible Note Warrants, in consideration for its services in respect of the financing described above, the Company also issued to Paulson Investment Company, LLC (the “Placement Agent”) a warrant to purchase 209,670 shares of the Company’s common stock at a price per share of $0.60 (the “Placement Agent Warrant”). The Placement Agent Warrants have a five year term and are exercisable at any time from the issuance date. In addition, the Company paid the Placement Agent a commission of approximately $125,000.

The April 2023 Convertible Note Warrants and the Placement Agent Warrants were accounted as a liability under ASC 815, as the April 2023 Convertible Note Warrants and Placement Agent Warrants do not meet the criteria for equity classification due to the lack of available authorized shares. The aggregate fair value of the April 2023 Convertible Note Warrants and the Placement Agent Warrants was $1,527,640 and $87,552, respectively, at the issuance date using a Black Scholes Option Pricing Model. The initial fair value was determined based on the following assumptions:


Expected volatility	72.8	%
Risk-free interest rate	3.51	%
Expected term (in years)	5.0
Expected dividend yield	0	%

The Company determined that the April 2023 Conversion Feature is subject to bifurcation under the guidance in ASC 815 due to the lack of available authorized shares and registration requirements and recognized a derivative

liability of $560,436 at the issuance date (the “April 2023 Conversion Feature Liability”). The derivative liability was estimated using a Black Scholes Option Pricing Model, based on the following assumptions:


Expected volatility	66.5	%
Risk-free interest rate	4.94	%
Expected term (in years)	0.5
Expected dividend yield	0	%

At the issuance date, the proceeds from the April 2023 Convertible Notes were allocated to the April 2023 Convertible Note Warrants and the April 2023 Conversion Feature Liability based on their fair values of $1,527,640 and $560,436, respectively, with the remaining proceeds allocated to the convertible notes. The resulting discount on the April 2023 Convertible Notes was accreted into the interest expense over the term of the convertible notes using the effective interest method. The fair value of the Placement Agent Warrants at the issuance date and the cash commission were capitalized and amortized into the interest expense over the term of the convertible notes using the effective interest method. The Company is in default on the April 2023 Convertible Notes, however, the Company has not received demands for repayment through the filing date of these unaudited condensed consolidated financial statements.

In December 2023, certain holders of April 2023 Convertible Notes agreed to exchange the aggregate amount of $187,950 of April 2023 Convertible Notes, including the accrued interest, into the same amount of December 2023 Convertible Notes (see below).

In January 2024, additional holders of April 2023 Convertible Notes agreed to exchange the aggregate amount of $250,600 of April 2023 Convertible Notes, including the accrued interest, into the same amount of December 2023 Convertible Notes (see below).

The Company recorded interest expense of $44,376 and $0, including amortization of discount of $0 and $0, for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the outstanding balance on the April 2023 Convertible Notes was approximately $1,863,698, including principal of $1,775,034 and accrued interest of $88,663.

April 2023 Convertible Notes, related party

On April 28, 2023, the Company entered into a subscription agreement with its founder and director to exchange $1,130,775 in outstanding Founder Loans into the same amount of convertible promissory note with the same terms as the April 2023 Convertible Notes and 1,884,625 April 2023 Convertible Note Warrants. The amounts converted included $448,940 of principal and $26,830 accrued interest due under the 2021 Founder Loans, $400,000 of principal and $3,806 of interest due under the Venn Loan, and $250,000 of principal and $1,199 of accrued interest due under the March 2023 Founder Loan. The Company accounted for the issuance of the April 2023 convertible notes payable, related party, as a debt extinguishment in accordance with ASC 470 and recognized a loss of approximately $1,014,368 during the year ended December 31, 2023. As at December 31, 2023 and March 31, 2024, the April 2023 Convertible Note, related party was in default.

At the issuance date, the carrying value of the April 2023 Convertible Notes was reduced by the fair value of the related April 2023 Convertible Note Warrants and the April 2023 Conversion Feature Liability of $786,967 and $288,710, respectively, with the remaining proceeds allocated to the convertible notes. The April 2023 Conversion Feature Liability related to the April 2023 Convertible Notes, related party, was valued using a Black Scholes Option Pricing Model. The initial fair value was determined to be $0.3 million based on the following assumptions: stock price of $0.655, expected volatility of 66.5%, risk-free rate of 4.94% and expected term of 0.5 years. The resulting discount on the April 2023 Convertible Notes, related party was accreted into the interest expense over the term of the convertible notes using the effective interest method. The Company is in default on the April 2023 Convertible Notes, related party. However, the Company has not received demands for repayment through the filing date of these unaudited condensed consolidated financial statements.

The Company recorded interest expense of approximately $28,269 and $0, including amortization of discount of $0 and $0 for the three months ended March 31, 2024 and March 31, 2023, respectively. At March 31, 2024, the outstanding balance of the April 2023 Convertible Notes, related party, was approximately $1,184,801, including principal of $1,130,775 and accrued interest of $54,026.

events of default relating to, among other things, payment defaults and breaches of representations and warranties. The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. In January 2022, the Company entered into an employment agreement with its founder and director. As part of the agreement, the Company agreed to repay $0.5 million of the $1.5 million outstanding under the related party loan upon closing of the Business Combination. The remaining $1.0 million plus accrued interest will be repaid pursuant to the discretion of the Company’s Board of Directors. The Company repaid $150,000 of the loan in December ~~2022. In April~~ 2023, aConvertible portion of this related party loan was settled through the issuance of a related party convertible note payable (as described below). At September 30, 2023 and December 31, 2022, there was $0.9 million and $1.35 million, respectively, outstanding under this loan. Interest expense for the three months ended September 30, 2023 and 2022 was $4,737 and $3,754, respectively. Interest expense for the nine months ended September 30, 2023 and 2022 was $10,735 and $11,263, respectively.Notes

In ~~April~~December, ~~2022~~2023, the Company ~~entered~~issued ~~into~~convertible anpromissory ~~agreement~~notes ~~with its founder and director,~~ in ~~consideration of~~ the ~~repayment~~aggregate toprincipal beamount ~~made~~of by the Company’s founder and director to settle a contractual obligation for the upfront payment received by the Company associated with the License Agreement with Venn DC "(Venn"). Per the agreement, the Company agreed to repay its founder and director $~~400~~1,000,000 ~~with interest to accrue on~~ (the ~~unpaid~~“December ~~principal~~2023 ~~balance~~Convertible atNotes”). ~~the~~In ~~rate~~addition, ofcertain 1%holders ~~per annum. The timing~~ of ~~the~~April ~~repayment~~2023 ~~will~~Convertible beNotes ~~determined~~agreed ~~and pursuant~~ to ~~the~~exchange ~~discretion of~~ the ~~Company’s~~aggregate ~~Board~~amount of ~~Directors. In May 2022, the Company’s founder and director repaid to Venn the~~ $~~400~~187,~~000~~950 ~~upfront~~of ~~payment and the License Agreement was terminated. In~~ April 2023, ~~this~~Convertible ~~related party loan~~Notes, ~~was~~including ~~settled through~~ the ~~issuance~~accrued ~~of a related party convertible note payable (as described below). At September 30~~interest, ~~2023~~into ~~and December 31, 2022,~~ the ~~Company~~same ~~recorded~~amount ~~a liability to related party loans~~ of $0December ~~and $400,000, respectively, related to this payment. Interest expense for the three months ended September 30,~~ 2023 ~~and~~Convertible ~~2022 was $0 and $1,011, respectively~~Notes. ~~Interest expense for the nine months ended September 30, 2023 and 2022 was $1,304 and $1,735, respectively.~~

In ~~May~~January ~~2022~~and February 2024, the Company ~~received~~completed ~~proceeds~~additional ~~from~~closes aof ~~loan~~the inDecember 2023 Convertible Notes pursuant to which the Company issued the notes with the principal amount of ~~approximately~~ $23738,000. ~~from~~In anaddition, ~~employee~~at ofthose date, the ~~Company~~holders of April 2023 Convertible Notes agreed to ~~settle~~exchange ~~certain~~the ~~payables~~aggregate amount of ~~the~~$250,600 ~~Company.~~of ~~The~~April ~~loan~~2023 ~~accrued~~Convertible ~~interest~~Notes, atincluding 4%the ~~per~~accrued ~~annum~~interest, ~~and~~into ~~was~~the ~~repaid~~same inamount of December ~~2022~~2023 Convertible Notes.

InThe ~~September~~December ~~2022,~~2023 ~~the~~Convertible ~~Company~~Notes ~~received~~bear ~~proceeds~~an ~~from~~interest arate ~~loan~~of in10% ~~the~~per ~~amount~~annum ofand ~~$500,000~~have ~~from~~a ~~one~~maturity date of ~~its~~December ~~director~~18, ~~nominees~~2024. The ~~loan~~terms ~~matures~~of onthe December 2023 Convertible Notes provide for automatic conversion of the ~~second~~outstanding ~~anniversary~~principal amount of the December 2023 Convertible Notes and ~~bear~~all accrued and unpaid interest atupon a ~~rate~~business ofcombination ~~5.0%~~(as ~~per~~defined ~~annum~~in the agreement) into the Company common stock at the Conversion Price (the “Automatic Conversion Feature”). The ~~loan~~Conversion ~~was~~Price ~~evidenced~~is determined by areference ~~promissory~~to ~~note,~~the ~~which~~purchase ~~contains~~price ~~customary~~payable ~~events~~in ofconnection ~~default~~with ~~relating~~such tobusiness combination, ~~among~~multiplied ~~other~~by ~~things~~70%, ~~payment~~where ~~defaults~~the ~~and~~price ~~breaches~~per share of ~~representations~~the ~~and~~common ~~warranties.~~stock ~~The~~is ~~loan~~determined ~~could~~by bereference ~~prepaid~~to bythe 30-day volume weighted average price of the Company’s atcommon ~~any~~stock ~~time~~on the public exchange immediately prior to ~~maturity~~conversion, ~~without~~resulting in 43% discount on the ~~consent~~issuance ofprice in the ~~lender~~a business combination (the Automatic Discount”). If Ina ~~November~~business ~~2022,~~combination ~~this~~does ~~loan~~not ~~was~~occur ~~amended~~prior ~~resulting~~to inthe maturity date of the ~~outstanding~~December ~~principal~~2023 Convertible Notes and ~~accrued~~if ~~interest~~the ~~under~~Company’s Common Stock is listed on a public exchange as of such date, then the ~~related~~holders ~~party~~have ~~loan~~the ~~converting~~right, at atheir ~~price~~option, to convert the outstanding principal amount of ~~$10.00~~the ~~per~~December ~~share~~2023 Convertible Notes (and all accrued and unpaid interest thereof) into ~~50,273~~the shares of common stock ~~along~~of ~~with~~the Company at a ~~warrant~~price equal to ~~purchase~~the ~~46,754~~30-day ~~shares~~volume weighted average price of the Company’s common stock ~~with~~on anthe ~~exercise~~public ~~price~~exchange ofon ~~$0.01~~which ~~per~~it ~~share~~is traded multiplied by 90% (the “Optional Conversion Feature”).

In ~~November~~consideration ~~2022,~~for ~~upon~~its ~~consummation~~services in respect of the ~~Business~~financing ~~Combination~~described above, the Company ~~assumed~~paid aPaulson ~~promissory~~Investment ~~note~~Company, LLC (the “December 2023 Placement Agent”) the commission of $~~211~~83,~~643~~600 ~~with~~and ~~Ignyte~~$63,840 ~~Sponsor~~for ~~LLC~~the December 2023 issuances and the January and February 2024 issuances, respectively. ~~The~~Further, ~~principal~~upon ~~balance~~conversion of the ~~note~~December ~~was~~2023 ~~payable~~Convertible inNotes ~~cash~~into ~~upon~~Common ~~consummation~~Stock of the ~~Business~~Company, ~~Combination.~~the NoDecember ~~interest~~2023 ~~shall~~Placement ~~accrue~~Agent onwill receive shares of restricted common stock of the ~~unpaid~~Company ~~principal~~equal ~~balance~~to (i) 4% of the ~~Note.~~total Atnumber ~~December~~of ~~31,~~shares ~~2022,~~of common stock received upon conversion of the ~~Company~~December ~~recorded~~2023 aConvertible ~~liability~~Notes issued for new capital and (ii) 1% of the ~~promissory~~total ~~note~~number of ~~$211,643.~~shares Inof ~~May~~common stock received upon conversion of the December 2023, ~~all~~Convertible ~~amounts~~Notes ~~owed~~issued ~~under~~for ~~this~~the ~~promissory~~exchange ~~note~~for ~~were~~April ~~cancelled~~2023 ~~and~~Convertible ~~forgiven~~Notes. The cash commission to the December 2023 Placement Agent was capitalized and amortized into the interest expense over the term of the convertible notes using the effective interest method. The Company ~~recognized~~accounted for the issuance of the common stock shares to the Placement Agent under ASC 718 as equity-based compensation based on a ~~capital~~performance ~~contribution~~condition. ~~from~~As the ~~related~~issuance ~~party~~of the common stock shares to the December 2023 Placement Agent upon conversion of ~~$211~~the notes was deemed not probable both at issuance date and March 31,~~643~~ 2024, no expense was recorded for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 related to this equity based compensation and had no impact on the interest expense for the three months ended March 31, 2024.

InThe ~~March~~Company ~~2023,~~determined ~~the~~that ~~Company~~both ~~received~~the ~~proceeds~~Automatic ~~from~~Conversion aFeature ~~loan~~and in the ~~amount~~Optional ofConversion ~~$250,000~~Feature ~~from~~are ~~its~~subject ~~founder~~to ~~and~~bifurcation ~~director.~~under ~~The~~the ~~loan~~guidance ~~matures~~in onASC ~~December~~815 ~~31,~~as ~~2023~~variable-share ~~and~~redemption ~~bear~~features ~~interest~~ at a ~~rate~~discount. ofThe ~~5.0%~~Company ~~per~~recognized ~~annum.~~the ~~The~~total ~~loan~~derivative ~~was~~liability ~~evidenced~~of by$573,546 aand ~~promissory~~$0 ~~note,~~for ~~which~~the ~~contains~~Automatic ~~customary~~Conversion ~~events~~Feature ofand ~~default~~the ~~relating~~Optional toConversion Feature, ~~among~~respectively, ~~other~~at ~~things,~~the ~~payment~~issuance ~~defaults~~dates ~~and~~(together, ~~breaches~~the of“December ~~representations~~2023 ~~and~~Conversion ~~warranties~~Feature Liability”). The ~~loan~~fair ~~may~~value beof ~~prepaid~~the byderivative ~~the~~liability ~~Company~~related atto ~~any~~the ~~time~~Automatic ~~prior~~Conversion toFeature ~~maturity~~was ~~without~~estimated by applying the ~~consent~~probability of ~~the~~a ~~lender. In~~business ~~April~~combination ~~2023,~~of ~~this~~50% ~~related~~to ~~party~~the ~~loan~~Automatic ~~was~~Discount ~~settled~~of ~~through~~43%. The ~~the~~fair ~~issuance~~value of athe ~~convertible~~derivative ~~note~~liability ~~payable,~~ related ~~party~~to ~~(see~~the ~~below).~~Optional ~~Interest~~Conversion ~~expense~~Feature ~~for~~was immaterial as the ~~three~~probability ~~months~~that ~~ended~~the ~~September~~Company ~~30,~~is ~~2023~~listed ~~and~~on ~~2022~~a ~~was~~public ~~$0.~~exchange ~~Interest~~in ~~expense~~absence ~~for~~of ~~the~~a ~~nine~~business ~~months~~combination ~~ended~~prior ~~September~~to ~~30,~~the ~~2023~~maturity ~~and~~of ~~2022~~the ~~was~~December ~~$1,918~~2023 ~~and~~Convertible ~~$0,~~Notes ~~respectively~~was deemed minimal.

~~Insurance~~At ~~Financing~~the ~~Payable~~issuance date, the proceeds from the December 2023 Convertible Notes were allocated to the December 2023 Conversion Feature Liability based on its fair value with the remaining proceeds allocated to the convertible notes. The resulting discount on the and the December 2023 Convertible Notes was accreted into the interest expense over the term of the convertible notes using the effective interest method. The cash commission to the December 2023 Placement Agent was capitalized and amortized into the interest expense over the term of the convertible notes using the effective interest method.

The Company obtained financing for certain Director & Officer liability insurance policy premiums. The agreement assigns First Insurance Funding (Lender) a first priority lien on and security interest in the financed policies and any additional premium required in the financed policies including (a) all returned or unearned

~~premiums,~~The ~~(b)~~Company ~~all~~recorded ~~additional~~interest ~~cash~~expense ~~contributions~~of or$186,775 ~~collateral~~for ~~amounts assessed by~~ the ~~insurance~~three ~~companies~~months inended ~~relation~~March to31, ~~the financed policies and financed by Lender~~2024, ~~(c)~~including ~~any~~amortization ~~credits~~of ~~generated by~~ the ~~financed~~discount ~~policies,~~on ~~(d)~~the ~~dividend~~convertible ~~payments,~~notes and ~~(e)~~the ~~loss~~commission ~~payments~~to ~~which~~the ~~reduce~~December ~~unearned~~2023 ~~premiums.~~Placement IfAgent ~~any~~of ~~circumstances~~$134,590. ~~exist~~At inMarch ~~which~~31, ~~premiums~~2024, ~~related~~the tooutstanding ~~any~~principal ~~Financed~~balance ~~Policy~~of ~~could~~the ~~become~~December ~~fully~~2023 ~~earned~~Convertible inNotes ~~the~~was ~~event of loss~~$1,704,603 ~~Lender~~plus ~~shall~~accrued beinterest ~~named~~of ~~a loss-payee with respect to such policy~~$55,183.

~~The~~December total premiums, taxes and fees financed were approximately $1,006,342 with an annual interest rate of 7.20%. In consideration of the premium payment by Lender to the insurance companies or the Agent or Broker, the Company unconditionally promises to pay Lender the amount Financed plus interest and other charges permitted under the Agreement. At September 30, 2023 ~~and~~Convertible ~~December 31~~Notes, ~~2022,~~related the Company recognized approximately $0 and $921,576, respectively, as an insurance financing note payable in its consolidated balance sheets. The Company had fully paid the insurance financing through monthly installment payments by August 1, 2023.party

~~Interest~~On ~~expense~~December ~~for~~18, 2023, the ~~three~~Company ~~months~~issued ~~ended~~a ~~September 30~~$500,000 ~~2023~~in ~~and~~convertible ~~2022~~notes ~~was~~to ~~$7,608,~~its founder and ~~$0,~~director ~~respectively.~~on ~~Interest~~the ~~expense~~same ~~for~~terms as the ~~nine~~December ~~months~~2023 ~~ended~~Convertible ~~September~~Notes ~~30,~~(“December 2023 ~~and~~Convertible ~~2022 was $22~~Notes,~~823and~~ ~~$0,~~related ~~respectively~~party”).

At the issuance date, the proceeds from the December 2023 Convertible Notes, ~~Payable~~related party, were allocated to the December 2023 Conversion Feature Liability based on its fair value of $107,143 with the remaining proceeds allocated to the convertible notes. The resulting discount on the and the December 2023 Convertible Notes, related party, was accreted into the interest expense over the term of the convertible notes using the effective interest method.

~~On November 1, 2022, the Company issued a $1,512,500 convertible note (the “2022 Convertible Note”).~~ The ~~2022 Convertible Note accrues interest at a rate of 8% per annum and is payable on October 31, 2023, provided however that the~~ Company ~~agrees~~recorded ~~to make mandatory prepayments on this note (which shall first be applied to accrued~~ interest ~~and~~expense ~~then to principal) from time to time in amounts equal to 15%~~ of ~~the gross proceeds received by the Company from any equity lines~~$37,025 ~~forward~~during ~~purchase agreements or other equity financings consummated by Company prior to~~ the ~~maturity~~three ~~date.~~months Onended ~~the~~March ~~maturity date~~31, ~~the~~2024 ~~note~~on ~~holder may, in its sole and absolute discretion, convert all or part of~~ the principal and/or accrued interest of this convertible note into shares of common stock of the Company at a per share conversion price equal to 90% of the volume weighted average price of a share of common stock of the Company for the five trading days immediately prior to the maturity date. The Company did not make the mandatory prepayments required under this note agreement and as such was in default as at September 30, 2023 and December 31, 2022. The Company determined that the conversion upon maturity represents an embedded derivative that requires bifurcation and separate accounting. The Company determined the embedded derivative liability fair value to be $165,000 and recorded the remaining proceeds to convertible note payable. The fair value of the derivative liability at September 30, 2023 ~~and~~Convertible ~~December 31~~Notes, ~~2022~~related ~~was $165~~party,~~000.~~ ~~The~~including ~~allocation~~amortization of ~~funds to~~ the ~~derivative liability resulted in a~~ discount toon the convertible notes of $~~165~~24,~~000~~559. ~~which~~At isMarch ~~being~~31, ~~amortized~~2024, tothe ~~interest~~outstanding ~~expense~~principal ~~over~~balance ~~the term~~ of the ~~convertible~~December ~~notes.~~2023 ~~The~~Convertible ~~Company recorded interest expense for the three and nine months ended September 30~~Notes, ~~2023~~ related ~~to the amortization of the discount to the convertible notes of $41~~party,~~703~~ ~~and~~was $~~123~~420,~~750,~~862 ~~respectively.~~plus ~~The~~accrued ~~Company~~interest ~~determined that the fair value~~ of ~~the equity linked prepayment provision~~$14, ~~which is separable derivative, is nominal~~247.

OnInsurance ~~November~~Financing ~~1, 2023, we entered into an amendment to the 2022 Convertible~~ Note ~~whereby the principal amount was reduced from $1,512,500 to $650,000. The interest was reduced to 6% per annum, maturity was extended to December 31, 2024 and the conversion option was removed.~~

InOn ~~April~~November ~~2023~~1, 2022, the Company ~~entered~~financed ~~into~~its ~~separate~~2022 ~~subscription~~annual ~~agreements~~Director ~~(the~~& ~~“2023~~Officer ~~Convertible~~liability ~~Note~~insurance ~~and~~policy ~~Warrant~~premium ~~Subscription Agreements”) for the purchase~~ of ~~convertible promissory notes in the aggregate principal amount of~~ $21,~~195~~006,~~034~~342 (~~the~~including ~~“2023~~premiums, ~~Convertible~~taxes ~~Notes”)~~ and anfees) ~~aggregate~~with ~~amount~~First ofInsurance ~~3,658,390~~Funding ~~warrants~~ (the “~~Convertible Note Warrants~~Lender”) ~~with a fair value of $1.5 million. The 2023 Convertible Notes will be convertible into shares of our common stock~~ at ~~$0.60 per share. For each share into which a 2023 Convertible Note is convertible, the investor received Convertible Note Warrants to purchase~~ an ~~equal~~annual ~~amount~~interest ofrate ~~shares~~ of ~~our common stock at $0~~7.6020% per share. In connection with the issuance of the Convertible Notes and the Convertible Note Warrants, in consideration for its services in respect of the financing described above, the Company also issued to Paulson Investment Company, LLC (the “~~Placement~~Insurance ~~Agent”)~~Financing ~~a purchase warrant (the “Placement Agent Warrant~~Note”) ~~to purchase 209,670 shares of the Company’s common stock at a price per share of $0~~.~~60.~~ The ~~Placement~~Insurance ~~Agent~~Financing ~~Warrant~~Note ~~has~~was apayable ~~5-year~~in ~~term.~~monthly Ininstallment ~~addition,~~payments ~~the~~through ~~Company~~August paid the Placement Agent a commission of approximately $125,000. The proceeds from the 2023 Convertible Notes were allocated to the Convertible Notes Payable, Derivative Liability and Warrant Liability based on their fair value of $0.1 ~~million~~, ~~0.6 million, and $1.5 million, respectively. The Company recorded interest expense for the three and nine months ended September 30,~~ 2023 ~~related to the amortization of the discount to the convertible notes of $1,083,835 and $1,827,811, respectively~~. ~~The table in Note 11 summarizes the activity for the 2023 Convertible Notes and~~

17On November 1, 2023, the Company financed its 2023 annual Director & Officer liability insurance policy premium of $631,993 with the Lender at an annual interest rate of 9.95%. The Insurance Financing Note is payable in monthly installment payments through July 1, 2024.

~~Warrant~~The ~~Subscription~~agreement ~~Agreement~~assigns the Lender a first priority lien on and security interest in the financed policies and any additional premium required in the financed policies including (a) all returned or unearned premiums, (b) all additional cash contributions or collateral amounts assessed by the insurance companies in relation to the financed policies and financed by Lender, (c) any credits generated by the financed policies, (d) dividend payments, and (e) loss payments which reduce unearned premiums. If any circumstances exist in which premiums related to any Financed Policy could become fully earned in the event of loss, Lender shall be named a loss-payee with respect to such policy.

~~Convertible~~The ~~Notes~~Company ~~Payable~~recognized $5,736 ~~Related~~and ~~Party~~$7,608 in interest expenses related the Insurance Financing for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the balance on the Insurance Financing Note was $315,997.

10.

In April 2023, the Company entered into a subscription agreement with its founder and director to settle $1,130,775 in related party loans made to the Company. The Company issued a $1,130,775 related party unsecured convertible promissory note and warrants to purchase 1,884,625 shares of common stock at $0.60 per share (the “Founder and Director Warrants”). The Company accounted for the issuance of convertible notes payable, related party as a debt extinguishment in accordance with ASC 470 and recognized the loss of $1 million for the nine month period ended September 30, 2023. At the time of issuance, the Company was experiencing financial difficulties and issued warrants with a fair value of $0.8 million and allowed the holder to convert the loan balance into shares of the Company's common stock. The Company recorded interest expense for the three and nine months ended September 30, 2023 related to the amortization of the discount to the convertible notes, related party of $30,654 and $51,090, respectively. The table in Note 11 summarizes the Related Party Convertible Notes and Warrant Subscription Agreement.

The following table presents the roll forward of the 2022 and 2023 convertible notes payable and 2023 related party convertible notes payable:

	2022 Convertible Notes		2023 Convertible Notes		2023 Related Party Convertible Notes
Balance at December 31, 2022	$	1,374,698	$	—	$	—
Accretion expense		40,797		—		—
Balance at March 31, 2023	$	1,415,495	$	—	$	—
Issuance of 2023 convertible notes		—		42,086		—
Issuance of related party convertible notes		—		—		1,069,467
Accretion expense		41,250		743,976		20,436
Balance at June 30, 2023	$	1,456,745	$	786,062	$	1,089,903
Accretion expense		41,703		1,083,835		30,654
Balance at September 30, 2023	$	1,498,448	$	1,869,897	$	1,120,557

Stockholders' Equity

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share, of which no shares were issued and outstanding at September 30, 2023.

Common Stock

The Company is authorized to issue 60,000,000 shares of common stock with a par value of $0.0001 per share.

In May 2022, the Company entered into an agreement with a certain investor in which the investor purchased an aggregate of 132,302 shares of the Peak Bio Co., Ltd. common stock for aggregate gross proceeds of approximately $1.2 million.

Key Company Stockholder Agreements

InOn April ~~2022~~5, ~~the~~2023, ~~Company entered into a forward purchase agreement (~~the ~~“Key~~ Company ~~Stockholder~~received ~~Forward~~notice ~~Purchase~~from ~~Agreement”) with~~ its founder and director, ~~Hoyoung~~informing ~~Huh (~~the ~~“Key~~ Company ~~Stockholder”).~~that ~~Pursuant~~he towould not consummate the ~~terms~~purchase of the Key Company Stockholder Forward Purchase Agreement, ~~the~~as ~~Key~~a ~~Company~~result ~~Stockholder~~of ~~would,~~the ~~subject~~Company’s failure to satisfy the ~~receipt~~condition ofto ~~margin~~be ~~financing~~listed ~~within~~on ~~180~~Nasdaq ~~days~~as ~~following~~required by the ~~closing~~agreement. ofAs ~~the~~a ~~Business Combination~~result, ~~purchase shares of~~ the Company's ~~common~~cancelled ~~stock~~and atretired athe ~~purchase~~1,930,501 ~~price~~shares of ~~$10.00~~common ~~per~~stock ~~share~~being held in aescrow ~~private~~and ~~placement~~recognized ~~(the~~$13,000 ~~“Key~~loss ~~Company~~on ~~Stockholder~~extinguishment ~~Purchase”) for up to an aggregate amount~~ of ~~$10,000,000 (~~the ~~“Subscription~~Key ~~Amount”),~~Company ~~subject~~Stockholder toForward ~~the~~Purchase ~~conditions~~Liability ~~set forth~~ in the ~~Key~~second ~~Company~~quarter ~~Stockholder~~of ~~Forward Purchase Agreement~~2023.

18On April 5, 2023, the Company and its Key Company Stockholder entered into a letter agreement to provide for the conversion of up to $2,031,034 of the Founder loans into future debt and equity financings on the same terms with other investors. Pursuant to the agreement, the amount converted would be based on the Key Company

In December 2022, the Company and the Key Company Stockholder entered into an amendment to the Key Company Stockholder Forward Purchase Agreement (the “Amendment to Key Company Stockholder Forward Purchase Agreement”), pursuant to which (i) the Key Company Stockholder Purchase is no longer subject to the receipt of margin financing as a condition precedent, (ii) the Key Company Stockholder agreed to fund the Subscription Amount on or prior to March 31, 2023 and (iii) the Key Company Stockholder Purchase would be consummated at a purchase price of $5.18 per share of the Company's common stock. Accordingly, upon closing of such purchase, the Key Company Stockholder would have received 1,930,501 shares of common stock in exchange for his $10.0 million investment in the Company.17

InStockholder's ~~April~~pro-rata ~~2023,~~portion of the ~~Company~~equity ~~received~~ownership ~~notice~~in ~~from~~the ~~its~~Company’s ~~founder~~outstanding ~~and~~common ~~director~~stock ~~informing~~and ~~the~~would ~~Company~~not ~~that~~exceed hein ~~would~~the ~~not~~aggregate ~~consummate~~ the ~~purchase~~amount of the outstanding debt with Key Company Stockholder. ~~Forward~~On ~~Purchase~~April ~~Agreement~~28, as2023, ~~a result of~~ the Company’s ~~failure~~entered tointo ~~satisfy~~a ~~the~~subscription ~~condition~~agreement ~~that~~with ~~the~~its ~~Company's~~founder ~~common~~and ~~stock~~director ~~continue~~ to beexchange ~~listed~~$1,130,775 onin ~~Nasdaq~~outstanding asFounder ~~required~~Loans byinto the ~~agreement.~~same Asamount aof ~~result,~~convertible ~~the~~promissory ~~Company~~note ~~cancelled~~with ~~and~~the ~~forfeited~~same terms as the ~~1,930,501~~April ~~shares~~2023 ofConvertible ~~common~~Notes ~~stock~~and ~~being~~1,884,625 ~~held~~2023 inConvertible ~~escrow~~Note Warrants.

The Company determined that the Key Company Stockholder Forward Purchase Agreement required accounting as a liability and was fair valued.

White Lion Common Stock Purchase and Registration Rights Agreements

On November 3, 2022, the Company entered into a Common Stock Purchase Agreement (~~as amended,~~ the “White Lion Purchase Agreement") and Registration Rights (the “White Lion RRA”) with White Lion Capital, LLC, a Delaware limited liability company (“White Lion”). Pursuant to the White Lion Purchase Agreement, the Company has the right, but not the obligation, to require White Lion to purchase, from time to time, up to $100,000,000 in aggregate gross purchase price of newly issued shares of its ~~common~~Common ~~stock~~Stock, subject to certain limitations and conditions set forth in the White Lion Purchase Agreement. ~~Capitalized terms used but not otherwise defined in this section shall have the meanings given to such terms by the White Lion Purchase Agreement and the White Lion RRA.~~ The Company recorded a derivative liability for this agreement (see Note 116).

The Company is obligated under the White Lion Purchase Agreement and the White Lion RRA to file a registration statement with the SEC to register the ~~common~~Common ~~stock~~Stock under the Securities Act, for the resale by White Lion of shares of ~~common~~Common ~~stock~~Stock that the Company may issue to White Lion under the White Lion Purchase Agreement.

Subject to the satisfaction of certain customary conditions including, without limitation, the effectiveness of a registration statement registering the shares issuable pursuant to the White Lion Purchase Agreement, the Company's right to sell shares to White Lion will commence on the effective date of the registration statement and extend until November 1, 2025. During such term, subject to the terms and conditions of the White Lion Purchase Agreement, the Company may notify White Lion when it exercises its right to sell shares (the effective date of such notice, a “Notice Date”).

The number of shares sold pursuant to any such notice may not exceed (i) the lower of (a) the Purchase Notice Fixed Limit (described below) and (b) the product of (1) the Average Daily Trading Volume (as defined in the White Lion Purchase Agreement), and (2) the applicable Percentage Limit (as defined in the White Lion Purchase Agreement). The Purchase Notice Fixed Limit is $500,000 upon payment of the Initial Commitment Shares (as defined in the White Lion Purchase Agreement) and can be increased in two tranches: (A) to $1,000,000 following an aggregate purchase of $5,000,000 shares and issuance by the Company to White Lion of an additional $250,000 in Commitment Shares, and (B) to $2,000,000 following an aggregate purchase of $10,000,000 shares and issuance by the ~~Company~~ for payment of an additional $250,000 in Commitment Shares (as defined in the White Lion Purchase Agreement).

The applicable Percentage Limit is 40% or 150% depending on the price the Company agrees to sell shares to White Lion. At an applicable Percentage Limit of 40%, the Purchase Price to be paid by White Lion for any such shares will equal 97% of lowest daily volume-weighted average price of ~~common~~Common ~~stock~~Stock during a period of two consecutive Trading Days following the applicable Purchase Notice Date (as defined in the White Lion Purchase Agreement) until an aggregate of $50,000,000 in Purchase Notice Shares (as defined in the White Lion Purchase Agreement) have been purchased under White Lion Purchase Agreement, at which point the Purchase Price (as defined in the White Lion Purchase Agreement) to be paid by White Lion will equal 98% of the lowest daily volume-weighted average price of ~~common~~Common ~~stock~~Stock during a period of two consecutive Trading Days following the applicable Purchase Notice Date. At an applicable Percentage Limit of 150%, the Purchase Price to be paid by White Lion for any such shares will equal 94.5% of the lowest daily volume-weighted average price of Common Stock during a period of three consecutive Trading Days following the applicable Purchase Notice Date.

19The Company will have the right to terminate the White Lion Purchase Agreement at any time after commencement, at no cost or penalty, upon three (3) Trading Days’ prior written notice. Additionally, White Lion will have the right to terminate the White Lion Purchase Agreement upon three (3) days’ prior written notice to the Company if (i) there is a Fundamental Transaction (as defined in the White Lion Purchase Agreement), (ii) the Company is in breach or default in any material respect of the White Lion RRA, (iii) there is a lapse of the effectiveness, or unavailability of, the registration statement for a period of 45 consecutive Trading Days or for more than an aggregate of 90 Trading Days in any 365-day period, (iv) the suspension of trading of the Common Stock for a period of five (5) consecutive Trading Days, (v) the material breach of the White Lion Purchase Agreement by the Company, which breach is not cured within the applicable cure period or (vi) a Material Adverse Effect (as defined

the applicable Purchase Notice Date. At an applicable Percentage Limit of 150%, the Purchase Price to be paid by White Lion for any such shares will equal 94.5% of the lowest daily volume-weighted average price of common stock during a period of three consecutive Trading Days following the applicable Purchase Notice Date. 18

The Company will have the right to terminate the White Lion Purchase Agreement at any time after commencement, at no cost or penalty, upon three (3) Trading Days’ prior written notice. Additionally, White Lion will have the right to terminate the White Lion Purchase Agreement upon three (3) days’ prior written notice to the Company if (i) there is a Fundamental Transaction (as defined in the White Lion Purchase Agreement), (ii) the Company is in breach or default in any material respect of the White Lion RRA, (iii) there is a lapse of the effectiveness, or unavailability of, the registration statement for a period of 45 consecutive Trading Days or for more than an aggregate of 90 Trading Days in any 365-day period, (iv) the suspension of trading of the common stock for a period of five (5) consecutive Trading Days, (v) the material breach of the White Lion Purchase Agreement by the Company, which breach is not cured within the applicable cure period or (vi) a Material Adverse Effect (as defined in the White Lion Purchase Agreement) has occurred and is continuing. No termination of the White Lion Purchase Agreement will affect the registration rights provisions contained in the White Lion RRA.

In consideration for the commitments of White Lion, as described above, the Company has agreed that it will issue to White Lion shares of ~~common~~Common ~~stock~~Stock having a value of $250,000 based upon the Closing Sale Price (as defined in the White Lion Purchase Agreement) of ~~common~~Common ~~stock~~Stock two Trading Days prior to the filing of the Initial Registration Statement as Initial Commitment Shares. The Company may increase the number of shares it may sell to White Lion by issuing additional Commitment Shares in two additional tranches of $250,000 each. The Company issued Initial Commitment Shares of 50,200 shares of ~~common~~Common ~~stock~~Stock to White Lion, based upon the Closing Sale Price of our ~~common~~Common ~~stock~~Stock of $4.98 per share on November 30, 2022.

Concurrently with the execution of the White Lion Purchase Agreement, the Company entered into the White Lion RRA with White Lion in which the Company agreed to register the shares of ~~common~~Common ~~stock~~Stock purchased by White Lion with the SEC for resale within 30 days of the consummation of a business combination. The White Lion RRA also contains usual and customary damages provisions for failure to file and failure to have the registration statement declared effective by the SEC within the time periods specified.

The White Lion Purchase Agreement and the White Lion RRA contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.

The White Lion 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 estimated at $1,900,000 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 $13.05, expected volatility of 86.5%, risk-free rate of 4.53% and discounted at 45.0% for the probability of the Company timely filing all SEC documents and meeting the NASDAQ listing requirements.

In March 2023, the Company entered into an amendment to the White Lion Purchase Agreement to give the Company the right, but not the obligation to require White Lion to purchase shares of the Company's common stock while trading on the OTC Market. Under the terms of the amendment, at an applicable Percentage Limit of 200%, the Purchase Price to be paid by White Lion for any such shares will equal 90% of the lowest daily volume-weighted average price of common stock during a period of six consecutive Trading Days following the applicable Purchase Notice Date if the Company is listed on the OTC Market with the exception of the OTC Pink or OTC Bulletin Board, in which case the Purchase Price will equal 85% of the lowest daily volume-weighted average price of common stock during a period of six consecutive Trading Days following the applicable Purchase Notice Date. Further, the Company will issue to White Lion within five (5) Trading Days following the effective date of the amendment fully paid, non-assessable shares of the Company's common stock equal to the quotient obtained by dividing (i) $250,000 and (ii) the lowest traded sale price of the common stock of the 10 (ten) Trading Days prior to the effective date of the amendment, minus 50,200. In March 2023, the Company issued 412,763 shares of its common stock to White Lion.

In August 2023, the Company and White Lion entered into a second amendment to the common stock Purchase Agreement (the “Second Amendment”). The Second Amendment includes, among other things, the right of the Company to issue a Purchase Notice (defined in the Second Amendment as an “Accelerated Purchase Notice”) requesting White Lion to purchase newly issued shares of common stock from the Company, subject to acceptance by White Lion, with pricing of the shares to be sold by the Company to White Lion under such Accelerated Purchase Notice determined on the date of issuance by the Company of the Accelerate Purchase Notice and acceptance by White Lion (the date of such notice defined as the “Accelerated Valuation Period”). Such accelerated purchases pursuant to an Accelerated Purchase Notice will be sold to White Lion at a price, defined as an “Accelerated Purchase Price,” equal to the lower of (i) the opening price of common stock during the Accelerated Valuation Period, (ii) the closing price of the common stock during Accelerated Valuation Period, or (iii) the volume weighted average price of the common stock during Accelerated Valuation Period; provided, however, that if at the time the Company delivers an Accelerated Purchase Notice to Investor the price of the common stock is lower than the opening price of the common stock during the Accelerated Valuation Period, the Accelerated Purchase Price will be discounted by 20%. In addition, the Second Amendment provides for an “Accelerated Purchase Notice Limit” equal to 200%.

2019

or (iii) the volume weighted average price of the common stock during Accelerated Valuation Period; provided, however, that if at the time the Company delivers an Accelerated Purchase Notice to Investor the price of the common stock is lower than the opening price of the common stock during the Accelerated Valuation Period, the Accelerated Purchase Price will be discounted by 20%. In addition, the Second Amendment provides for an “Accelerated Purchase Notice Limit” equal to 200%.

In addition, in the event the Company does not issue Purchase Notices (as defined in the White Lion Purchase Agreement) to White Lion providing for the purchase of at least $1,250,000 of Purchase Shares (as defined in the White Lion Purchase Agreement and Second Amendment) in the aggregate within 180 days following the effective date of the amendment, the Company will issue to White Lion an additional number of fully paid, non-assessable shares of common stock equal to the quotient obtained by dividing (i) $150,000 and (ii) the lowest Closing Sale Price (as defined in the White Lion Purchase Agreement and Second Amendment) of common stock of the 10 (ten) Trading Days prior to the 180th day following the effective date of the amendment.

~~During~~As ~~the~~at ~~three~~March ~~months ended September 30~~31, ~~2023,~~2024 ~~the~~and ~~Company~~December ~~issued an aggregate of 729~~31,~~000~~ ~~common shares to White Lion for aggregate gross proceeds of $105,317 pursuant to the terms of the agreement. As at September 30,~~ 2023, the Company had no outstanding purchase notices issued to White Lion.

The Company determined that the White Lion Purchase Agreement included an embedded put option and an embedded forward option and that these derivatives require bifurcation and separate accounting (see Note 11).

Public Warrants

In November 2022, upon consummation of the Business Combination, the Company assumed 2,875,000 public warrants ~~(the~~from ~~“Public~~Ignyte ~~Warrants”)~~Acquisition Corporation. Each ~~Public~~whole ~~Warrant~~warrant entitles the holder to purchase one share of ~~common~~Common ~~stock~~Stock at a price of $11.50 per share, subject to adjustment as discussed herein. The ~~Public~~warrants ~~Warrants~~ became exercisable 30 days after the completion of the Business Combination. However, no ~~Public~~warrants ~~Warrants~~ will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the ~~Public~~warrants ~~Warrants~~ and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the ~~Public~~public ~~Warrants~~warrants is not effective within a specified period following the consummation of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. In the event of such cashless exercise, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the ~~Public Warrants~~warrants, multiplied by the difference between the exercise price of the ~~Public~~warrants ~~Warrants~~ and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose will mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the trading day prior to the date of exercise. The ~~Public~~warrants ~~Warrants~~ will expire on the fifth anniversary of the completion of an initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

The Company may call the ~~Public~~warrants ~~Warrants~~ for redemption:

•

in whole and not in part;

•

at a price of $0.01 per warrant;

•

at any time after the warrants become exercisable,

•

upon not less than 30 days’ prior written notice of redemption to each warrant holder; and

•

if, and only if, the reported last sale price of the ~~common~~Common ~~stock~~Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations) for any 20 trading days within a 30-trading day period commencing at any time after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and

•

if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.

21If the Company calls the warrants for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose shall mean the average

If the Company calls the Public Warrants for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Public Warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Public Warrants.20

reported last sale price of the shares of common stock for the 5 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.

There were no exercises or forfeitures of the Public Warrants during the three months ended March 31, 2024.

Private Placement Warrants

In November 2022, upon consummation of the Business Combination, the Company assumed 2,500,000 ~~private~~Private ~~placement~~Placement ~~warrants~~Warrants ~~(the~~from ~~“Private~~Ignyte ~~Placement~~Acquisition ~~Warrants”)~~Corporation. Each Private Placement Warrant will entitle the holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment.

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants ~~are~~were non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees. Further, the Sponsor had agreed not to transfer, assign, or sell the Private Placement Warrants (including the shares of common stock issuable upon the exercise of the Private Placement Warrants), except to certain permitted transferees, until after the consummation of the Business Combination.

AThe ~~summary~~Private ofPlacement Warrants were accounted for under ASC 815, pursuant to which the ~~Company's~~Private ~~outstanding~~Placement ~~warrants~~Warrants atdo ~~September~~not 30meet the criteria for equity classification and must be recorded as liabilities. The Private Placement Warrants were valued using the Black Scholes Option Pricing Model, ~~2023~~which is considered to be a Level 3 fair value measurement, as ~~follows:~~there was no observable market for the Private Placement Warrants and was determined based on significant inputs not observable in the market.

Description	Number of Warrants		Exercise price per share		Expiration Date
Private Placement Warrants		2,500,000	$	11.50	11/1/2027
Public Warrants		2,875,000	$	11.50	11/1/2027
Convertible note warrants		3,868,060	$	0.60	4/28/2028
Founder and director warrants		176,292	$	0.60	4/28/2028
Other Warrants		492,045	$	0.01	11/1/2023
Outstanding Warrants		9,911,397

The following weighted average assumptions were used in determining the fair value of the Private Placement Warrants at March 31, 2024:

The following table summarizes the warrant activity:


	March 31,
		2024
Expected volatility			100	%
Risk-free interest rate			4.40	%
Expected term (in years)			3.59
Expected dividend yield			0	%

	Number of Warrants			Weighted-average exercise price per share		Weighted average remaining contractual term (in years)
Outstanding at December 31, 2022		5,867,045		$	10.54		3.75
Issued		5,752,685		$	0.60		4.58
Expired		—		$	—
Exercised		(1,708,333	)	$	0.60
Outstanding at September 30, 2023		9,911,397		$	6.48		4.09

There were no exercises or forfeitures of the Private Placement Warrants during the three months ended March 31, 2024.

~~In connection with the~~ April 2023 Convertible ~~Notes, the Company issued to its founder and director warrants to purchase 1,884,625 shares of the Company’s common stock with an exercise price of $0.60 per share (~~Note ~~9). The Founder and Director~~ Warrants were accounted for under ASC 815, “Derivatives and Hedging,” pursuant to which the Founder and Director Warrants do not meet the criteria for equity classification and must be recorded as liabilities, since the total number of shares of common stock not yet issued or issuable pursuant to settlement of derivative liabilities and exercise of options and warrants, exceeded the number of authorized shares.

~~During~~On ~~the~~April ~~nine months ended September 30~~28, 2023, in connection with the ~~Company's~~April ~~founder~~2023 ~~and~~Convertible ~~director~~Notes ~~exercised~~and ~~warrants~~April to2023 ~~purchase~~Convertible 1Notes,~~708,333~~ ~~shares~~related ofparty, the Company’s ~~common~~issued ~~stock at $0.60 per share for a total purchase price of $1~~5,~~025~~752,~~000.~~685 ~~The~~warrants ~~fair~~to ~~value~~purchase of the ~~Founder~~Company's ~~and~~common ~~Director~~stock ~~Warrants~~ at ~~the exercise dates was~~ $0.860 ~~million~~per ~~which was reclassified from the warrant liability into the additional paid-in capital (see Note 11)~~share.

On June 22, 2023, the founder and director exercised 666,667 of the April 2023 Convertible Note Warrants for total proceeds of $400,000. The fair value of the April 2023 Convertible Note Warrants at the exercise date was $244,261 which was reclassified from the warrant liability into the additional paid-in capital. The Company recognized a capital contribution of $244,261 using a Black Scholes Option Pricing Model based on the following assumptions: stock price of $0.598, expected volatility of 72.0%, risk-free rate of 4.03% and expected term of 4.85 years.

On July 20, 2023, the founder and director exercised 458,333 of the April 2023 Convertible Note Warrants for total proceeds of $275,000. The fair value of the April 2023 Convertible Note Warrants at the exercise date was $269,004 which was reclassified from the warrant liability into the additional paid-in capital. The Company recognized a capital contribution of $269,004 related to the fair value of the April 2023 Convertible Note Warrants at the exercise date, which as determined using a Black Scholes Option Pricing Model based on the following assumptions: stock price of $0.84, expected volatility of 76.2%, risk-free rate of 4.43% and expected term of 4.78 years.

On August 14, 2023, Company's founder and director exercised 583,333 of the April 2023 Convertible Note Warrants for a total purchase price of $350,000. The fair value of the April 2023 Convertible Note Warrants at the exercise dates was $248,303 which was reclassified from the warrant liability into the additional paid-in capital. The Company recognized a capital contribution of $248,303 million using a Black Scholes Option Pricing Model based

on the following assumptions: stock price of $0.66, expected volatility of 76.0%, risk-free rate of 4.64% and expected term of 4.71 years.

On November 1, 2023, the remaining 4,044,352 April 2023 Convertible Note Warrants were reclassified from liability into equity following the exchange of the November 2022 Convertible Notes into Promissory Note (see Note 10) and resulting sufficient number of authorized shares being available for issuance of the warrants. The fair value of the warrant liability was $65,469 at the reclassification date.

The summary of the Company's outstanding common stock warrants at March 31, 2024 is as follows:


Description	Number of Warrants		Exercise price per share		Expiration Date
Private Placement Warrants		2,500,000	$	11.50	11/1/2027
Public Warrants		2,875,000	$	11.50	11/1/2027
April 2023 Convertible note warrants		3,868,060	$	0.60	4/28/2028
April 2023 Convertible note warrants, related party		176,292	$	0.60	4/28/2028
Total		9,419,352

11.

Fair Value of Financial Instruments

The Company believes the carrying amounts of its cash, accounts payable and accrued expenses, and debt balances approximate their fair values due to their near-term maturities. There were no transfers among Level 1, Level 2 or Level 3 categories.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy


	Fair Value Measurement at March 31, 2024
	Total		Level 1		Level 2		Level 3
								-
Derivative liability		688,255		—		—		688,255
Warrant liability	Less than $1			—		—	Less than $1
Total Liabilities	$	688,255	$	—	$	—	$	688,255


	Fair Value Measurement at December 31, 2023
	Total		Level 1		Level 2		Level 3
								-
Derivative liability		361,704		—		—		361,704
Warrant liability	Less than $1			—		—	Less than $1
Total Liabilities	$	361,704	$	—	$	—	$	361,704

The table below presents the changes in Level 3 liabilities (assets) measured at fair value on a recurring basis during the three months ended March 31, 2024 and 2023:


	White Lion Derivative Liability			Key Company Stockholder Forward Liability (Asset)			Private Placement Warrants Liability			November 2022 Convertible Note Liability		April 2023 Conversion Feature Liability		April 2023 Convertible Notes Warrants Liability		December 2023 Conversion Feature Liability
Balance at January 1, 2023	$	1,000		$	(13,000	)	$	525,000		$	165,000	$	—	$	—	$	—
Change in fair value		(1,000	)		13,000			(525,000	)		—		—		—		—
Balance at March 31, 2023	$	—		$	—		$	—		$	165,000	$	—	$	—	$	—

Balance at January 1, 2024	$	—		$	—		$	—		$	—	$	—	$	—	$	361,704
Issuance of December 2023 Convertible Notes		—			—			—			—		—		—		211,842
Change in fair value		—			—			—			—		—		—		114,709
Balance at March 31, 2024	$	—		$	—		$	—		$	—	$	—	$	—	$	688,255

InWhite ~~accordance~~Lion ~~with~~Derivative ~~ASC~~Liability 820, Fair Value Measurements and Disclosures, fair value is defined as the exit price, or the amount that would be received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs include those that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability.

The ~~Company’s~~White ~~financial~~Lion ~~assets~~Derivative Liability is valued using Monte Carlo simulation model and ~~liabilities~~a ~~are~~such ~~measured~~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 White Lion Derivative Liability at March 31, 2023 of $1,000 was determined using the Monte Carlo Model based on the projected stock price of $0.65, expected volatility of 78%, risk-free rate of 3.84% and ~~classified~~discounted ~~within~~by 5.0% for the probability of the Company timely filing all SEC documents and meeting the OTC Market listing requirements. The fair value ~~hierarchy~~of ~~which~~the isWhite ~~defined~~Lion asPurchase ~~follows:~~Agreement was $0 at March 31, 2024.

~~Level~~The 1following —weighted ~~Quoted~~average ~~prices~~assumptions inwere ~~active~~used ~~markets~~in ~~for~~determining ~~identical~~the ~~assets~~fair orvalue ~~liabilities~~of ~~that~~ the ~~Company~~White ~~has~~Lion ~~the~~Purchase ~~ability~~Agreement toat ~~access~~March at31, ~~the~~2024 ~~measurement~~and ~~date.~~March 31, 2023:

Level 2 — Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.


	March 31,			March 31,
	2024			2023
Stock Price	$	0.01		$	0.65
Expected volatility		86.1	%		78.0	%
Risk-free interest rate		4.66	%		3.84	%
Discount related to the probability of timely filing all SEC documents and meeting the NASDAQ listing requirements		2.5	%		5.0	%
Expected dividend yield		—	%		—	%

~~Level~~April 32023 —Convertible ~~Unobservable~~Note ~~inputs~~Warrants ~~that are supported by little or no market activity~~ and ~~that~~Placement ~~are~~Agent ~~significant to the fair value of the assets or liabilities.~~ Warrants

The ~~categorization~~April of2023 aConvertible ~~financial~~Note ~~instrument~~Warrants ~~within~~and ~~the~~Placement ~~valuation~~Agent ~~hierarchy~~Warrants iswere ~~based~~accounted ~~upon~~as a liability at the ~~lowest~~issuance ~~level~~date and ofwere ~~input~~fair ~~that~~valued using a Black Scholes Option Pricing Model, and is ~~significant~~considered to ~~the~~be a Level 3 fair value measurement., ~~The~~as ~~Company~~the ~~believes~~fair value of the ~~carrying~~instruments ~~amounts~~was ofdetermined ~~its~~based ~~cash~~on ~~and~~significant ~~cash~~inputs ~~equivalents~~not observable in the market. On November 1, ~~related~~2023, ~~party~~all ~~loan~~outstanding ~~and~~April ~~debt~~2023 ~~approximate~~Convertible ~~their~~Note ~~fair~~Warrants ~~values~~were ~~due~~reclassified tofrom ~~their~~liability ~~near-term~~into ~~maturities~~equity (see Note 10).

The ~~following table presents a roll-forward of the~~ fair value of the ~~derivative~~April ~~liability,~~2023 ~~derivative~~Convertible ~~asset~~Note ~~and~~Warrants ~~warrant liability that will continue to be measured~~ at ~~fair~~the ~~value~~reclassification ondate awas ~~recurring basis for which fair value is determined~~ based on ~~significant inputs not observable in~~ the ~~market,~~following which represents a Level 3 measurement within the fair value hierarchy as of September 30, 2023 and December 31, 2022. The valuation models used to determine the fair value at each reporting date require management judgment and pricing inputs from observable and unobservable markets, including projected share prices and probabilities of success. Significant deviations from these estimates and inputs could result in a material change in fair value.assumptions:

	Derivative Liability			Derivative Asset			Warrant Liability
Stock price		$0.08
Balance at December 31, 2022	$	166,000		$	13,000		$	525,000
Expected volatility		74.9	%
Fair value adjustments		(1,000	)		(13,000	)		(525,000	)
Risk-free interest rate		4.65	%
Balance at March 31, 2023	$	165,000		$	—		$	—
Expected term (in years)		4.49
Issuance of 2023 convertible notes and warrants		560,436			—			1,615,194
Expected dividend yield		0	%
Issuance of related party convertible notes and warrants		288,710			—			786,967
Capital Contribution upon exercise of warrants		—			—			(244,261	)
Fair value adjustments		548,233			—			712,857
Balance at June 30, 2023	$	1,562,379		$	—		$	2,870,757
Capital Contribution upon exercise of warrants		—			—			(517,307	)
Fair value adjustments		(1,397,379	)		—			(2,218,040	)
Balance at September 30, 2023	$	165,000		$	—		$	135,410

~~The~~Private ~~derivative~~Placement liability, accounted for under ASC 480, “Distinguishing Liabilities from Equity,” related to the $1,512,500 convertible note issued on November 1, 2022 (as described in Note 9) for the embedded beneficial conversion feature for the settlement of the notes upon maturity was initially valued at $165,000 based on the following inputs: the estimated probability of maturity of 100%, the 10% discount awarded upon conversion and a discount rate of 10%.Warrants

The ~~derivative~~fair ~~asset,~~value ~~accounted~~of ~~for under ASC 815, “Derivatives and Hedging,” for a put option related to~~ the ~~Key~~Private ~~Company~~Placement ~~Stockholder~~Warrants ~~Forward~~was ~~Purchase~~estimated ~~Agreement~~using ~~entered into in April 2022 (as described in Note 10) had~~ a ~~fair~~Black ~~value~~Scholes ofOption ~~$13,000~~Pricing ~~on December 31~~Model, ~~2022,~~ which 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 ~~is the probability~~ of the ~~key~~Private ~~company~~Placement ~~stockholder~~Warrants ~~obtaining~~at aboth ~~margin~~March ~~loan~~31, 2024 and ~~the~~March ~~Company~~31, ~~meeting~~2023 ~~the~~was ~~NASDAQ listing requirements~~$0. ~~The fair value of the Key Company Stockholder~~

The fair value of the Private Placement Warrants was based on the following assumptions:

Forward Purchase Agreement at December 31, 2022 was valued using a probability weighted scenario analysis with a Black Scholes Option Pricing Model based on a stock price of $4.21, expected volatility of 82.2%, risk-free rate of 4.5% and discounted at 0.5% for the probability of the Company closing the Business Combination Agreement, the key company stockholder obtaining a margin loan and the Company meeting the NASDAQ listing requirements. The fair value of the Key Company Stockholder Forward Purchase Agreement at March 31, 2023 was valued at $0 as the time to fund concluded on March 31, 2023, resulting in a change in fair value of derivative asset of $13,000 for the nine months ended September 30, 2023. In April 2023, this agreement was cancelled due to the Company's failure to satisfy the condition that the Company's common stock continue to be listed on Nasdaq as required by the agreement.


	March 31,			March 31,
	2024			2023
Stock Price	$	0.01		$	0.65
Expected volatility		100.0	%		14.0	%
Risk-free interest rate		4.40	%		4.59	%
Expected term (in years)		3.59			4.59
Expected dividend yield		—	%		—	%

~~The~~April White Lion Purchase Agreement (as described in Note 10) qualifies as a standby equity purchase agreement under ASC 815 “Derivatives and Hedging” and 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. As at September 30, 2023 ~~and~~Conversion ~~December~~Feature 31, 2022, there were no outstanding notices issued to White Lion for the sale of common stock of the Company. The derivative liability, accounted for under ASC 815, “Derivatives and Hedging,” for a put option related to the White Lion Purchase Agreement entered into on November 3, 2022 had a fair value of $1,000 on December 31, 2022, which 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 at December 31, 2022 of the White Lion Purchase Agreement was determined using a Monte Carlo simulation based on the projected stock price of $4.19, expected volatility of 81.0%, risk-free rate of 4.16% and discounted at 0.25% for the probability of the Company timely filing all SEC documents and meeting the NASDAQ listing requirements. The fair value of the White Lion Purchase Agreement at September 30, 2023 was valued using a Monte Carlo simulation based on the projected stock price of $0.12, expected volatility of 90.3%, risk-free rate of 4.89% and discounted by 2.5% for the probability of the Company timely filing all SEC documents and meeting the OTC Market listing requirements resulting in a change in fair value of $1,000 for the nine months ended September 30, 2023 and a derivative liability of $0 at September 30, 2023.Liability

InOn ~~November~~January ~~2022~~1, ~~upon~~2024, ~~consummation~~on adoption of ~~the~~ASU ~~Business Combination~~2020-06, the ~~Company~~April ~~assumed~~2023 ~~2,500,000~~Conversion ~~Private~~Feature ~~Placement~~Liability ~~Warrants~~met ~~(as~~the ~~defined~~derivative inaccounting ~~Note~~scope ~~10).~~exception ~~The Private Placement Warrants were accounted for under ASC 815, “Derivatives~~ and ~~Hedging,” pursuant to which~~ the ~~Private~~conversion ~~Placement~~feature ~~Warrants~~no dolonger ~~not~~required ~~meet~~bifurcation form the ~~criteria~~April ~~for~~2023 ~~equity~~Convertible ~~classification~~Notes and ~~must~~2023 beApril ~~recorded~~2023 asConvertible ~~liabilities.~~Notes, ~~The~~related ~~Private~~party. ~~Placement~~On ~~Warrants~~January ~~were valued using a Modified Black Scholes Option Pricing Model~~1, ~~which is considered to be a Level 3 fair value measurement~~2024, as the fair value ~~was determined based on significant inputs not observable in the market. The fair value~~ of the Private Placement Warrants was discounted to present value at December 31, 2022, utilizing the Company's stock price of $4.19, a risk-free rate of 3.99%, and expected volatility of 30% of the Company's common stock. The fair value of the ~~Private~~April ~~Placement Warrants was discounted to present value at September 30,~~ 2023, ~~utilizing~~Conversion ~~the~~Feature ~~Company's~~Liability ~~stock~~was ~~price of~~ $0.~~12,~~ ~~a risk-free rate of 4.80%, and expected volatility of 89.6% of the Company's common stock.~~

InDecember ~~April~~ 2023, ~~the~~Conversion ~~Company~~Feature issued 2023 Convertible Notes for an aggregate amount of $2,195,034 and 2023 Convertible Note Warrants for an aggregate amount of 3,658,390 warrants (see Note 9). The Company also issued 209,670 Placement Agent Warrants with the same terms as the 2023 Convertible Note Warrants. The 2023 Convertible Note Warrants and the Placement Agent Warrants were accounted for under ASC 815, “Derivatives and Hedging,” pursuant to which the 2023 Convertible Note Warrants and Placement Agent Warrants do not meet the criteria for equity classification and must be recorded as liabilities under ASC 815 at the issuance date and September 30, 2023, since the total number of shares of common stock not yet issued or issuable pursuant to settlement of derivative liabilities and exercise of options and warrants, exceeded the number of authorized shares. The 2023 Convertible Note Warrants and Placement Agent Warrants were valued using a Black Scholes Option Pricing Model, which 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 initial fair value was determined to be $1.6 million based on the following assumptions: stock price of $0.655, expected volatility of 72.8%, risk-free rate of 3.51% and expected term of 5 years. The fair value of the 2023 Convertible Note Warrants and Placement Agent Warrants at September 30, 2023 was valued at $0.1 million using a Black Scholes Option Pricing Model based on the following assumptions: stock price of $0.12, expected volatility of 74.6%, risk-free rate of 4.80% and expected term of 4.58 years. The Company recorded a change in fair value of $1.5 million for the nine months ended September 30, 2023. The 2023 Convertible Notes were also accounted for under ASC 815, “Derivatives and Liability

24The fair value of the December 2023 Conversion Feature Liability was estimated based on the probability weighted settlement scenarios, which 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. At March 31, 2024, the fair value of the derivative liability related to the Automatic Conversion Feature was estimated at $688,256 by applying the probability of a business combination of 60% to the Automatic Discount of 43%. At March 31, 2024, the fair value of the derivative liability related to the Optional Conversion Feature was deemed immaterial as the probability that the Company is listed on a public exchange in absence of a business combination prior to the maturity of the December 2023 Convertible Notes was deemed minimal.

12.

Hedging,” pursuant to which the Company recognized a derivative liability for the embedded beneficial conversion feature for the settlement of the notes upon maturity. The derivative liability was valued using a Black Scholes Option Pricing Model, which 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 initial fair value was determined to be $0.6 million based on the following assumptions: stock price of $0.655, expected volatility of 66.5%, risk-free rate of 4.94% and expected term of 0.5 years. The fair value at September 30, 2023 was valued at $0 using a Black Scholes Option Pricing Model based on the following assumptions: stock price of $0.12, expected volatility of 41.9%, risk-free rate of 5.55% and expected term of 0.08 years. The Company recorded a change in fair value of $0.6 million for the nine months ended September 30, 2023.

The following table summarizes the activity for the 2023 Convertible Notes and Warrant Subscription Agreement:

	2023 Convertible Notes			Derivative Liability			Warrant Liability			Total
Issuance of 2023 convertible notes and warrants		106,957			560,436			1,527,641			2,195,034
Issuance of Placement Agent warrants								87,553
Debt issuance costs		(64,871	)		—			—			—
Accretion expense		1,827,811			—			—			1,827,811
Fair value adjustments		—			(560,436	)		(1,485,606	)		(2,046,042	)
Balance at September 30, 2023	$	1,869,897		$	—		$	129,588		$	1,976,803

In April 2023, the Company issued a $1,130,775 related party unsecured convertible promissory note and Founder and Director warrants to purchase 1,884,625 shares of common stock at $0.60 per share (see Note 9). The Founder and Director Warrants were accounted for under ASC 815, “Derivatives and Hedging,” pursuant to which the Founder and Director Warrants do not meet the criteria for equity classification and must be recorded as liabilities under ASC 815 at the issuance date and September 30, 2023, since the total number of shares of common stock not yet issued or issuable pursuant to settlement of derivative liabilities and exercise of options and warrants, exceeded the number of authorized shares. The Founder and Director Warrants were valued using a Black Scholes Option Pricing Model, which 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 initial fair value of the Founder and Director Warrants was determined to be $0.8 million based on the following assumptions: stock price of $0.655, expected volatility of 72.8%, risk-free rate of 3.51% and expected term of 5 years. In June 2023, the founder and director exercised 666,667 of their warrants for total proceeds of $400,000. The Company recognized a capital contribution of $0.2 million using a Black Scholes Option Pricing Model based on the following assumptions: stock price of $0.598, expected volatility of 72.0%, risk-free rate of 4.03% and expected term of 4.85 years. In July 2023, the founder and director exercised 458,333 of their warrants for total proceeds of $275,000. The Company recognized a capital contribution of $0.3 million using a Black Scholes Option Pricing Model based on the following assumptions: stock price of $0.84, expected volatility of 76.2%, risk-free rate of 4.43% and expected term of 4.78 years. In August 2023, the founder and director exercised 583,333 of their warrants for total proceeds of $350,000. The Company recognized a capital contribution of $0.3 million using a Black Scholes Option Pricing Model based on the following assumptions: stock price of $0.66, expected volatility of 76.0%, risk-free rate of 4.64% and expected term of 4.71 years. The fair value at September 30, 2023 for the remaining 176,192 Founder and Director Warrants was valued at $5,822 using a Black Scholes Option Pricing Model based on the following assumptions: stock price of $0.12, expected volatility of 74.6%, risk-free rate of 4.80% and expected term of 4.58 years. The Company recorded a change in fair value of $19,577 for the nine months ended September 30, 2023. The Founder and Director Convertible Notes was also accounted for under ASC 815, “Derivatives and Hedging,” pursuant to which the Company recognized a derivative liability for the embedded beneficial conversion feature for the settlement of the notes upon maturity. The derivative liability was valued using a Black Scholes Option Pricing Model, which 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 initial fair value was determined to be $0.3 million based on the following assumptions: stock price of $0.655, expected volatility of 66.5%, risk-free rate of 4.94% and expected term of 0.5 years. The fair value at September 30, 2023 was valued at $0 using a Black Scholes Option Pricing Model based on the following assumptions: stock price of $0.12, expected volatility of 41.9%, risk-free rate of 5.55% and expected term of 0.08 years. The Company recorded a change in fair value of $0.3 million for the nine months ended September 30, 2023.

The following table summarizes the Related Party Convertible Notes and Warrant Subscription Agreement:

The Company believes the carrying amounts of its cash and cash equivalents, related party loan and current note payable approximate their fair values due to their near-term maturities. There were no transfers among Level 1, Level 2 or Level 3 categories in the nine months ended September 30, 2023 and 2022.

	2023 Convertible Notes, Related Party		Derivative Liability			Warrant Liability			Total
Issuance of related party convertible notes and warrants		1,069,467		288,710			786,967			2,145,144
Accretion expense		51,090		—			—			51,090
Exercise of warrants							(761,568	)		(761,568	)
Fair value adjustments				(288,710	)		(19,577	)		(308,287	)
Balance at September 30, 2023	$	1,120,557	$	—		$	5,822		$	1,126,379

Grant Revenue

Government grants

The Company has one active government grant with the Department of Defense, US Army Medical Research Acquisition Activity. This grant is for work on a COVID-19 therapeutic with a potential of $4.0 million, awarded in stages starting in January 2021 and with potential stages running through September 2026. Funding from the grant is received after expenditures have been incurred by the Company pursuant to the ~~preapproved~~pre-approved statement of work and upon submission of a detailed voucher. The Grant is governed by the DoD Grant and Agreement Regulations, a subsection of the Code of Federal Regulations and requires the Company to provide financial and technical reports on a periodic basis to the Department of Defense.

For the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, grant revenue of $~~278,831~~0 and $~~192~~13,~~547 was recognized from this grant. For the nine months ended September 30~~854, ~~2023~~respectively ~~and 2022, grant revenue of $292,685 and $346,413~~ was recognized from this grant. Approximately $2.65 million in funding remains available for this grant at ~~September~~March 3031, ~~2023.~~2024

13.

Income Taxes

~~For~~The ~~interim~~Company ~~financial~~did ~~reporting,~~not provide for any income taxes for the ~~Company~~three ~~estimates~~months ~~its~~ended ~~annual~~March ~~effective~~31, ~~tax~~2024 ~~rate~~and ~~based~~2023. onThe Company has evaluated the ~~projected~~positive ~~income~~and ~~for~~negative evidence bearing upon its ~~entire~~ability ~~fiscal~~to ~~year~~realize ~~and~~the ~~records~~deferred atax ~~provision~~assets. ~~(benefit)~~Management ~~for~~has ~~income~~considered ~~taxes~~the onCompany’s ahistory ~~quarterly~~of ~~basis~~cumulative ~~based~~net onlosses ~~the~~incurred ~~estimated~~since ~~annual~~inception ~~effective~~and ~~income~~its ~~tax~~lack ~~rate. Our~~of ~~effective~~commercialization ~~tax~~of ~~rate~~any products or generation of any revenue from ~~continuing~~product ~~operations~~sales ~~was~~since ~~0.0%~~inception and ~~1.01%~~has ~~for~~concluded ~~the~~that ~~nine~~it ~~months~~is ~~ended~~not ~~September~~more ~~30,~~likely ~~2023~~than ~~and~~not ~~2022~~that ~~respectively.~~the ~~The~~ Company ~~recognized~~will ~~tax~~realize ~~expense~~the benefits of $0the ~~for~~deferred ~~the~~tax ~~three~~assets. ~~and~~Accordingly, ~~nine~~a ~~months~~full ~~ended~~valuation ~~September~~allowance ~~30,~~has ~~2023~~been ~~and~~established aagainst the deferred tax ~~benefit~~assets as of ~~$41~~March 31,~~700~~ 2024 and ~~$51~~December 31,~~000~~ 2023. The Company recognized tax expense of $0 for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022,~~2024 ~~respectively~~and 2023.

14.

Subsequent Events

WeMay ~~have~~2024 ~~concluded~~Convertible ~~that no subsequent events have occurred that require disclosure, except for those referenced below and as disclosed in Note 9 to the consolidated financial statements.~~Notes

~~Secured Financing~~ 24

In ~~January,~~May 2024, wethe ~~received~~Company ~~proceeds~~entered ~~from~~into a ~~Senior~~secured ~~Secured~~convertible ~~Promissory~~promissory ~~Note~~note ~~(the~~agreement pursuant ~~“Secured~~to ~~Note”)~~which in the ~~amount~~Company ofissued ~~$750,000~~convertible ~~from~~notes ~~our~~in ~~founder and director, Hoyoung Huh (~~the ~~“Key~~aggregate ~~Company~~principal ~~Stockholder”).~~amount ~~In accordance with the terms~~ of ~~the Secured Note~~$1, ~~the Company~~324,500 ~~together with its subsidiaries, also entered into a Security Agreement with Dr. Huh~~ (the “~~Security~~May ~~Agreement~~2024 Convertible Notes”). The Secured Note has a maturity date on January 23, 2025 and carries an interest rate of 15% per annum. As security for payment of the Secured Note, the Security Agreement grants and assigns to Dr. Huh a security interest in all of the assets of the Company and its subsidiaries.

~~December~~In ~~2023~~July 2024, the Company completed a final closing of the May 2024 Convertible ~~Note~~Notes and entered into a secured convertible promissory note agreement pursuant to which the Company issued convertible notes in the aggregate principal amount of $2,175,000 (the “May 2024 Convertible Notes”).

InThe May 2024 Convertible Notes carry an interest rate of 10% per annum, have a maturity date of December ~~2023~~18, we2024. ~~entered~~The ~~into~~terms ~~separate~~of ~~subscription~~the ~~agreements~~May 2024 Convertible Notes provide for ~~the~~automatic ~~issuance~~conversion of ~~convertible~~the ~~promissory~~outstanding ~~notes~~principal (amount of the ~~“December~~notes ~~2023~~and ~~Convertible~~all ~~Notes”)~~accrued ~~pursuant~~and tounpaid ~~which~~interest upon a business combination (ias defined in the agreement) weinto ~~issued~~the ~~December~~Company ~~2023~~common ~~Convertible~~stock ~~Notes~~at inthe Conversion Price. The Conversion Price is determined by reference to the ~~aggregate~~purchase ~~principal~~price ~~amount~~payable ofin $1connection with such business combination,~~000~~ multiplied by 50%,~~000~~ ~~and~~where ~~(ii)~~the ~~certain~~price ~~April~~per ~~2023~~share of the common stock is determined by reference to the 30-day volume weighted average price of our common stock on the public exchange immediately prior to conversion. In conjunction with the May 2024 Convertible Notes, the Company entered into the Security Agreement which grants and assigns the May 2024 convertible note holders a senior security interest in all of the assets of the Company and its subsidiaries.

26In consideration for its services in respect of the financing described above, the Company paid Paulson Investment Company, LLC (the “May 2024 Placement Agent”) the commission of $200,000. Further, upon conversion of the May 2024 Convertible Notes into Common Stock of the Company, the May 2024 Placement Agent will receive shares of restricted common stock of the Company equal to 4% of the total number of shares of common stock received upon conversion of May 2024 Convertible Notes on certain notes with a principal value of $2,500,000.

~~previously~~Former ~~issued~~Employee inWage ~~the aggregate original principal amount of $180,000 were exchanged for December 2023 Convertible Notes.~~ Claim

InOn ~~January~~August 14, 2024, wethe ~~completed~~Company anreceived ~~additional~~from ~~close~~the California Labor Commissioner’s Office notice of ~~the~~a ~~December~~claim ~~2023~~submitted ~~Convertible~~by ~~Notes~~a ~~pursuant~~former toemployee ~~which~~seeking ~~(i)~~recovery weof ~~issued~~unpaid ~~December~~wages, ~~2023~~statutory ~~Convertible~~liquidated ~~Notes~~damages and waiting time penalties in the ~~aggregate~~total ~~principal~~ amount of approximately $~~675~~32,~~000~~800. ~~and~~The ~~(ii)~~Labor ~~certain~~Commissioner’s ~~April~~Office ~~2023~~has ~~Convertible~~scheduled ~~Notes~~a ~~previously~~settlement ~~issued~~conference into be held on November 19, 2024. The Company’s management is currently investigating the ~~aggregate~~claimant’s ~~original~~allegations ~~principal~~to determine if an amount or range of ~~$240,000~~amounts ~~were~~of ~~exchanged~~losses ~~for~~related ~~December~~to ~~2023~~the ~~Convertible~~claim ~~Notes.~~is probable and reasonably estimable.

~~In February 2024, we completed a final closing of the December 2023 Convertible Notes and entered into separate subscription agreements in the aggregate principal amount of $63,000.~~ 25

The December 2023 Convertible Notes carry an interest rate of 10% per annum, have a maturity date of December 18, 2024, and provide for automatic conversion, optional conversion and registration rights as follows:

Automatic Conversion: If a Business Combination (defined below) occurs while the December 2023 Convertible Notes are outstanding, then the outstanding principal amount of the December 2023 Convertible Notes and all accrued and unpaid interest shall automatically convert into common stock, par value $0.0001 per share (the “Common Stock”) of the Company immediately prior to the closing of the Business Combination at the Conversion Price (defined below) where:

“Business Combination” means any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock of the Company is converted into or exchanged for securities of another entity that are traded on a Public Exchange.

“Conversion Price” means the price per share for the Company’s Common Stock determined by reference to the purchase price payable in connection with such Business Combination, multiplied by 70%, where the price per share of the Common Stock is determined by reference to the 30-day volume weighted average price of the Surviving Company Securities on the Public Exchange immediately prior to conversion and the exchange ratio used in the Business Combination.

“Public Exchange” means the Nasdaq Stock Market, the New York Stock Exchange or another public exchange or marketplace approved by the Company’s Board of Directors.

Optional Conversion: If a Business Combination does not occur prior to the maturity date of the December 2023 Convertible Notes and if the Company’s Common Stock is listed on a Public Exchange as of such date, then the holders will have the right, at their option, to convert the outstanding principal amount of the December 2023 Convertible Notes (and all accrued and unpaid interest thereof) into fully paid and nonassessable shares of Common Stock of the Company at a price equal to the 30-day volume weighted average price of the Company’s Common Stock on the Public Exchange on which it is traded multiplied by 90%.

Registration Rights: Upon the Company’s next equity financing in which the Company provides future investors with registration rights, the Company will provide substantially equivalent registration rights to the December 2023 Convertible Note Investors with respect to the shares of Common Stock into which the December 2023 Convertible Notes are convertible.

In consideration for its services in respect of the financing described above, we paid the Placement Agent a commission of $147,440. Further, upon conversion of the December 2023 Convertible Notes into Common Stock of the Company, the Placement Agent will receive shares of restricted Common Stock of the Company equal to (i) 4% of the total number of shares of Common Stock received upon conversion of the December 2023 Convertible Notes issued for the aggregate principal of $1,738,000 new capital and (ii) 1% of the total number of shares of Common Stock received upon conversion of the December 2023 Convertible Notes issued for the aggregate principal of $420,000 in exchange of the April 2023 Convertible Notes.

In December 2023, we issued a $500,000 related party December 2023 Convertible Note to the Key Company Stockholder. This note has the same terms as the December 2023 Convertible Notes outlined above.

In May 2024, we entered into separate secured convertible promissory notes (the “May 2024 Convertible Notes”) pursuant to which we issued May 2024 Convertible Notes in the aggregate principal amount of $1,324,500. The May 2024 Convertible Notes carry an interest rate of 10% per annum, have a maturity date of December 18, 2024, and provide for automatic conversion, security interest and registration rights as follows:

Automatic Conversion: If a Business Combination (defined below) occurs while the May 2024 Convertible Notes are outstanding, then the outstanding principal amount of the May 2024 Convertible Notes and all accrued and unpaid interest shall automatically convert into common stock, par value $0.0001 per share (the “Common Stock”) of the Company immediately prior to the closing of the Business Combination at the Conversion Price (defined below) where:

“Conversion Price” means the price per share for the Company’s Common Stock determined by reference to the purchase price payable in connection with such Business Combination, multiplied by 50%, where the price per share of the Common Stock is determined by reference to the 30-day volume weighted average price of the Surviving Company Securities on the Public Exchange immediately prior to conversion and the exchange ratio used in the Business Combination.

“Public Exchange” means the Nasdaq Stock Market, the New York Stock Exchange or another public exchange or marketplace approved by the Company’s Board of Directors.

Security Interest: As security for payment, the Security Agreement grants and assigns the May 2024 convertible note holders a senior security interest in all of the assets of the Company and its subsidiaries.

Registration Rights: Upon the Company’s next equity financing in which the Company provides future investors with registration rights, the Company will provide substantially equivalent registration rights to the May 2024 Convertible Note Investors with respect to the shares of Common Stock into which the May 2024 Convertible Notes are convertible.

Issuance of Unregistered Securities

On November 1, 2023, certain shareholders exercised warrants to purchase 492,045 shares of our common stock at $0.01 per share for a total purchase price of $4,920.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of Peak Bio’s financial condition and results of operations together with Peak Bio’s unaudited interim condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to plans and strategy for Peak Bio’s business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors” of this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023, Peak Bio’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from Peak Bio’s forward-looking statements. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Unless otherwise indicated or the context otherwise requires, references in this Peak Bio’s Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “Peak Bio,” “we,” “us,” “our” and other similar terms refer to Peak Bio Co., Ltd ~~(excluding the Non-Peak Bio Assets transferred in the Spin-Off)~~ prior to the Ignyte Business Combination and to Peak Bio, Inc. and its consolidated subsidiaries after giving effect to the Business Combination.

Overview

Peak Bio is a clinical-stage biopharmaceutical company focused on developing therapeutics addressing significant unmet need in the areas of oncology, inflammation and rare diseases. Our management team has a combined 50 years of industry experience in the areas of small molecules, antibodies, and antibody-drug-conjugates (ADC).

With our current strategic focus, we have leveraged two decades of industry learning in the antibody-drug-conjugate (ADC) field to develop a platform of proprietary technologies that enable us to design ADCs to have improved efficacy, safety, and tolerability relative to existing antibody or ADC therapies. Our most advanced platform, PH-1 or Thailanstatin is being used to generate a pipeline of proprietary ADC product candidates to address patient populations with improved efficacy relative to traditional ADC-based therapies. Our second product candidate is an ADC targeting Trop2, an antigen broadly expressed in solid tumors. We expect our Trop2 ADC to enter clinical development by late 2024. Our Trop2 ADC and other undisclosed discovery-stage product candidates are based on our proprietary PH-1 platform of toxin payloads targeting RNA splicing.

Despite commercial success of the ADCs currently on the market, there continues to be a need for ADCs that not only deliver antibody-directed payloads selectively to their tumors, but to also release them safely via improved linker technology and avoid off- target toxicities. Secondly, we believe that adding an immunomodulatory effect to our toxin(s) that engages our immune systems to assist in the cancer killing would contribute to improved tumor killing.

Our lead product candidate for which we are seeking a strategic partner for, PHP-303 is a small molecule, 5th generation Phase 2 clinical-ready neutrophil elastase (NE) inhibitor (NEI). We are planning a Phase 2 clinical study in Alpha-1 anti-trypsin deficiency (AATD) patients. We have completed two Phase 1 trials of PHP-303 in healthy volunteers testing higher doses of PHP-303 by single-ascending dose (SAD) and multiple-ascending dose (MAD). PHP-303 demonstrated dose- dependent pharmacokinetics and the recommended Phase 2 dose was achieved in these trials. A maximum tolerated dose for PHP-303 was not achieved in these Phase 1 trials.

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

We have incurred significant losses since the commencement of our operations. Our net loss was $122.34 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and $1312.18 million and $813.31 million for the years ended December 31, ~~2022~~2023 and ~~2021~~2022, respectively. Since the end of March 31, 2024, we raised $3.5 million from the issuance of May 2024 Convertible Notes. We expect to ~~continue to~~ incur significant expenses and operating losses for the foreseeable future as we continue our efforts to identify product candidates and seek regulatory approvals within our portfolio.

2926

~~future~~We aswill weneed ~~continue~~additional ~~our~~financing ~~efforts~~ to ~~identify~~fund ~~product~~our ~~candidates~~ongoing activities and ~~seek~~to ~~regulatory~~close ~~approvals~~the ~~within~~Merger ~~our~~with ~~portfolio~~Akari of(defined ~~product candidates~~below). ~~These~~We ~~losses~~may ~~have~~raise ~~resulted~~this ~~primarily~~additional ~~from~~funding ~~costs~~through ~~incurred~~the insale ~~connection~~of ~~with~~equity, ~~research~~debt ~~and~~financings ~~development~~or ~~activities~~other ~~and~~capital tosources, aincluding ~~lesser~~potential ~~extent~~collaborations ~~from general and administrative costs associated~~ with ~~our~~other ~~operations.~~companies ~~Our~~or ~~net~~other ~~losses~~strategic ~~may~~transactions ~~fluctuate significantly from period to period, depending on the timing of~~ and ~~expenditures~~funding onunder ~~our~~government ~~research and development activities~~contracts.

We may be unable to raise additional funds or enter into other arrangements when needed on favorable terms, or at all. There can be no assurances that other sources of financing will be available. Due to these uncertainties, there is substantial doubt about our ability to continue as a going concern.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or classification of liabilities that might result from the outcome of the uncertainties discussed above.

Recent Developments

Akari Merger

Merger Agreement

On March 4, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Akari Therapeutics, Plc, a public company limited by shares incorporated in England and Wales (“Akari”), 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 “Merger”), with Peak Bio surviving the Merger as a wholly-owned subsidiary of Akari.

30 Each option to acquire shares of Peak Common Stock (“Peak Option”) that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, will be 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 will be equal to the product of (i) the total number of shares of Peak Common Stock subject to such Peak Option immediately prior to the Effective Time 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 will be equal to the exercise price of such Peak Option immediately prior to the Effective Time divided by the Exchange Ratio. The Adjusted Options will be further adjusted, if applicable, to give effect to the impact of the Additional Exchange Ratio.

applicable) subject to the Adjusted Option will be equal to the product of (i) the total number of shares of Peak Common Stock subject to such Peak Option immediately prior to the Effective Time 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 will be equal to the exercise price of such Peak Option immediately prior to the Effective Time divided by the Exchange Ratio. The Adjusted Options will be further adjusted, if applicable, to give effect to the impact of the Additional Exchange Ratio.

Voting Agreements

Concurrently with the Merger Agreement, we and Akari entered into voting and support agreements (the “Voting Agreements”) with certain stockholders of Peak Bio (the “Peak Stockholders”) and certain shareholders of Akari (the “Akari Shareholders” and, together with the Peak Stockholders, the “Supporting Holders”). The Supporting Holders have agreed to, among other things, vote their shares in favor of the Merger Agreement and the Merger or the issuance of Akari Ordinary Shares in connection therewith, as applicable, in accordance with the recommendation of the respective boards of directors of Peak Bio and Akari.

Bylaws Amendment

In connection with the execution of the Merger Agreement, on March 3, 2024, our Board approved an amendment to our Amended and Restated Bylaws (the “Bylaws Amendment”), which became effective immediately. The Bylaws Amendment requires that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or stockholder (including a beneficial owner) of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim against any director, officer, employee or stockholder (including a beneficial owner) of the Company arising under any provision of the Delaware General Corporation Law (“DGCL”) or the bylaws or the certificate of incorporation of the Company, or (iv) any action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware (or if the Court of Chancery for the State of Delaware does not have jurisdiction, a state court located within the State of Delaware or, if no state court located within the State of Delaware has subject matter jurisdiction, the federal district court for the District of Delaware). In addition, the Bylaws Amendment provides that unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any claim or cause of action arising under the Securities Act of 1933, as amended.

Financing

~~Key~~Secured ~~Company~~Promissory ~~Stockholder Agreements~~Note

In January, 2024, we received proceeds from a Senior Secured Promissory Note (the “Secured ~~Note~~Founder Loan”) in the amount of $750,000 from our founder and director, ~~Hoyoung~~Dr. Huh ~~(the “Key Company Stockholder”)~~. In accordance with the terms of the Secured ~~Note,~~Founder ~~the Company~~Loan, ~~together with its subsidiaries~~we, also entered into a Security Agreement with Dr. ~~Huh~~Hue (the “Security Agreement”). The Secured Note has a maturity date on January 23, 2025 and carries an interest rate of 15% per annum. As security for payment of the Secured Note, the Security Agreement grants and assigns to ~~Dr.~~the ~~Huh~~Founder athe security interest in all of the assets of the Company and its subsidiaries.

In March 2023, we received proceeds from a loan in the amount of $250,000 from our Key Company Stockholder. The loan matures on December 31, 2023 and bear interest at a rate of 5.0% per annum. The loan was evidenced by a promissory note, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. The loan may be prepaid by us at any time prior to maturity without the consent of the lender. In April 2023, this related party loan was settled through the issuance of a convertible note payable, related party (see below).

In April 2022, we entered into a forward purchase agreement (the “Key Company Stockholder Forward Purchase Agreement”) with our Key Company Stockholder. In April 2023, we entered into a subscription agreement with our founder and director to replace and supersede the Key Company Stockholder Forward Purchase Agreement, to provide for the conversion of the loans made by the Key Company Stockholder totaling $1,750,000 plus interest into convertible notes and warrants to purchase shares of our common stock, and to cancel and forfeit the 1,930,501 shares of common stock being held in escrow.

Convertible Notes

2022 Convertible Note

On November 1, 2022, we issued a $1,512,500 convertible note to EarlyBirdCapital, Inc., the sole book running manager of Ignyte’s IPO, in lieu of the deferred underwriting fee that was payable at the Closing. The convertible note accrues interest at a rate of 8% per annum and is payable on October 31, 2023, provided however that we agree to make mandatory prepayments on this note (which shall first be applied to accrued interest and then to principal) from time to time in amounts equal to 15% of the gross proceeds received by us from any equity lines, forward purchase agreements or other equity financings consummated by us prior to the maturity date.

On the maturity date, the note holder may, in its sole and absolute discretion, convert all or part of the principal and/or accrued interest of this convertible note into shares of our common stock of at a per share conversion price equal to 90% of the volume weighted average price of a share of our common stock for the five trading days immediately prior to the maturity date.

On November 1, 2023, we entered into an amended and restated promissory note whereby the principal amount was reduced to $650,000. The loan matures on December 31, 2024, bears interest at a rate of 6.0% per annum, and has no conversion feature. Further, the loan requires the Company to make a payment of $300,000 by December 31, 2023, which was paid.

April 2023 Convertible Note

In April 2023, we entered into separate subscription agreements for the issuance of convertible promissory notes (the “April 2023 Convertible Notes”) in the aggregate principal amount of $2,195,034 and an aggregate amount of 3,658,390 warrants (the “Warrants”). The 2023 Convertible Notes will be convertible into shares of our common stock at $0.60 per share. For each share into which a 2023 Convertible Note is convertible, the investor received Warrants to purchase an equal amount of shares of our common stock at $0.60 per share. In connection with the issuance of the 2023 Convertible Notes and the Warrants, in consideration for its services in respect of the financing described above, the Company also issued the Placement Agent purchase warrants (the “Placement Agent Warrant”) to purchase 209,670 shares of the Company’s common stock at a price per share of $0.60. The Placement Agent Warrant has a 5-year term. In addition, the Company paid the Placement Agent a commission of approximately $125,000.

In April 2023, we entered into a subscription agreement with our founder and director to settle $1,130,775 in related party loans made to us. We issued a $1,130,775 related party unsecured convertible promissory note and warrants to purchase 1,884,625 shares of our common stock at $0.60 per share.

December 2023 Convertible Note

In December, 2023, we ~~entered~~raised ~~into~~proceeds ~~separate~~from ~~subscription agreements for~~ the issuance of convertible promissory notes in the aggregate principal amount of $1,000,000 (the “December 2023 Convertible Notes”). ~~pursuant~~In toaddition, ~~which~~certain ~~(i)~~holders weof ~~issued~~April ~~December~~ 2023 Convertible Notes inagreed to exchange the aggregate ~~principal~~ amount of $1187,~~000,000~~950 ~~and~~of ~~(ii) certain~~ April 2023 Convertible Notes, ~~previously~~including ~~issued~~the inaccrued ~~the~~interest, ~~aggregate~~into ~~original~~the ~~principal~~same amount of ~~$180,000 were exchanged for~~ December 2023 Convertible Notes.

In January 2024, we completed an additional close of the December 2023 Convertible Notes pursuant to which (i) we issued December 2023 Convertible Notes in the aggregate principal amount of $675,000 and (ii) certain April 2023 Convertible Notes previously issued in the aggregate original principal amount of $240,000 were exchanged for December 2023 Convertible Notes. 28

In January and February 2024, we completed aadditional ~~final~~closes ~~closing~~ of the December 2023 Convertible Notes ~~and~~pursuant ~~entered~~to ~~into~~which ~~separate~~the ~~subscription~~Company ~~agreements~~issued in the ~~aggregate~~notes with the principal amount of $63738,000. In addition, at those date, the holders of April 2023 Convertible Notes agreed to exchange the aggregate amount of $250,600 of April 2023 Convertible Notes, including the accrued interest, into the same amount of December 2023 Convertible Notes.

32The December 2023 Convertible Notes bear an interest rate of 10% per annum and have a maturity date of December 18, 2024. The terms of the December 2023 Convertible Notes provide for automatic conversion of the outstanding principal amount of the December 2023 Convertible Notes and all accrued and unpaid interest upon a business combination (as defined in the agreement) into the Company common stock at the Conversion Price (the “Automatic Conversion Feature”). The Conversion Price is determined by reference to the purchase price payable in connection with such business combination, multiplied by 70%, where the price per share of the common stock is determined by reference to the 30-day volume weighted average price of the Company’s common stock on the public exchange immediately prior to conversion, resulting in 43% discount on the issuance price in the a business combination (the Automatic Discount”). If a business combination does not occur prior to the maturity date of the December 2023 Convertible Notes and if the Company’s Common Stock is listed on a public exchange as of such date, then the holders have the right, at their option, to convert the outstanding principal amount of the December 2023 Convertible Notes (and all accrued and unpaid interest thereof) into the shares of common stock of the Company at a price equal to the 30-day volume weighted average price of the Company’s common stock on the public exchange on which it is traded multiplied by 90% (the “Optional Conversion Feature”).

~~The~~In consideration for its services in respect of the financing described above, we paid the Placement Agent a commission of $187,811. Further, upon conversion of the December 2023 Convertible Notes ~~carry~~into anCommon ~~interest~~Stock ~~rate~~of the Company, the Placement Agent will receive shares of 10restricted Common Stock of the Company equal to (i) 4% ~~per~~of ~~annum,~~the ~~have~~total anumber ~~maturity~~of ~~date~~shares of Common Stock received upon conversion of the December ~~18,~~2023 ~~2024~~Convertible Notes issued for the aggregate principal of $2,238,000 new capital and ~~provide~~(ii) ~~for~~1% ~~automatic~~of the total number of shares of Common Stock received upon conversion of the December 2023 Convertible Notes issued for the aggregate principal of $438,550 ~~optional~~in ~~conversion~~exchange ~~and~~of ~~registration~~the ~~rights~~April as2023 ~~follows:~~Convertible Notes.

“Public Exchange” means the Nasdaq Stock Market, the New York Stock Exchange or another public exchange or marketplace approved by the Company’s Board of Directors.

In December 2023, we issued a $500,000 related party December 2023 Convertible Note to the Key Company Stockholder. This note has the same terms as the December 2023 Convertible Notes outlined above.

May 2024 Convertible Notes

In May 2024, wethe Company entered into ~~separate~~a secured convertible promissory ~~notes~~note ~~(the “May 2024 Convertible Notes”)~~ agreement pursuant to which wethe Company issued ~~May~~convertible ~~2024~~notes ~~Convertible Notes~~ in the aggregate principal amount of $1,324,500. ~~The~~(the “May 2024 Convertible Notes”). ~~carry an interest rate of 10% per annum, have a maturity date of December 18, 2024, and provide for automatic conversion, security interest and registration rights as follows:~~

~~Automatic~~In ~~Conversion: If~~July ~~a Business Combination (defined below) occurs while the May~~ 2024 ~~Convertible Notes are outstanding~~, ~~then~~ the ~~outstanding~~Company ~~principal~~completed ~~amount~~a final closing of the May 2024 Convertible Notes and ~~all~~entered ~~accrued and unpaid interest shall automatically convert~~ into ~~common~~a ~~stock,~~secured ~~par~~convertible ~~value~~promissory ~~$0.0001~~note ~~per~~agreement pursuant ~~share~~to ~~(the~~which ~~“Common Stock”) of~~ the Company ~~immediately~~issued ~~prior~~convertible tonotes in the ~~closing~~aggregate ofprincipal ~~the~~amount ~~Business~~of ~~Combination~~$2,175,000 at (the ~~Conversion~~“May ~~Price~~2024 ~~(defined~~Convertible ~~below~~Notes”) ~~where:~~.

33The May 2024 Convertible Notes carry an interest rate of 10% per annum, have a maturity date of December 18, 2024. The terms of the May 2024 Convertible Notes provide for automatic conversion of the outstanding principal amount of the notes and all accrued and unpaid interest upon a business combination (as defined in the agreement) into the Company common stock at the Conversion Price. The Conversion Price is determined by reference to the purchase price payable in connection with such business combination, multiplied by 50%, where the price per share of the common stock is determined by reference to the 30-day volume weighted average price of our common stock on the public exchange immediately prior to conversion. In conjunction with the May 2024 Convertible Notes, we entered into the Security Agreement which grants and assigns the May 2024 convertible note holders a senior security interest in all of the assets of the Company and its subsidiaries.

~~“Business~~In ~~Combination”~~consideration ~~means~~for ~~any~~its ~~reorganization,~~services ~~recapitalization~~in respect of the financing described above, ~~reclassification~~the Company paid Paulson Investment Company, ~~consolidation~~LLC or(the ~~merger~~“May ~~involving~~2024 Placement Agent”) the ~~Company~~commission inof ~~which~~$200,000. Further, upon conversion of the May 2024 Convertible Notes into Common Stock of the Company, isthe ~~converted~~May ~~into~~2024 orPlacement ~~exchanged~~Agent ~~for~~will ~~securities~~receive shares of ~~another~~restricted ~~entity~~common ~~that~~stock ~~are~~of ~~traded~~the Company equal to 4% of the total number of shares of common stock received upon conversion of May 2024 Convertible Notes on certain notes with a ~~Public~~principal ~~Exchange~~value of $2,500,000.

“Conversion Price” means the price per share for the Company’s Common Stock determined by reference to the purchase price payable in connection with such Business Combination, multiplied by 50%, where the price per share of the Common Stock is determined by reference to the 30-day volume weighted average price of the Surviving Company Securities on the Public Exchange immediately prior to conversion and the exchange ratio used in the Business Combination.29

“Public Exchange” means the Nasdaq Stock Market, the New York Stock Exchange or another public exchange or marketplace approved by the Company’s Board of Directors.

Registration Rights: Upon the Company’s next equity financing in which the Company provides future investors with registration rights, the Company will provide substantially equivalent registration rights to the May 2024 Convertible Note Investors with respect to the shares of Common Stock into which the May 2024 Convertible Notes are convertible.

White Lion Common Stock Purchase and Registration Rights Agreements

On November 3, 2022, we entered into a Common Stock Purchase Agreement (the “White Lion Purchase Agreement”) and Registration Rights (the “White Lion RRA”) with White Lion Capital, LLC, a Delaware limited liability company (“White Lion”). Pursuant to the White Lion Purchase Agreement, we have the right, but not the obligation, to require White Lion to purchase, from time to time, up to $100,000,000 in aggregate gross purchase price of newly issued shares of our Common Stock, subject to certain limitations and conditions set forth in the White Lion Purchase Agreement. Capitalized terms used but not otherwise defined in this section shall have the meanings given to such terms by the White Lion Purchase Agreement and the White Lion RRA.

We are obligated under the White Lion Purchase Agreement and the White Lion RRA to file a registration statement with the SEC to register the Common Stock under the Securities Act, for the resale by White Lion of shares of Common Stock that we may issue to White Lion under the White Lion Purchase Agreement.

Subject to the satisfaction of certain customary conditions including, without limitation, the effectiveness of a registration statement registering the shares issuable pursuant to the White Lion Purchase Agreement, our right to sell shares to White Lion will commence on the effective date of the registration statement and extend until November 1, 2025. During such term, subject to the terms and conditions of the White Lion Purchase Agreement, we may notify White Lion when we exercise our right to sell shares (the effective date of such notice, a “Notice Date”).

The number of shares sold pursuant to any such notice may not exceed (i) the lower of (a) the Purchase Notice Fixed Limit (described below) and (b) the product of (1) the Average Daily Trading Volume (as defined in the White Lion Purchase Agreement), and (2) the applicable Percentage Limit (as defined in the White Lion Purchase Agreement). The Purchase Notice Fixed Limit is $500,000 upon payment of the Initial Commitment Shares (as defined in the White Lion Purchase Agreement) and can be increased in two tranches: (A) to $1,000,000 following an aggregate purchase of $5,000,000 shares and issuance by us to White Lion of an additional $250,000 in Commitment Shares, and (B) to $2,000,000 following an aggregate purchase of $10,000,000 shares and issuance by the for payment of an additional $250,000 in Commitment Shares (as defined in the White Lion Purchase Agreement).

The applicable Percentage Limit is 40% or 150% depending on the price we agree to sell shares to White Lion. At an applicable Percentage Limit of 40%, the Purchase Price to be paid by White Lion for any such shares will equal 97% of lowest daily volume-weighted average price of Common Stock during a period of two consecutive Trading Days following the applicable Purchase Notice Date (as defined in the White Lion Purchase Agreement) until an aggregate of $50,000,000 in Purchase Notice Shares (as defined in the White Lion Purchase Agreement) have been purchased under White Lion Purchase Agreement, at which point the Purchase Price (as defined in the White Lion Purchase Agreement) to be paid by White Lion will equal 98% of the lowest daily volume-weighted average price of Common Stock during a period of two consecutive Trading Days following the applicable Purchase Notice Date. At an applicable Percentage Limit of 150%, the Purchase Price to be paid by White Lion for any such shares will equal 94.5% of the lowest daily volume-weighted average price of Common Stock during a period of three consecutive Trading Days following the applicable Purchase Notice Date.

consecutive Trading Days following the applicable Purchase Notice Date (as defined in the White Lion Purchase Agreement) until an aggregate of $50,000,000 in Purchase Notice Shares (as defined in the White Lion Purchase Agreement) have been purchased under White Lion Purchase Agreement, at which point the Purchase Price (as defined in the White Lion Purchase Agreement) to be paid by White Lion will equal 98% of the lowest daily volume-weighted average price of Common Stock during a period of two consecutive Trading Days following the applicable Purchase Notice Date. At an applicable Percentage Limit of 150%, the Purchase Price to be paid by White Lion for any such shares will equal 94.5% of the lowest daily volume-weighted average price of Common Stock during a period of three consecutive Trading Days following the applicable Purchase Notice Date.

We will have the right to terminate the White Lion Purchase Agreement at any time after commencement, at no cost or penalty, upon three (3) Trading Days’ prior written notice. Additionally, White Lion will have the right to terminate the White Lion Purchase Agreement upon three (3) days’ prior written notice to us if (i) there is a Fundamental Transaction (as defined in the White Lion Purchase Agreement), (ii) we are in breach or default in any material respect of the White Lion RRA, (iii) there is a lapse of the effectiveness, or unavailability of, the registration statement for a period of 45 consecutive Trading Days or for more than an aggregate of 90 Trading Days in any 365-day period, (iv) the suspension of trading of the Common Stock for a period of five (5) consecutive Trading Days, (v) the material breach of the White Lion Purchase Agreement by us, which breach is not cured within the applicable cure period or (vi) a Material Adverse Effect (as defined in the White Lion Purchase Agreement) has occurred and is continuing. No termination of the White Lion Purchase Agreement will affect the registration rights provisions contained in the White Lion RRA.

In consideration for the commitments of White Lion, as described above, we have agreed that it will issue to White Lion shares of Common Stock having a value of $250,000 based upon the Closing Sale Price (as defined in the White Lion Purchase Agreement) of Common Stock two Trading Days prior to the filing of the Initial Registration Statement as Initial Commitment Shares. We may increase the number of shares it may sell to White Lion by issuing additional Commitment Shares in two additional tranches of $250,000 each. The Company issued Initial Commitment Shares of 50,200 shares of Common Stock to White Lion, based upon the Closing Sale Price of our Common Stock of $4.98 per share on November 30, 2022.

Lion by issuing additional Commitment Shares in two additional tranches of $250,000 each. We issued Initial Commitment Shares of 50,200 shares of Common Stock to White Lion, based upon the Closing Sale Price of our Common Stock of $4.98 per share on November 30, 2022.

Concurrently with the execution of the White Lion Purchase Agreement, we entered into the White Lion RRA with White Lion in which we have agreed to register the shares of Common Stock purchased by White Lion with the SEC for resale within 30 days of the consummation of a business combination. The White Lion RRA also contains usual and customary damages provisions for failure to file and failure to have the registration statement declared effective by the SEC within the time periods specified.

In March 2023, we entered into an amendment to the White Lion Purchase Agreement to give ~~the~~us ~~Company~~ the right, but not the obligation to require White Lion to purchase shares of our common stock while trading on the OTC Market. Under the terms of the amendment, we will issue to White Lion within five (5) Trading Days following the effective date of the amendment fully paid, non-assessable shares of our Common Stock equal to the quotient obtained by dividing (i) $250,000 and (ii) the lowest traded sale price of the common stock of the 10 (ten) Trading Days prior to the effective date of the amendment, minus 50,200. In March 2023, as compensation for its commitment to enter into the amendment, we issued 412,763 shares of our common stock to White Lion.

In August 2023, ~~the~~we ~~Company~~ and White Lion entered into a second amendment to the Common Stock Purchase Agreement (the “Second Amendment”). The Second Amendment includes, among other things, the right of the Company to issue a Purchase Notice (defined in the Second Amendment as an “Accelerated Purchase Notice”) requesting White Lion to purchase newly issued shares of common stock from ~~the Company~~us, subject to acceptance by White Lion, with pricing of the shares to be sold by ~~the~~us ~~Company~~ to White Lion under such Accelerated Purchase Notice determined on the date of issuance by ~~the~~us ~~Company~~ of the Accelerate Purchase Notice and acceptance by White Lion (the date of such notice defined as the “Accelerated Valuation Period”). Such accelerated purchases pursuant to an Accelerated Purchase Notice will be sold to White Lion at a price, defined as an “Accelerated Purchase Price,” equal to the lower of (i) the opening price of common stock during the Accelerated Valuation Period, (ii) the closing price of the common stock during Accelerated Valuation Period, or (iii) the volume weighted average price of the common stock during Accelerated Valuation Period; provided, however, that if at the time we deliver an Accelerated Purchase Notice to Investor the price of the common stock is lower than the opening price of the common stock during the Accelerated Valuation Period, the Accelerated Purchase Price will be discounted by 20%. In addition, the Second Amendment provides for an “Accelerated Purchase Notice Limit” equal to 200%.

Valuation Period, (ii) the closing price of the common stock during Accelerated Valuation Period, or (iii) the volume weighted average price of the common stock during Accelerated Valuation Period; provided, however, that if at the time the Company delivers an Accelerated Purchase Notice to Investor the price of the common stock is lower than the opening price of the common stock during the Accelerated Valuation Period, the Accelerated Purchase Price will be discounted by 20%. In addition, the Second Amendment provides for an “Accelerated Purchase Notice Limit” equal to 200%.

In addition, in the event we do not issue Purchase Notices (as defined in the White Lion Purchase Agreement) to White Lion providing for the purchase of at least $1,250,000 of Purchase Shares (as defined in the White Lion Purchase Agreement and Second Amendment) in the aggregate within 180 days following the effective date of the amendment, we will issue to White Lion an additional number of fully paid, non-assessable shares of common stock equal to the quotient obtained by dividing (i) $150,000 and (ii) the lowest Closing Sale Price (as defined in the White Lion Purchase Agreement and Second Amendment) of common stock of the 10 (ten) Trading Days prior to the 180th day following the effective date of the amendment.

~~Release~~In September 2023, we issued notices to purchase the total of ~~Certain~~729,000 ~~Lock-Up~~common ~~Restrictions~~shares to White Lion for the total proceeds of $105,317. We issued no notices to purchase securities during the three months ended March 31, 2024.

In order to comply with Nasdaq listing requirements, on January 4, 2023, we released 30% of the Target Consideration Shares (excluding shares held by Dr. Huh) from the six-month lock-up restrictions entered into in connection with the Business Combination (representing a total of 3,057,599 shares for release, of which, we estimate that approximately one-third will have been purchased below the closing price of our Common Stock of $4.21 on December 29, 2022). The release of those shares from lock-up restrictions may cause the market price of our securities to decline or increase the volatility in the market price of our securities. Additionally, since the Target Consideration Shares that may be offered for resale pursuant to this prospectus represent approximately 88% of the shares outstanding as of December 29, 2022 (after giving effect to redemptions and repurchases), the sale of all the securities being offered in this prospectus, or the perception that these sales could occur, could result in a significant decline in the public trading price of our securities.

Departure of Directors; Appointment of New Audit Committee Chair

On August 25, 2023, Michael Friedman was appointed to the Board, effective immediately. Further, the Board appointed Michael Friedman as a member of the Audit Committee.

Issuance of Unregistered Securities

On June 23, 2023, our founder and director exercised warrants to purchase 666,667 shares of our common stock at $0.60 per share for a total purchase price of $400,000.

On July 20, 2023, our founder and director exercised additional warrants to purchase 458,333 shares of our common stock at $0.60 per share for a total purchase price of $275,000.

On August 14, 2023, our founder and director exercised additional warrants to purchase 583,333 shares of our common stock at $0.60 per share for a total purchase price of $350,000.

On November 1, 2023, certain shareholders exercised warrants to purchase 492,045 shares of our common stock at $0.01 per share for a total purchase price of $4,920.

Components of Results of Operations

~~Operating~~Our ~~Expenses~~unaudited condensed consolidated financial statements for the three months ended March 31, 2024 include the accounts of Peak Bio Co., Ltd. and its subsidiary, Peak Bio CA., Inc. All intercompany balances and transactions have been eliminated in consolidation.

Prior to April 1, 2022, the consolidated financial statements have been extracted from the accounting records of pH Pharma, Ltd. on a carve-out basis. The historical results of operations, financial position, and cash flows may not be indicative of what we would have been had we been a separate stand-alone entity, nor are they indicative of what the results of operations, financial position and cash flows may be in the future.

The majority of our operating expenses related to research and development (“R&D”). R&D expenses directly related to us were entirely attributed to us in the accompanying consolidated financial statements. R&D salaries, wages and benefits were allocated to us using methodologies based on the proportionate share of R&D expenses for the PHP-303 and PH-1 ADC Platform programs compared to the R&D expenses for pH Pharma Ltd as a whole. We also received services and support from other functions of pH Pharma Ltd. Our operations are dependent upon the ability

of these other functions to provide these services and support. The costs associated with these services and support were allocated to us using methodologies based on the proportionate share of R&D expenses for the PHP-303 and PH-1 ADC Platform programs compared to the R&D expenses for pH Pharma Ltd as a whole. These allocated costs were primarily related to corporate administrative expenses, non-R&D employee related costs, including salaries and other benefits, for corporate and shared employees, and other expenses for shared assets for the following functional groups: information technology, legal, accounting and finance, human resources, facilities, and other corporate and infrastructural services. These allocated costs were primarily recorded as R&D expenses and general and administrative (“G&A”) expenses in the statements of operations and comprehensive loss.

The Spin-Off resulted in Peak Bio Co., Ltd. retaining the PHP-303 and PH-1 ADC Platform programs. Historically and throughout the periods presented, the PHP-303 and PH-1 ADC Platform programs have been owned by pH Pharma Co., Ltd and its subsidiaries (prior to the change of its name to Peak Bio Co., Ltd.). The PHP-303 and PH-1 ADC Platform programs have historically operated as a part of pH Pharma Co., Ltd and not as a separate stand-alone entity or group. The Spin-Off resulted in Peak Bio Co., Ltd. retaining approximately 90% of the equity outstanding in pH Pharma Co., Ltd., consisting of 8,283,613 shares of common stock and 693,000 stock options.

As of April 1, 2022, we concluded that all the assets and liabilities of the newly created Peak Bio Co., Ltd. legal entity were contributed by the parent company pH Pharma Ltd. No other assets or liabilities were considered to be attributable to Peak Bio Co., Ltd. or that would be transferred to Peak Bio Co., Ltd. upon the completion of the Business Combination, eliminating the necessity to allocate a portion of pH Pharma Ltd.’s assets and liabilities to Peak Bio Co., Ltd. on a carve-out basis. Therefore, there was no longer a need to allocate assets and liabilities, as well as expenses, from the parent for the consolidated financial statements.

Our consolidated financial statements for the year ended December 31, 2022 include the accounts of Peak Bio Co., Ltd. and its subsidiary, Peak Bio CA., Inc. All intercompany balances and transactions have been eliminated in consolidation.

Revenue

Our revenue has historically been generated through grants from government organizations. We currently have no commercially approved products. Grant revenue is recognized during the period that the research and development services occur, as qualifying expenses are incurred or conditions of the grants are met. We concluded that payments received under these grants represent conditional, nonreciprocal contributions, as described in ASC 958, Not-for-Profit Entities, and that the grants are not within the scope of ASC 606, Revenue from Contracts with Customers, as the organizations providing the grants do not meet the definition of a customer. Qualifying expenses are recognized when incurred as research and development expenses. Expenses for grants are tracked by using a project code specific to the grant, and the employees also track hours worked by using the project code.

development services occur, as qualifying expenses are incurred or conditions of the grants are met. Qualifying expenses are recognized when incurred as research and development expenses. Expenses for grants are tracked by using a project code specific to the grant, and the employees also track hours worked by using the project code.

Grant Revenue

Our grant revenues are derived from research programs with the Department of Defense, US Army Medical Research Acquisition Activity for work on a COVID-19 therapeutic.

Grants awarded to us for research and development by government entities are outside the scope of the contracts with customers and contributions guidance. This is because these granting entities are not considered to be customers and are not receiving reciprocal value for their grant support provided to us. These grants provide us with payments for certain types of expenditures in return for research and development activities over a contractually defined period.

We recognize grant revenue based on the reimbursable costs that are incurred during the period, up to pre-approved award limits. The expenses associated with these reimbursements are reflected as a component of research and development expense in our consolidated statements of operations and comprehensive loss.

Research and Development Expense

We expense research and development costs as incurred. Research and development expense consist primarily of costs related to personnel, including salaries and other personnel related expenses, contract manufacturing and supply, consulting fees, and the cost of facilities and support services used in drug development. Assets acquired that are used for research and development and have no future alternative use are expensed as in-process research and development.

General and Administrative Expenses

~~Our~~General ~~general~~ and administrative expenses consist primarily of ~~personnel~~salaries ~~costs, depreciation expense~~ and ~~other~~related ~~expenses for outside professional services~~benefits, including ~~legal fees relating to patent and corporate matters, human resources, audit and accounting services and facility~~stock-~~related fees not otherwise included in research and development expenses. Personnel costs consist of salaries, benefits and equity-~~based compensation ~~expense~~, ~~for~~related to our ~~personnel in~~ executive, finance, ~~and~~business ~~accounting~~development, ~~business~~legal, ~~operations~~human resources and ~~other~~support ~~administrative~~ functions. WeOther ~~expect our~~ general and administrative expenses to increase over the next several years to support our continued research and development activities, manufacturing activities, increased costs of expanding our operations and operating as a public company. These increases will likely include ~~increases~~professional ~~related~~fees tofor ~~the hiring of additional personnel~~auditing, ~~fees to outside consultants~~tax, ~~lawyers~~consulting and ~~accountants, and increased costs associated with being a public company such as expenses~~ patent-related to services ~~associated with maintaining compliance with Nasdaq listing rules and SEC requirements~~, ~~director~~rent and ~~officer~~utilities ~~insurance premiums~~ and ~~investor relations costs~~insurance.

37Results of Operations for the three months ended March 31, 2024 and 2023

~~Results~~The offollowing ~~Operations~~table ~~for~~provides ~~the~~our ~~three~~selected ~~months~~financial ~~ended September 30, 2023 and 2022~~information:

The following table provides selected financial information for the Company:


	Three Months Ended March 31,						Change
	2024			2023			Amount
Revenues	$	—		$	13,854		$	(13,854	)
Operating expenses
Research and development		70,269			713,106			(642,837	)
General and administrative		2,134,559			3,004,823			(870,264	)
Impairment Loss		—			3,513,999			(3,513,999	)
Total operating expenses		2,204,828			7,231,928			(5,027,100	)
Loss from operations		(2,204,828	)		(7,218,074	)		5,013,246
Other income (expense), net		(229,873	)		451,240			(681,113	)
Loss before income tax expense	$	(2,434,701	)	$	(6,766,834	)	$	4,332,133

	Three months ended September 30,						Change
	2023			2022			Amount
Revenues	$	278,831		$	192,547		$	86,284
Operating expenses
Research and development		552,988			868,410			(315,422	)
General and administrative		1,756,801			1,010,010			746,791
Total operating expenses		2,309,789			1,878,420			431,369
Loss from operations		(2,030,958	)		(1,685,873	)		(345,085	)
Other income (expense), net		2,441,545			(68,739	)		2,510,284
Loss before income tax expense	$	410,587		$	(1,754,612	)	$	2,165,199

Revenue

Our revenue has historically been generated through grants from government organizations. The total revenue for government grants was $~~278,831~~0 and $~~192~~13,~~547~~854 for the three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, respectively. We performed no work under the government grant with the Department of Defense, US Army Medical Research Acquisition Activity during the three months ended March 31, 2024.

Research and Development Expense

The following table summarizes our research and development expenses:

	Three months ended September 30,
	Three Months Ended March 31,
	2023		2022
	2024		2023
Third-party direct project expenses
PHP-303	$	~~297~~10,~~979~~884	$	3321,~~152~~611
PH-1 ADC Platform		4818,~~007~~904		~~(37~~58,~~513~~272	)
General program expenses and other pre-clinical programs		—		~~132,240~~—
Total third-party direct project expenses		~~345~~29,~~986~~788		~~127~~79,~~879~~883
Other research and development costs
Personnel costs		~~200~~35,~~872~~246		~~330~~401,~~397~~734
Facilities and other costs		65,~~130~~235		~~410~~231,~~134~~489
Total other research and development costs		~~207~~40,~~002~~481		~~740~~633,~~531~~223
Total research and development costs	$	552,988	$	868,410
Total research and development expenses	$	70,269	$	713,106

Research and development expense decreased by $0.36 million during the three months ended ~~September~~March 3031, ~~2023~~2024 compared to the three months ended ~~September~~March 3031, ~~2022~~2023. The decrease was primarily due to ~~decreases~~the todecrease ~~facilities~~in ~~and~~personnel ~~other~~ costs of $0.53 million, ~~partially~~driven ~~offset~~ by ana ~~increase~~reduction inof ~~direct~~R&D ~~project~~headcount ~~expenses~~during 2023 and a decrease in facility related toand other costs, following the ~~PHP-303~~abandonment ~~and~~of ~~PH-1~~our ~~ADC~~premises ~~Platform~~in Palo Alto, California of $0.2 million.

General and Administrative Expense

General and administrative expense ~~increased~~decreased by $0.79 million during the three months ended ~~September~~March 3031, ~~2023~~2024 compared to the three months ended ~~September~~March 3031, ~~2022~~2023. The ~~increase~~decrease was primarily ~~driven~~due byto ana ~~increase~~decrease in ~~D&O~~personnel ~~insurance~~costs of $0.4 million, ~~increase~~driven inby ~~wages~~a reduction of ~~$0.4~~general ~~million~~ and ~~increase~~administrative inpersonnel ~~professional~~during ~~fees~~2023, ~~related~~decrease toin ~~being~~facility arelated ~~public~~expense ~~company of~~ $0.42 million, ~~partially~~and ~~offset by~~ a decrease in ~~administrative~~professional ~~services~~fees related to public filings of $0.51 million.

Other Income, Net

Other income, net increased by $2.5 million during the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily due to the change in fair value of warrant liability of $2.2 million, change in fair value of derivative liability of $1.4 million, partially offset by interest expense on the convertible notes payable and related party convertible notes payable of $1.2 million.

Results of Operations for the nine months ended September 30, 2023 and 2022

The following table provides selected financial information for the Company:

	Nine months ended September 30,						Change
	2023			2022			Amount
Revenues	$	292,685		$	346,413		$	(53,728	)
Operating expenses
Research and development		1,637,247			3,443,147			(1,805,900	)
General and administrative		7,060,681			3,543,018			3,517,663
Impairment loss on operating lease right-of-use asset		3,513,999			—			3,513,999
Total operating expenses		12,211,927			6,986,165			5,225,762
Loss from operations		(11,919,242	)		(6,639,752	)		(5,279,490	)
Other income (expense), net		(381,231	)		252,547			(633,778	)
Loss before income tax expense	$	(12,300,473	)	$	(6,387,205	)	$	(5,913,268	)

Revenue

Our revenue has historically been generated through grants from government organizations. The total revenue for government grants was $292,685 and $346,413 for the nine months ended September 30, 2023 and 2022, respectively.

Research and Development Expense

The following table summarizes our research and development expenses:

	Nine months ended September 30,
	2023		2022
Third-party direct project expenses
PHP-303	$	333,974	$	371,218
PH-1 ADC Platform		183,693		351,107
General program expenses and other pre-clinical programs		—		344,821
Total third-party direct project expenses		517,667		1,067,146
Other research and development costs
Personnel costs		877,762		1,174,757
Facilities and other costs		241,818		1,201,244
Total other research and development costs		1,119,580		2,376,001
Total research and development costs	$	1,637,247	$	3,443,147

Research and development expense decreased by $1.8 million during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease was primarily due to decreases in direct project expenses related to the PHP-303 programs of $0.1 million, the PH-1 ADC Platform of $0.2 million and general program expenses and other pre-clinical programs of $0.3 million. In addition, there was a decrease in personnel costs of $0.3 million driven by a reduction of staff and a decrease to facilities and other costs of $1 million.

General and Administrative Expense

General and administrative expense increased by $3.5 million during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase was primarily driven by an increase in D&O insurance of $1.4 million, increase in wages of $1.1 million and increase in professional fees related to being a public company of $1.5 million, partially offset by a decrease in administrative services of $0.8 million.

Impairment Loss on Operating Lease Right-of-Use Asset

39We recognized an impairment loss on the operating lease right-of-use asset of $3.5 million due to the abandonment of the premises in Palo Alto, California for the three months ended March 31, 2023.

We recognized an impairment loss on the operating lease right-of-use asset of $3.5 million due to the abandonment of the premises in Palo Alto, California for the nine months ended September 30, 2023 and 2022.

Other Income, Net

Other income, net decreased by $0.67 million during the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 compared to the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 primarily due to ~~interest expense on~~ the ~~convertible~~increase ~~notes~~in ~~payable~~interest ~~and~~expense, ~~related~~partially ~~party~~offset ~~convertible~~by ~~notes~~the ~~payable~~other income of $20.2 million ~~and~~related ato athe ~~loss~~settlement onof ~~extinguishment~~liability ofwith ~~debt~~a ofrelated $1party. ~~million~~Also, ~~partially~~during ~~offset~~the bythree amonths ~~fair~~ended ~~value~~March ~~adjustment~~31, to2023, ~~the~~we ~~warrant~~recognized ~~liability~~the ofgain $2on ~~million,~~the a fair value adjustment ~~of $0.8 million~~ to the ~~derivative~~warrant liability ~~and a receipt~~ of an$0.5 ~~employee~~million, ~~retention~~with ~~credit~~no ofsimilar ~~$0.3~~gain ~~million~~recognized during the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2024.

~~Liquidity~~We recognized an additional $0.3 million in interest expense, ~~Capital~~including ~~Resources~~the amortization of related discounts, during the three months ended March 31, 2024 as compared to the prior period, related to the November 2022 Convertible Notes, April 2023 Convertible Notes and ~~Going~~December ~~Concern~~2023 Convertible Notes.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net loss was $122.34 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and $1312.18 million and $813.31 million for the years ended December 31, ~~2022~~2023 and ~~2021~~2022, respectively. At ~~September~~March 3031, ~~2023~~2024 we had cash of $0.1 million. Our primary uses of cash to date have been to fund our research and development activities, business planning, establishing and maintaining our intellectual property portfolio, and providing general and administrative support for our operations.

Since the beginning of 2024, we raised aggregate gross proceeds of approximately $0.7 million from the issuance of December 2023 Convertible Notes, $0.75 million from the issuance of Secured Founder Loan and $3.5 million from the issuance of May 2024 Convertible Notes.

Funding Requirements

We expect to incur losses from operations for the foreseeable future primarily due to research and development expenses, including expenses related to conducting research activities, pre-clinical expenses and clinical trials. Our future capital requirements will depend on a number of factors, including:

•

the scope, progress, results and costs of our clinical trials, including but not limited to PHP-303 and our PH-1 ADC Platform;

•

the cost of manufacturing drug supply for our clinical and preclinical studies;

•

the future results of on-going preclinical research and subsequent clinical trials for treatments for oncology, genetic disease, liver disease, inflammation, and other pipeline candidates we may identify from time to time, including our ability to obtain regulatory approvals;

•

any changes in regulatory standards relating to the review of our product candidates; and our ability to timely obtain such required regulatory approvals;

•

the number and development requirements of other product candidates that we pursue;

•

the emergence of competing technologies and other adverse market developments;

•

our ability, and the ability of our third-party manufacturers, to manufacture or supply sufficient quantities of clinical products;

•

the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities, for any of our product candidates for which we receive marketing approval;

•

our ability to achieve the degree of market acceptance necessary for future commercial success of our product candidates for which we receive marketing approval, if any;

•

the costs of preparing, filing, and prosecuting patent applications and maintaining, enforcing, and defending intellectual property-related claims;

•

the impact of litigation that may be brought against us or of litigation that we may pursue against others;

•

the extent to which we acquire or invest in businesses, products, and technologies;

•

our ability to successfully integrate acquired products and technologies into our business, including the possibility that the expected benefits of the transactions will not be fully realized by us or may take longer to realize than expected;

•

our ability to establish and maintain collaborations, partnerships or other similar arrangements and to obtain or satisfy any milestone, royalty, or other payments from any such collaborations;

•

the extent to which our business could be adversely impacted by the effects of COVID-19 outbreak, including due to actions by us, governments, suppliers or other third parties to control the spread of COVID-19, or by other health epidemics or pandemics; and

•

the costs of operating as a public company.

We have not been capitalized with sufficient funding to conduct our operations. We entered into the White Lion Purchase Agreement on November 3, 2022, as amended, whereby we have the right, but not the obligation, to require White Lion to purchase, from time to time, up to $100 million in aggregate gross purchase price of newly issued shares of our common stock. We expect to incur significant expenses and operating losses for the foreseeable future as we continue our efforts to identify product candidates and seek regulatory approvals within our gene therapy portfolio.

Additional financing will be needed to fund our ongoing activities. We may raise this additional funding through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions and funding under government contracts. We may be unable to raise additional funds or enter into such other arrangements or arrangement when needed on favorable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate certain of our research and development programs. There can be no assurances that other sources of financing would be available. Due to these uncertainties, there is substantial doubt about our ability to continue as a going concern.

Our future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of additional financing; (ii) the success of our research and development programs; (iii) the development of competitive therapies by other biotechnology and pharmaceutical companies, (iv) our ability to attract and retain key employees, (v) our ability to manage growth of the organization; (vi) our ability to protect our proprietary technology; and ultimately (vii) regulatory approval and market acceptance of our product candidates.

Cash Flows Discussion

The following table summarizes our cash flows for the periods indicated:

	Nine months ended September 30,
	Three Months Ended March 31,
	2023			2022
	2024			2023
Net cash used in operating activities	$	(31,~~289~~417,~~416~~672	)	$	(31,~~786~~440,~~504~~075	)
Net cash used in investing activities		—			~~(128,454~~—	)
Net cash provided by financing activities		21,~~527~~108,~~972~~163			41,~~175~~144,~~505~~429
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(~~761~~309,~~444~~509	)	$	~~260~~(295,~~547~~646	)

Operating Activities

~~During~~ Net cash used in operating activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2023,~~2024 was the same as the net cash used infor ~~operating~~the ~~activities~~three ~~was~~months ~~$3.3~~ended ~~million~~March 31, ~~due~~2023. toAlthough ~~our~~the operating ~~loss~~expenses ofdecreased by $121.34 million, ain ~~loss~~2024 onas ~~extinguishment~~compared ofto ~~debt of $1 million~~2023, this ~~partially~~decrease was offset by ~~non-cash~~the ~~items~~increase ~~including~~in ~~impairment~~accounts ~~loss~~payable onand ~~operating~~accruals ~~right~~due ofto ~~use~~the ~~asset~~timing of ~~$3.5~~the ~~million,~~cash ~~amortization~~outlays. ofThe ~~right-of-use~~decrease ~~asset~~in ofthe ~~$0.2~~operating ~~million,~~expenses ~~issuance~~is ofdue ~~shares~~to ~~for~~the ~~finance~~reduction ~~fee~~in offacilities ~~$0.3 million~~expenses, ~~depreciation~~reduction ~~expense~~in headcount of ~~$0.1~~general ~~million~~ and ~~share-based~~administrative ~~compensation of $0.4 million~~employees, aand ~~change~~decreases in ~~the~~direct ~~fair~~project ~~value~~expenses ofrelated ~~warrant~~to ~~liability~~the ofPHP-303 ~~$2 million~~program, ~~a change in~~ the ~~fair~~PH-1 ~~value~~ADC ofPlatform, ~~derivative~~and ~~liability~~other ofgeneral ~~$0.8~~and ~~million~~pre-clinical asprograms ~~well~~ as a ~~decrease~~result of delays in ~~working~~our ~~capital~~ongoing ofand ~~$4.2~~planned ~~million~~research activities .

During the nine months ended September 30, 2022, net cash used in operating activities was $3.8 million, due to our operating loss of $6.3 million, partially offset by amortization of right-of-use asset of $0.6 million, depreciation expense of $0.1 million, share-based compensation of $0.4 million and a decrease in working capital of $1.3 million.

Investing Activities

During the ~~nine~~three months ended ~~September~~March 3031, 2024 and 2023, there was no net cash used in investing activities. During the nine months ended September 30, 2022, net cash used in investing activities was $128,454 primarily due to capital expenditures for furniture and fixtures related to the office in South San Francisco, California.

Financing Activities

During the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 net cash provided by financing activities was driven by the net proceeds from ~~issuance~~additional closes of ~~convertible~~the ~~notes~~December ~~payable~~2023 ofConvertible ~~$2.1~~Notes ~~million,~~in ~~proceeds~~the ~~from~~amount ~~exercise~~ of ~~warrants of~~ $10.7 million, and proceeds from a related party loan of $0.37 million, ~~and proceeds from the issuance of common shares under the White Lion Purchase Agreement (as defined below),~~ partially offset by repayment of the ~~insurance~~Insurance ~~financing~~Financing Payable of $0.93 million.

During the ~~nine~~three months ended ~~September~~March 3031, ~~2022,~~2023 net cash provided by financing activities was driven by the net proceeds from pHadvances ~~Pharma~~payable ~~Ltd~~ of $1.32 million, ~~proceeds~~and ~~from the issuance of long term debt of $1.3 million,~~ proceeds from a related party loan of $0.53 million, ~~and~~partially ~~proceeds~~offset ~~from~~by ~~the~~repayment ~~issuance~~ of ~~common~~the ~~stock~~Insurance ~~for~~Financing Payable of $10.23 million.

Contractual Obligations and Commitments

In October 2021, we entered into a lease for laboratory and office facilities in Palo Alto, California that expires in March 2027 with a five-year renewal option and opened a secured letter of credit with a third-party financial institution in lieu of a security deposit for $177,000. Base rent for this ~~lease~~sublease is approximately $89,000 monthly with annual escalations of 3%. In March 2023, ~~the~~we ~~Company~~ vacated the premises and returned possession of the premises to the landlord in April 2023. The full amount of the ~~secured letter of credit issued in lieu of a~~ security deposit has been applied to back rent and ~~the~~we ~~Company~~are is still responsible for the outstanding payments under the lease. In June 2024, the landlord was awarded a default judgment against the Company in the amount of $796,773, primarily representing past due rent which is included in the operating lease liability. The Company is in the process of negotiating a settlement with the landlord.

On March 1, 2022, wethe Company and pH Pharma Co., Ltd entered into an administrative services and facilities agreement whereby pH Pharma Co., Ltd ~~will~~would perform services, functions and responsibilities for usthe Company. Under the agreement, wethe ~~would~~Company ~~pay~~paid pH Pharma Co., Ltd $100,000 per month through August 30, 2022 and $15,000 per month from September 1, 2022 through February 28, 2023 based on the estimated value of the ~~level~~services ~~of service~~ to be performed. Additionally, wethe ~~would~~Company ~~pay~~reimbursed pH Pharma Co., Ltd $3,000 per month in lease payments from March 1, 2022 through February 28, 2023 ~~in lease payments~~. At ~~September~~December 3031, 2023, wethe ~~recorded~~balance apayable ~~liability~~ to ~~accrued~~pH ~~expenses~~Pharma ~~of $297~~Co.,~~421~~ ~~related~~Ltd tounder this agreement was $309,534, which was included in accounts payable in the consolidated balance sheet. On January 31, 2024, the Company and pH Pharma Co., Ltd entered into a settlement agreement, settled the outstanding

~~Off-Balance Sheet Arrangements~~35

Wedebt ~~had~~for noa ~~off~~one-~~balance~~time ~~sheet~~payment ~~arrangements~~of as$85,000, resulting in $207,967 recognized during three months ended March 31, 2024 in cancellation of ~~September~~trade 30liability, ~~2023~~and terminated the administrative services and ~~December~~facilities agreement. The Company recognized $0 and $36,357 expenses under the administrative services and facilities agreement for the three months ended March 31, ~~2022~~2024 and 2023, respectively.

On April 1, 2024, the Company and pH Pharma Co., Ltd entered into an administrative services agreement whereby pH Pharma Co., Ltd will perform investor relations services, functions and responsibilities on behalf of the Company in the Republic of Korea. Under the agreement, the Company is obligated to pay pH Pharma Co., Ltd. a one-time fee of $230,000 for the services performed from January 1, 2024 through April 30, 2024 and a monthly fee of $10,000 per month for services rendered from May 1, 2024 through July 31, 2024. At March 31, 2024, the amounts accrued to pH Pharma Co., Ltd under this agreement totaled $230,000, included in accounts payable in the unaudited condensed consolidated balance sheets. The Company recognized $172,500 expense under this administrative services agreement for the three months ended March 31, 2024.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of our unaudited interim condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Our significant accounting policies and estimates are described in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023 filed with the SEC on ~~June~~August 295, ~~2023~~2024, which describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.

There have been no material changes to our critical accounting policies and estimates as from the date upon which we filed our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023 with the SEC.

Recently ~~Issued~~Adopted Accounting Standards

AIn ~~description~~November of2023, ~~recently~~the FASB issued ~~accounting~~ASU ~~pronouncements~~2023-07, ~~that~~Segment ~~may~~Reporting: ~~potentially~~Improvements ~~impact~~to ~~our~~Reportable ~~financial~~Segment ~~position~~Disclosures. This ASU modified the disclosure and ~~results~~presentation requirements primarily through enhanced disclosures of ~~operations~~significant issegment ~~disclosed~~expenses and clarified that single reportable segment entities must apply Topic 280 in ~~Note~~its 2,entirety. ~~Summary~~This ofguidance ~~Significant~~is ~~Accounting~~effective ~~Policies~~for the Company for the year beginning January 1, 2024, with early adoption permitted. The amendments should be applied retrospectively to ~~our~~all ~~condensed~~prior periods presented in the financial statement. The Company adopted ASU 2023-07 on January 1, 2024 and the adoption did not have a material effect on the Company’s consolidated financial statements.

On January 1, 2024, on adoption of ASU 2020-06, the Company determined that the April 2023 Conversion Feature Liability met the derivative accounting scope exception and the conversion feature no longer required bifurcation form the April 2023 Convertible Notes and April 2023 Convertible Notes, related party (see Note 10). On January 1, 2024, the fair value of the fair value of the April 2023 Conversion Feature Liability was zero. Therefore, the adoption had no impact on the Company’s unaudited condensed consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for all public entities for fiscal years beginning after December 15, 2024. Early adoption is permitted and should be applied either prospectively or retrospectively. The Company plans to adopt ASU 2023-09 and related updates on January 1, 2025. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

There were no other recently issued but not yet effective accounting pronouncements that will have a material effect on the accompanying unaudited condensed consolidated financial statements.

JOBS Act Accounting Election

We qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements that are not otherwise applicable to public companies. These provisions include, but are not limited to:

•

being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q;

•

not being required to comply with the auditor attestation requirements on the effectiveness of our internal controls over financial reporting;

•

not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);

•

reduced disclosure obligations regarding executive compensation arrangements; and

•

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We may use these provisions until the last day of our fiscal year in which the fifth anniversary of the completion of this offering occurs. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.235 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

We have elected to take advantage of certain of the reduced disclosure obligations in this Form 10-Q and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than the information you receive from other public companies in which you hold stock.

The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, until those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which we will adopt the recently issued accounting standard.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~Effects~~Not ~~of Inflation~~ applicable.

Inflation generally affects us by increasing our cost of labor and research and development contracts. We do not believe that inflation has had a material effect on our financial results during the periods presented.

Concentration of Credit Risk

We received 100% of our revenue through a grant from a government organization during the three and nine months ended September 30, 2023 and 2022. To date, no receivables have been written off.

Interest Rate Risk

As of September 30, 2023 and December 31, 2022, we had a cash balance of $0.1 million, $0.7 million, respectively, all of which were maintained in business checking accounts and money market accounts in the U.S. and South Korea. Our primary exposure to market risk is to interest income volatility, which is affected by changes in the general level of interest rates. As such rates are at a near record low, a 10% change in the market interest rates would not have a material effect on our business, financial condition or results of operations.

Foreign Currency Risk

We conduct our business in U.S. dollars and, thus, are not exposed to financial risks from exchange rate fluctuations between the U.S. dollar and other currencies.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, mean controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2023, our chief executive officer and chief financial officer concluded that, as of such date, our internal controls over financial reporting were not effective as of the end of the period covered by this Interim Report on Form 10-Q due to material weaknesses as describe herein. 37

AOur ~~material~~management, ~~weakness~~with isthe aparticipation ~~control~~of ~~deficiency~~our ~~(within~~chief executive officer and chief financial officer, evaluated the ~~meaning~~effectiveness of ~~the~~our ~~Public~~disclosure ~~Company~~controls ~~Accounting~~and ~~Oversight~~procedures ~~Board~~as of March 31, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(~~United~~e) ~~States~~and 15d-15(e) ~~Auditing~~under ~~Standard~~the ~~No.~~Exchange 2)Act, ormean ~~combination~~controls and other procedures of ~~control~~a ~~deficiencies~~company that ~~result~~are designed to ensure that information required to be disclosed by us in ~~more~~the ~~than~~reports athat ~~remote~~we ~~likelihood~~file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that ainformation ~~material~~required ~~misstatement~~to ofbe disclosed by a company in the ~~annual~~reports that it files or ~~interim~~submits under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial ~~statements~~officers, ~~will~~as ~~not~~appropriate beto ~~prevented~~allow ortimely ~~detected~~decisions regarding required disclosure. Management ~~has~~recognizes ~~identified~~that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the ~~following~~cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2024, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q due to material weaknesses: in our internal control over financial reporting as describe below.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (United States) Auditing Standard No. 2201) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following material weaknesses:

•

Formal documentation of the Company’s internal control over financial reporting including risk assessments and processes needed to mitigate critical risks does not exist.

•

The Company lacks sufficient resources with respect to the number of people employed in its accounting department and the adequacy of their training in relation to its financial reporting requirements.

•

The Company’s internal control over financial reporting is ineffective with respect to its financial closing process in the following areas:

Preparation, review and approval of journal entries including the reasonableness of critical accounting estimates;

Completeness and proper ~~cutoff~~cut-off of accrued liabilities ~~including $1.4 million of unpaid compensation due to its former Chief Executive Officer under the terms of an executive employment agreement~~;

~~Timely~~Evaluation ~~closings~~of asthird-party ~~required~~financial toreporting ~~maintain~~advisors' ~~compliance~~capabilities ~~with~~and ~~reporting~~the ~~deadlines~~monitoring ~~under~~and ~~applicable~~evaluation ~~Securities~~of the accuracy and ~~Exchange~~completeness ~~Commission~~of ~~regulations~~their work product;

~~Accuracy~~Timely ofclosings ~~diluted~~as ~~earnings~~required ~~per~~to ~~share~~maintain ~~calculation~~compliance with reporting deadlines under applicable Securities and Exchange Commission regulations; and

~~Evaluation~~Accuracy of ~~third~~diluted ~~party~~earnings ~~financial~~per ~~reporting~~share ~~advisors’ capabilities and the monitoring and evaluation of the accuracy and completeness of their work product~~calculation.

•

The Company experienced difficulties in applying complex accounting principles including:

Financial instruments accounted for under ASC 480 and ASC 815-10;

~~Consolidation~~Differentiating ~~accounting~~between ~~following~~contractual ~~the~~liabilities ~~completion~~and ofgain ~~a reverse merger~~ and ~~recapitalization~~loss ~~transaction~~contingencies; and

Income taxes including the application of applicable foreign income tax regulations;

Debt extinguishment accounting including the settlement of a note payable to a related party and conversion of notes payable by a related party;

Fair value measurements.

Planned Remediation

Management continues to work to improve its controls related to our material weaknesses, specifically implementing improved processes and internal controls, and hiring outside consultants, to ensure the proper application of accounting practices and guidance. We also intend to increase our accounting staff as soon as economically feasible and sustainable to remediate these material weaknesses. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded that these controls are operating effectively.

Changes in Internal Control

Except as noted above, there has been no change in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.38

Except for the hiring of outside consultants as noted above, there has been no change in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently a party to any material legal proceedings. At each reporting date, we evaluate whether a potential loss amount or a potential range of loss in respect of legal proceedings is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. We expense the costs related to our legal proceedings as incurred.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023, which could materially affect our business, financial condition, or results of operations. There have been no material changes in or additions to the risk factors referred to in the previous sentence.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).

ExhibitNumber		Description
10.1		~~Second~~Form ~~Amendment~~of toConvertible ~~Common~~Note ~~Stock Purchase~~ Agreement, dated asMay ~~of August14~~28, ~~2023~~2024, by and between Peak Bio, Inc. and ~~White~~the ~~Lion~~Investors ~~Capital~~party ~~LLC.~~thereto (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on ~~August~~June 157, ~~2023~~2024).
10.2		Form of Convertible Note Agreement, dated July 12, 2024, by and between Peak Bio, Inc. and the Investors party thereto (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 17, 2023).
31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

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31.1*		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PEAK BIO, INC.
Date: June 24, 2024	By:	/s/ Stephen LaMond
Date: August 23, 2024	By:	/s/ Stephen LaMond
		Stephen LaMond
		Interim Chief Executive Officer and Director
		(principal executive officer)

Date: June 24, 2024	By:	/s/ Stephen LaMond
Date: August 23, 2024	By:	/s/ Divya Patel
		Stephen LaMond
		Divya Patel
		Acting Chief Financial Officer


			(principal financial and accounting officer)

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