Item 7. Management’s Discussion and Analysis
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial
statements and the related notes included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis
or set forth elsewhere in this Annual Report, including information with respect to our plans, objectives, expectations, projections,
and strategy for its business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result
of many factors, including those factors set out in the “Risk Factors” section of this Annual Report, our actual results
could differ materially from the results described in or implied by these forward-looking statements. See also the section titled “Cautionary
Note Regarding Forward-Looking Statements” in this Annual Report.
Unless
otherwise indicated or as the context requires, the historical financial information included or discussed in this Management’s
Discussion and Analysis of Financial Condition and Results of Operations is that of Semper Paratus Acquisition Corporation prior to the
Business Combination because the Business Combination was consummated after the period covered by the financial statements included in
this Annual Report. In addition, accordingly, unless otherwise indicated or the context requires, historical references to the “Company,”
“we,” “us,” and “our” in this section also generally refer to Semper Paratus Acquisition Corporation
prior to the closing of the Business Combination.
Overview
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 and innovative business models. We aspire to be the first biotechnology company offering commercially attractive, economically
viable, and cost-effective personalized T cell therapies.
We
believe our allogeneic, precision T cell technology platform, ExacTcell, 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 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.” 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. 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. 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.
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 Long COVID. TVGN 489 consists of CTLs active
against multiple precise, well defined, and well characterized targets across the SARS-CoV-2 genome. We hope to launch a pivotal trial
of TVGN 489 in COVID-19 patients with B cell malignancies in as soon as late 2024, with studies of other highly vulnerable populations
thereafter. TVGN 489 is also in preclinical development for treatment and prevention of Long COVID.
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To
date, we have not generated any revenue. As a result, we have never been profitable and have incurred net losses since the commencement
of our operations. 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 acquisition, and our commercialization organization, including reimbursement, marketing, managed market, distribution
functions, and training, and deploying a specialty medical science liaison team.
Semper
Paratus Acquisition Corporation
We
were incorporated as a Cayman Islands exempted company on April 21, 2021. We were formed for the purpose of entering into a merger, share
exchange, asset acquisition, stock purchase, reorganization or other similar business transaction with one or more businesses (an “Initial
Business Combination”).
On
November 8, 2021, we consummated the initial public offering (the “IPO”) of 30,000,000 units (“Units”) with respect
to the ordinary shares included in the Units being offered (the “Public Shares”) at $10.00 per Unit generating gross proceeds
of $300,000,000. Simultaneously with the closing of the IPO, we consummated the sale of 1,360,000 private placement units (“Private
Placement Units”) at a price of $10.00 per Private Placement Unit in a private placement to our sponsor, Semper Paratus Sponsor
LLC (the “Original Sponsor”) and underwriter Cantor Fitzgerald & Co. (“Cantor”), generating gross proceeds
of $13,600,000. Simultaneously with the closing of the IPO, we consummated the closing of the sale of 4,500,000 additional Units upon
receiving notice of the underwriter’s election to fully exercise its overallotment option (“Overallotment Units”),
generating additional gross proceeds of $45,000,000, and the private placement of an additional 90,000 Private Placement Units to the
Original Sponsor, generating gross proceeds of $900,000. Following the closing of the IPO, $351,900,000 from the net proceeds of the
sale of the Units in the IPO and the Private Placement Units was placed in a trust account (the “Trust Account”) for investment
in U.S. government securities with a maturity of 180 days or less or in any open-ended investment company that holds itself as a money
market fund until the earlier of the completion of an Initial Business Combination and the distribution of the Trust Account.
On
May 4, 2023, we entered into a purchase agreement (the “Purchase Agreement”) with the Sponsor and the Original Sponsor, pursuant
to which the Sponsor purchased from the Original Sponsor (x) 7,988,889 Class A ordinary shares and (y) 1,000,000 Private Placement Units,
each consisting of one Class A ordinary share and one-half of one redeemable warrant that is exercisable for one Class A ordinary share,
free and clear of all liens and encumbrances (other than those contained in the Letter Agreement, dated November 3, 2021, that we entered
into with our officers, directors and the Original Sponsor, and the Underwriting Agreement, dated November 3, 2021, that we entered into
with Cantor as representative of the several underwriters (the “Underwriting Agreement”)), for an aggregate purchase price
of $1.00 (the “Purchase Price”) payable at the time of the Initial Business Combination. The transactions contemplated by
the Purchase Agreement closed June 7, 2023, and the Original Sponsor transferred the Private Placement Units and the Class A ordinary
shares to the Sponsor.
Prior
to the Business Combination (defined below), our management had broad discretion with respect to the specific application of the net
proceeds of its IPO and the sale of Private Placement Warrants, although substantially all of the net proceeds were intended to be applied
generally toward consummating a business combination.
Charter
Amendments and Share Redemptions
On
February 3, 2023, our shareholders approved an amendment (the “First Extension Charter Amendment”) to our Amended and Restated
Memorandum and Articles of Association to extend the date by which we were required to consummate an Initial Business Combination from
February 8, 2023, to December 15, 2023. Under Cayman Islands law, the First Extension Charter Amendment took effect upon approval by
the shareholders. In connection with the meeting, shareholders holding approximately 32,116,947 Public Shares exercised their right to
redeem their shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $333 million (approximately
$10.38 per Public Share) was removed from the Trust Account to pay such holders.
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On
December 14, 2023, our shareholders approved an amendment (the “Second Extension Charter Amendment”) to our Amended and
Restated Memorandum and Articles of Association to extend the date by which we were required to consummate an Initial Business
Combination to September 15, 2024. Under Cayman Islands law, the Second Extension Charter Amendment took effect upon approval by the
shareholders. In connection with the meeting, shareholders holding approximately 880,873 Public Shares exercised their right to
redeem their shares for a pro rata portion of the funds in the Trust Account. As a result, approximately $9.71 million
(approximately $11.03 per Public Share) was removed from the Trust Account to pay such holders. Approximately $16.7 million remained
in the Trust Account as of December 31, 2023, and we had 1,502,180 public shares outstanding as of December 31, 2023.
On
January 31, 2024, our shareholders approved the proposals relating to the entry into and consummation of the Merger Agreement. In connection
with the Meeting, shareholders holding 1,432,457 Public Shares exercised their right to redeem their shares for a pro rata portion of
the funds in the Trust Account. As a result, approximately $16.0 million (approximately $11.14 per Public Share) was removed from the
Trust Account to pay such holders. Following these redemptions, approximately $0.8 million remained in the Trust Account.
Business
Combination
On
the Closing Date, pursuant to the Merger Agreement, Merger Sub merged with and into Tevogen Bio, with Tevogen Bio being the surviving
company and our wholly owned subsidiary (the “Merger,” and together with the other transactions contemplated by the Merger
Agreement, the “Business Combination”). Prior to the effective time of the Merger (the “Effective Time”), pursuant
to the Merger Agreement, we changed our jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing
and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”). In connection
with the Domestication, we changed our name to “Tevogen Bio Holdings Inc.” Also in connection with the Domestication, our
governing documents were amended and restated.
At
the Effective Time, in accordance with the terms and subject to the conditions of the Merger Agreement, each share of common stock of
Tevogen Bio issued and outstanding immediately prior to the Effective Time was converted into the right to receive the number of shares
of duly authorized, validly issued, fully paid, and nonassessable shares of our common stock, par value $0.0001 per share (the “Common
Stock”), equal to the quotient obtained by dividing (x) the quotient obtained by dividing (i) $1,200,000,000 by (ii) ten dollars
($10.00) by (y) the aggregate number of shares of the common stock of Tevogen Bio that were issued and outstanding immediately prior
to the Effective Time (the “Exchange Ratio”).
Results
of Operations
As
of December 31, 2023, we had not commenced any operations. All activity through December 31, 2023, relates to our formation, the IPO,
the search for an Initial Business Combination, and the consummation of the Business Combination with Tevogen Bio. We did not generate
any operating revenues prior to the completion of the Business Combination. We generated non-operating income in the form of interest
income from the proceeds derived from the IPO placed in the Trust Account.
For
the year ended December 31, 2023, we had a net loss of $67,325, which consisted of unrealized gain on investment held in the Trust
Account of $2,734,426, offset by general and administrative expenses of $2,273,970, change in the fair value of warrants of $21,750, interest expense of $256,031, and impairment of amounts due from related party of $250,000.
For
the year ended December 31, 2022, we had a net income of $4,408,361, which consisted of unrealized gain on investment held in the Trust
Account of $4,948,194 and change in the fair value of warrants of $413,250, offset by general and administrative expenses of $953,083.
Liquidity
and Capital Resources
For
the year ended December 31, 2023, net cash used in operating activities was $1,376,351, net loss of $67,325 was impacted by the unrealized
gain on investments held in the Trust Account of $2,734,426, offset by non-cash interest expense of $256,031, the change in the fair value of warrants of $21,750 and changes
in operating assets and liabilities of $1,147,619.
For
the year ended December 31, 2022, net cash used in operating activities was $215,395, net income of $4,408,361 was impacted by the unrealized
gain on investments held in the Trust Account of $4,948,194, a change in the fair value of warrants of $413,250 and changes in operating
assets and liabilities of $737,688.
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As
of December 31, 2023, we had $8,835 in cash and $16,681,497 remained in the Trust Account. See “Overview – Charter
Amendments and Share Redemptions” above for a discussion of withdrawals from the Trust Account in connection with redemptions
in 2023.
Our primary sources of funds
to meet our near-term liquidity and capital requirements include cash on hand, including the funding 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. As of the date of this Annual Report, we have received only $1.2
million of the $6.0 million aggregate purchase price for the shares of Series A-1 Preferred Stock. Even if we receive all of
such proceeds, we will still need additional capital to fully implement our business, operating, and development plans.
We
expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct our planned clinical
trials of TVGN 489 and other product candidates. Identifying potential product candidates and conducting pre-clinical testing and clinical
trials is a time-consuming, expensive, and uncertain process that takes years to complete, and we may never generate the necessary data
or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not
achieve commercial success.
We
expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our pre-clinical
studies and clinical trials. In addition, if we obtain marketing approval for TVGN 489 in any indication or for any other product candidate
we are developing or develop in the future, we expect to incur significant commercialization expenses related to product manufacturing,
sales, marketing, and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly,
we will need to obtain substantial additional funding.
Until
such time, if ever, as we can generate substantial revenues from product sales, we expect to finance our cash needs through a combination
of public and private equity offerings and debt financings, strategic alliances, collaborations, and marketing, distribution, or licensing
arrangements. However, adequate additional financing may not be available to us on acceptable terms, or at all, and may be impacted by
the economic climate and market conditions. See the risk factor in this Annual Report with the caption beginning “We will require
substantial additional financing to pursue our business objectives ….”
Off-Balance
Sheet Arrangements
We
have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2023 and 2022. We do
not participate in transactions that create relationships with entities or financial partnerships, often referred to as variable
interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not
entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual
Obligations
As
of December 31, 2023 and 2022, we did not have any long-term debt, capital lease obligations, operating lease obligations or long-term
liabilities.
Underwriting
Agreement
Cantor
was entitled to deferred underwriting commissions of $14,700,000 in the aggregate, consisting of $13,800,000 deferred underwriting commissions,
and $900,000 cash underwriting discount agreed to be deferred until consummation of the Business Combination. The deferred fee was to
become payable to the underwriter from the amounts held in the Trust Account solely in the event that we completed a Business Combination,
subject to the terms of the Underwriting Agreement.
On
June 28, 2023, we entered into a fee reduction agreement with Cantor (the “Fee Reduction Agreement”) pursuant to which Cantor
agreed to forfeit $9,700,000 of the deferred underwriting fees payable, resulting in a remainder of $5,000,000 of deferred underwriting
fees payable (the “Reduced Deferred Fee”) to Cantor that became payable upon the closing of the Business Combination. The
Reduced Deferred Fee was payable to Cantor in the form of 500,000 shares of our common stock. The Fee Reduction Agreement only applied
to the consummation of the Transaction with Tevogen Bio and no other potential Business Combinations that we may contemplate or consummate.
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JOBS
Act
On
April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements
for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply
with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We have elected
to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards
on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, our financial statements
may not be comparable to companies that comply with public company effective dates.
Subject
to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we are not required to, among other things,
(i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404
of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies
under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or (iii) comply with any requirement that may be adopted by the
PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the
audit and the financial statements (auditor discussion and analysis). These exemptions will apply for a period of five years following
the completion of our IPO or until we are otherwise no longer an emerging growth company, whichever is earlier.
Critical
Accounting Estimates
The
preparation of unaudited condensed financial statements and related disclosures in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during
the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting
policies:
Warrant
Liabilities
We
account for the Private Placement Warrants included in Private Placement Units and the redeemable warrants (the “Public Warrants”)
that were included in units that we issued in our IPO (collectively, the “Warrants”) in accordance with Accounting Standards
Codification (“ASC”) 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity (“ASC 815”),
under which the Private Placement Warrants do not meet the criteria for equity classification and must be recorded as liabilities. As
the Private Placement Warrants meet the definition of a derivative as contemplated in ASC 815, the Private Placement Warrants are measured
at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value
recognized in the statements of operations in the period of change.
Ordinary
Shares Subject to Possible Redemption
We
account for our ordinary shares that were subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as liability instruments and are measured
at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified
as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares featured certain
redemption rights that are considered to have been outside of our control and subject to occurrence of uncertain future events. Accordingly,
ordinary shares subject to possible redemption are presented as temporary equity outside of the shareholders’ equity section of
our balance sheets. We recognize changes in redemption value immediately as they occur and adjust the carrying value of redeemable ordinary
shares to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable
ordinary shares are affected by charges against additional paid in capital and accumulated deficit.
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Recently
Issued Accounting Pronouncements
In
June 2016, the Financial Accounting Standards Bureau (“FASB”) issued Accounting Standards Update 2016-13 – Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This
update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement
of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and
reasonable and supportable forecasts that affect the collectability of the reported amount. Since June 2016, FASB issued clarifying updates
to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for fiscal years
beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. We adopted ASU 2016-13
on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on its financial statements.
In
December 2023, FASB issued Accounting Standards Update 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”),
which provides for additional disclosures primarily related to the income tax rate reconciliations and income taxes paid. ASU 2023-09
requires entities to annually disclose the income tax rate reconciliation using both amounts and percentages, considering several categories
of reconciling items, including state and local income taxes, foreign tax effects, tax credits and nontaxable or nondeductible items,
among others. Disclosure of the reconciling items is subject to a quantitative threshold and disaggregation by nature and jurisdiction.
ASU 2023-09 also requires entities to disclose net income taxes paid or received to federal, state and foreign jurisdictions, as well
as by individual jurisdiction, subject to a five percent quantitative threshold. ASU 2023-09 may be adopted on a prospective or retrospective
basis and is effective for fiscal years beginning after December 15, 2024 with early adoption permitted. We are evaluating the impact
of ASU 2023-09 on disclosures in our Financial Statements.
Management
does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This
information appears following Item 16 of this Annual Report on Form 10-K and is incorporated herein by reference.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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