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Item 7. Management’s Discussion and Analysis

2024-03-28 compared with 2023-03-28 · 374 added, 195 removed, 9 unchanged (98% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References to the “company,” “our,” “us” or “we” refer to JATT Acquisition Corp.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the audited financial statements and the notes related thereto which are included in “Item 8.

Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary,” “Item 1.A.

Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act.

We have based these forward-looking statements on our current expectations and projections about future events.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions.

Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.

Prior to closing the Business Combination on March 20, 2023, we were a blank check company incorporated as a Cayman Islands exempted company on March 10, 2021.

We were incorporated for the purpose of effecting a Business Combination.

Our Sponsor is JATT Ventures, L.P., a Cayman Islands exempted limited partnership.

The registration statement for our Initial Public Offering was declared effective on July 13, 2021.

On July 16, 2021, we consummated the Initial Public Offering of 12,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $120.0 million, and incurring offering costs of approximately $5.8 million (net of reimbursement from underwriter of $480,000), of which approximately $3.4 million and approximately $331,000 was for deferred underwriting commissions and offering costs allocated to derivate warrant liabilities, respectively.

On July 19, 2021, the underwriters fully exercised their option and purchased 1,800,000 additional Units, generating gross proceeds of $18.0 million (the “Over-Allotment”), and incurring offering costs of $990,000, of which $630,000 was for deferred underwriting commissions.

Simultaneously with the closing of the Initial Public Offering, we consummated the Private Placement of 5,370,000 Private Placement Warrants, at a price of $1.00 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $5.4 million.

Concurrent with the consummation of the Over-Allotment on July 19, 2021, the Sponsor purchased 540,000 additional Private Placement Warrants, generating proceeds of $540,000 in the Second Private Placement.

Upon the closing of the Initial Public Offering and the Private Placement on July 16, 2021, and the Over-Allotment and Second Private Placement on July 16, 2021, approximately $139.4 million ($10.10 per Unit) of the net proceeds of the Initial Public Offering and the Private Placement was placed in a Trust Account with Continental Stock Transfer & Trust Company acting as trustee and invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under Investment Company Act of 1940, as amended, (the “Investment Company Act”), which invest only in direct U.S.

government treasury obligations, as determined by us, until the earlier of:

(i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

Trust Account Redemptions

In connection with JATT’s shareholder proposal to amend its amended and restated memorandum and articles of association to extend the date by which JATT was required to consummate a business combination, which was approved at an extraordinary general meeting held on January 12, 2023, the holders of 12,111,022 of JATT’s ordinary shares, par value $0.0001 per share (the “ JATT Class A Ordinary Shares ”), exercised their right to redeem their shares for cash at a redemption price of approximately $10.26 per share for

an aggregate redemption amount of approximately $124,226,450.64.

In connection with the Extraordinary General Meeting and the Business Combination, the holders of an additional 1,506,480 Ordinary Shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.26 per share for an aggregate redemption amount of approximately $15,456,484.80.

Prior to the Business Combination, holders of an aggregate of 13,617,502 Ordinary Shares exercised their right to redeem their shares for cash for an aggregate redemption amount of approximately $139,682,935.44.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report.

In addition to historical information, this discussion and analysis contains forward-looking statements.

These forward-looking statements are subject to risks and uncertainties, including those discussed in the section titled “Risk Factors” in this Annual Report, that could cause actual results to differ materially from historical results or anticipated results.

Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “Zura,” “we,” “us,” and “our” refer to Zura Bio Limited, a Cayman Islands exempted company formerly known as JATT Acquisition Corp., and its consolidated subsidiaries.

References to JATT Acquisition Corp.

or “JATT” refer to the Company prior to the consummation of the Business Combination.

Zura Bio Limited, formerly known as JATT Acquisition Corp., is a multi-asset clinical-stage biotechnology company focused on developing novel medicines for immune and inflammatory disorders.

The experienced leadership team aims to become a leader in the autoimmune and inflammatory field.

We were incorporated as a Cayman Islands exempted company on March 10, 2021.

Our wholly owned subsidiary, Zura Bio Limited (“Zura Bio UK”) was formed in the United Kingdom, or UK, on January 18, 2022.

Prior to March 20, 2023, our operations were conducted through Zura Bio UK.

We have a limited operating history.

Since our inception, our operations have focused on organizing and staffing our company, business planning, raising capital and entering into collaboration agreements for conducting manufacturing, research and development activities.

Our lead product candidates are in the clinical testing stage;

however, we have not conducted any clinical tests ourselves, nor have any been conducted during the period since our inception.

We do not have any product candidates approved for sale and have not generated any revenue from product sales.

We have funded our operations through (i) the sale of equity, raising an aggregate of $10.0 million of gross proceeds from the sale of shares of convertible preferred stock of Zura Bio UK through March 31, 2023;

(ii) the issuance of a promissory note, receiving net proceeds of $7.6 million in December 2022;

(iii) proceeds from the Business Combination of $56.7 million in March 2023;

and (iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and Pre-Funded Warrants during the year ended December 31, 2023.

Since our inception, we have incurred significant operating losses.

Our net loss for the year ended December 31, 2023 and period ended December 31, 2022 were $60.4 million and $25.7 million, respectively.

As of December 31, 2023, we had an accumulated deficit of $103.5 million.

We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

● continue to advance the preclinical and clinical development of our product candidates;

● conduct our planned preclinical studies and clinical trials for the ZB Assets, as well as initiate and complete additional trials of future potential product candidates;

● scale up our clinical and regulatory capabilities;

● manufacture current good manufacturing practices, or cGMP, material for clinical trials or potential commercial sales;

● hire additional clinical, quality, regulatory, manufacturing, scientific and administrative personnel;

● establish a commercialization infrastructure and scale up manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval;

● adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products

● seek regulatory approval for any product candidates that successfully complete clinical trials;

● maintain, expand and protect our intellectual property portfolio;

● add operational, financial, and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts;

● incur additional legal, accounting, and other expenses in operating as a public company.

Business Combination

On March 20, 2023 (the “Closing Date”), Zura Bio Limited, a limited company incorporated under the laws of England and Wales (“Zura”), JATT Acquisition Corp, a Cayman Islands exempted company (“JATT”), JATT Merger Sub, a Cayman Islands exempted company and wholly owned subsidiary of JATT (“Merger Sub”), JATT Merger Sub 2, a Cayman Islands exempted company and wholly owned subsidiary of JATT (“Merger Sub 2”) and Zura Bio Holdings Ltd, a Cayman Islands exempted company (“Holdco”), consummated the closing of the transactions contemplated by the Business Combination Agreement, dated June 16, 2022, as amended on September 20, 2022, November 14, 2022 and January 13, 2023, by and among Zura, JATT, Merger Sub, Merger Sub 2, and Holdco (the “Business Combination Agreement”), following the approval at an extraordinary general meeting of JATT’s shareholders held on March 16, 2023 (the “Extraordinary General Meeting” and the consummation of such transactions, the “Closing”).

Pursuant to the Business Combination Agreement, (i) Merger Sub merged with and into Holdco, with Holdco continuing as the surviving company and a wholly owned subsidiary of JATT (the “Merger”);

(ii) immediately following the Merger, Holdco merged with and into Merger Sub 2, with Merger Sub 2 continuing as the surviving company and a wholly owned subsidiary of JATT (the “Subsequent Merger” and, together with the Merger and the other transactions contemplated by the Business Combination Agreement, the “Business Combination”);

and (iii) JATT changed its name to “Zura Bio Limited” (the “Company” or “Zura Bio Limited”).

In connection with JATT’s shareholder proposal to amend its amended and restated memorandum and articles of association to extend the date by which JATT was required to consummate a business combination, which was approved at an extraordinary general meeting held on January 12, 2023, the holders of 12,111,022 of JATT’s ordinary shares, par value $0.0001 per share (the “JATT Class A Ordinary Shares”), exercised their right to redeem their shares for cash at a redemption price of approximately $10.26 per share for an aggregate redemption amount of approximately $124,226,450.64.

Conversion and Exchange of Equity in the Business Combination

Pursuant to the Business Combination Agreement, all outstanding Holdco shares as of immediately prior to the Business Combination were cancelled in exchange for the right to receive a number of newly issued ordinary shares of JATT, par value $0.0001 per share (“Company Class A Ordinary Shares”), equal to the Exchange Ratio (as defined in the Business Combination Agreement) and all outstanding options to purchase shares of capital in Zura were exchanged for a number of options exercisable for newly issued Company Class A Ordinary Shares based upon the Exchange Ratio.

The total consideration received by securityholders of Holdco at the Closing consisted of newly issued Company Class A Ordinary Shares (or options to purchase such shares) with an aggregate value equal to $165 million (the “Merger Consideration”).

Subject to, and in accordance with, the terms and conditions of the Business Combination Agreement, in connection with the Merger and the Subsequent Merger, at the Closing, (i) each JATT unit was (to the extent not already separated) automatically separated and the holder thereof was deemed to hold one JATT Class A Ordinary Share and one-half of a JATT warrant;

(ii) in consideration for the Merger, JATT issued to holders of Holdco’s issued and outstanding shares immediately prior to the Effective Time (as defined in the Business Combination Agreement) an aggregate of 14,558,067 JATT Class A Ordinary Shares (including 499,993 JATT Class A Ordinary Shares underlying restricted stock units granted to Amit Munshi, the Company’s Non-Executive Chairman) plus 1,941,933 options to acquire JATT Class A Ordinary Shares for which outstanding options to acquire Holdco ordinary shares were exchanged on Closing;

On March 20, 2023 (the “Closing Date”), we consummated the previously-announced transactions contemplated by the Business Combination Agreement, dated June 16, 2022, as amended on September 20, 2022, November 14, 2022, and January 13, 2023 by and among Zura Bio Limited, a limited company incorporated under the laws of England and Wales (“Zura Bio UK”), JATT Acquisition Corp, a Cayman Islands exempted company (“JATT”), JATT Merger Sub, a Cayman Islands exempted company and wholly owned subsidiary of JATT (“Merger Sub”), JATT Merger Sub 2, a Cayman Islands exempted company and wholly owned subsidiary of JATT (“Merger Sub 2”) and Zura Bio Holdings Ltd, a Cayman Islands exempted company (“Holdco”), following the approval at an extraordinary general meeting of JATT’s shareholders held on March 16, 2023.

Pursuant to the Business Combination Agreement, (a) before the closing of the Business Combination, Holdco was established as our new holding company and became a party to the Business Combination Agreement;

and (b) on the closing date, in sequential order:

(i) Merger Sub merged with and into Holdco, with Holdco continuing as the surviving company and a wholly owned subsidiary of JATT (the “Merger”);

and (iii) JATT changed its name to “Zura Bio Limited” (“Zura Bio”).

Subject to, and in accordance with, the terms and conditions of the Business Combination Agreement, at the Closing, (i) each JATT unit was (to the extent not already separated) automatically separated and the holder thereof was deemed to hold one JATT Class A Ordinary Share and one-half of a JATT warrant;

(ii) in consideration for the Merger, JATT issued to holders of Holdco’s issued and outstanding shares immediately prior to the Effective Time (as defined in the Business Combination Agreement) an aggregate of 14,558,067 JATT Class A Ordinary Shares (including 499,993 JATT Class A Ordinary Shares underlying restricted share units granted to Amit Munshi, the Company’s Non-Executive Chairman) plus 1,941,933 options to acquire JATT Class A Ordinary Shares for which outstanding options to acquire Holdco Class A Ordinary Shares were exchanged on Closing;

and (iii) pursuant to the terms and conditions of JATT’s existing amended and restated memorandum and articles of association, all then-outstanding Class B Ordinary Shares, par value $0.0001 per share, were automatically converted into JATT Class A Ordinary Shares on a one-for-one basis.

PIPE Subscription Agreements

On the Closing Date, Ewon Comfortech Co., Ltd.

(“Ewon”), an institutional accredited investor which is an indirect investor in Zura through its equity interest in Hana Immunotherapeutics LLC (“Hana”), purchased from JATT 2,000,000 JATT Class A Ordinary Shares and Eugene Investment & Securities Co., Ltd (“Eugene”), an unaffiliated institutional credited investor, purchased from JATT 9,950 JATT Class A Ordinary Shares (Ewon, together with Eugene, the “PIPE Investors”), for an aggregate of 2,009,950 JATT Class A Ordinary Shares (the “PIPE Shares”) at a price of $10.00 per share, for an aggregate purchase price of $20,099,500 (the “PIPE Financing”), pursuant to the subscription agreement entered into by JATT and the Ewon as of June 16, 2022, as amended on November 25, 2022 (the “Ewon PIPE Subscription Agreement”) and the subscription agreement entered into by JATT and Eugene as of March 13, 2023 (the “Eugene PIPE Subscription Agreement” and, together with the Ewon PIPE Subscription Agreement, the “PIPE Subscription Agreements”).

Pursuant to the PIPE Subscription Agreements, JATT granted certain registration rights to the PIPE Investors with respect to the PIPE Shares.

The sale of the PIPE Shares was consummated concurrently with the closing of the Business Combination.

Forward Purchase Agreement

At the Closing of the Business Combination, Athanor Master Fund, LP and Athanor International Master Fund, LP (collectively, the “FPA Investors”), each of which is an unaffiliated institutional investor, purchased (i) an aggregate of 3,000,000 JATT Class A Ordinary Shares at $10 per share for $30,000,000;

(ii) an aggregate of 1,301,633 JATT Class A Ordinary Shares at $10 per share for $13,016,330 (the “Redemption Backstop”) as public share redemptions were greater than 90% at the time of the Business Combination (the “Excess Redemptions”);

and (iii) an additional 2,500,000 JATT Class A Ordinary Shares in consideration for the FPA Investors entering into the latest amendment, but for no additional monetary consideration, pursuant to the forward purchase agreements JATT and the FPA Investors entered into on August 5, 2021, as amended and restated on January 27, 2022 and as amended on March 8, 2023 (the “Forward Purchase Agreement”).

Sponsor Support Agreement

Concurrently with the execution of the Business Combination Agreement, JATT, Zura, JATT Ventures, L.P., a Cayman Islands exempted limited partnership (the “Sponsor”) and certain directors and officers of JATT entered into a support agreement dated June 16, 2022 (the “Sponsor Support Agreement”), pursuant to which, among other things, the Sponsor and directors and officers of JATT agreed to (i) vote all of the JATT Class A Ordinary Shares beneficially owned by them, including any additional shares to which they acquire ownership of or the power to vote, in favor of the SPAC Shareholder Voting Matters (as defined in the Business Combination Agreement), (ii) not to redeem any of their JATT Class A Ordinary Shares in conjunction with shareholder approval of the Business Combination and (iii) be bound by certain transfer restrictions with respect to their JATT Class A Ordinary Shares.

Company Shareholder Support Agreement

Concurrently with the execution of the Business Combination Agreement, JATT, Zura and the shareholders of Zura entered into a support agreement dated June 16, 2022 (the “Company Shareholder Support Agreement”), pursuant to which the Zura shareholders agreed to vote all Zura ordinary shares beneficially owned by them, including any additional shares of Zura they acquire ownership of or the power to vote, in favor of the Business Combination and related transactions.

Sponsor Forfeiture Agreement

Contemporaneously with the execution of the Business Combination Agreement, the Sponsor entered into a sponsor forfeiture agreement (the “Sponsor Forfeiture Agreement”) with JATT and Zura, pursuant to which at the Closing, the Sponsor forfeited 4,133,466 of its private placement warrants to purchase JATT Class A Ordinary Shares, exercisable at $11.50 per share (the “Forfeited Private Placement Warrants”), acquired by the Sponsor in July 2021 upon JATT’s initial public offering, which were transferred to the FPA Investors and Ewon on a pro rata basis in accordance with the FPA Investors’ and Ewon’s total invested capital.

The FPA Investors received an aggregate of 2,480,000 Forfeited Private Placement Warrants and Ewon received 1,653,466 Forfeited Private Placement Warrants.

Lock-Up Agreement

Contemporaneously with the execution of the Business Combination Agreement, JATT, the Sponsor, certain affiliates of the Sponsor and the Zura shareholders and optionholders, entered into a lock-up agreement (the “Lock-Up Agreement”), which took effect at Closing, containing restrictions on transfer with respect to Company Class A Ordinary Shares held by each such holder (subject to

certain exceptions, the “Lock-Up Shares”) for a period as follows:

one-third (1/3) of the Lock-Up Shares will be restricted until 6 months after the Closing, one-third (1/3) of the Lock-Up Shares will be restricted until 12 months after the Closing, and one-third (1/3) of the Lock-Up Shares shall be restricted until 24 months after the Closing;

provided, that each portion of the Lock-Up Shares will be freely tradable on the earlier of (i) the date on which the closing price of the JATT ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period on a VWAP (as defined below) basis during the relevant lock-up period;

and (ii) the date on which JATT consummates a liquidation, merger, capital share exchange, reorganization, or other similar transaction that results in all of JATT’s shareholders having the right to exchange their JATT ordinary shares for cash, securities or other property.

For purposes of the Lock-Up Agreement, “VWAP” means, for any date, the daily volume weighted average price of the JATT ordinary shares for such date (or the nearest preceding date) on the trading market on which the JATT ordinary shares are then listed or quoted as reported by Bloomberg L.P.

(based on a trading day from 9:30 a.m.

(New York City time) to 4:00 p.m.

(New York City time)).

Amendment to the Insider Letter Agreement

In connection with the execution of the Business Combination Agreement, JATT, the Sponsor, members of JATT’s board of directors and certain other individuals (collectively, the “Insiders”) entered into an Amendment to the Insider Letter Agreement (the “Amended Insider Letter Agreement”), which provides, among other things, that certain of JATT’s Class B ordinary shares (the “Founder Shares”) (and any JATT Class A Ordinary Shares issuable upon conversion thereof) shall be subject to certain time and share-performance-based vesting provisions which are described below.

The Sponsor and the Insiders agreed that they shall not transfer any Founder Shares until the earlier of (A) six months after the completion of the initial business combination and (B) the date following the completion of an initial business combination on which JATT completes a liquidation, merger, share exchange, reorganization or other similar transaction that results in all of the public shareholders having the right to exchange their JATT Class A Ordinary Shares for cash, securities or other property.

Notwithstanding the foregoing, if, subsequent to the Business Combination, the closing price of the JATT Class A Ordinary Shares equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30- trading day period commencing at least 150 days after the Business Combination, the Founder Shares shall be released from the lock-up restrictions.

Lilly Lock-Up Agreement

Pursuant to the Equity Grant Agreement (the “JATT Equity Grant Agreement”) entered into on December 8, 2023, by and between JATT and Eli Lilly and Company (“Lilly”), JATT and Lilly entered into a Lock-Up Agreement (the “Lilly Lock-Up Agreement”), on the Closing Date.

The Lilly Lock-Up Agreement contains restrictions on transfer with respect to the shares issued to Lilly under the JATT Equity Grant Agreement (subject to certain exceptions, the “Lilly Lock-Up Shares”) for a period as follows:

one-third (1/3) of the Lilly Lock-Up Shares will be restricted until 6 months after the Closing, one-third (1/3) of the Lilly Lock-Up Shares will be restricted until 12 months after the Closing, and one-third (1/3) of the Lilly Lock-Up Shares shall be restricted until 24 months after the Closing;

provided, that each portion of the Lilly Lock-Up Shares will be freely tradable on the earlier of (i) the date on which the closing price of the JATT ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period on a VWAP (as defined below) basis during the relevant lock-up period;

For purposes of the Lilly Lock-Up Agreement, “VWAP” means, for any date, the daily volume weighted average price of the JATT ordinary shares for such date (or the nearest preceding date) on the trading market on which the JATT ordinary shares are then listed or quoted as reported by Bloomberg L.P.

(based on a trading day from 9:30 a.m.

(New York City time) to 4:00 p.m.

(New York City time)).

Amended and Restated Registration and Shareholders Rights Agreement

In connection with the Closing, Zura, JATT and certain securityholders of each of Zura and JATT who received JATT Class A Ordinary Shares pursuant to the Business Combination Agreement, entered into an amended and restated registration and shareholders rights agreement (the “Registration Rights Agreement”), which became effective upon the consummation of the Business Combination.

The Registration Rights Agreement governs the registration of certain of the Company Class A Ordinary Shares for resale and includes certain customary demand and “piggy-back” registration rights with respect to the Company Class A Ordinary Shares held by the parties thereto.

Hydra Promissory Note

On December 8, 2022, Zura and Hydra LLC, a Cayman Islands limited liability company managed and controlled by Verender S.

Badial and Someit Sidhu (“Hydra”), entered into a promissory note (the “Hydra Promissory Note”) pursuant to which (i) Hydra loaned to Zura a principal amount (the “Principal Amount”) of $8 million (including an original issue discount of $400,000) with an interest rate equal to 9.0% per annum, compounding daily.

Under the Hydra Promissory Note, Hydra had the right to accelerate the Hydra Promissory Note and receive an amount equal to 120% of the Principal Amount because the registration statement on Form S-4 relating to the Business Combination was not declared effective by the SEC on or before February 15, 2023.

On March 8, 2023, Zura and Hydra signed a limited waiver letter under the Hydra Promissory Note (the “Waiver Letter”), pursuant to which Hydra agreed to waive its acceleration right in consideration of Zura paying to Hydra 125% of the Principal Amount (equal to $10,000,000 in the aggregate) on the earlier of December 8, 2023 and five business days after the consummation of the Business Combination.

On March 21, 2023, Zura repaid the Hydra Promissory Note in full and the Hydra Promissory Note was terminated.

As of the Closing Date and following the completion of the Business Combination, the Company had the following outstanding securities (including derivative securities):

● 27,552,148 Company Class A Ordinary Shares (including 499,993 Company Class A Ordinary Shares underlying restricted stock units (the “ RSUs ”));

6,900,000 public warrants, each exercisable for one Company Class A Ordinary Share at a price of $11.50 per share (the “ Public Warrants ”);

5,910,000 private placement warrants, each exercisable for one Company Class A Ordinary Share at a price of $11.50 per share (the “ Private Placement Warrants ”);

1,941,933 options, each exercisable for one Company Class A Ordinary Share (the “ Options ”).

and (iii) an additional 2,500,000 JATT Class A Ordinary Shares in consideration for the FPA Investors entering into the latest amendment, but for no additional monetary consideration, to the forward purchase agreements JATT and the FPA Investors entered into on August 5, 2021, as amended and restated on January 27, 2022 and as amended on March 8, 2023 (the “Forward Purchase Agreement”).

The Business Combination, together with the PIPE financing, the Forward Purchase Agreement, and the Redemption Backstop, generated approximately $56.7 million in proceeds.

On March 21, 2023, the Company’s Class A Ordinary Shares and public warrants began trading on the Nasdaq under the symbols “ZURA” and “ZURAW,” respectively.

April 2023 Private Placement

On April 26, 2023, the Company entered into its second PIPE subscription agreement (the “April 2023 Private Placement”) with certain accredited investors (the “Subscribers”), whereby the Company issued 15,041,530 Class A Ordinary Shares, par value $0.0001 per share and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 3,782,000 Class A Ordinary Shares.

Each Class A Ordinary Share was sold at a price of $4.25 per Class A Ordinary Share and each Pre-Funded Warrant was sold at a price of $4.249 per Pre-Funded Warrant for an aggregate purchase price of $80.0 million.

Concurrently with the April 2023 Private Placement, the Company agreed to, within six months of April 24, 2023, exercise its call option on 50% of the Z33 Series Seed Preferred Shares previously issued to Stone Peach.

The Company agreed to settle its call option by issuing 2,000,000 Class A Ordinary Shares.

The amended settlement terms represented an extinguishment and reissuance of the Z33 Series Seed Preferred Shares.

The $10.9 million difference between the estimated fair value of the new instrument issued and the carrying value of the Z33 Series Seed Preferred Shares was recorded as a deemed dividend to the redeemable noncontrolling interest.

The Company and Stone Peach subsequently renegotiated the settlement terms as discussed in the 2022 Lilly License section below.

2023 Lilly License

On April 26, 2023, the Company’s newly-formed subsidiary ZB17 LLC (“ZB17”) entered into a license agreement (the “2023 Lilly License” and, together with the 2022 Lilly License, the “Lilly Licenses”) with Lilly, for an exclusive license to develop, manufacture and commercialize a certain bispecific antibody relating to IL-17 and BAFF (“ZB-106”) in exchange for an upfront payment consisting of $5.8 million as well as 1,000,000 Class A Ordinary Shares issued at a fair value of $7.84 per Class A Ordinary Share.

In addition, ZB17 will make a payment of $5.0 million upon the receipt of certain know-how, data, information and materials that Lilly is required to provide under the license agreement.

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, ZB17 granted to Stone Peach the right, but not the obligation, to purchase 4.99% of the fully diluted equity of ZB17 for $1.0 million (the “Stone Peach Call Right”).

The Stone Peach Call Right is not exercisable until after the last patient is dosed in any single next clinical trial with ZB-106 and expires one year from the date of first indication approval for ZB-106 by the FDA or the EMA.

As additional consideration, Stone Peach will receive annual payments first of $0.6 million, and increasing by 10% annually, so long as the Company maintains its license for ZB-106 and beginning on May 1, 2023.

As a finder’s fee for arranging the acquisition of the 2023 Lilly License, the Company agreed to make a one-time milestone payment of $5.0 million to BAFFX17, Ltd (“BAFFX17”) upon the occurrence of either:

(i) a change of control transaction, (ii) the closing of an issuance of equity or equity-linked securities by the Company of at least $100.0 million (iii) the consummation of a sale of assets resulting in net proceeds in excess of $100.0 million, or (iv) the Company’s fully diluted shares outstanding exceed 52,500,000 shares (on a split adjusted basis).

In addition to the consideration transferred during the year ended December 31, 2023, the Company is obligated to make 4 development milestone payments to Lilly up to an aggregate of $155.0 million, and sales milestone payments up to an aggregate of $440 million based on respective thresholds of net sales of products developed from ZB-106.

The Company is also obligated to pay Lilly over a multi-year period (twelve years, or upon the later expiration of regulatory exclusivity of ZB-106 in a country) an annual earned royalty at a marginal royalty rate in the mid-single digits to low-double digits, with increasing rates depending on net sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of years.

The Company is obligated to pay BAFFX17 a fee equal to 3% of any milestone or royalty payments due to Lilly pursuant to the terms of either the 2022 Lilly License and the 2023 Lilly License with Lilly.

Upon receiving written approval from the FDA, EMA, or similar regulatory authority of the Investigational New Drug (“IND”) and the commencement of a clinical trial in the applicable jurisdiction for ZB-106, Stone Peach will also receive a one-time payment of $4.5 million.

Stone Peach will also receive a one-time milestone payment of $25 million upon either (i) certain equity-related transactions, or (ii) the receipt of regulatory approval from the applicable regulatory authority for any new indication in the applicable jurisdiction.

Furthermore, Stone Peach was granted a royalty of 2% of the aggregate net sales of any products developed from the Compound.

As of December 31, 2023, none of the contingent payments were due.

2022 Lilly License

On December 8, 2022, the Company’s consolidated subsidiary, Z33 Bio Inc.

(“Z33”), entered into a license agreement (the “2022 Lilly License”) with Lilly pursuant to which Lilly granted Z33 an exclusive (even as to Lilly), royalty-bearing global license to develop, manufacture, and commercialize certain intellectual property owned by Lilly relating to its IL-33 compound.

As consideration, the Company paid Lilly an upfront fee of $7.0 million.

As consideration for the 2022 Lilly License, Lilly agreed to receive either 550,000 Class A Ordinary Shares upon the closing of the Business Combination (subject to certain lock-up provisions) or 4,702,867 shares of Z33 Series Seed Preferred Shares (the subsidiary redeemable preferred shares) if the Business Combination was not consummated.

Upon the Closing Date of the Business Combination, the Company issued Lilly 550,000 Class A Ordinary Shares at an aggregate fair value of $4.5 million.

As a finder’s fee in connection with arranging the acquisition, Z33 issued to Stone Peach Properties, LLC (“Stone Peach”) 4,900,222 shares of Z33 Series Seed Preferred Shares, which is included in the measurement of the cost of the acquired asset.

Zura has the right, but not the obligation to purchase up to 50% of the Series Seed Preferred Shares issued to Stone Peach at a price per share of $2.448869 for a period of two years from the date of the agreement (the “Call Option”).

Stone Peach has the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to Zura for a price per share of $2.040724 (the “Put Option”).

Stone Peach may exercise its option at any time between the first anniversary and the second anniversary of the transaction.

In April 2023, the Company agreed to, within six months of April 24, 2023, exercise its Call Option on 50% of the Z33 Series Seed Preferred Shares previously issued to Stone Peach.

The Company agreed to settle its Call Option by issuing 2,000,000 Class A Ordinary Shares.

In November 2023, the Company and Stone Peach amended the terms of the agreement, voiding the Company’s obligation to exercise its Call Option, and instead reverting the Company’s rights and obligations under the Call Option back to that of the original agreement.

Stone Peach, in addition to the existing Put Option, was granted the right, but not the obligation to sell up to 50% of the Series Seed Preferred Shares issued to Stone Peach to Zura in exchange for 2,000,000 Class A Ordinary Shares (the “Put Right”).

Stone Peach may exercise its Put Option and Put Right at any time between April 24, 2024 and April 24, 2028 under the new agreement.

In addition to the consideration transferred on December 8, 2022, the Company is obligated to pay $3.0 million to Lilly upon the completion of a financing by the Company with gross proceeds exceeding $100 million.

The Company is further obligated to make 10 commercial, development and regulatory milestone payments up to an aggregate of $155.0 million and sales milestone payments up to an aggregate of $440.0 million based on respective thresholds of net sales of products developed from the licensed compound.

The Company will also pay an annual earned royalty to Lilly at a marginal royalty rate between in the mid-single to low-double digits (less than 20%), with increasing rates based on Net Sales in the respective calendar year, based on a percentage of sales within varying thresholds for a certain period of the year.

The Company will account for these contingent payments when they become due.

As of December 31, 2023, none of the contingent payments were due.

Pfizer Agreement

On March 22, 2022, the Company entered into a license agreement and a Series A-1 Subscription and Shareholder’s Agreement (collectively, the “Pfizer Agreement”) with Pfizer.

Under the Pfizer Agreement, the Company acquired a license for a compound initially developed by Pfizer, in exchange for $5.0 million in cash and 2,702,083 shares (as adjusted by the exchange ratio established in the Business Combination Agreement) of the Company’s Series A-1 convertible preferred shares, representing a 20% interest in the Company.

In addition to the consideration transferred on March 22, 2022, the Company is obligated to make 12 development and regulatory milestone payments aggregating up to $70.0 million and sales milestone payments up to an aggregate of $525.0 million based on respective thresholds of net sales of products (developed from the licensed compound) (the “Products”).

In further consideration for the license, the Company will also pay an annual earned royalty at a marginal royalty rate in the mid-single digits to low double digits (less than 20%), based on thresholds of nets sales of Products.

Royalties are payable on a country-by-country basis for a certain period of years or upon the later expiration of regulatory exclusivity of the Company’s Products in a country.

The Company is also subject to a potential multi-million dollar transaction payment if, within a certain period the Company has (a) certain changes in control, excluding an initial public offering or any business combination where the securities of the Company are listed on a stock exchange (e.g., a transaction with a special purpose acquisition company), or (b) the Company sublicenses or divests of its rights to the Products.

The Pfizer Agreement also has an anti-dilution provision to allow Pfizer to maintain an 18% interest in the Company.

Immediately prior to the Closing Date of the Business Combination, additional share options and restricted share units were issued to certain employees, executives, and directors that would result in the dilution of Pfizer’s ownership in the Company.

In accordance with the anti-dilution provision of the Pfizer Agreement, Pfizer was issued additional Series A-1 convertible preferred shares upon the closing of the Business Combination that were immediately converted to 267,939 Class A Ordinary Shares.

The first $1.0 million development milestone became due during the year ended December 31, 2023.

The Company does not owe any other amounts under the Pfizer Agreement.

Appointment of Directors

On May 31, 2023, the Board of Directors (the "Board") of the Company increased the size of the Board from seven directors to nine directors.

On June 22, 2023, the Board appointed Parvinder Thiara to fill the vacancy on and serve as a member of the Board, to serve until the next annual meeting of stockholders and until his successor is duly elected and qualified or until his earlier death, resignation or removal.

Thiara has no family relationships with any of the executive officers or directors of the Company.

On November 9, 2023, the Board appointed Arnout Ploos van Amstel to serve as a member of the Board.

Ploos van Amstel replaced Dr.

Garry Neil who left the Board on the same date and would continue to support the Company as an advisor on R&D matters.

Ploos van Amstel has no family relationships with any of the executive officers or directors of the Company.

Components of Operating Results

Operating Expenses

General and Administrative Expenses

General and administrative expenses primarily consist of professional fees for legal, accounting, and consulting costs relating to corporate matters, as well as salaries and related costs for personnel in executive and administrative functions, including share-based compensation.

We anticipate that our general and administrative expenses will increase in the future as we continue to support research and development activities and incur increased costs of operating as a public company.

These costs include increased headcount to support expanded operations and infrastructure.

Additionally, we anticipate increased costs associated with maintaining compliance with Nasdaq rules and SEC requirements such as accounting, audit, legal and consulting services, as well as director and officer liability insurance, investor and public relations activities.

Research and Development Expenses

Research and development (“R&D”) expenses consist of all direct and indirect operating expenses supporting the processes in development, including consulting fees for medical and manufacturing advisory services, costs related to manufacturing material for clinical studies, payroll and benefits, which includes share-based compensation, for research and development employees, licensing fees, and study acquisition costs.

Expenses are recognized as the related goods are delivered or the services are performed.

R&D expenses include the cost of in-process research and development (“IPR&D”) assets purchased in an asset acquisition transaction.

IPR&D assets are expensed unless the assets acquired are deemed to have an alternative future use, provided that the acquired asset did not also include processes or activities that would constitute a “business” as defined under U.S.

GAAP, the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use.

Acquired IPR&D payments are immediately expensed in the period in which they are incurred and include upfront payments, as well as transaction fees and subsequent pre-commercial milestone payments.

Research and development costs incurred after the acquisition are expensed as incurred.

R&D expenses also include the remeasurement of the research and development license consideration liability.

The research and development license consideration liability represented an obligation to issue either preferred shares of the Company’s subsidiary or Class A Ordinary Shares to Lilly as consideration for the 2022 Lilly License, which was ultimately settled through the issuance of Class A Ordinary Shares upon the closing of the Business Combination.

Research and development expenses could include:

● employee-related expenses, including salaries, bonuses, benefits, share-based compensation and other related costs for those employees involved in research and development efforts;

● external research and development expenses incurred under agreements with clinical research organizations, investigative sites and consultants to conduct our studies;

● costs related to manufacturing material for preclinical studies and clinical trials, including fees paid to contract manufacturing organizations;

● laboratory supplies and research materials;

● costs related to compliance with regulatory requirements;

● facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance and equipment.

Research and development activities are central to our business model.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

We plan to substantially increase our research and development expenses for the foreseeable future as we develop our product candidates and manufacturing processes and conduct discovery and research activities for our clinical programs.

We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future clinical studies of our product candidates due to the inherently unpredictable nature of clinical development.

Clinical development timelines, the probability of success and development costs can differ materially from expectations.

We anticipate that we will make determinations as to how we pursue our product candidates and how much funding to direct to each program on an ongoing basis in response to the results of future clinical trials, regulatory developments and our ongoing assessments as to commercial potential.

We will need to raise substantial additional capital in the future.

Our clinical development costs are expected to increase as we commence, continue and expand our clinical trials.

Our future expenses may vary significantly each period based on factors such as:

● expenses incurred to conduct preclinical studies required to advance our product candidates into clinical trials;

● per patient clinical trial costs, including based on the number of doses that patients receive;

● the number of patients who enroll in each clinical trial;

● the number of clinical trials required for approval;

● the number of sites included in the clinical trials;

● the countries in which the clinical trials are conducted;

● the length of time required to enroll eligible patients;

● the drop-out or discontinuation rates of patients;

● potential additional safety monitoring requested by regulatory agencies;

● the duration of patient participation in clinical trials and follow-up;

● the phase of development of the product candidate;

● third party contractors failing to comply with regulatory requirements or meet their contractual obligations in a timely manner, or at all;

● the cost of insurance, including product liability insurance, in connection with clinical trials;

● regulators or institutional review boards requiring that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

● the efficacy and safety profile of our product candidates

Results of Operations

Comparison of the Year Ended December 31, 2023 and the Period from January 18, 2022 (date of inception) to December 31, 2022.

The following table summarize our results of operations for the periods presented (in thousands):

For the Period from January

18, 2022 (date of inception) to

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other expense/(income), net:

Other expense, net

Interest income

Dividend income

Change in fair value of private placement warrants

Change in fair value of note payable

Total other expense/(income), net

Loss before income taxes

Income tax benefit

Net loss before redeemable noncontrolling interest

Net loss attributable to redeemable noncontrolling interest

Accretion of redeemable noncontrolling interest to redemption value

Deemed contribution from redeemable noncontrolling interest

Deemed dividend to redeemable noncontrolling interest

Net loss attributable to Ordinary Shareholders of Zura

*Percentage change not meaningful

Operating Expenses

Research and Development Expenses

Research and development expenses increased by $20.3 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

This was primarily due to an increase of $5.3 million of costs incurred to acquire licenses, as we recognized $21.9 million of expense related to the acquisitions of an in-process research and development (“IPR&D”) license from Pfizer and Lilly during the period ended December 31, 2022 and $27.2 million related to the acquisition of an IPR&D license from Lilly during the year ended December 31, 2023.

The increase was also due to the issuance of additional shares to Pfizer under an anti-dilution provision of $2.2 million recognized during the year ended December 31, 2023, an increase of $1.5 million in expenses related to compensation for personnel in research and development functions including share-based compensation, an increase of $1.7 million related to the change in fair value of our research and development license consideration liability, an increase of $9.1 million related to manufacturing of our product candidates, and an increase of $0.5 million of costs incurred for consulting and advisory services for clinical development strategy.

General and Administrative Expenses

General and administrative expenses increased by $15.2 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

The increase was primarily due to increases of $11.4 million in expenses related compensation for personnel in executive and administrative functions including share-based compensation, as well as an increase of $2.9 million in professional fees for legal and accounting costs incurred related to our ongoing operations as a public company, an increase of $0.8 million of travel, office, and other general and administrative expenses.

Other Expense (Income)

Other expense, net

Other expense decreased by an immaterial amount for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

This decrease was primarily due to a foreign exchange transaction gain for the year ended December 31, 2023 as compared to a foreign exchange transaction loss for the period ended December 31, 2022.

Interest income

Interest income increased by $2.2 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

This increase is due to an increase in our cash and cash equivalents balance during year ended December 31, 2023 as compared to the period ended December 31, 2022.

Dividend income

Dividend income increased by $1.4 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

The Company held no dividend-generating cash equivalents during the period ended December 31, 2022.

Change in fair value of private placement warrants

Revaluation gain on the liability-classified private placement warrants assumed in the Business Combination was $0.7 million for the year ended December 31, 2023.

No warrants were outstanding during the period ended December 31, 2022.

Change in fair value of note payable

Revaluation loss on the note payable increased by $2.1 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022, as a result of remeasurement to its settlement value.

Net loss attributable to redeemable noncontrolling interest

Net loss attributable to redeemable noncontrolling interest, representing the noncontrolling shareholder’s interest in the net loss of our consolidated subsidiary, Z33, decreased by $1.4 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022 due to a decrease in operating expenses for Z33 during the year ended December 31, 2023 as compared to the period ended December 31, 2022.

Accretion of redeemable noncontrolling interest to redemption value

Accretion of redeemable noncontrolling interest to redemption value increased by $0.6 million for the year ended December 31, 2023 as compared to the period ended December 31, 2022.

This increase is due to modifications of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach during the year ended December 31, 2023 and the resulting adjustments to redemption value.

Deemed Dividend to Redeemable Noncontrolling Interest

Deemed dividend to the redeemable noncontrolling interest was $10.9 million for the year ended December 31, 2023, due to the modification of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach in April 2023.

There were no deemed dividends to the redeemable noncontrolling interest during the period ended December 31, 2022.

Deemed Contribution from Redeemable Noncontrolling Interest

Deemed contribution from the redeemable noncontrolling interest was $9.2 million for the year ended December 31, 2023, due to the modification of the terms of the Z33 Series Seed Preferred Shares issued to Stone Peach in November 2023.

There were no deemed contributions from the redeemable noncontrolling interest during the period ended December 31, 2022.

Liquidity and Capital Resources

Our liquidity needs through December 31, 2022, were satisfied through the cash contribution of $25,000 from our Sponsor to purchase our Class B ordinary shares (“Founder Shares”), and a loan from our Sponsor of approximately $117,000 under a promissory note (the “Note”).

We repaid the Note in full on July 21, 2021.

Subsequent to the consummation of the Initial Public Offering, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account.

In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, provide the Company working capital loans.

As of December 31, 2022, there was $356,000 outstanding under a Working Capital Loan.

No amounts were outstanding as of December 31, 2021.

Results of Operations before the Business Combination

Our entire activity since inception up to December 31, 2022 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination.

We will not generate any operating revenues until after the completion of our initial Business Combination.

We generate non-operating income in the form of investment income from the Trust Account.

We will continue to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

Additionally, we recognize non-cash gains and losses within other income (expense) related to changes in recurring fair value measurement of our derivative liabilities at each reporting period.

For the year ended December 31, 2022, we had net income of approximately $3.6 million, which consisted of non-operating income of approximately $4.1 million resulting from changes in fair value of derivative warrant liabilities and approximately $2.1 million of income from investments held in the trust account, partially offset by approximately $2.3 million of general and administrative expenses and approximately $381,000 of general and administrative expenses - related party.

For the period from March 10 (inception) through December 31, 2021, we had net income of approximately $6.8 million, resulting from a non-operating gain of approximately $10.2 million from the change in fair value of the derivative warrant liabilities and an unrealized gain on investments held in the trust account of approximately $19,000, partially offset by a non-operating loss of approximately $1.8 million for the fair value of warrants issued to our Sponsor in excess of the purchase price, a non-operating loss of approximately $747,000 for offering costs associated with our derivative warrant liabilities and approximately $889,000 in general and administrative costs, including approximately $168,000 of general and administrative expenses to a related party.

Off-balance sheet financing arrangements before the Business Combination

We had no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of December 31, 2021.

We did not participate in transactions that create relationships with unconsolidated 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 had 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 before the Business Combination

We did not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than the agreements described below.

Registration and Shareholder Rights

The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) are entitled to registration rights pursuant to a registration and shareholder rights agreement.

The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities.

In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the initial Business Combination.

We will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

We granted the underwriter a 45-day option from the date of the Initial Public Offering to purchase up to 1,800,000 additional Units at the Initial Public Offering price less the underwriting discounts and commissions.

The underwriter fully exercised its over-allotment option on July 19, 2021.

The underwriter was paid an underwriting discount of $0.20 per unit, or approximately $2.4 million in the aggregate upon the closing of the Initial Public Offering.

In addition, we received a reimbursement from the underwriter of $480,000 to cover for certain offering expenses.

In addition, $0.35 per unit, or approximately $3.4 million in the aggregate (net of the reimbursement from the underwriter of $820,000 from the deferred commissions for business combination expenses) will be payable to the underwriter for deferred underwriting commissions.

The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that that we complete a Business Combination, subject to the terms of the underwriting agreement.

In connection with the consummation of the Over-Allotment on July 19, 2021, the underwriter was paid an additional fee of $360,000 and an additional amount of $630,000 is payable in deferred underwriting commissions.

Support Agreement and Services

We agreed to pay our Sponsor a total of $10,000 per month, commencing on the date of listing on the NYSE, for office space, utilities, secretarial and administrative support services provided to members of the management team.

Upon completion of the initial Business Combination or our liquidation, we will cease paying these monthly fees.

For the year ended December 31, 2022 and for the period from March 10, 2021 (inception) through December 31, 2021, we incurred approximately $120,000 and $55,000, respectively, in such fees, included as general and administrative expenses on the consolidated statements of operations.

As of December 31, 2022 and 2021, $78,000 and $18,000 has been included for such services and is included as due from related party on the accompanying consolidated balance sheets.

An affiliate of our Sponsor and CFO provides office space and consulting services to us.

For year ended December 31, 2022 and for the period from March 10, 2021 (inception) through December 31, 2021, the Company incurred fees of $60,000 and $113,000, respectively, included as general and administrative fees - related party on the consolidated statements of operations.

As of December 31, 2022 and 2021, there is no balance owed for these services

For the year ended December 31, 2022 and for the period from March 10, 2021 (inception) through December 31, 2021,we incurred merger consulting fees of $201,000 and $0, respectively, included as general and administrative fees - related party on the consolidated statements of operations.

Forward Purchase Agreements

On August 5, 2021, we entered into Forward Purchase Agreements with certain of our Anchor Investors, Athanor Master Fund LP (“AMF”) and with Athanor International Master Fund, LP (“AIF”) (collectively the “Forward Purchase Agreements”, and collectively, “AMF and AIF are “FPA Purchasers”).

Pursuant to the Forward Purchase Agreements, we were to issue and sell to the FPA Purchasers, and the FPA Purchasers were to purchase from us, an aggregate of 7,500,000 forward purchase shares, or “Forward Purchase Shares”, for a purchase price of $10.00 per Forward Purchase Share, or $75,000,000 in the aggregate.

Each Forward Purchase Share will consist of one Class A ordinary share of the Company.

The Class A ordinary shares would have the same terms as the Company’s publicly traded Class A ordinary shares but will be restricted securities and not be freely tradable until registered with the Securities and Exchange Commission (SEC”).

In January 2022, we amended the Forward Purchase Agreements (“Amended Forward Purchase Agreements”) to:

(1) reduce the number of forward purchase shares from an aggregate of 7,500,000 to 3,000,000 and from a total $75,000,000 in the aggregate to $30,000,000 in the aggregate;

and (2) to add a requirement for the FPA Purchasers to provide a binding redemption backstop (the “Redemption Backstop”) to purchase an additional $15 million of redeeming shareholders in the event that redemptions are greater than 90% in connection with a Business Combination (the “Excess Redemptions”);

and (3) to add a requirement that at the time of entering into a binding agreement for the Business Combination, the Purchasers will directly provide the target merger company (Target”) with bridge financing of $30 million evidenced by a convertible promissory note (“Convertible Note”) which shall be convertible into the our Class A ordinary shares at the closing of the Business Combination.

On March 8, 2023, the Company and the FPA Purchasers entered into Amendment No.

2 to Forward Purchase Agreement and Related Agreements, pursuant to which, among other things, the FPA Purchasers agreed to purchase up to 1,500,000 shares of JATT’s Class A ordinary shares from the Company for an aggregate purchase price of up to $15,000,000 in the event that redemptions exceed certain thresholds.

The agreement previously provided that such shares would be purchased from public stockholders.

The FPA Purchasers will be issued an additional 2,500,000 Class A Shares upon the closing of the business combination previously announced between JATT and Zura in connection with the amendment.

For more information, the full text of the Amended Forward Purchase Agreements are included as Exhibit 10.1 to our Annual Report on Form 10-K for the period ended December 31, 2021, filed with the SEC on April 11, 2022, and our Current Report on 8-K dated March 10, 2023.

Critical Accounting Policies and Estimates before the Business Combination

This management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements.

On an ongoing basis, we evaluate our estimates and judgments, including those related to fair value of financial instruments and accrued expenses.

We base our estimates on historical experience, known trends and events and various other factors that we believe 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.

We have identified the following as our critical accounting policies:

Derivative Financial Instruments

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

We evaluate all of our financial instruments, including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

The warrants issued in connection with the Initial Public Offering (the “Public Warrants”) and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815.

Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period.

The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statements of operations.

The fair value of the Public Warrants and the Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation and a Black Scholes option pricing model, respectively.

The fair value of the Private Placement Warrants continues to be measured using a Black-Scholes option pricing model.

The fair value of the Public Warrants were subsequently measured at their listed trading price since they began to be separately listed and traded beginning in September 2021.

Derivative warrant liabilities are classified as non-current liabilities as their liquidation will not be reasonably expected to require the use of current assets or require the creation of current liabilities.

Net Income (Loss) Per Ordinary Share

We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A ordinary shares and Class B ordinary shares.

Income and losses are shared pro rata between the two classes of shares.

Net income (loss) per ordinary share is calculated by dividing the net income (loss) by the weighted average ordinary shares outstanding for the respective period.

The calculation of diluted net income per share does not consider the effect of the warrants issued in connection with the Initial Public Offering (including exercise of the over-allotment option) and the Private Placement to purchase an aggregate of 12,810,000 ordinary shares because their exercise is contingent upon future events.

The number of weighted average Class B ordinary shares for calculating basic net income per ordinary share was reduced for the effect of an aggregate of 450,000 Class B ordinary shares that were subject to forfeiture if the over-allotment option was not exercised in full or part by the underwriters.

Since the contingency was satisfied, the Company included these shares in the weighted average number as of the beginning of the period to determine the dilutive impact of these shares.

Fair value adjustment associated with the redeemable Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.

Class A Ordinary Shares Subject to Possible Redemption

We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC 480.

Class A ordinary shares subject to mandatory redemption (if any) is classified as liability instruments and are measured at fair value.

Conditionally redeemable Class A ordinary shares (including Class A ordinary shares that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.

At all other times, Class A ordinary shares is classified as shareholders’ equity.

Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events.

As of December 31, 2022 and 2021, 13,800,000 shares of Class A ordinary shares are subject to possible redemption and are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our consolidated balance sheets.

The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the Class A ordinary shares subject to possible redemption to equal the redemption value at the end of each reporting period.

Effective with the closing of the Initial Public Offering (including exercise of the over-allotment option), we recognized the fair value adjustment from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

Since our inception, we have not generated any revenue and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable.

As of December 31, 2023, we had cash and cash equivalents of $99.8 million.

As of December 31, 2023, we have funded our operations through (i) the sale of equity, raising an aggregate of $10.0 million of gross proceeds from the sale of our convertible preferred shares;

(ii) the issuance of a promissory note, receiving net proceeds of $7.6 million;

(iii) proceeds from the Business Combination of $56.7 million in March 2023;

and (iv) the April 2023 Private Placement, raising an aggregate of $80.0 million of gross proceeds from the sale of Class A Ordinary Shares and Pre-Funded Warrants in May and June 2023.

We have experienced operating losses and cash outflows from operations since inception and will require ongoing financing in order to continue our research and development activities.

We have not earned any revenue or reached successful commercialization of our products.

Our future operations are dependent upon our ability to finance our cash requirements which will allow us to continue our research and development activities and the commercialization of our products.

There can be no assurance that we will be successful in continuing to finance our operations.

Capital Requirements

To date, we have not generated revenue from any source, including the commercial sale of approved drug products, and we do not expect to generate revenue for at least the next few years.

If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be adversely affected.

We do not know when, or if, we will generate any revenue from our product candidates, and we do not expect to generate revenue unless and until we obtain regulatory approval of, and commercialize, our product candidates.

We expect our expenses to continue to increase in connection with our ongoing activities, particularly as we continue the research and development, and seek marketing approval for our product candidates, as well as administrative costs associated with supporting our operations.

In addition, if we obtain approval for any of our product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution.

Furthermore, we expect to incur additional costs associated with operating as a public company.

We will also be responsible to Pfizer and Lilly for significant future contingent payments under the Pfizer Agreement, the 2022 Lilly License, and the 2023 Lilly License (collectively with the 2022 Lilly License, the “Lilly Licenses”) upon the achievement of certain development, regulatory, and sales milestones, as well as ongoing royalties on net commercial sales.

The size and timing of these milestone payments will vary greatly depending upon a number of factors, and it is therefore difficult to estimate the total payments that could become payable to Pfizer and Lilly and when those payments would be due.

If we achieve all of the milestones, we would be obligated to pay multimillion dollar development and regulatory milestone payments and sales milestone payments.

We will be required to pay certain of these milestone payments prior to the time at which we are able to generate sufficient revenue, if any, from commercial sales of any of our product candidates.

We intend to fund these milestone payments using a portion of the proceeds from the Business Combination and the April 2023 Private Placement.

In addition to milestone payments, we are also required to pay Pfizer and Lilly under the Pfizer Agreement and Lilly Licenses, respectively, ongoing royalties in the mid-single digits to low double-digits (less than 20%) percentage range based upon thresholds of net sales of products.

We anticipate that we will need substantial additional funding in connection with our continuing operations.

We intend to devote most of the net proceeds from the Business Combination and the April 2023 Private Placement to the preclinical and clinical development of our product candidates, our public company compliance costs and certain milestone payments under the Pfizer Agreement and Lilly Licenses.

Based on our current business plans, we believe that the net proceeds from the Business Combination and the Private Placement (as defined below) will enable us to fund our operating expenses and capital requirements through at least the next twelve months.

Our estimate as to how long we expect the net proceeds from the Business Combination and the Private Placement to be able to fund our operating expenses and capital requirements is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

Changing circumstances, some of which may be beyond our control, could result in less cash available to us or cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drug products, we are unable to estimate the exact amount of our operating capital requirements.

Our future funding requirements will depend on many factors, including, but not limited to:

● the extent to which we develop, in-license or acquire other product candidates and technologies in our product candidates pipeline;

● the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs as we advance them through preclinical and clinical development;

● the number and development requirements of product candidates that we may pursue;

● the costs, timing and outcome of regulatory review of our product candidates;

● the timing and amount of our milestone payments to Pfizer under the Pfizer Agreement and to Lilly under the Lilly Licenses;

● our headcount growth and associated costs as we expand our research and development capabilities and establish and expand our commercial infrastructure and operations;

● the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distributions, for any of our product candidates for which we receive marketing approval;

● royalty payments to Pfizer under the Pfizer Agreement and Lilly under the Lilly Licenses;

● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

● the revenue, if any, received from sales of our product candidates for which we receive marketing approval;

● the costs of operating as a public company

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many 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.

Our commercial revenues, if any, will be derived from sales of our product candidates that we do not expect to be commercially available in the near term, if at all.

Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

Adequate additional financing may not be available to us on acceptable terms, or at all.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict our ability to operate.

Any future debt financing and equity financing, if available, may involve covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

2022 (date of

inception) to

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash flows from operating activities

Cash used in operating activities for the year ended December 31, 2023 was $15.1 million, which consisted of a net loss before redeemable noncontrolling interest of $60.6 million, partially offset by $40.4 million in non-cash charges and a net change of $5.1 million in our net operating assets and liabilities.

The non-cash charges consisted of expense incurred in connection with the 2023 Lilly License of $27.4 million, a change in fair value of our promissory note of $2.2 million, a change in fair value of our research and development license consideration liability of $1.9 million, share-based payment expense of $2.2 million related to the anti-dilution shares issued to Pfizer, additional share-based payments of $7.5 million, and a change in fair value on the private placement warrants of $0.7 million.

Cash used in operating activities for the period ended December 31, 2022 was $1.2 million, which consisted of a net loss before redeemable noncontrolling interest of $27.3 million, partially offset by non-cash charges of $22.6 million and a net change of $3.5 million in our net operating assets and liabilities.

The non-cash charges consisted of the $21.9 million cost of the acquisitions of the licenses under the Pfizer Agreement and 2022 Lilly License, which were expensed to research and development, a change in fair value of our promissory note of $0.2 million, a change in fair value of our research and development license consideration liability of $0.2 million, and share-based payment expense of $0.3 million.

Cash flows from investing activities

Cash used in investing activities for the year ended December 31, 2023 was $8.0 million, which was entirely related to the cash consideration paid to acquire the 2023 Lilly License.

Cash used in investing activities for the period ended December 31, 2022 was $12.0 million, which was entirely related to the cash consideration paid to acquire the license under the Pfizer Agreement and the license under the 2022 Lilly License.

Cash flows from financing activities

Cash provided by financing activities for the year ended December 31, 2023 was $121.3 million, which consisted of $56.7 million of net proceeds from the issuance of shares upon the closing of the Business Combination and $59.7 million of proceeds, net of transaction costs, from the issuance of Class A Ordinary Shares in connection with the April 2023 Private Placement, and $16.1 million of proceeds from the issuance of Pre-Funded Warrants in connection with the April 2023 Private Placement, partially offset by a $10.0 million repayment of our promissory note and the payment of $1.2 million of deferred transaction costs.

Cash provided by financing activities for the period ended December 31, 2022 was $14.8 million, which consisted of $10.0 million from the issuance of Series A-1 convertible preferred shares of Legacy Zura in March 2022 and $7.6 million in net proceeds from the issuance of the Note to Hydra, partially offset by the payment of $2.8 million of deferred transaction costs.

Contractual Obligations and Other Commitments

We have or will enter into agreements in the normal course of business with contract research organizations, contract manufacturing organizations and other vendors for research and development services for operating purposes, which are generally cancelable upon written notice.

Some third party CMOs have intellectual property, such as patents and/or know-how with an annual fee and royalty bearing license to its customers that forms part of the manufacturing agreement.

We have entered into the Lonza License for a worldwide non-exclusive license for Lonza’s gene expression system in exchange for varying considerations depending on a number of factors such as whether the Company enters further into manufacturing agreements with Lonza or with a third party, and whether the Company enters into sublicense agreements with third parties (including up to middle six-figure annual payments per sublicense upon commencement of a sublicense, as well as royalties of up to low-single digit percentages of net sales of certain products over a commercially standard double-digit multi-year term).

The Lonza License will remain in effect until terminated.

The Company is free to terminate the Lonza License at any time upon 60 days’ notice, with or without cause.

Lonza may terminate the Lonza License for cause upon a breach by the Company or for other commercially standard reasons.

During October 2023, the Company began drug substance manufacturing with a third-party.

As a result of manufacturing with a third-party other than Lonza, under the terms of the Lonza License the first annual milestone payment of $0.4 million became due and payable.

WuXi Biologics

In July 2023, we entered into a biologics master services agreement (the “WuXi Biologics MSA”) with WuXi Biologics.

Under the WuXi Biologics MSA, we are obligated to pay WuXi Biologics a service fee and all non-cancellable obligations in the amount specified in each work order associated with the agreement for the provision of services.

The WuXi Biologics MSA terminates on the completion of services under all work orders executed by the parties, unless terminated earlier.

The term of each work order terminates upon completion of the services under such work order, unless terminated earlier.

We can terminate the WuXi Biologics MSA or any work order at any time upon 30 days’ prior written notice and immediately upon written notice if WuXi Biologics fails to obtain or maintain required material governmental licenses or approvals.

Either party may terminate a work order at any time upon three months’ prior notice with reasonable cause, provided however that if WuXi Biologics terminates a work order in such manner, no termination or cancellation fees shall be paid by us and immediately for cause upon the other party’s material breach that remains uncured for 30 days after notice of such breach.

In July 2023, we entered into a cell line license agreement (the “Cell Line License Agreement”) with WuXi Biologics.

The Cell Line License Agreement provides the Company with a non-exclusive, worldwide, sublicensable license to certain of WuXi Biologics’s know-how, cell line, and biological materials (the “WuXi Biologics Licensed Technology”) to manufacture, have manufactured, use, sell and import certain products produced through the use of the cell line licensed by WuXi Biologics under the Cell Line License Agreement (the “WuXi Biologics Licensed Products”).

In consideration for the license, we agreed to pay WuXi Biologics a non-refundable license fee of $150,000.

Additionally, if we manufacture all of our commercial supplies of bulk drug product with a manufacturer other than WuXi Biologics or its affiliates, we are required to make royalty payments to WuXi Biologics in an amount equal to a fraction of a single digit percentage of global net sales of WuXi Biologics Licensed Products manufactured by a third-party manufacturer (the “Royalty”).

If we manufacture part of our commercial supplies of the WuXi Biologics Licensed Products with WuXi Biologics or its affiliates, then the Royalty will be reduced accordingly on a pro rata basis.

The Cell Line License Agreement will continue indefinitely unless terminated (i) by us upon three months’ prior written notice and its payment of all undisputed amounts due to WuXi Biologics through the effective date of termination, (ii) by WuXi Biologics for a material breach by us that remains uncured for 30 days after written notice, or (iii) by WuXi Biologics if we fail to make a payment and such failure continues for 30 days after receiving notice of such failure.

We have not included future milestone or royalty payments or other contractual payment obligations as the timing and amount of such obligations are unknown or uncertain and are contingent upon the initiation, continuation, and/or successful completion of future activities.

Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

Generally Accepted Accounting Principles.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate research and development costs incurred during the period, which impacts the amount of accrued expenses and prepaid balances related to such costs as of each balance sheet date.

This process involves reviewing open contracts and purchase orders, communicating with our personnel and service providers to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met.

We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time.

We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary.

The significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced.

To date, our estimated accruals have not differed materially from actual costs incurred.

External costs consist primarily of payments to third parties in connection with our process development, manufacturing and clinical development activities.

External expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date.

We allocate external costs by program and functional area.

Internal costs consist primarily of employee-related costs including salaries, related benefits and share-based compensation expense for employees engaged in research and development functions.

We do not allocate internal costs by program because these costs are deployed across multiple programs and, as such, are not separately classified.

Share-Based Compensation

When share-based awards are granted to executives, directors, employees, and consultants, the fair value of the equity instruments at the date of grant is charged to the consolidated statements of operations over the vesting period.

When the terms and conditions are modified before they vest, any increase in the fair value of the shares, measured immediately before and after the modification, is also charged to the consolidated statements of operations.

We recognize share-based compensation expense for share options on a straight-line basis over the requisite service period and account for forfeitures as they occur.

Our share-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes option pricing model.

This model utilizes inputs which are highly subjective assumptions and generally require significant judgment.

These assumptions include:

Expected volatility —Due to our limited operating history and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded.

The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the share-based awards.

We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

Expected term —The expected term represents the period that the stock-based awards are expected to be outstanding.

We have opted to use the “simplified method” for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option, which is generally between 5 to 10 years.

Dividend Yield —We have never paid dividends on our ordinary shares and have no plans to pay dividends on our ordinary shares.

Therefore, we used an expected dividend yield of zero.

Redeemable Noncontrolling Interest

Our consolidated subsidiary Z33 issued its Series Seed Preferred Shares to Stone Peach as a finder’s fee for the 2022 Lilly License.

As the agreement to issue the Z33 preferred shares included embedded put and call features, the shares issued to Stone Peach represent redeemable noncontrolling interest that we were required to initially measure at fair value at issuance.

The agreement between Z33 and Stone Peach was amended in both April 2023 and November 2023.

The amendments were accounted for as extinguishments and reissuances of the Z33 Series Seed Preferred Shares which triggered the Company to remeasure the fair value of the Z33 Series Seed Preferred Shares at those points in time.

The fair value of the shares without the embedded features was first determined using an option pricing model which utilizes inputs which are highly subjective assumptions and generally require significant judgement.

These assumptions include expected volatility, expected term, the underlying value of Z33’s equity, a discount for lack of control, and a discount for lack of marketability.

We then valued the embedded put and call features utilizing the Black-Scholes option pricing model utilizing inputs which are highly subjective and require significant judgement, including expected volatility, expected term, and the fair value of a Z33 preferred share.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas.

We adopted ASU 2020-06 on March 10, 2021 (inception).

Adoption of the ASU did not impact our financial position, results of operations or cash flows.

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 will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies.

We are electing 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.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.

Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (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, (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) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.

See Note 2 to our consolidated financial statements located in “Part I – Financial Information, Item 1.

Financial Statements” in this Annual Report for a description of recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition of results of operations.

Emerging Growth Company and Smaller Reporting Company Status

In April 2012, the JOBS Act was enacted.

Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

Upon closing of the Business Combination, remained an emerging growth company and may elect to extend the transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.

In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies.

These provisions include:

● being permitted to present only two years of audited financial statements in addition to any required unaudited interim financial statements, with correspondingly reduced disclosure in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

● an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;

● reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registrations statements;

● exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements;

and an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on financial statements.

We would cease to qualify as an emerging growth company on the date that is the earliest of:

(i) December 31, 2026, (ii) the last day of the fiscal year in which we have more than $1.07 billion in total annual gross revenues, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our Class A Ordinary Shares that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or (iv) the date on which we have issued more than $1.0 billion of non-convertible debt over the prior three-year period.

We may choose to take advantage of some but not all of these reduced reporting burdens.

We have taken advantage of certain reduced reporting requirements in this Quarterly report on Form 10-Q.

Accordingly, the information contained herein may be different than you might obtain from other public companies in which you hold equity interests.

We are also a “smaller reporting company” as defined under the Securities Act and Exchange Act.

We may continue to be a smaller reporting company so long as either (i) the market value of Class A Ordinary Shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of Class A Ordinary Shares held by non-affiliates is less than $700 million.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and have reduced disclosure obligations regarding executive compensation, and, similar to emerging growth companies, if we are a smaller reporting company under the requirements of (ii) above, we would not be required to obtain an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company”, we are not required to provide the information otherwise required by this Item 3.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis