Tevogen Bio Holdings Inc

Previous wording

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

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Previous wording

Forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account information currently available to us and are not guarantees of future results. A number of important factors could cause actual results to differ materially from the results anticipated by these forward-looking statements, including the following risks and uncertainties, among others:

Current wording

Forward-looking statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account information currently available to us and are not guarantees of future results. A number of important factors could cause actual results to differ materially from the results anticipated by these forward-looking statements, including without limitation risks and uncertainties related to:

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 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.

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 therapeutics for the treatment of infectious diseases and cancers 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, 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.

Current wording

We believe our allogeneic, precision T cell technology, ExacTcell TM, 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

ExacTcell therapies are based on carefully selected, naturally occurring CTLs that recognize targets of interest from the body’s native T cell receptor pool, unlike genetically engineered T cell therapies. CD8+ CTLs in ExacTcell-based products target multiple and distinct antigens, with the aim to circumvent the impact of mutations in viruses and cancer cells that can render existing treatments ineffective. ExacTcell is designed to maximize the immunologic specificity of our products in order to eliminate malignant and virally infected cells while allowing healthy cells to remain intact. We believe this high degree of specificity has the potential to significantly reduce the chances of cross-reactivity or adverse impact on healthy cells. Our confidence in ExacTcell is reflected in our development pipeline, which has been carefully tailored to address the unmet needs of large patient populations grappling with life-threatening viral diseases, both viral and non-viral induced cancers, and neurological disorders such as multiple sclerosis.

Current wording

ExacTcell therapies are based on carefully selected, naturally occurring CTLs that recognize targets of interest from the body’s native T cell receptor pool, unlike genetically engineered T cell therapies. CD8+ CTLs in ExacTcell-based products target multiple and distinct antigens, with the aim to circumvent the impact of mutations in viruses and cancer cells that can render existing treatments ineffective. ExacTcell is designed to maximize the immunologic specificity of our products in order to eliminate malignant and virally infected cells while allowing healthy cells to remain intact. We believe this high degree of specificity has the potential to significantly reduce the chances of cross-reactivity or adverse impact on healthy cells. Our confidence in ExacTcell is reflected in our development pipeline, which has been carefully tailored to address the unmet needs of large patient populations grappling with life-threatening viral diseases, both viral and non-viral induced cancers, and neurological disorders such as multiple sclerosis. Through our Tevogen.AI artificial intelligence initiative, we are exploring ways to deploy artificial intelligence-powered target detection to further accelerate our product development pace, either internally or in collaboration with leading entities in the field of artificial intelligence, such as through our recently announced enrollment in the Microsoft for Startups program.

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. 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.

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 pre-clinical development for treatment and prevention of Long COVID, and we have other product candidates in our pipeline for other indications.

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. generally accepted accounting principles (“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 GAAP because the Company was determined to be the accounting acquirer.

Previous 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.

Current wording

To date, we have not generated any revenue. Our net loss for the three months ended September 30, 2024 and 2023 was $5.9 million and $3.9 million, respectively. Net loss for the three months ended September 30, 2024 was primarily attributable to a $6.1 million loss from operations. Our net loss for the nine months ended September 30, 2024 and 2023 was $4.3 million and $56.8 million, respectively. Net loss for the nine months ended September 30, 2024 was primarily attributable to a loss from operations of $44.2 million that primarily resulted from non-cash, stock-based compensation expense recognized with the liquidity event condition contained in certain stock awards was satisfied upon the closing of the Business Combination as well as $7.5 million in transaction costs in connection with the Business Combination, partially offset by the change in fair value of convertible promissory notes of $48.5 million. As of September 30, 2024, we had cash of $2.3 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 $3.0 million has been received through June 30, 2024. The remainder is expected to be received in the third quarter of 2024.

Current wording

On February 14, 2024, we entered into a securities purchase agreement with The Patel Family, LLP (the “Patel Family”) pursuant to which the Patel Family 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 Patel Family pursuant to which we amended and restated the original agreement and the Patel Family 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 November 19, 2024. On August 21, 2024, we entered into a securities purchase agreement with the Patel Family, pursuant to which the investor purchased 600 shares of our Series C Preferred Stock for an aggregate purchase price of $6.0 million.

Previous wording

As described in more detail in “Liquidity and Capital Resources – Funding Requirements” below, on June 6, 2024, we entered into a Loan Agreement with The Patel Family, LLP (the “Lender”) providing for (i) an unsecured line of credit facility (the “Facility”), pursuant to which the Lender agreed to lend us up to $36.0 million (the “Maximum Loan Amount”) of term loans in $1.0 million increments on a monthly basis, over a draw period of thirty-six months, and (ii) a contingent option for the Lender to purchase at least $14.0 million of Common Stock in a future private placement (the “Optional PIPE”). The Loan Agreement also contains a contingent option for the lender to purchase at least $14.0 million of our Common Stock plus up to the then-remaining available amount under the Facility, in a future private placement if the ten-day trailing volume weighted average price per share of the Common Stock (the “Trailing VWAP”) reaches $10.00 per share. Pursuant to the terms of the Loan Agreement, the Company also issued to the Lender 1,000,000 shares of Common Stock as a commitment fee (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 (as defined in the Loan Agreement) in the event the Company has satisfied all applicable closing conditions.

Current wording

As described in more detail in “Liquidity and Capital Resources - Funding Requirements” below, on June 6, 2024, we entered into a Loan Agreement (the “Loan Agreement”) with the Patel Family providing for (i) an unsecured line of credit facility (the “Facility”), pursuant to which the Patel Family agreed to lend us up to an initial amount of $36.0 million (the “Maximum Loan Amount”) of term loans in $1.0 million increments on a monthly basis, over a draw period of thirty-six months, and (ii) a contingent option for the Patel Family to purchase at least $14.0 million of our common stock, par value $0.0001 per share (the “Common Stock”), in a future private placement (the “Optional PIPE”). The Loan Agreement also contains a contingent option for the Patel Family to purchase at least $14.0 million of our Common Stock plus up to the then-remaining available amount under the Facility, in a future private placement if the ten-day trailing volume weighted average price per share of the Common Stock (the “Trailing VWAP”) reaches $10.00 per share. Pursuant to the terms of the Loan Agreement, the Company also issued to the Patel Family 1,000,000 shares of Common Stock as a commitment fee (the “Commitment Shares”), subject to forfeiture by the Patel Family of the Commitment Shares or an equal number of shares of Common Stock in the event the Patel Family 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 (as defined in the Loan Agreement) in the event the Company has satisfied all applicable closing conditions.

Previous 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.

Current wording

Based on cash on hand as of the date of this Report, the $2.0 million received from the sale of Series C Preferred Stock in October 2024, 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

We do not expect to generate product revenue unless and until we obtain marketing approval for and successfully commercialize TVGN 489 or another product candidate, and we cannot assure you that we will ever generate significant revenue or profits. We expect to incur significant expenses related to expanding our research and development capability, building our manufacturing infrastructure including through acquisitions, and developing our commercialization organization, including reimbursement, marketing, managed market, and distribution functions, and training and deploying a specialty medical science liaison team.

Current wording

We do not expect to generate product revenue unless and until we obtain marketing approval or other authorization for and successfully commercialize TVGN 489 or another product candidate. We expect to incur expenses related to expanding our research and development capability, building our manufacturing infrastructure including through acquisitions, and developing our commercialization organization, including reimbursement, marketing, managed market, and distribution functions, and training and deploying a specialty medical science liaison team.

Previous wording

To date, we have not generated any revenue, and we do not expect to generate any revenue from the sale of products unless and until we obtain marketing approval for and commercialize TVGN 489 or another product candidate.

Current wording

To date, we have not generated any revenue, and we do not expect to generate any revenue from the sale of products unless and until we obtain marketing approval or other authorization for and commercialize TVGN 489 or another product candidate.

Previous wording

Research and development expenses consist primarily of costs incurred for our research activities, including staffing, discovery efforts, preclinical studies, and clinical development of TVGN 489, and preclinical studies of other product candidates, and include:

Current wording

Research and development expenses consist primarily of costs incurred for our research activities, including staffing, discovery efforts, pre-clinical studies, and clinical development of TVGN 489, and pre-clinical studies of other product candidates, and include:

Previous wording

Research and development activities are central to the biotechnology business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased study sizes, which also leads generally to longer patient enrollment times in later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase manufacturing, shipping, and storage of clinical batches required for clinical trials, personnel costs, including stock-based compensation, conduct planned clinical trials for TVGN 489 and other clinical and pre-clinical activities for other product candidates, and prepare regulatory filings for any of our product candidates.

Current wording

Research and development activities are central to the biotechnology business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased study sizes, which also leads generally to longer patient enrollment times in later-stage clinical trials. We expect our research and development expenses to increase over the next several years as we increase manufacturing, shipping, and storage of clinical batches required for clinical trials, personnel costs, including stock-based compensation, conduct planned clinical trials for TVGN 489 and other clinical and pre-clinical activities for other product candidates, and prepare regulatory filings for any of our product candidates.

Previous wording

A change in the outcome of any of these variables concerning the development, manufacturing, or commercialization activities of a product candidate could result in a significant change in the costs and timing associated with the development of that product candidate. For example, if we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive, if there are safety concerns or if we determine that the observed safety or efficacy profile would not be competitive in the marketplace, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years, and we expect to spend a significant amount in development costs.

Current wording

A change in the outcome of any of these variables concerning the development, manufacturing, or commercialization activities of a product candidate could result in a change in the costs and timing associated with the development of that product candidate. For example, if we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive, if there are safety concerns or if we determine that the observed safety or efficacy profile would not be competitive in the marketplace, we could be required to expend significant additional financial resources and time on the completion of clinical development. We anticipate that product commercialization may take several years, and we expect to spend a significant amount in development costs.

Previous 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).

Current wording

Interest expense, net consists primarily of interest on our convertible promissory notes and loan agreement, 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 and consolidated statements of cash flows.

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.

Previous wording

Equity-linked purchase options issued in connection with our debt agreements are assessed to determine whether they are freestanding or embedded with the host instrument under ASC 815. Our embedded and freestanding purchase options were determined to be liability-classified derivative instruments and are measured at fair value both on the date of issuance and at each subsequent balance sheet date, with changes in fair value recorded to “Change in fair value of written call option derivative liabilities” within the consolidated statements of operations.

Current wording

Equity-linked purchase options issued in connection with our debt agreements are assessed to determine whether they are freestanding or embedded with the host instrument under ASC 815. Our embedded and freestanding purchase options were determined to be liability-classified derivative instruments and are measured at fair value both on the date of issuance and at each subsequent balance sheet date, with changes in fair value recorded to “Change in fair value of written call option derivative liabilities” within the consolidated statements of operations and consolidated statements of cash flows.

Previous wording

Our other expenses consist of losses on the issuance of the Commitment Shares during the three months ended June 30, 2024 associated with the Loan Agreement. Since we intend to elect the fair value option for future draws under the Loan Agreement, we expense all issuance costs associated with the Loan Agreement, which are comprised of the fair value of the Commitment Shares as well as the issuance date fair value of the $14.0 million Purchase Option and Additional Amount Purchase Option. For more information about the Loan Agreement, see “—Liquidity and Capital Resources—Funding Requirements” below.

Current wording

Our other expenses consist of losses on the issuance of the Commitment Shares during the nine months ended September 30, 2024 associated with the Loan Agreement. Since we intend to elect the fair value option for future draws under the Loan Agreement, we expense all issuance costs associated with the Loan Agreement, which are comprised of the fair value of the Commitment Shares as well as the issuance date fair value of the $14 million Purchase Option and Additional Amount Purchase Option. For more information about the Loan Agreement, see “—Liquidity and Capital Resources—Funding Requirements” below.

Previous wording

General and administrative expenses for the three months ended June 30, 2024 were $4.5 million compared to $1.2 million for the three months ended June 30, 2023. The increase was primarily attributable to increased legal and professional fees of $2.0 million, primarily attributable to additional services incurred as a result of with the Merger, restricted stock compensation expense of $0.7 million related to the RSUs granted to Dr. Saadi, and a non-cash stock-based compensation expense of $0.4 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.

Current wording

General and administrative expenses for the three months ended September 30, 2024 were $2.8 million compared to $1.2 million for the three months ended September 30, 2023. The $0.5 million increase in legal and professional fees was primarily attributable to additional services incurred as a result of the Merger. The $1.1 million in stock-based compensation was due to stock compensation expense related to the RSUs granted to Dr. Saadi.

Previous wording

We recognized $0.3 million in interest expense for the three months ended June 30, 2023. Interest expense for the three months ended June 30, 2023 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 $0.0 million and $0.3 million in interest expense for the three months ended September 30, 2024 and 2023, respectively. Interest expense for the three months ended September 30, 2023 was attributable primarily to the outstanding principal balance associated with our convertible promissory notes which converted into Common Stock in connection with the Closing.

Previous wording

We recognized a non-cash charge of $19.7 million for the change in fair value of the convertible promissory notes for the three months ended June 30, 2023. The change in fair value of the convertible promissory notes was primarily a result of the increase in the underlying estimated fair value of our common stock during the three months ended June 30, 2023. The convertible promissory notes were converted into shares of common stock in connection with the Closing.

Current wording

We recognized a non-cash charge of $1.3 million for the change in fair value of the convertible promissory notes for the three months ended September 30, 2023. The change in fair value of the convertible promissory notes was primarily a result of the increase in the underlying estimated fair value of our Common Stock during the three months ended September 30, 2023. The convertible promissory notes were converted into shares of Common Stock in connection with the Closing.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023:

Previous wording

We do not track our internal research and development costs on a program-by-program basis. The following table summarizes our research and development expenses for the six months ended June 30, 2024 and 2023:

Current wording

We do not track our internal research and development costs on a program-by-program basis. The following table summarizes our research and development expenses for the nine months ended September 30, 2024 and 2023:

Previous wording

Research and development expenses for the six months ended June 30, 2024 were $24.9 million, compared to $2.4 million for the six months ended June 30, 2023. The increase was primarily attributable to a non-cash stock-based compensation expense of $20.5 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 and restricted stock compensation expense of $2.3 million related to the RSUs granted to Dr. Saadi.

Current wording

Research and development expenses for the nine months ended September 30, 2024 were $28.2 million, compared to $3.5 million for the nine months ended September 30, 2023. The increase was primarily attributable to an increase in stock-based compensation due to a non-cash stock-based compensation expense of $20.5 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

General and administrative expenses for the six months ended June 30, 2024 were $13.2 million compared to $2.1 million for the six months ended June 30, 2023. The increase was primarily attributable to stock-based compensation expense of $7.7 million, of which $6.7 million was recognized as a non-cash stock-based compensation expense 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, and $1.0 million was recognized as restricted stock compensation expense related to the RSUs granted to Dr. Saadi. The increase of $1.2 million in personnel costs was primarily attributable to an increase in headcount and an increase in premium for the Company’s director and officer insurance policy, and $0.8 million was recognized as a loss from the issuance of Series A Preferred Stock. The increase of $2.2 million in legal and professional fees was primarily attributable to the additional services incurred as a result of the Merger.

Current wording

General and administrative expenses for the nine months ended September 30, 2024 were $16.0 million compared to $3.3 million for the nine months ended September 30, 2023. The increase was primarily attributable to stock-based compensation expense of $8.9 million, of which $6.7 million was recognized as a non-cash stock-based compensation expense 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, and $2.2 million was recognized as restricted stock compensation expense related to the RSUs granted. The increase of $1.2 million in personnel costs was primarily attributable to an increase in headcount and an increase in premium for the Company’s director and officer insurance policy, and $0.8 million was recognized as a loss from the issuance of Series A Preferred Stock. The increase of $2.7 million in legal and professional fees was primarily attributable to the additional services incurred as a result of the Merger.

Previous 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.

Current wording

We recognized $0.2 million and $0.9 million in interest expense for the nine months ended September 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 six months ended June 30, 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 nine months ended September 30, 2024.

Previous 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.

Current wording

We recognized a non-cash gain of $48.5 million and a non-cash loss of $49.1 million for the change in fair value of the convertible promissory notes for the nine months ended September 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 nine months ended September 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

We incurred losses on the issuance of Commitment Shares during the six months ended June 30, 2024, associated with the Loan Agreement.

Current wording

We incurred losses on the issuance of Commitment Shares during the nine months ended September 30, 2024, associated with the Loan Agreement.

Previous 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.

Current wording

As of September 30, 2024, we had $2.3 million in cash, as compared to $1.1 million in cash 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 preferred stock, funds drawn on the Loan Agreement, 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, $3.0 million from deposits related to the future sale of our Series A-1 Preferred Stock, and $6.0 million from the sale of our Series C 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. As of September 30, 2024, we have drawn an aggregate of $1.0 million under the Loan Agreement.

Previous wording

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

Current wording

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

Previous 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.

Current wording

During the nine months ended September 30, 2024, we used $9.0 million of net cash in operating activities. Cash used in operating activities reflected $9.7 million of net loss, 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, partially offset by a $0.7 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 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.

Current wording

During the nine months ended September 30, 2023, we used $6.2 million of net cash in operating activities. Cash used in operating activities reflected our net loss of $56.9 million offset by $49.1 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 $0.4 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 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.

Current wording

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

Previous 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.

Current wording

During the nine months ended September 30, 2024, we received $10.2 million of net cash from financing activities attributable to $2.0 million in proceeds from the sale of Series A Preferred Stock, $4.0 million in proceeds from the sale of Series C Preferred Stock, $3.0 million of non-refundable prepaid proceeds towards the anticipated issuance of Series A-1 Preferred Stock, $1.0 million drawn under the Loan Agreement, and $0.2 million of cash in connection with the Merger.

Previous 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.

Current wording

During the nine months ended September 30, 2023, we received $3.7 million of net cash from financing activities attributable to the proceeds from the convertible promissory notes, partially offset by $0.2 million in payment of deferred transaction costs.

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, 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.

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 and Series C 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 the 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. On August 21, 2024, we entered into a securities purchase agreement with an investor pursuant to which the investor agreed to purchase shares of our Series C Preferred Stock for an aggregate purchase price of $6.0 million.

Previous 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.

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, Series A-1, and Series C 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. As of September 30, 2024, we have drawn an aggregate of $1.0 million under the Loan Agreement