Condensed Consolidated Interim Statement of Changes in Equity for the six months ended 30 June 2021 and 30 June 2020

Condensed Consolidated Interim Statement of Cash Flows for the six months ended 30 June 2021

Major non-cash transactions

Conversion of debt into common shares.                                                                                                10,400,000                             -

Shares issued as Arrangement Fees                                                                                                             666,337                             -

Notes to the Condensed Consolidated Interim Financial Statements

1.          General Information

The Group's business is preclinical-stage biotechnology focused on the discovery, development and commercialisation of innovative treatments relating to bone marrow/hematopoietic (blood-forming) stem cell (BM/HSC) transplants for blood diseases, including leukaemia, lymphoma and bone marrow failure, and viral infections. The products under development are designed to address a range of problems that occur with  current standard of care treatments.

The Company's registered office is located at 5 Fleet Place, London EC4M 7RD, and the Company's shares are listed on the main market of the London Stock Exchange.

2.          Interim financial information

The condensed consolidated interim financial statements are for the six month period ended 30 June 2021. The condensed consolidated interim financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2020, which were prepared under International Financial Reporting Standards (IFRS).

The condensed consolidated interim financial statements have not been audited nor have they been reviewed by the Group’s auditors under ISRE 2410 of the Auditing Practices Board. These condensed consolidated interim financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group’s statutory financial statements for the year ended 31 December 2020 prepared under IFRS have been filed with the Registrar of Companies. The auditor’s report on those financial statements was unqualified and did not contain a statement under Section 498(2) of the Companies Act 2006.

3.          Basis of preparation and changes to the Group's Accounting Policies

The principal accounting policies applied in the preparation of these consolidated interim condensed financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of Preparation

The condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting'. The accounting policies adopted in this report are consistent with those of the annual financial statements for the year to 31 December 2020 as described in those financial statements. A number of new or amended standards became applicable for the current reporting period, but they did not have any impact on the group's accounting policies and did not require retrospective adjustments.

Going Concern

The preparation of interim financial statements requires an assessment on the validity of the going concern assumption.

The Directors have given particular thought to the impact on the Group that may result from COVID-19 and any other potential pandemics that may arise. The Group's New York operations were classed as an essential business and were not subject to closure during lockdown periods, and so work continued with prudent hygiene and distancing measures in place including limited work in the laboratory on rota and work from home. The Group allowed for extended delivery times for some supplies, and for slower progress with collaboration partners. The Board and UK management continued to operate remotely, as usual. At the present time work has returned to normal, and the Group believes that there should be no material disruption to its work in the event of further pandemic-related restrictions. The Board continues to monitor these risks and the Group's business continuity plans.

The Company raised £12,000,000 before expenses through convertible debt placings during the period, all of which was converted to equity except for £1,600,000 which was repaid. The Company had cash and cash equivalents totalling £10,563,668 as at 30 June 2021.

The Directors, having made due and careful enquiry, are of the opinion that the Company has or will have access to sufficient funding in order to execute its operations over the next 12 months. The Directors therefore have made an informed judgment, at the time of approving the financial statements, that there is a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. As a result, the Directors have adopted the going concern basis of accounting in the preparation of the annual financial statements.

Notwithstanding the Company's cash balance, should the Company elect to raise additional capital within the next year, it cannot be certain that such additional funding will be available on acceptable terms, or at all. To the extent that the Company raises additional funds by issuing equity securities, the Company's stockholders may experience dilution. Any debt financing, if available, may involve restrictive covenants. If the Company is unable to raise additional capital when required or on acceptable terms, it may have to (i) significantly delay, scale back or discontinue the development and/or commercialisation of one or more product candidates; (ii) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favourable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that it would otherwise seek to develop or commercialise on unfavourable terms.

Segmental Reporting

The Group's operations are located in New York, USA, with the head office located in the United Kingdom. The main assets of the Group, cash and cash equivalents, are held in the United States to support the operating business.

The Group currently has one reportable segment: a biotechnology business focused on the discovery, development and commercialisation of innovative treatments relating to bone marrow/hematopoietic (blood-forming) stem cell (BM/HSC) transplants for blood disease and treatment of blood diseases such as AML and autoimmune diseases, and viral infections.

Accounting Policies

The accounting policies, presentation and methods of computation applied by the Group in these condensed interim financial statements are the same as those applied by the Group in its consolidated financial information in its 2020 Annual Report and Accounts. The new standards, described below, will be adopted by the Group when effective, and have had no impact on these half yearly results.

New and amended accounting standards and interpretations

On 12 February 2021 the IASB issued an amendment to IAS 1 concerning accounting policy disclosures, and an amendment to IAS 8 concerning the definition of accounting estimates. On 7 May 2021 the IASB issued an amendment to IAS 12 concerning deferred tax related to assets and liabilities arising from a single transaction. The Company does not expect any material impact from the application of these two amendments, which are effective for annual reporting periods beginning on or after 1 January 2023. The Company will not early adopt these amendments.

On 23 January 2020 the IASB issued 'Classification of Liabilities as Current or Non-current', an amendment to IAS 1. On 14 May 2020 the IASB issued 'Reference to the Conceptual Framework', an amendment to IFRS 3; 'Proceeds before Intended Use', an amendment to IAS 16; 'Onerous Contracts - Cost of Fulfilling a Contract', an amendment to IAS 37; and 'Annual Improvements to IFRS standards 2018-2020'. The Company does not expect a material impact from those amendments, which are effective for annual reporting periods beginning on or after 1 January 2022. The Company will not early adopt these amendments.

4.          Significant accounting judgments, estimates and assumptions

The preparation of the financial statements in conformity with International Financial Reporting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the 

Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 December 2020.

5.          Other income

Other income during the period ended 30 June 2021 consists of £170,244 (H1 2020: £82,880) comprising £71,249 arising from the forgiveness of a US governmental loan programme (the Payroll Protection Program) in 2021; and £98,995 and £90,273 received from a third party under a research collaboration programme relating to humanised mice in 2021 and 2020, respectively.

6.          Earnings per share

Basic and fully diluted earnings per share are calculated by dividing the loss for the     six months from continuing operations of £3,631,142 (six months to 30 June 2020: £832,314) attributable to equity owners of the Group by the weighted average number of ordinary shares in issue during those periods of 546,669,219 and 396,250,052 respectively.

Diluted loss per Ordinary Share equals basic loss per Ordinary Share as, due to the losses incurred in the six months to 30 June 2021 and six months to 30 June 2020, there is no dilutive effect from the subsisting share options.

7.          Property, Plant and Equipment

During the six months ended 30 June 2021, the Group acquired assets with a cost of £13,925 (six months ended 30 June 2020: £nil).

8.          Called up Share Capital

9.          Borrowings

Mint Transactions

In November 2020, Mint Capital Limited ('Mint') and the Company entered into a Financing Facility agreement ('Financing Facility') whereby Mint conditionally agreed to subscribe for up to £60 million in aggregate principal amount of Convertible Loan Notes pursuant to an agreement entered into with the Company (the 'Subscription Agreement'). The shareholders of the Company approved the facility in January 2021 and a prospectus was published on 29 January 2021. The key terms of the Convertible Loan Notes were set out in the announcement relating to the Convertible Loan Notes which was released on 18 November 2020.

Arrangement fee

The Company agreed to pay a fee of 5% of the aggregate principal value of the Convertible Loan Notes issued to the arranger for the Facility (the "Arranger"). The company issued 7,741,935 shares in February 2021 as an arrangement fee to the arranger of the Financing Facility.

Draw Down

The Company received £12,000,000 from the first drawn down of the Financing Facility agreement in February 2021. The price of the conversion of the convertible loan notes issued under the Financing Facility agreement into common shares of the Company, as defined by the Financing Facility agreement, was to be the lesser of (i) 8.4375p and (ii) 90% of the lowest closing bid price as reported on Bloomberg from the three closing bid prices immediately preceding a conversion.

The Company received a conversion notice from Mint in respect of £650,000 in principal amount of Convertible Loan Notes and issued 13,131,313 shares to Mint in February 2021 which were admitted to trading on the London Stock Exchange's main market in March 2021. Further conversion notices were received from Mint in respect of £900,000 and £950,000 in principal amount of Convertible Loan Notes. The Company issued a further 14,285,714 shares to Mint in March 2021, and 24,547,803 shares in April 2021; both of these allotments of shares were admitted to trading on the London Stock Exchange's main market in April 2021. Further conversion notices were received from Mint in respect of £900,000 and £500,000 in principal amount of Convertible Loan Notes. The Company issued a further 29,850,746 shares to Mint in April 2021, and 22,222,222 shares in May 2021; both of these allotments of shares were admitted to trading on the London Stock Exchange's main market in May 2021.

In May 2021, the Company issued 1,000,000 shares to an Arranger for introducing an investor to purchase the remaining position of Mint. The Company received a conversion notice from the new investor in respect of £6,500,000 in principal amount of Convertible Loan Notes and issued 433,333,333 shares to such investor in May 2021. The Company repaid the remaining £1,600,000 under the facility and the facility was terminated.

During the period from 1 January 2021 through to 30 June 2021 the Company recognised £1,413,607 of financing related costs related to the issuance of the debt, including the value of the shares issued to the Arrangers. During the period from 1 January 2021 through to 30 June 2021 the Company recognised £1,212,475 of financing related costs representing the fair value of shares issued in excess of the outstanding principle at the date of the conversion.

Convertible Notes

During 2018 Orgenesis Inc. entered in to two debt facility agreements with the Group, one each with Hemogenyx Pharmaceuticals LLC and Immugenyx LLC:

1)   On 7 November 2018 the Group entered into a loan agreement with Orgenesis Inc., an organisation with which the Group has an existing collaboration agreement. The loan amount was for not less than US$1,000,000. As at reporting date drawdowns totalling US$1,000,000 had been made with Hemogenyx Pharmaceuticals LLC receiving the funds. The loan carries an interest rate of 2% and has a term of three years. Orgenesis has the option to convert both principal and accrued interest into equity in Hemogenyx-Cell at any time prior to maturity. Hemogenyx-Cell SPRL ("Hemo-Cell") is a wholly owned Belgian entity and was incorporated in April 2019 at which point this loan facility was treated as a borrowing in accordance with the provisions of IAS39.

2)   On 7 November 2018 the Group entered into a loan agreement, through its wholly owned subsidiary Immugenyx LLC, with Orgenesis Inc., an organisation with which the Group has an existing collaboration agreement. The loan amount was for not less than US$1,000,000. As at reporting date drawdowns totalling US$1,000,000 had been made. The loan carries an interest rate of 2% and has a term of three years. Orgenesis has the option to convert both principal and accrued interest into equity in Immugenyx LLC at any time prior to maturity. This loan has been treated in accordance with the provisions of IAS39.

PPP Loan

Included in borrowings at 30 June 2020 is an amount of £79,871 (US$98,947) received during the period under the United States Government's Paycheck Protection Program (PPP Loan) in response to the COVID-19 pandemic. The PPP Loan has been converted into a grant at the election of the Company as 60% of the amount was applied to payroll expenditure and there was no reduction in employee headcount, and it was therefore included in other income.

10.        Share-based payments

Options

During the six months to 30 June 2021 no options were issued to directors or employees and 1,068,128 options were cancelled.

A schedule of options granted as at 30 June 2021 is shown below:

For the six months ended 30 June 2021, the Company recognised share-based payment expense in the statement of profit or loss of £82,833 (30 June 2020: £20,747).

11.        Events after the reporting period

Appointment of Business Advisor and Board Observer

In July 2021 the Company appointed Dr Alan E. Walts to the roles of Business Advisor and Board Observer. Dr Walts is a US-based Venture Partner with Advent Life Sciences, and previously accumulated over 25 years of industry experience at Genzyme in business development, business strategy, research and development, general management, and venture capital. Prior to leaving Genzyme in 2013, Dr Walts most recently managed Genzyme's corporate venture fund, Genzyme Ventures (now Sanofi Ventures). Following Genzyme's landmark sale to Sanofi, he served as a business advisor to founding Chairman and CEO of Genzyme Henri Termeer from 2013-2017, and worked closely with Henri on founding and investing in early-stage companies. Dr Walts received a Ph.D. in chemistry from MIT in 1985, carried out post-doctoral research in biochemistry at MIT with Professor Christopher Walsh, and completed the executive Program for Management Development at Harvard Business School. The Company entered into a Consulting Agreement with Dr Walts for a 12 month period of service which includes cash compensation and approximately 3,100,000 options.

Grant of Patent on 31 August 2021

In September 2021 the Company announced that a patent application entitled MONOCLONAL ANTIBODIES TO HUMAN FLT3/FLK2 RECEPTOR PROTEIN had been approved and issued by the United States Patent and Trademark Office on 31 August 2021 as Patent Number US 11,104,738. This patent covers composition of matter (sequences) of monoclonal antibodies to the human FLT3/FLK2 receptor protein that is found on the surface of acute myeloid leukemia (AML) cells, hematopoietic (blood forming) stem cells and progenitors (HSC/HP), and dendritic cells. The monoclonal antibodies discovered and validated by Hemogenyx Pharmaceuticals have allowed the Company to develop both a bi-specific CDX antibody and HEMO-CAR-T as treatments for AML as well as potential treatments for other types of blood cancers, and bone marrow transplant (BM/HSC) conditioning. The patent now granted is particularly relevant to the chimeric antigen receptor (CAR) used in the HEMO-CAR-T product candidate for the treatment of AML. HEMO-CAR-T remains wholly owned by the Company and work is continuing in association with the University of Pennsylvania to take the therapy through to an IND (Investigational New Drug) application in preparation for clinical trials.