Tevogen Bio Holdings Inc

Previous wording

In this Quarterly Report on Form 10-Q (this “Report”), “we,” “our,” “us,” “Tevogen,” “the Company” and similar terms refer to Tevogen Bio Holdings Inc. and its subsidiaries collectively unless the context indicates otherwise. All quarterly information in this Management’s Discussion and Analysis is unaudited. The following discussion and analysis of our results of operations and our liquidity and capital resources should be read together with our unaudited consolidated financial statements and the related notes appearing elsewhere this Report and the audited financial information and related notes, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations and other disclosures, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”), and in Exhibits 99.1 and 99.2 to our Current Report on Form 8-K/A dated April 29, 2024 (the “Form 8-K”).

Current wording

In this Quarterly Report on Form 10-Q (this “Report”), “we,” “our,” “us,” “Tevogen,” “the Company” and similar terms refer to Tevogen Bio Holdings Inc. and its subsidiaries collectively unless the context indicates otherwise. All quarterly information in this Management’s Discussion and Analysis is unaudited. The following discussion and analysis of our results of operations and our liquidity and capital resources should be read together with our unaudited consolidated financial statements and the related notes appearing elsewhere in this Report and the audited financial information and related notes, as well as the Management’s Discussion and Analysis of Financial Condition and Results of Operations and other disclosures, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”), and in Exhibits 99.1 and 99.2 to our Current Report on Form 8-K/A dated April 29, 2024 (the “Form 8-K”).

Previous wording

Forward-looking statements should be considered in light of these factors and the factors described elsewhere in this Report, including in the “Risk Factors” section, in the “Risk Factors” section of our Annual Report, and in our various filings with the Securities and Exchange Commission (the “SEC”). It is important that you read these factors and the other cautionary statements made in this Report as being applicable to all related forward-looking statements wherever they appear in this Report. If any of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance, or achievements may differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. You should also read the more detailed description of our business in our Annual Report when considering forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements herein, which speak only as of the date of this Report. We undertake no obligation to publicly update any forward-looking statements, except as required by law.

Current wording

Forward-looking statements should be considered in light of these factors and the factors described elsewhere in this Report, including in the “Risk Factors” section, in the “Risk Factors” section of our Annual Report, and in our various filings with the SEC. It is important that you read these factors and the other cautionary statements made in this Report as being applicable to all related forward-looking statements wherever they appear in this Report. If any of these factors materialize, or if any underlying assumptions prove incorrect, our actual results, performance, or achievements may differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. You should also read the more detailed description of our business in our Annual Report when considering forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements herein, which speak only as of the date of this Report. We undertake no obligation to publicly update any forward-looking statements, except as required by law.

Previous wording

We are a clinical-stage specialty immunotherapy company harnessing one of nature’s most powerful immunological weapons, CD8+ cytotoxic T lymphocytes (“CD8+ CTLs”), to develop off-the-shelf, precision T cell therapies for the treatment of infectious diseases, cancers, and neurological disorders with the aim of addressing the significant unmet needs of large patient populations. We believe that sustainability and commercial success in the forthcoming era of medicine will rely on ensuring patient accessibility through advanced science, innovative business models, and engagement across the development lifecycle and healthcare system. We aspire to be the first biotechnology company offering commercially attractive, economically viable, and cost-effective personalized T cell therapies.

Current wording

We are a clinical-stage specialty immunotherapy company harnessing one of nature’s most powerful immunological weapons, CD8+ cytotoxic T lymphocytes (“CD8+ CTLs”), to develop off-the-shelf, precision T cell therapies for the treatment of infectious diseases, cancers, and neurological disorders with the aim of addressing the significant unmet needs of large patient populations. We believe that sustainability and commercial success in the forthcoming era of medicine will rely on ensuring patient accessibility through advanced science, innovative business models, and engagement across the development lifecycle and healthcare system. We believe the full potential of T cell therapies remains largely untapped, and aspire to be the first biotechnology company offering commercially attractive, economically viable, and cost-effective personalized T cell therapies.

Previous wording

We believe our allogeneic, precision T cell technology platform, ExacTcell TM, represents a significant scientific breakthrough that has the potential to produce a new class of off the shelf – manufactured and stored for immediate use – drugs with diverse applications spanning virology, oncology, and neurology. ExacTcell is a set of processes and methodologies to develop, enrich, and expand single human leukocyte antigen (“HLA”) restricted CTL therapies with proactively selected, precisely defined targets. HLA molecules are proteins that play an important role in the immune system’s ability to recognize “self” versus “foreign.” There are numerous HLA types that vary from person to person. CD8+ CTLs, also known as killer T cells, are white blood cells that are part of the immune system and destroy infected, malignant, or otherwise damaged cells. We are focused on using ExacTcell to develop allogeneic therapeutics, meaning therapeutics that are intended to be infused in patients other than the original donor.

Current wording

We believe our allogeneic, precision T cell technology platform, ExacTcellTM, represents a significant scientific breakthrough with the potential to mainstream cell therapy with a new class of off the shelf – manufactured and stored for immediate use – T cell therapies with diverse applications across virology, oncology, and neurology. ExacTcell is a set of processes and methodologies to develop, enrich, and expand single human leukocyte antigen (“HLA”) restricted CTL therapies with proactively selected, precisely defined targets. HLA molecules are proteins that play an important role in the immune system’s ability to recognize “self” versus “foreign.” There are numerous HLA types that vary from person to person. CD8+ CTLs, also known as killer T cells, are white blood cells that are part of the immune system and destroy infected, malignant, or otherwise damaged cells. We are focused on using ExacTcell to develop allogeneic therapeutics, meaning therapeutics that are intended to be infused in patients other than the original donor.

Previous wording

The first clinical product of ExacTcell, TVGN 489, is being developed to fill a critical gap in COVID-19 therapeutics for the immunocompromised and the high-risk elderly, with potential applications in both treatment and prevention of chronic lingering symptoms of the disease (“Long COVID”). Viruses, including COVID-19, hijack cellular machinery to transform infected cells into virus production plants. Elimination of infected cells is necessary to allow them to be replaced by healthy, uninfected counterparts. TVGN 489 consists of CTLs active against multiple precise, well defined, and well characterized targets across the SARS-CoV-2 genome. The product progressed from pre-discovery to the clinic in less than 18 months, and in January 2023, we completed the Phase 1 proof-of-concept clinical trial of TVGN 489 for the treatment of ambulatory, high-risk adult COVID-19 patients. No dose-limiting toxicities or significant treatment-related adverse events were observed in the treatment arm. Secondary endpoints showing a rapid reduction of viral load and that infusion of TVGN 489 did not prevent development of the patients’ own T cell-related (cellular) or antibody-related (humoral) anti-COVID-19 immunity were also met. None of the patients who participated in the trial reported progression of infection, reinfection, or the development of Long COVID during the six-month follow-up period. These clinical observations were mirrored by laboratory evidence of the persistence of TVGN 489 cells for at least six months after treatment. We plan to launch a pivotal trial of TVGN 489 in COVID-19 patients with B cell malignancies, with studies of other highly vulnerable populations thereafter. TVGN 489 is also in preclinical development for treatment and prevention of Long COVID.

Current wording

The first clinical product of ExacTcell, TVGN 489, is being developed to fill a critical gap in COVID-19 therapeutics for the immunocompromised and the high-risk elderly, with potential applications in both treatment and prevention of chronic lingering symptoms of the disease (“Long COVID”). Viruses, including COVID-19, hijack cellular machinery to transform infected cells into virus production plants. Elimination of infected cells is necessary to allow them to be replaced by healthy, uninfected counterparts. TVGN 489 consists of CTLs active against multiple precise, well defined, and well characterized targets across the SARS-CoV-2 genome. The product progressed from pre-discovery to the clinic in less than 18 months, and in January 2023, we completed the Phase 1 proof-of-concept clinical trial of TVGN 489 for the treatment of ambulatory, high-risk adult COVID-19 patients. No dose-limiting toxicities or significant treatment-related adverse events were observed in the treatment arm. Secondary endpoints showing a rapid reduction of viral load and that infusion of TVGN 489 did not prevent development of the patients’ own T cell-related (cellular) or antibody-related (humoral) anti-COVID-19 immunity were also met. None of the patients who participated in the trial reported progression of infection, reinfection, or the development of Long COVID during the six-month follow-up period. These clinical observations were mirrored by laboratory evidence of the persistence of TVGN 489 cells for at least six months after treatment. The results of the trial were submitted for peer-review and were published inBlood Advancesin June 2024. We believe these findings validate our initiative to develop off-the-shelf T cell therapies for outpatient administration, targeting diseases that affect large patient populations – for the very first time. We plan to launch a pivotal trial of TVGN 489 in COVID-19 patients with B cell malignancies, with studies of other highly vulnerable populations thereafter. TVGN 489 is also in preclinical development for treatment and prevention of Long COVID.

Previous wording

On February 14, 2024 (the “Closing Date”), pursuant to the agreement and plan of merger dated June 28, 2023 (the “Merger Agreement”) by and among Semper Paratus, Semper Merger Sub, Inc., a wholly owned subsidiary of Semper Paratus (“Merger Sub”), SSVK Associates, LLC, Tevogen Bio, and Dr. Ryan Saadi, in his capacity as seller representative, Merger Sub merged with and into Tevogen Bio, with Tevogen Bio being the surviving company and a wholly owned subsidiary of Semper Paratus (the “Merger,” and together with the other transactions contemplated by the Merger Agreement, the “Business Combination”) and Semper Paratus was renamed Tevogen Bio Holdings Inc. (the “Closing”). See Note 4 to our unaudited consolidated financial statements in this quarterly Report 10-Q for additional information regarding the net assets acquired through the Merger. The Merger was accounted for as a reverse recapitalization under U.S. GAAP because the Company was determined to be the accounting acquirer.

Current wording

On February 14, 2024 (the “Closing Date”), pursuant to the agreement and plan of merger dated June 28, 2023 (the “Merger Agreement”) by and among Semper Paratus, Semper Merger Sub, Inc., a wholly owned subsidiary of Semper Paratus (“Merger Sub”), SSVK Associates, LLC, Tevogen Bio, and Dr. Ryan Saadi, in his capacity as seller representative, Merger Sub merged with and into Tevogen Bio, with Tevogen Bio being the surviving company and a wholly owned subsidiary of Semper Paratus (the “Merger,” and together with the other transactions contemplated by the Merger Agreement, the “Business Combination”) and Semper Paratus was renamed Tevogen Bio Holdings Inc. (the “Closing”). See Note 4 to our unaudited consolidated financial statements in this quarterly Report 10-Q for additional information regarding the net assets acquired through the Merger. The Merger was accounted for as a reverse recapitalization under U.S. generally accepted accounting principles (“GAAP”) because the Company was determined to be the accounting acquirer.

Previous wording

To date, we have not generated any revenue. Our net income for the three months ended March 31, 2024, was $11.3 million and our net loss for the three months ended March 31, 2023, was $30.8 million. Net income for the three months ended March 31, 2024, was primarily attributable to a $48.5 million decrease in fair value in the three months ended March 31, 2024 due to the decrease in the fair value of our common stock prior to the Business Combination, partially offset by $7.5 million in transaction costs in connection with the Business Combination and a $29.5 million loss from operations that primarily resulted from non-cash, stock-based compensation expense recognized when the liquidity event condition contained in certain stock-based awards was satisfied upon the Closing. As of March 31, 2024, we had an accumulated deficit of $88.4 million and cash of $1.3 million.

Current wording

To date, we have not generated any revenue. Our net loss for the three months ended June 30, 2024 and 2023 was $9.7 million and $22.2 million, respectively. Net loss for the three months ended June 30, 2024 was primarily attributable to a $8.6 million loss from operations. Our net income (loss) for the six months ended June 30, 2024 and 2023 was $1.6 million and $(52.9) million, respectively. Net income for the six months ended June 30, 2024 was primarily attributable to a decrease in fair value in the six months ended June 30, 2024 due to the decrease in the fair value of our common stock, $0.0001 par value per share (the “Common Stock”), prior to the Business Combination, partially offset by $7.5 million in transaction costs in connection with the Business Combination and a $38.1 million loss from operations that primarily resulted from non-cash, stock-based compensation expense recognized when the liquidity event condition contained in certain stock-based awards was satisfied upon the Closing. As of June 30, 2024, we had an accumulated deficit of $98.1 million and cash of $1.1 million.

Previous wording

On February 14, 2024, we entered into a securities purchase agreement with an investor pursuant to which the investor purchased 500 shares of our Series A Preferred Stock for an aggregate purchase price of $2.0 million. On March 27, 2024, we entered into an Amended and Restated Securities Purchase Agreement with the investor pursuant to which we amended and restated the original agreement and the investor agreed to purchase 600 shares of our Series A-1 Preferred Stock for an aggregate purchase price of $6.0 million, of which $0.2 million was received during the three months ended March 31, 2024, and $2.0 million has been received subsequent to March 31, 2024. The remainder is expected to be received in the second quarter of 2024. The shares of Series A Preferred Stock are convertible into a total of 500,000 shares of our common stock at the election of the holder, and the shares of Series A-1 Preferred Stock will be convertible into a total of 600,000 shares of the Company’s common stock. The Series A Preferred Stock is and the Series A-1 Preferred Stock will be subject to a call right providing us the right to call the stock if the volume weighted average price of the common stock for the 20 days prior to delivery of the call notice is greater than $5.00 per share and there is an effective resale registration statement on file covering the underlying common stock. The Series A Preferred Stock is and the Series A-1 Preferred Stock will be non-voting, has or will have no mandatory redemption, and carries or will carry an annual 5% cumulative dividend, increasing by 2% each year, and the dividend on the Series A-1 Preferred Stock is capped at 15% per annum.

Current wording

On February 14, 2024, we entered into a securities purchase agreement with an investor pursuant to which the investor purchased 500 shares of our Series A Preferred Stock for an aggregate purchase price of $2.0 million. On March 27, 2024, we entered into an Amended and Restated Securities Purchase Agreement with the investor pursuant to which we amended and restated the original agreement and the investor agreed to purchase 600 shares of our Series A-1 Preferred Stock for an aggregate purchase price of $6.0 million, of which $3.0 million has been received through June 30, 2024. The remainder is expected to be received in the third quarter of 2024.

Previous wording

Based on cash on hand as of the date of this Report, as well as our history of operating losses and negative cash flows from operation combined with our anticipated use of cash, we have concluded that we do not have sufficient cash to fund our operations for 12 months from the issuance date of our unaudited consolidated financial statements, and as a result, under the applicable accounting standards and disclosure rules, there is substantial doubt about our ability to continue as a going concern. In making this determination, applicable accounting standards prohibited us from considering the potential mitigating effect of plans that have not been fully implemented as of the date of our unaudited consolidated financial statements, including without limitation plans to raise additional capital.

Current wording

Based on cash on hand as of the date of this Report, as well as our Loan Agreement, we have concluded that we have sufficient cash to fund our operations for at least the next 12 months from the issuance date of our unaudited consolidated financial statements.

Previous wording

Interest expense, net consists primarily of interest on our convertible promissory notes, partially offset by interest earned on bank deposits. (See “—Sources of Liquidity” below).

Current wording

Interest income (expense), net consists primarily of interest on our convertible promissory notes, partially offset by interest earned on bank deposits. (See “—Sources of Liquidity” below).

Previous wording

U.S. accounting standards provide entities with an option to measure many financial instruments and certain other items at fair value. As a result of us electing this option, we recorded all convertible promissory notes at fair value with changes in fair value reported in our statements of operations at each balance sheet date through the settlement of the convertible promissory notes in connection with the Closing, at which time the convertible promissory notes were converted into our common stock.

Current wording

U.S. accounting standards provide entities with an option to measure many financial instruments and certain other items at fair value. As a result of us electing this option, we recorded all convertible promissory notes at fair value with changes in fair value reported in our statements of operations at each balance sheet date through the settlement of the convertible promissory notes in connection with the Closing, at which time the convertible promissory notes were converted into our common stock and consolidated statements of cash flows.

Previous wording

General and administrative expenses for the three months ended March 31, 2024 were $8.7 million compared to $1.0 million for the three months ended March 31, 2023. The increase was primarily attributable to a non-cash stock-based compensation expense of $6.3 million recognized when the liquidity event condition contained in certain stock-based awards (the “Liquidity Condition”) was satisfied upon the Closing.

Current wording

Research and development expenses for the three months ended June 30, 2024 were $4.1 million, compared to $1.0 million for the three months ended June 30, 2023. The increase was primarily attributable to restricted stock compensation expense of $1.5 million related to the RSUs granted to Dr. Saadi and a non-cash stock-based compensation expense of $1.5 million recognized from certain stock-based awards that continue to vest through satisfaction of service conditions subsequent to the satisfaction of the liquidity condition upon the Closing.

Previous wording

We recognized $0.2 million and $0.3 million in interest expense for the three months ended March 31, 2024 and 2023, respectively, which was attributable primarily to the outstanding principal balance associated with our convertible promissory notes which converted into common stock in connection with the Closing.

Current wording

We recognized $0.2 million and $0.6 million in interest expense for the six months ended June 30, 2024 and 2023, respectively, which was attributable primarily to the outstanding principal balance associated with our convertible promissory notes that converted into common stock in connection with the Closing.

Previous wording

Merger transaction costs in excess of cash received from the Merger of $7.5 million were recognized as period expenses for the three months ended March 31, 2024.

Current wording

Merger transaction costs in excess of cash received from the Merger of $7.5 million were recognized as period expenses for the six months ended June 30, 2024.

Previous wording

We recognized a non-cash gain of $48.5 million and a non-cash loss of $28.1 million for the change in fair value of the convertible promissory notes for the three months ended March 31, 2024 and 2023, respectively. The change was primarily a result of the increase in the underlying estimated fair value of the Company’s common stock during the three months ended March 31, 2023 compared to a decrease in the underlying estimated fair value of the Company’s common stock from January 1, 2024 to the settlement of the convertible promissory notes upon the Closing.

Current wording

We recognized a non-cash gain of $48.5 million and a non-cash loss of $47.8 million for the change in fair value of the convertible promissory notes for the six months ended June 30, 2024 and 2023, respectively. The change was primarily a result of the increase in the underlying estimated fair value of our common stock during the six months ended June 30, 2023 compared to a decrease in the underlying estimated fair value of our common stock from January 1, 2024 to the settlement of the convertible promissory notes upon the Closing.

Previous wording

As of March 31, 2024, we had $1.3 million in cash and an accumulated deficit of $88.4 million compared to $1.1 million in cash and an accumulated deficit of $99.7 million as of December 31, 2023. To date, we have not yet commercialized any products or generated any revenue from product sales and have financed our operations primarily with proceeds from the sale of convertible promissory notes and research tax credits. Since January 2021, we have raised aggregate gross proceeds of $24.0 million from the sale of convertible promissory notes, $2.0 million from the sale of our Series A Preferred Stock, and $1.2 million from the sale of our Series A-1 Preferred Stock.

Current wording

As of June 30, 2024, we had $1.1 million in cash and an accumulated deficit of $98.1 million compared to $1.1 million in cash and an accumulated deficit of $99.7 million as of December 31, 2023. To date, we have not yet commercialized any products or generated any revenue from product sales and have financed our operations primarily with proceeds from the sale of convertible promissory notes and research tax credits. Since January 2021, we have raised aggregate gross proceeds of $24.0 million from the sale of convertible promissory notes, $2.0 million from the sale of our Series A Preferred Stock, and $3.0 million from deposits related to the future sale of our Series A-1 Preferred Stock. In June 2024, we entered into the Loan Agreement, which provided up to $36.0 million of term loans that can be drawn in $1.0 million increments each month over thirty-six months, as described below.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:

Previous wording

During the three months ended March 31, 2024, we used $2.2 million of net cash in operating activities. Cash used in operating activities reflected our net income of $11.3 million offset by $13.9 million of non-cash charges related to the change in the fair value of the convertible promissory notes, stock-based compensation expense, depreciation expense, reductions in the operating right of use (“ROU”) assets, non-cash interest on the convertible promissory notes, offset by a $0.5 million net change in our operating assets and liabilities attributable to the timing of our payments to our vendors for research and development activities.

Current wording

During the six months ended June 30, 2024, we used $5.1 million of net cash in operating activities. Cash used in operating activities reflected our net income of $1.6 million and $1.9 million net change in our operating assets and liabilities attributable to the timing of our payments to our vendors for research and development activities, offset by $8.6 million of non-cash charges related to the change in the fair value of the convertible promissory notes, stock-based compensation expense, Merger transaction costs, loss on the issuance of Series A Preferred Stock, loss on issuance of the Commitment Shares, depreciation expense, reductions in the operating right of use (“ROU”) assets, and non-cash interest on the convertible promissory notes.

Previous wording

During the three months ended March 31, 2023, we used $2.2 million of net cash in operating activities. Cash used in operating activities reflected our net loss of $30.8 million offset by $28.5 million of non-cash charges related to the change in the fair value of the convertible promissory notes, depreciation expense, reductions in the operating ROU assets, and a $0.1 million net change in our operating assets and liabilities attributable to the timing of our payments to our vendors for research and development activities.

Current wording

During the six months ended June 30, 2023, we used $4.4 million of net cash in operating activities. Cash used in operating activities reflected our net loss of $52.9 million offset by $48.6 million of non-cash charges related to the change in the fair value of the convertible promissory notes, depreciation expense, and reductions in the operating ROU assets, offset by a $0.1 million net change in our operating assets and liabilities attributable to the timing of our payments to our vendors for research and development activities.

Previous wording

During the three months ended March 31, 2023, the Company purchased $0.1 million of property and equipment.

Current wording

During the six months ended June 30, 2023, we purchased $0.1 million of property and equipment. There was no investing activities during the six months ended June 30, 2024.

Previous wording

During the three months ended March 31, 2024, we received $2.4 million of net cash from financing activities attributable to proceeds from the issuance of $2.0 million Series A Preferred Stock, $0.2 million of non-refundable prepaid proceeds towards the anticipated issuance of Series A-1 Preferred Stock and $0.2 million of cash in connection with the Merger.

Current wording

During the six months ended June 30, 2024, we received $5.2 million of net cash from financing activities attributable to proceeds from the issuance of $2.0 million Series A Preferred Stock, $3.0 million of non-refundable prepaid proceeds towards the anticipated issuance of Series A-1 Preferred Stock and $0.2 million of cash in connection with the Merger.

Previous wording

During the three months ended March 31, 2023, we received $2.5 million of net cash from financing activities attributable to the proceeds from the convertible promissory notes.

Current wording

During the six months ended June 30, 2023, we received $2.5 million of net cash from financing activities attributable to the proceeds from the convertible promissory notes.

Previous wording

Our primary sources of funds to meet our near-term liquidity and capital requirements include cash on hand, including the funding we have received from the sale of our Series A Preferred Stock and the funding we expect to receive from the sale of our Series A-1 Preferred Stock. On February 14, 2024, we entered into a securities purchase agreement with an investor pursuant to which an investor agreed to purchase shares of our Series A Preferred Stock for an aggregate purchase price of $8.0 million. On March 27, 2024, we entered into an agreement pursuant to which that amount was reduced to $2.0 million and the investor agreed to purchase shares of our Series A-1 Preferred Stock for an aggregate purchase price of $6.0 million. We have not yet received $4.8 million of the $6.0 million purchase price for the Series A-1 Preferred Stock. Even if we receive such proceeds, we will still need additional capital to fully implement our business, operating, and development plans.

Current wording

Our primary sources of funds to meet our near-term liquidity and capital requirements include cash on hand, including the funding we have received from the sale of our Series A Preferred Stock and the funding we expect to receive from the sale of our Series A-1 Preferred Stock, and our access to an unsecured line of credit (limited to a $1.0 million monthly draw) under the Loan Agreement described below. On February 14, 2024, we entered into a securities purchase agreement with an investor pursuant to which an investor agreed to purchase shares of our Series A Preferred Stock for an aggregate purchase price of $8.0 million. On March 27, 2024, we entered into an agreement pursuant to which that amount was reduced to $2.0 million and the investor agreed to purchase shares of our Series A-1 Preferred Stock for an aggregate purchase price of $6.0 million. We have not yet received $3.0 million of the $6.0 million purchase price for the Series A-1 Preferred Stock. Even if we receive such proceeds, we will still need additional capital to fully implement our business, operating, and development plans.

Previous wording

On May 10, 2024, we entered into a binding term sheet (the “Financing Term Sheet”) with a lender pursuant to which the lender agreed to provide to the Company up to $36.0 million (the “Maximum Loan Amount”) under an unsecured line of credit (the “Facility”). The lender is also the investor in our Series A and Series A-1 Preferred Stock. The Facility would permit us to borrow up to $1.0 million monthly in a single monthly draw over a period of up to three years. Draws would accrue interest at a fixed annual rate of the lower of (i) daily SOFR plus 2.00%, measured on the date we receive the draw (the “Deposit Date”), and (ii) 7.00%, payable quarterly. Interest would be payable in shares of our common stock priced at $1.50 per share, and each draw would mature 48 months after the Deposit Date. Prepayment would be permitted without penalty, and we would be permitted to repay or prepay any amount of outstanding principal balance at our election in cash or in shares of common stock priced at the greater of $1.50 per share and the closing price of the common stock on the day immediately preceding such payment, provided that there is an effective resale registration statement with respect to such shares. Pursuant to the Financing Term Sheet, we would also agree to provide the lender an option to purchase $14.0 million of shares of our common stock plus an additional amount up to the total then-remaining available and undrawn portion of the Maximum Loan Amount (which amount would cease to be available under the Facility). The Optional PIPE would be priced at a 30% discount to the 10-day trailing volume weighted average price of our common stock on the date such volume weighted average price first reaches at least $10.00 per share. We anticipate that we will enter into a definitive agreement for the financing provided by the Financing Term Sheet during the quarter ending June 30, 2024, but we have not yet entered into such an agreement and there is no assurance as to the timing of closing or the amount of proceeds we will ultimately receive.

Current wording

On June 6, 2024, we entered into the Loan Agreement, pursuant to which the Lender agreed to provide to the Company up to the Maximum Loan Amount of $36.0 million under the Facility. The Lender is also the investor in our Series A and Series A-1 Preferred Stock. The Facility permits us to borrow up to $1.0 million monthly in a single monthly draw over a period of up to three years. Draws will accrue interest at a fixed annual rate of the lower of (i) the daily secured overnight financing rate, measured on the date we receive the draw (the “Deposit Date”), plus 2.00% and (ii) 7.00%, accruing quarterly beginning on the Deposit Date and payable quarterly beginning on the three-month anniversary of the Deposit Date. Interest will be payable in shares of Common Stock with an effective purchase price of $1.50 per share, and each draw will mature 48 months after the Deposit Date. Prepayment will be permitted without penalty. The Company may repay or prepay any amount of outstanding principal balance under the Facility at the Company’s election in cash or in shares of Common Stock with an effective purchase price of the greater of $1.50 per share and the 10-day trailing volume weighted average price of the Common Stock (the “Trailing VWAP”) as of the trading day prior to payment, subject to certain requirements related to resale registration. Pursuant to the Loan Agreement, we also agreed to provide the Lender an option to purchase $14.0 million of shares of our Common Stock plus an additional amount up to the total then-remaining available and undrawn portion of the Maximum Loan Amount (which amount would thereafter no longer be available under the Facility). The Optional PIPE would be priced at a 30% discount to the Trailing VWAP on the date such price first reaches at least $10.00 per share (the “Threshold Price Date”) and will be exercisable by the Lender by written notice within three business days after the Company has notified the Lender of the Threshold Price Date (the date of such notice, the “Threshold Price Notice Date”). Pursuant to the terms of the Loan Agreement, we issued to the Lender the Commitment Shares, subject to forfeiture by the Lender of the Commitment Shares or an equal number of shares of Common Stock in the event the Lender fails to (i) make a deposit under the Facility when due or (ii) pay the purchase price for the Optional PIPE within 30 days after the Threshold Price Notice Date in the event the Company has satisfied all applicable closing conditions. There is no assurance as to the amount of proceeds we will ultimately receive under the Loan Agreement. Subsequent to June 30, 2024, the Company drew $1.0 million from the Facility, and $33.5 million remains available to borrow under the Facility for future draws.

Previous wording

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, the fair value of our common stock, the fair value of our convertible promissory notes, and stock-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, including those factors set out in the “Risk Factors” section of our Annual Report. See also the section entitled “–Forward-Looking Statements” above.

Current wording

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of the financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, the fair value of our common stock, the fair value of our convertible promissory notes, and stock-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, including those factors set out in the “Risk Factors” section of our Annual Report. See also the section entitled “–Forward-Looking Statements” above.

Previous wording

Our recurring fair value measurements primarily consist of the convertible promissory notes prior to the Merger, for which we elected the fair value option. As a result of our electing this option, we recorded our convertible promissory notes at fair value.

Current wording

Our recurring fair value measurements primarily consist of the convertible promissory notes prior to the Merger, for which we elected the fair value option, the freestanding $14 million purchase option under the Loan Agreement, and the bifurcated $36 million purchase option that is embedded within the loan commitment under the Loan Agreement.