Note 2 — Summary of Significant Accounting Policies

(a)          Basis of presentation

The condensed consolidated financial statements of Adaptimmune Therapeutics plc and its subsidiaries and other financial information included in this Quarterly Report are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and are presented in U.S. dollars. All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated on consolidation.

The unaudited condensed consolidated financial statements presented in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s 2024 Annual Report. The condensed consolidated balance sheet as of December 31, 2024, as presented herein, was derived from audited consolidated financial statements included in the Company’s 2024 Annual Report but does not include all disclosures required by U.S. GAAP. The Company’s significant accounting policies are described in Note 2 to those consolidated financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. However, these interim financial statements include all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary to fairly state the results of the interim period. The interim results are not necessarily indicative of results to be expected for the full year.

(b)          Use of estimates in interim financial statements

The preparation of interim financial statements, in conformity with U.S. GAAP and SEC regulations, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the interim financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are made in various areas, including in relation to valuation allowances relating to deferred tax assets, revenue recognition, the fair value of assets acquired, liabilities assumed, and estimation of the incremental borrowing rate for operating leases. If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.

(c)          Going concern

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

The Company has identified conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. The Company’s cash and cash equivalents are primarily used in its operating activities. As of March 31, 2025, the Company had cash, cash equivalents and marketable securities of $59.6 million and used $66.6 million cash in operating activities during the three months ended March 31, 2025. The Company expects negative cash flows from operations to continue, for at least the next twelve months, as the ramp up of its commercialization of TECELRA continues.

Based on the Company’s current cash and cash equivalents, anticipated cash outflows for operating and financing activities and likely cash inflows from customers, Management does not believe that the Company’s existing cash, cash equivalents and marketable securities will be sufficient to fund its operating activities (including in relation to its obligations arising under the Loan and Security Agreement (the “Loan Agreement”), with several banks and other financial institutions or entities and Hercules Capital, Inc. (“Hercules Capital”) entered into on May 14, 2024) for at least the next 12 months from the filing date of this Quarterly Report. As detailed further in Note 13 and our Annual Report on Form 10-K for the year ended December 31, 2024, the Company is also subject to certain financial covenants under the Loan Agreement, including the maintenance of cash, cash equivalents and marketable securities to certain levels. If the Company’s cash and cash equivalents and marketable securities fall below certain levels specified in the Hercules Capital Loan Agreement, this would result in a breach of the Company’s financial covenants. If the covenants with Hercules Capital are breached, then Hercules Capital may call in some or all of the outstanding principal (together with early repayment charge). The Company may have insufficient funds to repay the required amounts at the time that the amount becomes due despite having pre-paid $25 million of existing loan under the Loan Agreement.

The Company intends to attempt to mitigate the conditions that give rise to substantial doubt over going concern through a combination of different activities. First the Company is taking immediate steps to reduce its operating costs. These steps include the deprioritization of the PRAME and ADP-520 programs and stopping or deferment of all non-essential operating expenses. Such steps will have a short-term impact on operating expenses and also a longer-term impact on the amount of funding required for activities in the medium term. Despite these steps, further sources of funding will still need to be identified and we are actively looking at a variety of strategic opportunities. The Company has engaged TD Securities (USA) LLC (“TD Cowen”) to evaluate strategic options for the Company and all of its programs. These strategic options could include potential mergers with third parties or acquisitions of part or all of the business together with other collaborations or partnerships.

As detailed in Note 16, on November 13, 2024, the Company announced a restructuring program to deprioritize certain programs and reduce headcount, in order to reduce operating costs. Although these measures will reduce the Company’s operating costs in the long term, they will not alleviate the conditions that give rise to the substantial doubt over going concern and the Company must acquire additional funding. Whilst the Company has had a successful record of financing the company through various means since its inception, including raising over $1.4 billion through a combination of equity and business development activities, there is no assurance that the Company will be able to obtain sufficient additional capital to continue funding its operations or, if the Company does, that it will be on terms that are favorable to its shareholders.

If the Company fails to obtain additional funding, it will be required to do some or all of the following:

If the Company fails to obtain additional funding, or in the event that the Company further significantly reduces its ongoing expenditures and operations (including the current restructuring), this may result in an inability to retain the key individuals required for its ongoing business and may result in a need to delay or halt ongoing programs or change the nature and scope of such programs. As a result, our business financial condition and results of operations could be materially affected. Not all of the potential mitigating actions set out above are within the Company’s direct control and may rely on third parties for implementation. The general macro-economic conditions and market and trading environment are also difficult to predict and could adversely affect our ability to put in place mitigating actions. As a result, there is substantial doubt over the Company’s ability to continue as a going concern within 12 months from the date of filing of this Quarterly Report and is not alleviated as of the date of filing.

The consolidated financial statements do not include any adjustments that might result from the Company not being able to alleviate the substantial doubt over going concern. As such, the consolidated financial statements have been prepared on the basis that assumes the Company will be able to continue as a going concern and will be able to fund its operations and satisfy its liabilities, obligations and commitments as they fall due within the ordinary course of business.

(d)          Fair value measurements

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The hierarchy defines three levels of valuation inputs:

Level 1 - Quoted prices in active markets for identical assets or liabilities

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3 - Unobservable inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability

The carrying amounts of the Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. The fair value of marketable securities, which are measured at fair value on a recurring basis is detailed in Note 6, Fair value measurements.

(e)          Significant concentrations of credit risk

The Company held cash and cash equivalents of $41,054,000, marketable securities of $18,509,000 and restricted cash of $1,950,000 as of March 31, 2025. The cash and cash equivalents and restricted cash are held with multiple banks and the Company monitors the credit rating of those banks. The Company maintains cash balances in excess of amounts insured by the Federal Deposit Insurance Corporation in the United States (“U.S.”) and the U.K. Government Financial Services Compensation Scheme in the U.K. The Company’s investment policy limits investments to certain types of instruments, such as money market instruments, corporate debt securities and commercial paper, places restrictions on maturities and concentration by type and issuer and specifies the minimum credit ratings for all investments and the average credit quality of the portfolio.

The Company made sales of TECELRA to commercial customers and had two development revenue-generating customers during the three months ended March 31, 2025 which are Galapagos NV (“Galapagos”), and GSK. There were accounts receivable of $4,382,000 as of March 31, 2025 and $1,454,000 as of December 31, 2024. The Company has been transacting with Galapagos since 2024 and GSK since 2014 and has been selling products commercially since November 2024, during which time no credit losses have been recognized. As of March 31, 2025, the allowance for expected credit losses was not significant on the basis that the possibility of credit losses arising on its receivables as of March 31, 2025 is considered to be remote.

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Management analyzes current and past due accounts and determines if an allowance for credit losses is required based on collection experience, credit worthiness of customers and other relevant information. The process of estimating the uncollectible accounts involves assumptions and judgments and the ultimate amounts of uncollectible accounts receivable could be in excess of the amounts provided.

(f) New accounting pronouncements

Adopted in the current period

Improvements to Income Tax Disclosures

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In December 2023, the FASB issued ASU 2023-09 – Income Taxes (Topic 740) – Improvements to Income Tax Disclosures, which improves income tax disclosures primarily relating to the rate reconciliation and income taxes paid information. This includes a tabular reconciliation using both percentages and reporting currency amounts, covering various tax and reconciling items, and disaggregated summaries of income taxes paid during the period. For public business entities, the guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company intends to adopt the guidance in its Annual Report on Form 10-K for the fiscal year beginning January 1, 2025. The Company is currently evaluating the impact of the guidance on its Consolidated financial statements.

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To be adopted in future periods

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Disaggregation of Income Statement Expenses

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In November 2024, the FASB issued ASU 2024-03 Disaggregation of Income Statement Expense, which improves disclosure around the nature of expenses included in the income statement. The improvements require entities to disaggregate and disclose the amounts of certain types of expenses included in certain expense captions. For public business entities, the guidance is effective for annual periods beginning after December 15, 2026, with early adoption permitted. The Company intends to adopt the guidance in its Annual Report on Form 10-K for the fiscal year beginning January 1, 2027. The Company is currently evaluating the impact of the guidance on its Consolidated financial statements.

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