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Item 9A. Controls and Procedures

2024-02-29 compared with 2023-02-28 · 609 added, 269 removed, 645 unchanged (58% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2022.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were

effective 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, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2023.

Based on such evaluation, our Chief Executive Officer and Interim Chief Financial Officer have concluded that our disclosure controls and procedures were effective 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, and is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

Management’s Annual Report on Internal Control Over Financial Reporting

3 unchanged sentences

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

Under the supervision and with the participation of our management, including our Chief Executive Officer and Interim Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

Based on our evaluation under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.

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OTHER INFORMATION

Not applicable.

The following summary contains a description of material U.S.

federal income tax and UK tax consequences of the acquisition, ownership and disposition of our ordinary shares or ADSs.

This summary should not be considered a comprehensive description of all the tax considerations that may be relevant to beneficial owners of ADSs.

Federal Income Tax Considerations for U.S.

The following is a description of the material U.S.

federal income tax consequences to the U.S.

Holders described below of owning and disposing of our ordinary shares or ADSs.

It is not a comprehensive description of all tax considerations that may be relevant to a particular person’s decision to acquire securities.

This discussion applies only to a U.S.

Holder holds our ordinary shares or ADSs as a capital asset for tax purposes (generally, property held for investment).

In addition, it does not describe all of the tax consequences that may be relevant in light of a U.S.

Holder’s particular circumstances, including state and local tax consequences, estate tax consequences, alternative minimum tax consequences, the special tax accounting rules under Section 451(b) of the Code, the potential application of the Medicare contribution tax, and tax consequences applicable to U.S.

Holders subject to special rules, such as:

• banks, insurance companies, and certain other financial institutions;

expatriates and certain former citizens or long-term residents of the United States;

• dealers or traders in securities who use a mark-to-market method of tax accounting;

• persons holding ordinary shares or ADSs as part of a hedging transaction, “straddle,” wash sale, conversion transaction or integrated transaction or persons entering into a constructive sale with respect to ordinary shares or ADSs;

• persons whose “functional currency” for U.S.

federal income tax purposes is not the U.S.

• brokers, dealers or traders in securities, commodities or currencies;

• tax-exempt entities or government organizations;

• S corporations, partnerships, or other entities or arrangements classified as partnerships for U.S.

federal income tax purposes;

• regulated investment companies or real estate investment trusts;

• persons that own or are deemed to own 10% or more of the voting power or value of our ordinary shares or ADSs;

• persons who acquired our ordinary shares or ADSs pursuant to the exercise of any employee share option or otherwise as compensation;

• persons holding our ordinary shares or ADSs in connection with a trade or business, permanent establishment, or fixed base outside the United States;

• persons who own (directly or through attribution) 10% or more (by vote or value) of our outstanding ordinary shares.

If an entity that is classified as a partnership for U.S.

federal income tax purposes holds ordinary shares or ADSs, the U.S.

federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership.

Partnerships holding ordinary shares or ADSs and partners in such partnerships are encouraged to consult their tax advisers as to the particular U.S.

federal income tax consequences of holding and disposing of ordinary shares or ADSs.

The discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, administrative pronouncements, judicial decisions, final, temporary and proposed Treasury Regulations, and the income tax treaty between the UK and the United States, all as of the date of this Annual Report, changes to any of which may affect the tax consequences described herein-possibly with retroactive effect.

Holder” is a holder who, for U.S.

federal income tax purposes, is a beneficial owner of ordinary shares or ADSs and is:

• an individual who is a citizen or individual resident of the United States;

• a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia;

• an estate the income of which is subject to U.S.

federal income taxation regardless of its source;

• a trust if (1) a U.S.

court is able to exercise primary supervision over the administration of the trust and one or more U.S.

persons have authority to control all substantial decisions of the trust or (2) the trust has a valid election to be treated as a U.S.

person under applicable U.S.

Treasury Regulations.

Generally, a U.S.

Holder of an ADS should be treated for U.S.

federal income tax purposes as holding the ordinary shares represented by our ADS.

Accordingly, no gain or loss will be recognized upon an exchange of ADSs for ordinary shares.

Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying our ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying security.

Accordingly the creditability of foreign taxes, if any, as described below, could be affected by actions taken by intermediaries in the chain of ownership between the holders of ADSs and our company if as a result of such actions the holders of ADSs are not properly treated as beneficial owners of the underlying ordinary shares.

These actions would also be inconsistent with the claiming of the reduced tax rate, described below, applicable to dividends received by certain non-corporate holders.

PERSONS CONSIDERING AN INVESTMENT IN ORDINARY SHARES OR ADSs SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES APPLICABLE TO THEM RELATING TO THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE ORDINARY SHARES OR ADSs, INCLUDING THE APPLICABILITY OF U.S.

FEDERAL, STATE AND LOCAL TAX LAWS.

Passive Foreign Investment Company Rules

If we are classified as a passive foreign investment company, or PFIC, in any taxable year, a U.S.

Holder will be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S.

federal income tax that a U.S.

Holder could derive from investing in a non-U.S.

company that does not distribute all of its earnings on a current basis.

corporation will be classified as a PFIC for any taxable year in which, after applying certain look-through rules, either:

• at least 75% of its gross income is passive income (such as interest income);

• at least 50% of its gross assets (determined on the basis of a quarterly average) is attributable to assets that produce passive income or are held for the production of passive income.

We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation, the equity of which we own, directly or indirectly, 25% or more (by value).

Based on the current and expected composition of our income and assets and the value of our assets, we believe that we were a PFIC for U.S.

federal income tax purposes for our taxable year ended December 31, 2023.

However, no assurances regarding our PFIC status can be provided for any past, the current, or any future taxable years.

The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation.

If we are treated as a non-publicly traded CFC for the year being tested for purposes of the PFIC rules, the value of our assets will be measured by the adjusted tax basis of our assets.

If we are a publicly traded CFC or not a CFC for such year, the value of our assets generally will be determined by reference to the market price of our ordinary shares or ADSs from time to time, which may fluctuate considerably.

Under the income test, our status as a PFIC depends on the composition of our income which will depend on the transactions we enter into in the future and our corporate structure.

The composition of our income and assets is also affected by the spending of the cash we raise in any offering.

If we are classified as a PFIC in any year with respect to which a U.S.

Holder owns the ordinary shares or ADSs, we will continue to be treated as a PFIC with respect to such U.S.

Holder in all succeeding years during which the U.S.

Holder owns the ordinary shares or ADSs, regardless of whether we continue to meet the tests described above unless (i) we cease to be a PFIC and the U.S.

Holder has made a “deemed sale” election under the PFIC rules, or (ii) the U.S.

Holder makes a Qualified Electing Fund Election, or QEF Election, with respect to all taxable years during such U.S.

Holders holding period in which we are a PFIC.

If the “deemed sale” election is made, a U.S.

Holder will be deemed to have sold the ordinary shares or ADSs the U.S.

Holder holds at their fair market value and any gain from such deemed sale would be subject to the rules described below.

After the deemed sale election, so long as we do not become a PFIC in a subsequent taxable year, the U.S.

Holder’s ordinary shares or ADSs with respect to which such election was made will not be treated as shares in a PFIC and the U.S.

Holder will not be subject to the rules described below with respect to any “excess distribution” the U.S.

Holder receives from us or any gain from an actual sale or other disposition of the ordinary shares or ADSs.

Holders should consult their tax advisors as to the possibility and consequences of making a deemed sale election if we cease to be a PFIC and such election becomes available.

For each taxable year we are treated as a PFIC with respect to U.S.

Holders, U.S.

Holders will be subject to special tax rules with respect to any “excess distribution” such U.S.

Holder receives and any gain such U.S.

Holder recognizes from a sale or other disposition (including, under certain circumstances, a pledge) of ordinary shares or ADSs, unless (i) such U.S.

Holder makes a QEF Election or (ii) our ordinary shares or ADSs constitute “marketable” securities, and such U.S.

Holder makes a mark-to-market election as discussed below.

Distributions a U.S.

Holder receives in a taxable year that are greater than 125% of the average annual distributions a U.S.

Holder received during the shorter of the three preceding taxable years or the U.S.

Holder’s holding period for the ordinary shares or ADSs will be treated as an excess distribution.

Under these special tax rules:

• the excess distribution or gain will be allocated ratably over a U.S.

Holder’s holding period for the ordinary shares or ADSs;

• the amount allocated to the taxable year of disposition or distribution, and any taxable year prior to the first taxable year in which we became a PFIC, will be treated as ordinary income;

• the amount allocated to each other year will be subject to the highest tax rate in effect for that year for individuals or corporations, as appropriate, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ordinary shares or ADSs cannot be treated as capital, even if a U.S.

Holder holds the ordinary shares or ADSs as capital assets.

If we are a PFIC, a U.S.

Holder will generally be subject to similar rules with respect to distributions we receive from, and our dispositions of the stock of, any of our direct or indirect subsidiaries that also are PFICs, as if such distributions were indirectly received by, and/or dispositions were indirectly carried out by, such U.S.

Holders should consult their tax advisors regarding the application of the PFIC rules to our subsidiaries.

Holders can avoid the interest charge on excess distributions or gain relating to the ordinary shares or ADSs by making a mark-to-market election with respect to the ordinary shares or ADSs, provided that the ordinary shares or ADSs are “marketable.” Ordinary shares or ADSs will be marketable if they are “regularly traded” on certain U.S.

stock exchanges or on a foreign stock exchange that meets certain conditions.

For these purposes, the ordinary shares or ADSs will be considered regularly traded during any calendar year during which they are traded, other than in de minimis quantities, on at least 15 days

during each calendar quarter.

Any trades that have as their principal purpose meeting this requirement will be disregarded.

Our ADSs have been listed on Nasdaq, which is a qualified exchange for these purposes.

Consequently, if our ADSs remain listed on Nasdaq and are regularly traded, and you are a holder of ADSs, we expect the mark-to-market election would be available to you if we are a PFIC.

Holder should consult its tax advisor as to the whether a mark-to-market election is available or advisable with respect to the ordinary shares or ADSs.

Holder that makes a mark-to-market election must include in ordinary income for each year an amount equal to the excess, if any, of the fair market value of the ordinary shares or ADSs at the close of the taxable year over the U.S.

Holder’s adjusted tax basis in the ordinary shares or ADSs.

An electing holder may also claim an ordinary loss deduction for the excess, if any, of the U.S.

Holder’s adjusted basis in the ordinary shares or ADSs over the fair market value of the ordinary shares or ADSs at the close of the taxable year, but this deduction is allowable only to the extent of any net mark-to-market gains for prior years.

Gains from an actual sale or other disposition of the ordinary shares or ADSs will be treated as ordinary income, and any losses incurred on a sale or other disposition of the shares will be treated as an ordinary loss to the extent of any net mark-to-market gains for prior years.

Once made, the election cannot be revoked without the consent of the Internal Revenue Service, or the IRS, unless the ordinary shares or ADSs cease to be marketable.

However, a mark-to-market election generally cannot be made for equity interests in any lower-tier PFICs that we own, unless shares of such lower-tier PFIC are themselves “marketable.” As a result, even if a U.S.

Holder validly makes a mark-to-market election with respect to our ordinary shares or ADSs, the U.S.

Holder may continue to be subject to the PFIC rules (described above) with respect to its indirect interest in any of our investments that are treated as an equity interest in a PFIC for U.S.

federal income tax purposes.

Holders should consult their tax advisors to determine whether any of these elections would be available and if so, what the consequences of the alternative treatments would be in their particular circumstances.

We do not intend to provide information necessary for U.S.

holders to make QEF elections which, if available, would result in tax treatment different from the general tax treatment for PFICs described above .

Unless otherwise provided by the U.S.

Treasury, each U.S.

shareholder of a PFIC is required to file an annual report containing such information as the U.S.

Treasury may require.

Holder’s failure to file the annual report will cause the statute of limitations for such U.S.

Holder’s U.S.

federal income tax return to remain open with regard to the items required to be included in such report until three years after the U.S.

Holder files the annual report, and, unless such failure is due to reasonable cause and not willful neglect, the statute of limitations for the U.S.

Holder’s entire U.S.

federal income tax return will remain open during such period.

Holders should consult their tax advisors regarding the requirements of filing such information returns under these rules.

WE STRONGLY URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING THE APPLICATION OF THE PFIC RULES TO YOUR INVESTMENT IN THE ORDINARY SHARES OR ADSs.

Taxation of Distributions

Subject to the discussion above under “Passive Foreign Investment Company Rules,” distributions paid on ordinary shares or ADSs, other than certain pro rata distributions of ordinary shares or ADSs, will generally be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S.

federal income tax principles).

Because we may not calculate our earnings and profits under U.S.

federal income tax principles, we expect that distributions generally will be reported to U.S.

Holders as dividends.

Subject to applicable limitations and the discussions above regarding concerns expressed by the U.S.

Treasury, dividends paid to certain non-corporate U.S.

Holders may be taxable at preferential rates applicable to “qualified dividend income” if we are a “qualified foreign corporation” and certain other requirements are met.

However, the qualified dividend income treatment will not apply if we are treated as a PFIC with respect to the U.S.

The amount of the dividend will be treated as foreign-source dividend income to U.S.

Holders and will not be eligible for the dividends-received deduction generally available to U.S.

corporations under the Code.

Dividends will generally be included in a U.S.

Holder’s income on the date of the U.S.

Holder’s receipt of the dividend.

The amount of any dividend income paid in foreign currency will be the U.S.

dollar amount calculated by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless of whether the payment is in fact converted into U.S.

If the dividend is converted into U.S.

dollars on the date of receipt, a U.S.

Holder should not be required to recognize foreign currency gain or loss in respect of the dividend income.

Holder may have foreign currency gain or loss if the dividend is converted into U.S.

dollars after the date of receipt.

Such gain or loss would generally be treated as U.S.-source ordinary income or loss.

The amount of any distribution of property other than cash (and other than certain pro rata distributions of ordinary shares or ADSs or rights to acquire ordinary shares or ADSs) will be the fair market value of such property on the date of distribution.

For foreign tax credit limitation purposes, our dividends will generally be treated as passive category income.

Because no UK taxes will be withheld from dividends on ordinary shares or ADSs, there will be no creditable foreign taxes associated with any dividends that a U.S.

Holder will receive.

The rules governing foreign tax credits are complex and U.S.

Holders should therefore consult their tax advisers regarding the effect of the receipt of dividends for foreign tax credit limitation purposes.

Sale or Other Taxable Disposition of Ordinary Shares and ADSs

Subject to the discussion above under “Passive Foreign Investment Company Rules,” gain or loss realized on the sale or other taxable disposition of ordinary shares or ADSs will be capital gain or loss, and will be long-term capital gain or loss if the U.S.

Holder held the ordinary shares or ADSs for more than one year at the time of sale or other taxable disposition.

The amount of the gain or loss will equal the difference between the U.S.

Holder’s tax basis in the ordinary shares or ADSs disposed of and the amount realized on the disposition, in each case as determined in U.S.

This gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes.

Subject to the PFIC rules described above, long-term capital gains recognized by certain non-corporate U.S.

Holders (including individuals) will be, under current law, subject to reduced rates of U.S.

federal income tax.

The deductibility of capital losses is subject to limitations.

If the consideration received by a U.S.

Holder is not paid in U.S.

dollars, the amount realized will be the U.S.

dollar value of the payment received determined by reference to the spot rate of exchange on the date of the sale or other disposition.

However, if the ordinary shares or ADSs are treated as traded on an “established securities market” and you are either a cash basis taxpayer or an accrual basis taxpayer that has made a special election (which must be applied consistently from year to year and cannot be changed without the consent of the IRS), you will determine the U.S.

dollar value of the amount realized in a non-U.S.

dollar currency by translating the amount received at the spot rate of exchange on the settlement date of the sale.

If you are an accrual basis taxpayer that is not eligible to or does not elect to determine the amount realized using the spot rate on the settlement date, you will recognize foreign currency gain or loss to the extent of any difference between the U.S.

dollar amount realized on the date of sale or disposition and the U.S.

dollar value of the currency received at the spot rate on the settlement date.

Information Reporting and Backup Withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S.

Holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S.

Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding on a duly executed IRS Form W-9 or otherwise establishes an exemption.

The amount of any backup withholding from a payment to a U.S.

Holder may be allowed as a credit against the U.S.

Holder’s U.S.

federal income tax liability and may entitle the U.S.

Holder to a refund, provided that the required information is timely furnished to the IRS.

Information with Respect to Foreign Financial Assets

Holders who are individuals (and, under regulations, certain entities) may be required to report information relating to the ordinary shares or ADSs, subject to certain exceptions (including an exception for ordinary shares or ADSs held in accounts maintained by certain U.S.

financial institutions), by filing IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their federal income tax return.

Holders who fail to timely furnish the required information may be subject to a penalty.

Additionally, if a U.S.

Holder does not file the required information, the statute of limitations with respect to tax returns of the U.S.

Holder to which the information relates may not close until three years after such information is filed.

Holders should consult their tax advisers regarding their reporting obligations with respect to their ownership and disposition of the ordinary shares or ADSs.

The following is intended as a general guide to current UK tax law and HM Revenue & Customs, or HMRC, published guidance (which is not binding) applying as at the date of this Annual Report (both of which are subject to change at any time, possibly with retrospective effect) relating to the holding of ADSs.

It does not constitute legal or tax advice and does not purport to be a complete analysis of all UK tax considerations relating to the holding of ADSs, or all of the circumstances in which holders of ADSs may benefit from an exemption or relief from UK taxation.

It is written on the basis that we do not (and will not) directly or indirectly derive 75% or more of its qualifying asset value from UK land, and that we are and will

remain solely resident in the UK for tax purposes and will therefore be subject to the UK tax regime and not the U.S.

tax regime save as set out above under “U.S.

Federal Income Tax Considerations for U.S.

Except to the extent that the position of non-UK resident persons is expressly referred to, this guide relates only to persons who are resident (and in the case of individuals, domiciled or deemed domiciled) for tax purposes solely in the UK and do not have a permanent establishment, branch or agency (or equivalent) in any other jurisdiction with which the holding of our ADSs is connected, or UK Holders, who are absolute beneficial owners of our ADSs (and do not hold our ADSs through an Individual Savings Account or a Self-Invested Personal Pension).

This guide may not relate to certain classes of UK Holders, such as (but not limited to):

• persons who are connected with us;

• financial institutions;

• insurance companies;

• charities or tax-exempt organizations;

• collective investment schemes;

• pension schemes;

• market makers, intermediaries, brokers or dealers in securities or persons who hold ADSs otherwise than as an investment;

• persons who have (or are deemed to have) acquired their ADSs by virtue of an office or employment or who are or have been our officers or employees or any of our affiliates;

• individuals who are subject to UK taxation on a remittance basis or to whom split-year treatment applies.

The decision of the First-tier Tribunal (Tax Chamber) in HSBC Holdings PLC and The Bank of New York Mellon Corporation v HMRC (2012) cast some doubt on whether a holder of a depositary receipt is the beneficial owner of the underlying shares.

However, based on published HMRC guidance we would expect that HMRC will regard a holder of ADSs as holding the beneficial interest in the underlying shares and therefore these paragraphs assume that a holder of ADSs is the beneficial owner of the underlying ordinary shares and any dividends paid in respect of the underlying ordinary shares (where the dividends are regarded for UK purposes as that person’s own income) for UK direct tax purposes.

THESE PARAGRAPHS ARE A SUMMARY OF CERTAIN UK TAX CONSIDERATIONS AND ARE INTENDED AS A GENERAL GUIDE ONLY.

IT IS RECOMMENDED THAT ALL HOLDERS OF ADSs OBTAIN ADVICE AS TO THE CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSAL OF OUR ADSs IN THEIR OWN PARTICULAR CIRCUMSTANCES FROM THEIR OWN TAX ADVISORS.

IN PARTICULAR, NON-UK RESIDENT OR DOMICILED PERSONS OR PERSONS SUBJECT TO TAXATION IN ANY JURISDICTION OTHER THAN THE UK ARE ADVISED TO CONSIDER THE POTENTIAL IMPACT OF ANY RELEVANT DOUBLE TAXATION AGREEMENTS.

Withholding Tax

Dividends that we pay will not be subject to any withholding or deduction for or on account of UK tax.

An individual UK Holder may, depending on his or her particular circumstances, be subject to UK tax on dividends received from us.

An individual holder of ADSs who is not resident for tax purposes in the UK should not be chargeable to UK income tax on dividends received from us unless he or she carries on (whether solely or in partnership) a trade, profession or vocation in the UK through a permanent establishment, branch or agency to which our ADSs are attributable.

There are certain exceptions for trading in the UK through independent agents, such as some brokers and investment managers.

Dividend income is treated as the top slice of the total income chargeable to UK income tax for an individual UK Holder.

An individual UK Holder who receives a dividend in the 2023/2024 tax year will be entitled to a tax-free allowance of £1,000.

However, the UK government has announced that the dividend tax-free allowance of £1,000 will be reduced to £500 with effect from April 2024.

Income within the dividend allowance counts towards an individual’s basic, higher or additional rate limits and may, therefore, affect the level of personal allowance to which they are entitled.

Dividend income received during the 2023/2024 tax year in excess of the relevant tax-free allowance will (subject to the availability of any income tax personal allowance) be taxed at 8.75% to the extent the excess amount falls within the basic rate band, 33.75% to the extent the excess amount falls within the higher rate band, and 39.35% to the extent the excess amount falls within the additional rate band.

Corporation Tax

A corporate holder of ADSs who is not resident for tax purposes in the UK should not be chargeable to UK corporation tax on dividends received from us unless it carries on (whether solely or in partnership) a trade in the UK through a permanent establishment to which our ADSs are attributable.

Corporate UK Holders should not be subject to UK corporation tax on any dividend received from us so long as the dividends qualify for exemption, which should be the case, although certain conditions must be met.

It should be noted that the exemptions, whilst of wide application, are not comprehensive and are subject to anti-avoidance rules in relation to a dividend.

If the conditions for the exemption are not satisfied, or such anti-avoidance provisions apply or such UK Holder elects for an otherwise exempt dividend to be taxable, UK corporation tax will be chargeable on the amount of any dividends (at the current rate of 25% for companies with profits of more than £250,000 or 19% for companies with profits not exceeding £50,000 with a marginal relief applying to profits between £50,000 and £250,000, in each case for the 2023/2024 tax year).

Chargeable Gains

A disposal or deemed disposal of ADSs by a UK Holder may, depending on the UK Holder’s circumstances and subject to any available exemptions or reliefs (such as the annual exemption), give rise to a chargeable gain or an allowable loss for the purposes of UK capital gains tax (for individual UK Holders) and corporation tax on chargeable gains (for corporate UK Holders).

If an individual UK Holder who is subject to UK income tax at either the higher or the additional rate is liable to UK capital gains tax on the disposal of ADSs, the current applicable rate will be 20% (for the tax year 2023/2024).

For an individual UK Holder who is subject to UK income tax at the basic rate and liable to UK capital gains tax on such disposal, the current applicable rate would be 10% (for the tax year 2023/2024), save to the extent that any capital gains when aggregated with the UK Holder’s other taxable income and gains in the relevant tax year exceed the unused basic rate tax band.

In that case, the capital gains tax rate currently applicable to the excess would be 20% (for the tax year 2023/2024).

If a corporate UK Holder becomes liable to UK corporation tax on the disposal (or deemed disposal) of ADSs, the main rate of UK corporation tax would apply (currently at 25% for companies with profits of more than £250,000 or 19% for companies with profits not exceeding £50,000 with a marginal relief applying to profits between £50,000 and £250,000, in each case for the 2023/2024 tax year).

A holder of ADSs that is not resident for tax purposes in the UK should not normally be liable to UK capital gains tax or corporation tax on chargeable gains on a disposal (or deemed disposal) of ADSs, unless the person is carrying on (whether solely or in partnership) a trade, profession or vocation in the UK through a branch or agency (or, in the case of a corporate holder of ADSs, through a permanent establishment) to which our ADSs are attributable.

However, an individual holder of ADSs who has ceased to be resident for tax purposes in the UK or is treated as resident outside the UK for the purposes of a double taxation treaty for a period of five years or less and who disposes of ADSs during that period of temporary non-residence may be liable on his or her return to the UK (or upon ceasing to be regarded as resident outside the UK for the purposes of any relevant double taxation treaty) to UK tax on any capital gain realized (subject to any available exemption or relief).

Stamp Duty and Stamp Duty Reserve Tax

The discussion below relates to the holders of our ordinary shares or ADSs wherever resident, however it should be noted that special rules may apply to certain persons such as market makers, brokers, dealers or intermediaries.

Issue of Ordinary Shares

As a general rule (and except in relation to depositary receipt systems and clearance services (as to which see below)), no UK stamp duty or stamp duty reserve tax, or SDRT, is generally payable on the issue of the ordinary shares underlying our ADSs.

Transfer of Ordinary Shares

An unconditional agreement to transfer ordinary shares will normally give rise to a charge to SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer.

The purchaser of the ordinary shares is liable for the SDRT.

Transfers of ordinary shares by way of a written instrument of transfer are generally also subject to stamp duty at the rate of 0.5% of the amount or value of the consideration given for the transfer (rounded up to the nearest £5.00).

Stamp duty is normally paid by the purchaser.

The charge to SDRT will be cancelled or, if already paid, repaid (generally with interest), where a transfer instrument has been duly stamped within six years of the charge arising, (either by paying the stamp duty or by claiming an appropriate relief) or if the instrument is otherwise exempt from stamp duty.

Clearance Services and Depositary Receipts

Unless an exemption applies, when ordinary shares are issued or transferred into a depositary receipt system or a clearance service (including to a nominee, or agent for, a person whose business is or includes the issue of depositary receipts or the provision of clearance services), a higher rate of 1.5% UK stamp duty or UK SDRT, which we refer to as the 1.5% Charge, as applicable, generally arises.

However, under current UK tax law (as set out in the Finance Bill 2023-24, which received royal assent on 22 February 2024, becoming the Finance Act 2024), with effect from 1 January 2024,, no 1.5% Charge (to UK SDRT or, where effected by a written instrument, UK stamp duty) should arise in respect of an issue of ordinary shares, or an unconditional agreement to issue ordinary shares, to a clearance service or a depositary receipt system.

Further, subject to the below, no 1.5% Charge should arise in respect of a transfer of ordinary shares, or an unconditional agreement to transfer ordinary shares, to a clearance service or depositary receipt system, where the transfer is carried out in the course of “capital-raising arrangements”, being arrangements pursuant to which the relevant ordinary shares are issued by the company for the purpose of raising new capital.

Where any ordinary shares are subject to restriction that has the effect of preventing the transfer of such ordinary shares into a clearance service or depositary receipt system in the course of capital-raising arrangements, such ordinary shares must be transferred as soon as reasonably practicable after the time at which the restriction ceases to have effect in order to prevent the 1.5% Charge from applying.

Where a clearance service has made and maintained an election under section 97A of the UK Finance Act 1986, or a section 97A election, no 1.5% Charge will apply on any transfer of ordinary shares, or an unconditional agreement to transfer ordinary shares, to that clearance service.

It is understood that HMRC regards the facilities of DTC as a clearance service for these purposes, and we are not aware of any section 97A election having been made by the DTC.

If arising, any UK stamp duty or UK SDRT payable on a transfer of ordinary shares to a depositary receipt system or clearance service will in practice generally be paid by the transferors or participants in the clearance service or depositary receipt system.

Issue of ADSs

No UK stamp duty or UK SDRT should be payable on the issue of ADSs in the Company.

If arising, any stamp duty or SDRT payable on a transfer of ordinary shares to a depositary receipt system or clearance service will in practice generally be paid by the transferors or participants in the clearance service or depositary receipt system.

Transfer of ADSs within a clearance system

No UK SDRT should be required to be paid in respect of a paperless transfer of ADSs through the facilities of DTC, provided that no section 97A election has been made and maintained by DTC, and such ADSs are held through DTC at the time of any agreement for their transfer.

We are not aware of any section 97A election having been made by the DTC.

Issue or Transfers of ADRs

On the basis of current published HMRC guidance, an ADR is not regarded as stock or a marketable security for the purposes of UK stamp duty or a chargeable security for the purposes of UK SDRT and, as such, no UK stamp duty or SDRT should be required to be paid on the issue or transfer of (including an agreement to transfer) ADRs in the Company.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our board of directors has adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior officers.

Our board of directors has adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer, Interim Chief Financial Officer and other executive and senior officers.

The full text of our code of business conduct and ethics is posted on the Investor Relations section of our website at ir.compasspathways.com.

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Consolidated Statements of Operations and Comprehensive Loss F- 4

Consolidated Statements of Convertible Preferred Shares and Shareholders’ Equity (Deficit) F- 5

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows F- 6

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Description of Securities

4.4 Form of Lender Warrant

Form 8-K 001-39522 4.1 07/05/2023

4.5 Form of PIPE Investor Warrant

Form 8-K 001-39522 4.1 08/16/2023

10.1# Investment and shareholders’ agreement by and between COMPASS Rx Limited and the shareholders named therein, dated April 17, 2020 and amended and restated on August 7, 2020.

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Form F-1/A 333-248484 10.3 9/14/2020

10.7# Licence Agreement by and between The Office Group and COMPASS Pathways Limited dated October 31 2019.

Form F-1/A 333-248484 10.4 9/14/2020

10.8# Services Agreement by and between BioInnovation Labs LLC and COMPASS Pathways, Inc., dated May 30, 2019, as amended by Amendment No.

1 to Services Agreement, dated April 22, 2020, and as supplemented by Services Agreement, dated June 26, 2020.

Form F-1/A 333-248484 10.5 9/14/2020

Form of Deed of Indemnity between COMPASS Pathways plc and each of its Directors and Officers.

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Form 8-K 001-39522 10.2 02/04/2022

10.12#* Restricted share unit award agreement for company employees under the COMPASS Pathways plc 2020 Share O ption and I ncentive P lan

Restricted share unit award agreement for company employees under the COMPASS Pathways plc 2020 Share Option and Incentive Plan

Form 10-K 001-39522 10.12 02/28/2023

Employment Agreement with Matthew Owens

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WeWork Membership Agreement dated August 22, 2022 by and between COMPASS Pathways Inc and 130 Madison Avenue Tenant LLC

10-K 001-39522 10.19 02/28/23

Form of Inducement Award Non-Qualified Share Option Agreement.

10-Q 001-39522 10.3 8/04/2022

License Agreement between Fora Space Limited and COMPASS Pathfinder Limited dated April 4, 2023.

10-Q 001-39522 10.1 05/11/2023

Loan and Security Agreement, dated as of June 30, 2023, by and among the COMPASS Pathways plc, and is entered into by and among COMPASS Pathways plc and its subsidiaries, the lenders party thereto and Hercules Capital, Inc., in its capacity as administrative agent and collateral agent.

8-K 001-39522 10.1 07/05/2023

Securities Purchase Agreement, dated August 1 6, 2023, by and among the Company and the Purchasers.

8-K 001-39522 10.1 08/16/2023

Lease Agreement between Azul NYC LLC and COMPASS Pathways, Inc.

dated September 28, 2023.

10-Q 001-39522 10.2 11/2/2023

Separation Agreement dated October 24, 2023 by and between the Company and Michael Falvey

8-K 001-39522 10.1 10/26/2023

Employment Agreement dated May 7, 2020 by and between Compass Pathways and Mary-Rose Hughes, as amended

Employment Agreement dated December 6, 2023, by and between Compass Pathways and Teri Loxam.

8-K 001-39522 10.1 12/07/2023

Amendment to Employment Agreement dated August 1, 2023 by and between Kabir Nath and Compass Pathways, Inc.

dated August 1, 2023

21.1 Subsidiaries of COMPASS Pathways plc.

Form F-1 333-248484 21.1 8/28/2020

23.1* Consent of Pricewaterhou s e Coopers LLP, an Independent Registered Public Accounting Firm

23.1* Consent of PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm

31.1* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule 13(a)-14(a)/15d-14(a), by Principal Executive Officer

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32.1** Certification pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Principal Executive Office r and P r inciple Financial Officer

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Principal Executive Officer and Principle Financial Officer

97.1* Compass Pathways plc Compensation Recovery Policy

101.INS* XBRL Instance Document

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# Indicates a management contract or any compensatory plan, contract or arrangement.

† Certain confidential portions (indicated by brackets and asterisks) have been omitted from this exhibit pursuant to Item 601(b)(10)(iv).

The Company undertakes to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request.

* Filed herewith

** The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

** The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

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Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Convertible Preferred Shares and Shareholders’ Equity (Deficit )

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of COMPASS Pathways plc and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, of shareholders’ equity (deficit), and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and December 31, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2021.

We have audited the accompanying consolidated balance sheets of COMPASS Pathways plc and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of shareholders’ equity, and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgements.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Benefit from Research and Development Tax Credit

As described in Notes 2 and 5 to the consolidated financial statements, the Company carries out research and development activities and benefits from the UK research and development (“R&D”) tax credit regime under the scheme for small and medium-sized enterprises.

As described in Notes 2 and 3 to the consolidated financial statements, the Company carries out extensive research and development (“R&D”) activities and benefits from the UK R&D tax credit regime under the scheme for small and medium-sized enterprises (“SME”).

For the year ended December 31, 2023, the Company recognized $12.9 million in benefit from R&D tax credit.

As disclosed by management, they evaluate the tax credit programs the Company is expected to be eligible for and recognize a benefit from the R&D tax credit for the portion of the expense that management expects to qualify under the program and have reasonable assurance that the amount will ultimately be realized.

Management assesses its research and development activities and expenditures to determine whether the nature of the activities and expenditures will qualify for

credit under the tax credit program and whether the claim will ultimately be realized based on the allowable reimbursable expense criteria established by the UK government.

Management makes judgements to estimate the qualifying R&D expenditures including the allocation of time spent by individual team members on R&D activities versus non-R&D activities.

The principal considerations for our determination that performing procedures relating to the Benefit from R&D Tax Credit is a critical audit matter are (i) the significant judgement applied by management when determining the nature and amount of expenses that qualify under the tax credit program, including estimating the allocation of time spent on R&D activities;

and (ii) the high degree of auditor judgement, subjectivity and effort in performing procedures and evaluating audit evidence related to the benefit from R&D tax credit.

As disclosed by management, they evaluate which UK R&D tax credit programs the Company is expected to be eligible for, that they plan to submit a claim for and have reasonable assurance that the amount will ultimately be realized.

Management assesses the Company’s R&D activities and expenditures to determine whether the nature of the activities and expenditures will qualify for credit under the SME regime and whether the claim will ultimately be realized based on the allowable reimbursable expense criteria established by the UK government.

Management makes judgements and estimates relating to the allocation of time spent on R&D activities by individuals.

The principal considerations for our determination that performing procedures relating to benefit from research and development tax credit is a critical audit matter are (i) the significant judgement by management when determining the nature and amount of expenses that qualify under the tax credit program, including estimating the allocation of time spent by individuals on R&D activities;

and (ii) a high degree of auditor judgement, subjectivity and effort in performing procedures and evaluating audit evidence related to the benefit from R&D tax credit.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, (i) evaluating management’s assessment of the nature of the activities performed by the Company and their qualification for the R&D tax credit program available for small and medium sized enterprises, (ii) testing management’s process for estimating R&D costs that qualify, (iii) evaluating the reasonableness of management’s allocation of qualifying expenses including determining the amount expected to be realized based on relevant criteria outlined in the tax credit program, (iv) testing the completeness and accuracy of the data underlying the tax credit calculations, and (v) obtaining evidence of cash received in respect of the prior year’s claim to support the assessment that the benefit will ultimately be realized.

These procedures included, among others, (i) evaluating management’s assessment of the nature of the activities performed by the Company and their qualification for the R&D tax credit program available for small and medium sized enterprises, (ii) testing management’s process for determining R&D costs that qualify for the SME regime, (iii) evaluating the appropriateness of management’s allocation of qualifying expenses including determining the amount expected to be realized based on relevant criteria outlined in the tax credit program, (iv) testing the completeness and accuracy of the data used in the R&D tax credit calculations, and (v) obtaining evidence over the recoverability of the prior year claim given that the cash has not yet been received, to support the assessment that the benefit will ultimately be realized.

/s/ PricewaterhouseCoopers LLP

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NON-CURRENT ASSETS:

Investment 469 525

Property and equipment, net 617 398

Operating lease right-of-use assets 4,306 2,006

Deferred tax assets 3,336 2,224

Other assets 327 213

Long-term prepaid expenses and other assets

Total assets $ 275,987 $ 197,294

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NON-CURRENT LIABILITIES

Long-term debt

Operating lease liabilities - non-current 1,882 418

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Deferred shares, £ 21,921.504 par value;

one share authorized, issued and outstanding at December 31, 2022 and 2021

nil and 1 share authorized, issued and outstanding at December 31, 2023 and 2022, respectively

Additional paid-in capital 621,645 458,825

Accumulated other comprehensive (loss)/income ( 16,867 ) 8,840

Accumulated other comprehensive loss

( 16,926 ) ( 16,867 )

Accumulated deficit ( 379,610 ) ( 261,146 )

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OTHER INCOME (EXPENSE), NET:

Other income, net 4,061 40 319

Foreign exchange gains (losses) 821 1,990 ( 11,702 )

Fair value change of convertible notes — — ( 1,041 )

Fair value change of convertible notes - due to a related party — — ( 730 )

4,878 4,061 40

Interest expense

( 2,204 ) — —

Foreign exchange gains

3,686 821 1,990

Benefit from R&D tax credit 12,875 14,424 9,648

Total other income (expense), net 19,306 11,678 ( 8,909 )

Total other income, net

19,235 19,306 11,678

Loss before income taxes ( 117,684 ) ( 91,097 ) ( 71,543 )

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Net loss ( 118,464 ) ( 91,505 ) ( 71,742 )

Net loss per share attributable to ordinary shareholders—basic and diluted $ ( 2.32 ) $ ( 2.16 ) $ ( 1.79 )

Weighted average ordinary shares outstanding—basic and diluted 51,028,024 42,436,292 39,997,587

Net loss ( 118,464 ) ( 91,505 ) ( 71,742 )

Other comprehensive loss:

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Comprehensive loss ( 118,523 ) ( 117,212 ) ( 77,487 )

Net loss per share attributable to ordinary shareholders—basic and diluted $ ( 2.16 ) $ ( 1.79 ) $ ( 3.55 )

Weighted average ordinary shares outstanding—basic and diluted 42,436,292 39,997,587 16,991,664

The accompanying notes are an integral part of these consolidated financial statements.

COMPASS PATHWAYS PLC

Consolidated Statements of Shareholders’ Equity (Deficit)

Consolidated Statements of Shareholders’ Equity

(in thousands, except share and per share amounts)

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Dollars, unless otherwise stated)

CONVERTIBLE A CONVERTIBLE B CONVERTIBLE ORDINARY SHARES £ 0.008

DEFERRED SHARES ADDITIONAL PAID-IN CAPITAL ACCUMULATED OTHER COMPREHENSIVE (LOSS)/ INCOME ACCUMULATED DEFICIT TOTAL SHAREHOLDERS' EQUITY (DEFICIT)

PREFERRED SHARES PREFERRED SHARES PREFERRED SHARES PAR VALUE £ 21,921.504 PAR VALUE

SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT

ORDINARY SHARES

DEFERRED SHARES ADDITIONAL PAID-IN CAPITAL ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

ACCUMULATED DEFICIT TOTAL SHAREHOLDERS' EQUITY

£ 0.008 PAR VALUE

£ 21,921.504 PAR VALUE

SHARES AMOUNT SHARES AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT

Balance at December 31, 2020 35,930,331 $ 367 1 $ 28 $ 279,480 $ 14,585 $ ( 97,899 ) $ 196,561

Issuance of B convertible preferred shares, net of issuance costs — — — — 4,913,404 61,316 — — — — — — — —

Conversion of notes into B convertible preferred shares — — — — 1,723,263 21,614 — — — — — — — —

Exercise of share options 1,244,709 14 — — 1,891 — — 1,905

Exercise of share options but shares not issued — — — — — — — — — — 16 — — 16

Forfeiture of ordinary shares — — — — — — ( 63,972 ) ( 1 ) — — 1 — — —

Effect of corporate reorganization including conversion of preferred shares to ordinary shares ( 2,650,980 ) ( 3,761 ) ( 7,131,525 ) ( 35,147 ) ( 6,636,667 ) ( 82,930 ) 16,419,172 167 1 28 121,643 — — 121,838

Issuance of shares due to options exercised in previous year 232,227 3 — — ( 3 ) — — —

Issuance of ordinary shares, net of issuance costs 4,600,000 51 — — 154,743 — — 154,794

Issuance of ordinary shares to settle vested restricted stock units 12,607 — — — — — — —

Share-based compensation expense — — — — 8,639 — — 8,639

Unrealized gain (loss) on foreign currency translation — — — — — — — — — — — 14,683 — 14,683

Unrealized loss on foreign currency translation

— — — — — ( 5,745 ) — ( 5,745 )

Net loss — — — — — — ( 71,742 ) ( 71,742 )

Balance at December 31, 2021 42,019,874 $ 435 1 $ 28 $ 444,750 $ 8,840 $ ( 169,641 ) $ 284,412

Issuance of ordinary shares under ATM offering, net of issuance costs

44,416 1 — — 439 — — 440

Exercise of share options 462,722 4 — — 397 — — 401

Issuance of shares due to options exercised in previous year — — — — — — 232,227 3 — — ( 3 ) — — —

Issuance of ordinary shares, net of issuance costs — — — — — — 4,600,000 51 — — 154,743 — — 154,794

Issuance of ordinary shares to settle vested restricted stock units 82,622 — — — — — — —

Issuance of ordinary shares under employee share purchase plan

22,160 — — — 199 — — 199

Shares tendered for withholding taxes — — — — ( 83 ) — — ( 83 )

Share-based compensation expense — — — — 13,123 — — 13,123

Unrealized gain (loss) on foreign currency translation — — — — — — — — — — — ( 5,745 ) — ( 5,745 )

Unrealized loss on foreign currency translation

— — — — — ( 25,707 ) — ( 25,707 )

Net loss — — — — — — ( 91,505 ) ( 91,505 )

Balance at December 31, 2022 42,631,794 $ 440 1 $ 28 $ 458,825 $ ( 16,867 ) $ ( 261,146 ) $ 181,280

Issuance of ordinary share under ATM offering, net of issuance costs — — — — — 44,416 1 — — 439 — — 440

Exercise of share options 166,801 2 — — — — — 2

Issuance of ordinary shares under ATM offering, net of issuance costs

2,937,622 29 — — 28,091 — — 28,120

Issuance of ordinary shares under PIPE offering, net of issuance costs

16,076,750 163 — — 116,652 — — 116,815

Issuance of warrants to purchase ordinary shares

— — — — 687 — — 687

Issuance of ordinary shares to settle vested restricted stock units 78,022 1 — — ( 1 ) — — —

Cancellation of deferred share — — ( 1 ) ( 28 ) 28 — — —

Issuance of ordinary shares under employee share purchase plan

52,482 — — — 351 — — 351

Shares tendered for withholding taxes — — — — ( 265 ) — — ( 265 )

Share-based compensation expense — — — — 17,277 — — 17,277

Unrealized gain (loss) on foreign currency translation — — — — — ( 25,707 ) — ( 25,707 )

Unrealized loss on foreign currency translation

— — — — — ( 59 ) — ( 59 )

Net loss — — — — — — ( 118,464 ) ( 118,464 )

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Depreciation and amortization 242 330 175

Change in fair value of convertible notes — — 1,771

Non-cash loss on foreign currency remeasurement 1,141 22 —

Non-cash interest

Loss on disposal of property and equipment

Non-cash (gain) loss on foreign currency remeasurement

( 2,617 ) 1,141 22

Non-cash share-based compensation

17,277 13,123 8,639

Non-cash lease expenses

2,027 2,126 1,797

Changes in operating assets and liabilities

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Deferred and prepaid tax assets ( 1,661 ) ( 1,701 ) ( 877 )

Other assets ( 307 ) ( 160 ) ( 57 )

Long-term prepaid expenses and other assets

( 5,842 ) ( 307 ) ( 160 )

Operating lease liabilities ( 1,959 ) ( 2,081 ) ( 1,880 )

4 unchanged sentences

Purchases of property and equipment ( 66 ) ( 596 ) ( 334 )

Purchase of investments — — ( 497 )

Proceeds from disposal of property and equipment

Net cash used in investing activities ( 64 ) ( 596 ) ( 334 )

2 unchanged sentences

Proceeds from the issuance of shares under the employee share purchase plan 351 199 —

Payments of withholding tax on stock award

Net proceeds from issuance of long-term debt

Payment of issuance cost of long-term debt

Proceeds from exercise of share options 2 401 1,852

Issuance of ADRs in initial public offering, net of issuance costs — — 132,823

Proceeds of issuance of preferred shares, net of issuance costs — — 61,316

Net cash provided by financing activities 173,830 1,040 156,646

Effect of exchange rate changes on cash, cash equivalents and restricted cash 867 ( 24,959 ) ( 5,576 )

Net (decrease)/increase in cash, cash equivalents and restricted cash ( 129,966 ) 82,991 165,372

Net increase/(decrease) in cash, cash equivalents and restricted cash

77,257 ( 129,966 ) 82,991

Cash, cash equivalents and restricted cash, beginning of the period 143,381 273,347 190,356

Cash, cash equivalents and restricted cash, end of the period $ 220,638 $ 143,381 $ 273,347

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest

$ 1,254 $ — $ —

SUPPLEMENTAL NON-CASH TRANSACTIONS:

Right-of-use assets obtained in exchange for new operating lease liabilities $ 4,184 $ 783 $ 5,562

Unpaid tax withholdings on stock award recognized in accrued and other liabilities $ 85 $ — $ —

Proceeds from exercise of options were received and recorded in other current assets $ — $ 53 $ —

Unpaid withholding tax on stock award recognized in accrued and other liabilities

Proceeds from exercise of options received and recorded in other current assets

Deferred issuance costs included in accrued expenses $ — $ — $ 856

Conversion of convertible notes into convertible preferred shares $ — $ — $ 21,614

Issuance of warrants together with long-term debt

$ 687 $ — $ —

Issuance of warrants together with issuance of ordinary shares

$ 2,011 $ — $ —

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of each of the periods, shown above:

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Nature of Business

COMPASS Pathways plc, or the Company, is a mental health care company dedicated to accelerating patient access to evidence-based innovation in mental health.

The Company is developing its investigational COMP360 psilocybin therapy through late-stage clinical trials in Europe and North America for patients with treatment-resistant depression.

Compass Pathways plc, or the Company, is a biotechnology company dedicated to accelerating patient access to evidence-based innovation in mental health.

The Company is developing its investigational COMP360 psilocybin treatment through late-stage clinical trials in Europe and North America for patients with treatment-resistant depression.

The Company is subject to risks and uncertainties common to clinical stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary intellectual property and technology, compliance with government regulations and the ability to secure additional capital to fund operations.

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Even if the Company’s therapeutic development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from sales.

The Company has funded its operations primarily with proceeds from the sale of its convertible preferred shares, the issuance of convertible notes, and more recently through the sale of American Depository Shares, or ADSs, in connection with the Company’s initial public offering, or the IPO, in September 2020, and its $ 154.8 million May 2021 follow-on offering.

The Company has funded its operations primarily with proceeds from the sale of its convertible preferred shares, the issuance of convertible notes, and through the sale of American Depository Shares, or ADSs, in connection with the Company’s initial public offering, or the IPO, in September 2020, and its May 2021 follow-on offering.

On October 8, 2021, the Company entered into a Sales Agreement with Cowen and Company, LLC, or Cowen, under which the Company may issue and sell from time to time up to $ 150.0 million of its ADSs, each representing one ordinary share, through Cowen as the sales agent.

Sales of the Company’s ADSs, if any, will be made at market prices.

On December 14, 2022, under our at-the-market offering we sold 44,416 ADSs at $ 10.53 per ADS.

Through December 31, 2023, the Company sold 2,982,038 ADSs under the Sales Agreement, resulting in $ 28.6 million in net proceeds.

On June 30, 2023 (the “Effective Date”), the Company entered into a Loan Agreement with Hercules, which provided for aggregate maximum borrowings of up to $ 50.0 million, including a term loan of $ 30.0 million, which was funded on the Effective Date.

On August 16, 2023, the Company entered into a Securities Purchase Agreement, pursuant to which the Company agreed to sell and issue in a private placement transaction (the “PIPE”) (i) 16,076,750 ADSs and (ii) PIPE Warrants to purchase up to 16,076,750 ADSs, at a purchase price of approximately $ 7.78 per ADS and accompanying PIPE Warrant to purchase one ADS.

Each PIPE Warrant has an exercise price of $ 9.93 per ADS and is exercisable for a three year period beginning in February 2024.

The PIPE Warrants may be exercised on a cashless basis if there is no effective registration statement registering the shares underlying the PIPE Warrants.

The Company has incurred recurring losses since its inception, including net losses of $ 118.5 million and $ 91.5 million for the years ended December 31, 2023 and 2022, respectively.

1 unchanged sentence

The Company expects to continue to generate operating losses for the foreseeable future.

The Company believes the cash and cash equivalents on hand as of December 31, 2022 of $ 143.2 million will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months, including progressing our Phase 3 clinical program, our Phase 2 studies in anorexia nervosa and PTSD and costs associated with operating as a public company.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

We will need substantial additional funding to comple te the development and commercialization of our Phase 3 clinical program, and our Phase 2 studies in anorexia nervosa and PTSD.

The Company believes the cash and cash equivalents on hand as of December 31, 2023 of $ 220.2 million, together with the net proceeds raised to date during the first quarter, will be sufficient to fund its operating expenses and capital expenditure requirements into late 2025.

The future viability of the Company is dependent on its ability to raise additional capital to finance its operations.

The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

There can be no assurance that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all.

The future viability of the Company is dependent on its ability to raise additional capital to finance its operations.

The Company may raise additional capital through a combination of equity offerings, debt financings, collaborations, and other strategic transactions, including marketing, distribution or licensing arrangements.

There can be no assurance that additional funding will be available on terms acceptable to the Company, on a timely basis or at all.

The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial conditions.

The COVID-19 pandemic and policies and regulations implemented by governments in response to the COVID-19 pandemic, most of which have been lifted, have had a significant impact, both directly and indirectly, on global businesses and commerce.

For example, although restrictions in the United Kingdom and the United States have generally been lifted, additional indirect effects such as worker shortages and supply chain constraints continue to impact segments of the economy.

The future extent of the impact of the COVID-19 pandemic on our preclinical studies or clinical trial operations, our supply chain and manufacturing and our office-based business operations or any of the third parties on whom it relies or with whom the Company conducts business, such as CROs or CMOs, will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, the emergence of additional or more infectious variants, or the effectiveness of actions to contain and treat coronavirus.

Market volatility, instability in the banking system, geopolitical tensions resulting from the ongoing war between Ukraine and Russia, the Israel-Hamas war, fluctuating inflation and interest rates and the related impact on U.S., U.K.

and global economies, the risk of economic slowdown or recession or a potential government shutdown in the United States, the upcoming presidential election the United States or other factors could adversely impact our operations, financial results and ability to raise additional funding.

Summary of Significant Accounting Policies

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting periods.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the prepayment and accrual for research and development expenses, share-based compensation and the research and development tax credit.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, research and development expenses and the research and development tax credit.

Estimates are periodically reviewed in light of changes in circumstances, facts and experience.

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Restricted cash as of December 31, 2023 and 2022 represents a collateral deposit for employee credit cards.

The investment does not have readily determinable fair value and it is carried at cost, less impairment, adjusted for subsequent changes to estimated fair value up to the original cost, in circumstances where the Company does not have the ability to exercise significant influence or control over the operating and financial policies of the investee.

The Company’s investment of $ 0.5 million to acquire 8 % (on a fully diluted basis) shareholding in Delix Therapeutics, Inc., does not have a readily determinable fair value and it is carried at cost, less impairment, adjusted for subsequent changes to estimated fair value up to the original cost, in circumstances where the Company does not have the ability to exercise significant influence or control over the operating and financial policies of the investee.

As of December 31, 2023, no impairment loss was recognized.

Fair Value Measurements

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The carrying amounts reflected in the consolidated balance sheets for the Company’s cash and cash equivalents, restricted cash, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments.

The Company's convertible notes issued prior to IPO were classified within Level 3 of the fair value hierarchy because their fair values were estimated by utilizing valuation models and significant unobservable inputs.

The convertible notes were

valued using a scenario-based discounted cash flow analysis.

Two primary scenarios were considered and probability weighted to arrive at the valuation conclusion for each convertible note.

The first scenario considered the value impact of conversion at the stated discount to the issue price if the Company raised over £ 25.0 million in an equity financing before the first anniversary of the issuance date, the Qualified Financing, otherwise Non-Qualified Financing, while the second scenario assumed the convertible notes are held to maturity.

As of the issuance date of the convertible notes, an implied yield was calculated such that the probability weighted value of the convertible note was equal to the principal investment amount.

The implied yield of previously issued convertible notes was carried forward and used as the primary discount rate for subsequent valuation dates.

The Company estimated the fair value of the convertible notes based on a future value on projected conversion dates which were i) discounted back to the valuation date at an appropriate discount rate and ii) probability weighted to arrive at an indication of value for the convertible notes.

Fair Value Option

As permitted under Accounting Standards Codification 825, Financial Instruments, or ASC 825, the Company has elected the fair value option to account for its convertible notes.

In accordance with ASC 825, the Company records these convertible notes at fair value with changes in fair value recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

As a result of applying the fair value option, direct costs and fees related to the convertible notes were expensed as incurred and were not deferred.

The Company concluded that it was appropriate to apply the fair value option to the convertible notes because there are no non-contingent beneficial conversion options related to the convertible notes.

Concentration of Credit Risk

Financial instruments that subject the Company to credit risk consist primarily of cash and cash equivalents.

The Company places cash and cash equivalents in established financial institutions.

The Company places cash and cash equivalents in diversified and established financial institutions.

Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

The Company has cash and cash equivalents in excess of the FDIC insured limit.

The Company has no significant off-balance-sheet risk or concentration of credit risk, such as foreign exchange contracts, options contracts, or other foreign hedging arrangements.

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Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance.

The Company and the Company’s chief operating decision maker, the Company’s Chief Executive Officer, view the Company’s operations and manage its business as a single operating segment;

however, the Company operates in two geographic regions:

The Company and the Company’s chief operating decision maker, the Company’s Chief Executive Officer, view the Company’s operations and manage its business as a single operating segment, which carries out its operations in two geographic regions:

the United Kingdom, or UK, and the United States.

The Company’s fixed assets are primarily located in the UK.

The Company’s property and equipment are primarily located in the UK.

The Company’s singular concentration is focused on accelerating patient access to evidence-based innovation in mental health.

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The Company records prepayments and accruals for estimated ongoing research costs and receives updated estimates of costs and amounts owed on a monthly basis from its third-party service providers.

When evaluating the adequacy of the prepayments and accruals, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted cost estimates from third-party service providers.

Estimates are made in determining the prepaid and accrued expense balances at the end of any reporting period.

When evaluating the adequacy of the prepayments and accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted cost estimates from third-party service providers.

Estimates are made in determining the prepaid and accrued balances at the end of any reporting period.

The Company considers any prepayment that is more than 12 months in advance of the associated expense to be long-term.

Actual results could differ from the Company’s estimates.

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The Company accounts for all share-based payment awards granted to employees and non-employees as share-based compensation expense at fair value.

The Company grants equity awards under its share-based compensation programs, which may include share options and restricted stock units.

The Company grants equity awards under its share-based compensation programs, which may include share options and restricted share units.

The measurement date for employee and non-employee awards is the date of grant, and share-based compensation costs are recognized as an expense over the requisite service period, which is the vesting period, on a straight-line basis.

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On October 1, 2021, the Company launched the Share Incentive Plan, or the SIP, and Employee Share Purchase Plan, or the ESPP, through which employees can purchase shares at a discounted price.

The Company estimated the fair value of stock options and shares to be issued under the SIP and ESPP using the Black-Scholes option-pricing model on the date of grant.

The Company estimates the fair value of stock options and shares to be issued under the SIP and ESPP using the Black-Scholes option-pricing model on the date of grant.

The fair value of shares to be issued under these plans are recognized and amortized on a straight-line basis over the purchase period, which is generally six months.

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The expected term of the Company’s share options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

The “simplified” method was determined to be appropriate as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded.

The Company utilizes this method due to the lack of historical exercise data and the plain nature of its share-based awards.

Risk-free interest rate .

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Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on ordinary shares and does not expect to pay any cash dividends in the foreseeable future.

In addition, the Loan Agreement with Hercules currently prohibits dividends that may be declared or paid on our ordinary shares.

Fair value of ordinary shares.

Given the absence of an active market for the Company’s ordinary shares prior to the IPO, the Company and the board of directors of the Company, the members of which the Company believes have extensive business, finance, and venture capital experience, were required to estimate the fair value of the Company’s ordinary shares at

the time of each grant of a stock-based award prior to the IPO.

The grant date fair value of restricted ordinary shares and share options were calculated based on the grant date fair value of the underlying ordinary shares.

The Company calculated the fair value of the ordinary shares in accordance with the guidelines in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the “Practice Aid”.

The Company’s valuations of ordinary shares were prepared using a market approach, based on precedent transactions in the shares, to estimate the Company’s total equity value using an option-pricing method, or OPM.

After the Company’s IPO, the fair value of ordinary shares is determined by reference to the closing price of ADSs on the Nasdaq Global Select Market on the day prior to or day of the grant.

The OPM derives an equity value such that the value indicated for ordinary shares is consistent with the investment price, and it provides an allocation of this equity value to each of the Company’s securities.

The OPM treats the various classes of ordinary shares as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes.

Under this method, the ordinary shares have value only if the funds available for distribution to shareholders exceeded the value of the share liquidation preferences of ordinary shares with senior preferences at the time of the liquidity event.

Key inputs into the OPM calculation included the risk-free rate, expected time to liquidity and volatility.

A reasonable discount for lack of marketability was applied to the total equity value to arrive at an estimate of the total fair value of equity on a non-marketable basis.

Effective January 1, 2021, the Company adopted ASU No.

2016-02, Leases (Topic 842), as amended, using the modified retrospective method and utilizing the effective date as its date of initial application, with prior periods presented in accordance with previous guidance under ASC 840, Leases, or ASC 840.

The Company has elected to apply the package of three expedients to all of its leases requiring (1) no reassessment of whether any expired or existing contracts are or contain leases, (2) the lease classification of any expired or existing leases, or (3) the capitalization of initial direct costs for any existing leases.

Adoption of this standard resulted in the recording of operating lease right-of-use assets and current operating lease liabilities of $ 1.0 million, on the Company’s balance sheet on the effective date.

The adoption of the standard did not have a material effect on the Company’s statements of operations and comprehensive loss, statements of cash flows or accumulated deficit.

Refer to Note 14 for right-of-use assets and liabilities recorded during the periods ended December 31, 2022 and 2021 respectively.

The fair value of ordinary shares is determined by reference to the closing price of ADSs on the Nasdaq Global Select Market on the day prior to or day of the grant.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and current and non-current lease liabilities, as applicable.

Entities may elect not to separate lease and non-lease components.

The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets and to allocate all the contract consideration to the lease component only.

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Certain adjustments to the right-of-use asset may be required for items such as incentives received.

The interest rate implicit in lease contracts has not been readily determinable.

As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

When readily determinable, the discount rate used to calculate the lease liability is the rate implicit in the lease.

As the Company’s leases do not typically provide an implicit rate, the Company utilizes its incremental borrowing

rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

As the Company does not have a rating agency-based credit rating, quotes were obtained from lenders to establish an estimated secured rate to borrow based on Company and market-based factors as of the respective lease measurement dates.

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The Company typically only includes the non-cancelable lease term in its assessment of a lease arrangement unless there is an option to extend the lease that is reasonably certain of exercise.

The Company adjusts the right-of-use assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

Prospectively, the Company will adjust the right-of-use assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

Operating lease costs are recognized on a straight-line basis over the lease term, and they are categorized within research and development and general and administrative expenses in the consolidated statements of operations and comprehensive loss.

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Foreign Currency Translation

The Company maintains its consolidated financial statements in its functional currency, which is Pound Sterling.

Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates.

Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the date of the transaction.

Exchange gains or losses arising from foreign currency transactions are included in other income (expense), net in the consolidated statements of operations and comprehensive loss.

The Company recorded foreign exchange gains of approximately $ 0.8 million and $ 2.0 million for the years ended December 31, 2022 and 2021, respectively.

These gains arise from U.S.

dollars which are held in a financial institution in one of our UK subsidiaries that has a functional currency of Pound Sterling.

For financial reporting purposes, the consolidated financial statements of the Company have been presented in the U.S.

dollar, the reporting currency.

The financial statements of entities are translated from their functional currency into the reporting currency as follows:

assets and liabilities are translated at the exchange rates at the balance sheet dates, expenses and other income (expense), net are translated at the average exchange rates for the periods presented and shareholders’ equity is translated based on historical exchange rates.

Translation adjustments are not included in determining net loss but are included as a foreign exchange adjustment to other comprehensive income, a component of shareholders’ equity.

In December 2019, the FASB issued Accounting Standard Update, or ASU, 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740),” or ASU 740, which simplifies the accounting for income taxes.

The new guidance removes certain exceptions to the general principles in ASC 740 such as recognizing deferred taxes for equity investments, the incremental approach to performing intra-period tax allocation and calculating income taxes in interim periods.

The standard also simplifies accounting for income taxes under U.S.

GAAP by clarifying and amending existing guidance, including the recognition of deferred taxes for goodwill, the allocation of taxes to members of a consolidated group and requiring that an entity reflect the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

This guidance is effective for annual periods beginning after December 15, 2020, and interim periods thereafter;

however, early adoption is permitted.

The Company adopted this ASU as of January 1, 2021 and it has had no material impact on the consolidated financial statements.

The functional currency is the currency of the primary economic environment in which an entity’s operations are conducted.

On January 1, 2023, Compass Pathways plc and its wholly owned subsidiary Compass Pathfinder Holdings Limited changed their functional currency to the U.S.

Compass Pathways plc and Compass Pathfinder Holdings Limited have no operating activities and their primary functions are to serve as a financing vehicle to fund the operations of the Company’s operating entities, to serve as the listing company needed to access U.S.

capital markets, and to hold investments.

Therefore, its financing source is the primary indicator of its cash flows and its functional currency.

The change in functional currency from the British Pound Sterling is due to a change in the source of the Company’s financing and cash flows going forward, which will now primarily be U.S.

Dollars (“USD”).

The functional currency of Compass Pathfinder Holdings Limited’s wholly owned non-U.S.

subsidiary, Compass Pathfinder Limited, is British Pound Sterling and the functional currency of its U.S.

subsidiary, Compass Pathways Inc.

The functional currency of these subsidiaries is the same as the local currency.

The translated balances of monetary and non-monetary assets and liabilities recorded in the reporting entity’s consolidated financial statements as of the end of the prior reporting period become the new accounting basis for those assets and liabilities in the period of the change.

To the extent that the distinct and separable operation has monetary assets and liabilities denominated in the old functional currency, such balances will create transaction gains and losses subsequent to the change in functional currency.

The balance recorded in the cumulative translation adjustment account for prior periods is not reversed upon the change in functional currency.

The Company translates the assets and liabilities of Compass Pathfinder Limited into USD at the exchange rate in effect on the balance sheet date.

Income and expenses are translated at the average exchange rate in effect during the period.

Unrealized translation gains and losses are recorded as a cumulative translation adjustment, which is included in the consolidated statements of shareholders’ equity as a component of accumulated other comprehensive income/(loss).

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in its tax returns.

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First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities.

If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed as the amount of benefit to recognize in the consolidated financial statements.

If the tax position is deemed more-

likely-than-not to be sustained, the tax position is then assessed as the amount of benefit to recognize in the consolidated financial statements.

The amount of benefit that may be used is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.

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As a company that carries out extensive research and development activities, the Company benefits from the UK research and development tax credit regime under the scheme for small or medium-sized enterprises, or SME.

Under the SME regime, the Company is able to surrender some of its trading losses that arise from qualifying research and development activities for a

cash rebate of up to 33.35 % of such qualifying research and development expenditure.

The Company meets the conditions of the SME regime.

Qualifying expenditures largely comprise employment costs for research staff, consumables, outsourced contract research organization costs and utilities costs incurred as part of research projects.

Certain subcontracted qualifying research and development expenditures are eligible for a cash rebate of up to 21.67 %.

Under the SME regime, in effect through December 31, 2023, the Company is able to surrender some of its trading losses that arise from qualifying research and development activities for a cash rebate of a portion of such qualifying research and development expenditure.

Up until April 1, 2023 the effective rate was 33.3% on in-house expenditures and 21.7% on work that was contracted out (to unconnected subcontractors).

On and after April 1, 2023, the effective rates reduced to 18.6% and 12.1%, respectively.

New rules were announced in the Finance Bill 2023-24 for an enhanced effective rate of relief for loss making research intensive SMEs, which would be 27.0% for qualifying in-house expenditures and 17.5% for qualifying subcontracted expenditures.

The legislation was not substantively enacted at the balance sheet date, although based on the proposed rules, the Company does not believe that it would meet the criteria for the enhanced rate of relief for the year through December 31, 2023.

After the Finance Bill has received Royal Assent, the R&D claim will be reviewed at a transaction level, and the threshold calculation prepared with more certainty to determine whether the enhanced rate can be applied for submission of the claim.

The Company currently meets the conditions of the SME regime.

A large portion of costs relating to research and development, clinical trials and manufacturing activities are eligible for inclusion within these tax credit cash rebate claims.

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Due to the nature of the business, the Company has generated losses since inception.

The benefit from research and development, or R&D, tax credits is recognized in the consolidated statements of operations and comprehensive loss as a component of other income (expense), net, and represents the sum of the research and development tax credits recoverable in the UK.

The benefit from research and development, or R&D, tax credits is recognized in the consolidated statements of operations and comprehensive loss as a component of other income, net, and represents the sum of the research and development tax credits recoverable in the UK.

The UK research and development tax credit is fully refundable to the Company and is not dependent on current or future taxable income.

As a result, the Company has recorded the entire benefit from the UK research and development tax credit as a benefit which is included in net loss before income tax and accordingly, not reflected as part of the income tax provision.

If, in the future, any UK research and development tax credits generated are needed to offset a corporate income tax liability in the UK, that portion would be recorded as a benefit within the income tax provision and any refundable portion not dependent on taxable income would continue to be recorded within other income (expense), net.

If, in the future, any UK research and development tax credits generated are needed to offset a corporation tax liability in the UK, that portion would be recorded as a benefit within the income tax provision and any refundable portion not dependent on taxable income would continue to be recorded within other income, net.

The Company may not be able to continue to claim research and development tax credits under the SME regime in the future because it may no longer qualify as a small or medium-sized company.

In addition, the EU State Aid cap limits the total aid claimable in respect of a given project to € 7.5 million which may impact the Company's ability to claim R&D tax credits in future.

In addition, there is a maximum cap in respect of a given project of € 7.5 million which may impact the Company’s ability to claim R&D tax credits in future.

Further, the U.K.

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That exception requires the company to be creating, taking steps to create or managing intellectual property, as well as having qualifying research and development expenditure in respect of connected parties, which does not exceed 15 % of the total claimed.

If such exception does not apply, this could restrict the amount of payable credit that we claim.

In the Finance Act 2022-23, the rates for the SME R&D regime were reduced such that for expenditure from April 1, 2023 the effective credit will reduce from 33.4p/£ to 18.6p/£.

If such exception does not apply, this could restrict the amount of payable credit that the Company claims.

Unsurrendered UK losses may be carried forward indefinitely to be offset against future taxable profits, subject to numerous utilization criteria and restrictions.

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Comprehensive loss includes net loss as well as other changes in shareholders’ equity that result from transactions and economic events other than those with shareholders.

For the years ended December 31, 2022 and 2021, the only component of accumulated other comprehensive loss is foreign currency translation adjustment.

For the years ended December 31, 2023 and 2022, the only component of

accumulated other comprehensive loss is foreign currency translation adjustment.

Net Loss per Share

The Company has reported losses since inception and has computed basic net loss per share attributable to ordinary shareholders by dividing net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding for the period, without consideration for potentially dilutive securities.

The Company computes diluted net loss per ordinary share after giving consideration to all potentially dilutive ordinary shares, including unvested restricted shares and outstanding options.

The Company computes diluted net loss per ordinary share after giving consideration to all potentially dilutive ordinary shares, including unvested restricted shares, outstanding options and warrants.

Because the Company has reported net losses since inception, these potential ordinary shares have been anti-dilutive and basic and diluted loss per share were the same for all periods presented.

The Company enters into foreign currency contracts to reduce the risk that our cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations.

The Company enters into foreign currency contracts to reduce the risk that its cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations.

The Company does not enter into foreign currency contracts for speculative purposes.

The Company recognizes derivative instruments, which do not qualify for hedge accounting, as either assets or liabilities on the balance sheet at fair value.

The Company records changes in the fair value (gains or losses) of the derivatives in the accompanying consolidated statement of operations and comprehensive loss as other income (expense), net.

The Company records changes in the fair value (gains or losses) of the derivatives in the accompanying consolidated statements of operations and comprehensive loss as other income, net.

The Company did not enter into any contracts during the year ended December 31, 2023.

During the year ended December 31, 2022, the Company entered into and settled a foreign forward agreement, resulting in a positive fair value change of $ 2.3 million in other income.

During the year ended December 31, 2021, the Company did not enter into any contracts.

Long-term Debt

On June 30, 2023, the Company entered into the Loan Agreement with Hercules.

The Company assessed all terms and features of the Loan Agreement in order to identify any potential embedded features that would require bifurcation.

As part of this analysis, the Company assessed the economic characteristics and risks of the debt.

The Company determined that all features of the Loan Agreement are clearly and closely associated with a debt host and, as such, do not require separate accounting as a derivative liability.

Debt issuance costs consist of costs incurred in obtaining long-term financing.

These costs are classified on the consolidated balance sheet as a direct deduction from the carrying amount of the related debt liability.

These expenses are deferred and amortized as part of interest expense in the consolidated statement of operations using the effective interest rate method over the term of the debt agreement.

On June 30, 2023, the Company entered into a warrant agreement with Hercules.

The Company assessed all terms and features of the Warrant Agreement in order to determine accounting classification of the warrants as equity or liability.

As part of this analysis, the Company determined it appropriate to account for the warrants issued under the Loan Agreement as equity.

On August 18, 2023, in connection with the PIPE, the Company issued and sold PIPE Warrants to purchase up to 16,076,750 ADSs, each representing one ordinary share, at an exercise price of $ 9.93 per ADS.

The PIPE Warrants are exercisable for a three year period beginning in February 2024.

The Company assessed all terms and features of the PIPE Warrant Agreement in order to determine accounting classification of the warrants as equity or liability.

As part of this analysis, the Company determined it appropriate to account for the PIPE Warrants as equity.

The Company measures warrants at inception at fair value using the Black-Scholes valuation model.

Assumptions used in the warrant pricing model include the following:

Expected volatility .

The Company lacks sufficient company-specific historical and implied volatility information for its ordinary shares.

Therefore, it estimates its expected share volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price.

Expected term.

The expected term of the Hercules warrants is ten years .

The expected term of the PIPE Warrants is three and a half years.

Risk-free interest rate .

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of the issuance for time periods that are approximately equal to the expected term of the warrant.

Expected dividend.

Expected dividend yield of zero is based on the fact that the Company has never paid cash dividends on ordinary shares and does not expect to pay any cash dividends in the foreseeable future.

In addition, the Loan Agreement with Hercules currently prohibits, and any future debt financing arrangements may contain terms prohibiting or limiting the number of dividends that may be declared or paid on our ordinary shares.

Fair value of ordinary shares.

The fair value of the warrants is determined by reference to the closing price of ADSs on the Nasdaq Global Select Market on the day of issuance.

Recently Issued Accounting Pronouncements

The Company reviewed recently issued accounting pronouncements and determined there will not be an impact to our financial position and results of operations.

Fair Value Measurements

There are no financial instruments measured at fair value on a recurring basis as of December 31, 2022 and 2021.

Management believes that the carrying amounts of the Company’s consolidated financial instruments, including cash and cash equivalents, restricted cash, accounts payable and accrued expenses approximate fair value due to the short-term nature of those instruments.

The Company elected the fair value option to account for its convertible notes issued during 2019 (See Note 8).

The fair value of the convertible notes was determined based on significant inputs not observable in the market, which represents a level 3 measurement within the fair value hierarchy.

The Company recorded a loss of $ 1.8 million for changes in the fair value of the convertible notes in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

The following table provides a roll forward of the aggregate fair value of the Company’s convertible notes, for which fair value was determined using level 3 inputs (in thousands):

Convertible Notes

Balance as of December 31, 2019 $ 21,089

Change in fair value 1,771

Settlement of convertible notes ( 21,614 )

Exchange difference ( 1,246 )

Balance as of December 31, 2020, 2021 and 2022 $ —

On March 6, 2020, the Company made a strategic investment of $ 0.5 million to acquire an 8 % (on a fully diluted basis) shareholding in Delix Therapeutics, Inc., a drug discovery and development company researching novel small molecules for use in Central Nervous System, or CNS, indications.

The Company’s investment in Delix Therapeutics, Inc.

does not provide it with significant influence over the investee.

The investment does not have a readily determinable fair value and therefore will be measured at cost minus impairment adjusted by observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

This investment will be measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect.

An impairment loss is recognized in the consolidated statements of operations and comprehensive loss equal to the amount by which the carrying value exceeds the fair value of the investment.

As of December 31, 2022, no impairment loss was recognized.

In November 2023, the Financial Accounting Standard Board ("FASB") issued new guidance designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses per segment.

The guidance is effective for all fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

The new standard must be adopted on a retrospective basis and early adoption is permitted.

The Company is not early adopting the standard.

We are currently evaluating this guidance to determine its impact on our consolidated financial statements.

In December 2023, the FASB issued new guidance designed to improve income tax disclosure requirements, primarily through increased disaggregation disclosures within the effective tax rate reconciliation as well as enhanced disclosures on income taxes paid.

The guidance is effective for all fiscal years beginning after December 15, 2024.

The new standard can be adopted on a prospective basis with an option to be adopted retrospectively and early adoption is permitted.

The Company is not early adopting the standard.

We are currently evaluating this guidance to determine its impact on our consolidated financial statements.

Prepaid Expenses and Other Current Assets

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VAT recoverable 1,052 1,652

Deferred offering costs — 840

Security deposit 97 274

Other current assets 1,895 1,042

$ 39,535 $ 47,695

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

Lab equipment $ 332 $ 370

Office equipment 637 315

Furniture and fixtures 87 65

Leasehold improvements 91 6

accumulated depreciation ( 530 ) ( 358 )

Depreciation and amortization expenses were $ 0.3 million, $ 0.2 million and $ 0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Long-term Prepaid Expenses and Other Assets

Long-term prepaid expenses and other assets consisted of the following (in thousands):

Prepaid research and development - long-term

Property and equipment 423 617

Other investment 469 469

$ 7,049 $ 1,413

Accrued Expenses and Other Liabilities

6 unchanged sentences

$ 11,301 $ 9,325

Convertible Notes

On April 17, 2020, upon the Series B convertible preferred share financing, which constituted a Qualified Financing, the outstanding principal of the convertible notes of $ 18.4 million (£ 15.0 million) automatically converted into 1,723,263 Series B convertible preferred shares, and there was no outstanding balance as of December 31, 2020.

The Company elected the fair value option to account for the 2019 Convertible Notes.

The Company recorded the 2019 Convertible Notes at fair value and subsequently remeasured them to fair value at each reporting date.

Changes in fair value were recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

The Company recognized losses in the consolidated statements of operations and comprehensive loss of $ 1.8 million as change in fair value of the convertible notes during the year ended December 31, 2020.

There are no convertible notes outstanding in the years ended December 31, 2022 or 2021.

Convertible Preferred Shares

On April 17, 2020, the Company closed a Series B funding round to secure an additional $ 80.0 million of funding, including the conversion of the 2019 Convertible Notes (see Note 8), through the issuance of Series B convertible preferred shares.

The Company received $ 61.6 million in cash proceeds upon the issuance of 4,913,404 Series B convertible preferred shares and incurred issuance costs of $ 0.3 million, recorded as a reduction to the convertible preferred shares.

The 2019 Convertible Notes were converted into 1,723,263 Series B convertible preferred shares.

The issuance price of the Series B convertible preferred shares was $ 1.42 per share.

Convertible preferred shares and Series A convertible preferred shares consisted of the following as of December 31, 2019 (in thousands, except for share amounts):

Shares Liquidation Preference Carrying Value

Authorized Outstanding

Convertible preferred shares 2,650,980 2,650,980 $ 3,865 $ 3,761

Series A convertible preferred shares 7,131,525 7,131,525 35,414 35,147

9,782,505 9,782,505 $ 39,279 $ 38,908

Upon closing of the IPO, the convertible preferred shares and Series A convertible preferred shares as of December 31, 2019, together with the Series B convertible preferred shares issued during the year ended December 31, 2020, were converted to 16,419,172 ordinary shares.

The holders of the Company’s convertible preferred shares, Series A convertible preferred shares and Series B convertible preferred shares had certain voting, dividend, and redemption rights, as well as liquidation preferences and conversion privileges.

All rights, preferences, and privileges associated with the convertible preferred shares, Series A convertible preferred shares and Series B convertible preferred shares were terminated at the time of the Company’s IPO in conjunction with the conversion of all outstanding convertible preferred shares, Series A convertible preferred shares and Series B convertible preferred shares into ordinary shares.

On June 30, 2023, the Company entered into the Loan Agreement with Hercules, which provided for aggregate maximum borrowings of up to $ 50.0 million, consisting of (i) a term loan of $ 30.0 million, which was funded on the Effective Date, (ii) subject to the Company achieving certain performance milestones and available until December 15, 2024, an additional term loan of $ 10.0 million, and (iii) subject to the approval of Hercules’ investment committee in its sole discretion, and available during the interest-only period, an additional term loan of $ 10.0 million.

The term loan will mature on July 1, 2027.

The outstanding principal balance of the term loan bears interest at an annual rate equal to the greater of either (i) the prime rate as reported in The Wall Street Journal plus 1.50 % or (ii) 9.75 %.

Accrued interest is payable monthly following the funding of each term loan.

In addition to accrued interest, payment-in-kind (PIK) interest of 1.40 % will be added to the balance of the loan.

Payments under the Loan Agreement are interest only until the first principal payment is due on July 1, 2025 (or if the Borrowers achieve certain performance milestones, the interest only period may be extended to January 2, 2026 and, upon the achievement of certain additional performance milestones, the interest only period may be extended to July 1, 2026), followed by equal monthly payments of principal and interest through the scheduled maturity date, July 1, 2027.

The Company incurred fees and transaction costs totaling $ 3.3 million associated with the initial term loan, which are recorded as a reduction to the carrying value of the long-term debt in the consolidated balance sheet.

These fees included $ 0.4 million of facility fees, $ 0.8 million of company fees, $ 0.7 million in warrants, and $ 1.4 million of end of term charges.

The fees, transaction costs, and the end of term charge are amortized to interest expense through the maturity date using the effective interest method.

The effective interest rate of the Loan Agreement was 15.8 % as of December 31, 2023.

The Company issued warrants to Hercules to purchase the Company’s Ordinary Shares equal to the quotient derived by dividing (i) the amount equal to (a) 2.5 % times (b) the aggregate principal amount of term loan advances made and funded under the Loan Agreement by (ii) the exercise price of the warrants.

Upon receipt of the first term loan, 94,222 shares became exercisable to Hercules with a fair market value of $ 0.7 million.

The Loan Agreement includes a financial covenant requiring us to maintain a minimum level of $ 22.5 million of cash during the period commencing on July 1, 2024 (subject to adjustment if certain performance milestones are met).

Company meets the performance milestones, the minimum cash covenant will not apply if its market capitalization is at least $ 750.0 million.

The Company was in compliance with all covenants of the Loan Agreement as of December 31, 2023.

Long-term debt consisted of the following (in thousands):

Term loan payable

End of term charge

Future principal payments and end of term charge

PIK interest payable

Unamortized debt issuance costs

Carrying value of long-term debt

Future principal payments, including End of Term Charge, are as follows (in thousands):

December 31, 2024 —

December 31, 2025 6,572

December 31, 2026 14,166

December 31, 2027 10,687

Total $ 31,425

Interest expense associated with the Loan Agreement for the year ended December 31, 2023 was $ 2.2 million.

Shareholders’ Equity

Ordinary Shares

On September 22, 2020, the Company closed its IPO of ADSs representing its ordinary shares and issued and sold 8,625,000 ADSs at a public offering price of $ 17.00 per ADS, resulting in net proceeds of approximately $ 132.8 million after deducting underwriting fees and offering costs.

Upon the closing of the IPO, the convertible preferred shares and Series A convertible preferred shares and Series B convertible preferred shares were converted to 16,419,172 ordinary shares.

On May 4, 2021, the Company sold 4,000,000 ordinary shares in connection with its follow-on offering.

6 unchanged sentences

Sales of the Company’s ADSs, if any, will be made at market prices.

On December 14, 2022, under our at-the-market offering we sold 44,416 ADSs at $ 10.53 per ADS.

During the year ended December 31, 2021, the Company issued in total 1,476,936 ordinary shares to settle share options exercised by employees and non-employees, of which 232,227 ordinary shares related to options exercised in 2020, with subsequent share issuances in 2021.

During the year ended December 31, 2022, the Company issued in total 462,722 ordinary shares to settle share options exercised by employees and non-employees.

During the year ended December 31, 2021, a total of 70,482 restricted share units vested, of which 12,607 shares were vested and issued in settlement and 57,875 shares were vested but had not been issued at December 31, 2021.

Through December 31, 2023, we sold 2,982,038 ADSs, resulting in $ 28.6 million in net proceeds.

During the years ended December 31, 2023, 2022 and 2021 , the Company issued ordinary shares in the amount of 166,801 , 462,722 and 1,476,936 , respectively, to settle share options exercised by employees and non-employees.

During the year ended December 31, 2023, a total of 96,177 restricted share units vested, of which 69,120 shares were issued and 27,057 shares were settled.

During the year ended December 31, 2023, a total of 78,022 ordinary shares were issued in settlement of restricted share units, of which 8,902 shares were vested and not issued at December 31, 2022.

During the year ended December 31, 2022, a total of 42,635 restricted share units vested, of which 24,747 shares were vested and issued in settlement, 8,902 shares were vested but had not been issued and 8,986 shares were settled at December 31, 2022.

During the year ended December 31, 2022, a total of 82,622 shares were issued in settlement, of which 57,875 vested in 2021 and 24,747 vested in 2022.

During 2022, a total of 82,622 shares were issued in settlement, of which 57,875 vested in 2021 and 24,747 vested in 2022.

During the years ended December 31, 2022 and 2021, the Company issued in total 22,160 and 0 shares under the employee share purchase plans.

During the years ended December 31, 2023, 2022, and 2021 the Company issued in total 52,482 , 22,160 and nil shares, respectively, under the employee share purchase plan.

Deferred Shares

Immediately prior to the completion of the Company’s IPO in September 2020, the different classes of issued share capital of Compass Pathways plc were reorganized by way of a reverse share split, which was retroactively restated in our consolidated financial statements.

As part of this reverse share split, the nominal value of Compass Pathways plc’s ordinary shares changed from £ 0.001 per share to £ 0.008 per share and a single, non-voting deferred share with a nominal value of £ 21,921.504 in the capital of the Company was created and transferred to the Company.

On June 28, 2023, the single deferred share was cancelled.

On June 30, 2023, the Company entered into a Warrant Agreement with Hercules, which provides Hercules with the right to purchase a number of shares of the Company’s Ordinary Shares equal to the quotient derived by dividing (i) the amount equal to (a) 2.5 % times (b) the aggregate principal amount of term loan advances made and funded under the Loan Agreement by (ii) the exercise price.

Upon receipt of each term loan, the Warrant will automatically become exercisable and will expire in 10 years (on June 30, 2033).

On June 30, 2023, with the receipt of the first term loan, 94,222 shares became exercisable to Hercules with a fair market value of $ 0.7 million.

On August 18, 2023, in connection with the PIPE, the Company issued and sold warrants to purchase up to 16,076,750 ADSs, each representing one ordinary share, at a purchase price of $ 9.93 per ADS.

The PIPE Warrants will become exercisable for a three year period beginning in February 2024.

Share-Based Compensation

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The ESPP initially reserved and authorized the issuance of up to a total of 340,053 ordinary shares to participating employees.

The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2022 and each January 1 thereafter through termination of the 2020 Plan, by the lesser of (i) 1 % of the outstanding number of ordinary shares on the immediately preceding December 31, (ii) 510,080 ordinary shares or (iii) such lesser number of ordinary shares as determined by the plan administrator.

administrator.

The number of shares reserved under the ESPP is subject to change in the event of a share split, share dividend or other change in our capitalization.

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The Company initially reserved 2,074,325 of its ordinary shares for the issuance of awards under the 2020 Plan.

preceding December 31, or such lesser number of shares as determined by our compensation and leadership development committee.

The 2020 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2022, by up to 4 % of the outstanding number of ordinary shares on the immediately preceding December 31, or such lesser number of shares as determined by our compensation and leadership development committee.

This number is subject to adjustment in the event of a sub-division, consolidation, share dividend or other change in our capitalization.

6 unchanged sentences

2022 Inducement Option Award

On August 1, 2022, the Company granted to our new chief executive officer a non-qualified share option to purchase up to 600,000 ordinary shares as an inducement grant.

The non-qualified share option has a 10 year term and vests as to one-fourth on August 1, 2023 and as to the remaining three-fourths in equal monthly installments over the following 36 months.

During 2022, the Company granted a non-qualified share option to purchase up to 600,000 ordinary shares as an inducement grant to our chief executive officer.

The non-qualified share option has a 10 year term and one-fourth vested on August 1, 2023 and the remaining three-fourths will vest in equal monthly installments over the following 36 months.

The non-qualified share option has other terms that mirror those of non-qualified share options granted under the Company’s 2020 Plan and the Company’s standard form of non-qualified share option agreement.

Ordinary Shares

A summary of the changes in the Company’s unvested ordinary shares during the year ended December 31, 2022, 2021 and 2020 are as follows:

Number of Shares Weighted Average Grant Date Fair Value

Unvested and Outstanding as of December 31, 2020 13,757 $ 2.36

Granted — $ —

Vested ( 13,757 ) $ 2.36

Forfeited — $ —

Unvested and Outstanding as of December 31, 2022 and 2021 — $ —

The total fair value of vested shares was nil , less than $ 0.1 million and $ 1.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Restricted Share Units

2 unchanged sentences

Unvested and Outstanding as of December 31, 2022

Vested ( 70,482 ) 10.19

Forfeited ( 31,860 ) 10.19

Unvested and Outstanding as of December 31, 2021 115,140 $ 10.19

271,135 $ 12.23

Granted 175,750 10.85

3 unchanged sentences

320,203 $ 11.79

As of December 31, 2022, 2021 and 2020, there was $ 2.6 million, $ 1.2 million and $ 2.0 million of unrecognized compensation cost related to unvested restricted share units, respectively, which is expected to be recognized over a weighted-average period of 2.95 years, 2.5 years and 3.2 years, respectively.

As of December 31, 2023 and 2022, there was $ 3.0 million and $ 2.6 million of unrecognized compensation cost related to unvested restricted share units, respectively, which is expected to be recognized over a weighted-average period of 2.6 years and 3.0 years, respectively.

The exercise price of restricted share units is at a nominal value less than £ 0.01 per share.

3 unchanged sentences

Outstanding as of December 31, 2022

Granted 1,043,702 $ 36.11

Exercised ( 1,244,709 ) $ 1.55

Cancelled or forfeited ( 313,830 ) $ 22.45

Outstanding as of December 31, 2021

5,092,732 $ 13.55 8.38 $ 13,013

8 unchanged sentences

3,416,101 $ 13.35 8.72 $ 1,729

The aggregate intrinsic value of options exercised during the years ended December 31, 2022, 2021 and 2020 was $ 5.5 million, $ 47.4 million and $ 12.8 million, respectively.

The aggregate intrinsic value of options exercised during the years ended December 31, 2023, and 2022 was $ 1.4 million and $ 5.5 million, respectively.

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

The weighted average grant-date fair value of share options granted was $ 10 and $ 21.35 and $ 9.83 per share during the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, 2021 and 2020, there was $ 30.4 million, $ 27.4 million and $ 18.1 million of unrecognized compensation cost related to unvested share options, which is expected to be recognized over a weighted-average period of 2.8 years, 3.1 years and 3.5 years respectively.

The weighted average grant-date fair value of share options granted was $ 7.70 and $ 10.00 per share during the years ended December 31, 2023 and 2022.

As of December 31, 2023 and 2022, there was $ 29.7 million and $ 30.4 million of unrecognized compensation cost related to unvested share options, which is expected to be recognized over a weighted-average period of 2.5 years and 2.8 years, respectively.

Share Option Valuation

35 unchanged sentences

Total provision for income taxes $ 780 $ 408 $ 199

A reconciliation of income tax expense computed at the statutory UK income tax rate to income taxes as reflected in the consolidated financial statements is as follows (in thousands):

A reconciliation of income tax expense computed at the statutory UK corporation tax rate to income taxes as reflected in the consolidated financial statements is as follows (in thousands):

Year Ended December 31,

Corporation tax at UK statutory rate

$ ( 27,656 ) $ ( 17,309 ) $ ( 13,592 )

Income taxes at UK statutory rate $ ( 17,309 ) $ ( 13,592 ) $ ( 11,458 )

Permanent differences 1 14 69

4 unchanged sentences

Return to provision

( 2,259 ) 1,580 ( 854 )

Equity compensation

33 ( 782 ) ( 8,302 )

Change in UK tax rate

( 1,258 ) ( 3,609 ) ( 10,147 )

Other 18 35 17

33 unchanged sentences

As of December 31, 2023, 2022 and 2021, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations and comprehensive loss.

The Company and its subsidiaries file income tax returns in the UK and U.S.

The Company and its subsidiaries file corporation tax returns in the U.K.

and income tax returns in the U.S.

To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the federal, state, or foreign tax authorities, if such tax attributes are utilized in a future period.

During the second quarter of 2021, the Finance Act 2021 (the Act) was enacted in the United Kingdom.

The Act increases the corporate income tax rate from 19% to 25% effective April 1, 2023 and enhances the first-year capital allowance on qualifying new plant and machinery assets effective April 1, 2021.

The effects on the Company’s existing deferred tax balances have been recorded and is offset by the valuation allowance maintained against the Company’s U.K.

During the second quarter of 2021, the Finance Act 2021 (the Act) was enacted in the U.K..

The Act increased the main corporation tax rate from 19% to 25% effective April 1, 2023 and enhanced the first-year capital allowance on qualifying new plant and machinery assets effective April 1, 2021.

The effects on the Company’s existing deferred tax balances have been recorded and are offset by the valuation allowance maintained against the Company’s U.K.

net deferred tax assets.

7 unchanged sentences

Net loss per share - basic and diluted $ ( 2.32 ) $ ( 2.16 ) $ ( 1.79 )

The Company’s potentially dilutive securities, which include unvested ordinary shares, unvested restricted share units, and options granted, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

The Company’s potentially dilutive securities, which include unvested ordinary shares, unvested restricted share units, options granted and warrants have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of ordinary shares outstanding used to calculate both basic and diluted net loss per share attributable to ordinary shareholders is the same.

3 unchanged sentences

Unvested restricted share units 320,203 271,135 115,140

Unvested ordinary shares — — 13,757

Vested restricted share units, for which shares are not in issue — 17,888 57,875

Share options 6,969,328 5,092,732 3,915,503

Warrants 16,170,972 — —

23,460,503 5,381,755 4,088,518

2 unchanged sentences

In August 2022, the Company entered into a twelve month membership agreement with WeWork for rentable office space.

The membership is cancellable with 90 days’ notice.

This membership is accounted for as a short-term lease as the Company is not reasonably certain to extend the lease beyond twelve months and is therefore not recognized on the Company’s consolidated balance sheets.

The membership was cancellable with 90 days’ notice.

This membership was accounted for as a short-term lease as the Company was not reasonably certain to extend the lease beyond twelve months and was therefore not recognized on the Company’s consolidated balance sheets.

On October 31, 2023, the Company terminated the membership agreement with WeWork for rentable office space in New York, NY.

The Company is not required to pay any membership fees, for any period, following the termination date.

In September 2023, the Company entered into a lease agreement for office space located in New York, NY, that was undergoing construction to get the space ready for use.

The required improvements were subsequently completed in October 2023 and the space was made available for use, resulting in the lease commencing on October 9, 2023.

The stated lease term is three years .

Lease payments will be made on a monthly basis and increase approximately 3.5 % each year over the lease term.

The total commitment for lease payments over the stated term is $ 0.7 million.

The lease agreement has a noncancellable lease term of 2 years due to a one-time termination option, which becomes effective following the two-year anniversary of the commencement date.

If exercised, the Company would pay the landlord a termination fee equal to three months of the lease payments in effect at the time of termination.

Soho, London, UK

In July 2021, the Company entered into a two-year operating lease with Fora Space Limited commencing on September 1, 2021.

The noncancellable term is 24 months and there was no option to extend the lease.

The recurring residency fee per month is £ 136,200 , and the Company paid a refundable deposit of £ 136,200 at the execution of the agreement.

Additionally, at the start of each calendar year, the monthly residency fee was subject to an automatic inflation linked increase of the previous years’ amount.

In April 2023, the Company entered into a two-year operating lease with Fora Space Limited commencing on September 1, 2023.

The noncancellable term is 24 months and there is no option to extend the lease.

The recurring residency fee per month is £ 130,000 , and the Company paid a refundable deposit of £ 156,000 at the execution of the agreement.

Additionally, at the start of each calendar year, the monthly residency fee will be subject to an automatic inflation linked increase of the previous years’ amount.

Denmark Hill, London, UK

4 unchanged sentences

Year Ended December 31,

2023 2022 2021

Operating lease cost $ 2,331 $ 2,263 $ 1,844

Variable lease cost — —

Short-term lease cost 279 256 86

25 unchanged sentences

There have been no claims to date, and the Company has director and officer insurance that may enable it to recover a portion of any amounts paid for future potential claims.

Employee Benefit Plans

In the UK, the Company makes contributions to private defined contribution pension schemes on behalf of its employees.

The Company paid $ 0.2 million, $ 0.2 million and less than $ 0.1 million in contributions for the years ended December 31, 2022, 2021, and 2020 respectively.

In the United States, the Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code.

This plan covers substantially all U.S.

employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis.

The Company paid $ 0.2 million, $ 0.1 million and less than $ 0.1 million in contributions in the years ended December 31, 2022, 2021 and 2020, respectively.

Subsequent Events

During the first quarter quarter of 2024, through February 23, 2024, under our Sales Agreement with Cowen and Company, LLC, or Cowen, under which the Company may issue and sell its ADSs, each representing one ordinary share, we sold 2,154,798 ADSs, resulting in $ 22.4 million in net proceeds.

On February 27, 2024, we received warrant exercise notices from an investor that participated in our August 2023 PIPE indicating its intention to exercise warrants for 901,050 ADSs.

On February 28, 2024, we received the full exercise proceeds of $ 8.9 million for the notice to exercise warrants.

The exercise of the warrants has not settled and the underlying ADSs have

not yet been issued.

The ADSs issuable upon exercise of these warrants are registered for resale pursuant to a resale registration statement on Form S-3 (File No.

333-274436) which was declared by the Securities and Exchange Commission (SEC) on September 18, 2023.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934 the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

8 unchanged sentences

(Principal Executive Officer) February 29, 2024

/s/ Michael Falvey Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer) February 28, 2023

Michael Falvey

/s/ Mary-Rose Hughes

Interim Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

February 29, 2024

Mary-Rose Hughes

/s/ George Goldsmith Chair of Board of Directors February 29, 2024

George Goldsmith

/s/ Ekaterina Malievskaia Chief Innovation Officer and Director February 28, 2023

Ekaterina Malievskaia

/s/ David York Norton Lead Director February 29, 2024

2 unchanged sentences

Annalisa Jenkins, MBBS

/s/ Daphne Karydas

Director February 29, 2024

Daphne Karydas

/s/ Thomas Lönngren Director February 29, 2024

Thomas Lönngren

Ekaterina Malievskaia

/s/ Robert McQuade Director February 29, 2024

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures