UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 001-41002

Tevogen Bio Holdings Inc.

(Exact name of registrant as specified in its charter)

Delaware		98-1597194
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

15 Independence Boulevard, Suite #410 Warren, New Jersey		07059
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (877) 838-6436

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	TVGN	The Nasdaq Stock Market LLC
Warrants, each exercisable for one share of Common Stock for $11.50 per share	TVGNW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No ☒

As of August 12, 2024, there were 170,646,864 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Table of Contents

	Page
Part I – Financial Information	1
Item 1. Financial Statements (Unaudited)	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	30
Item 4. Controls and Procedures.	30
Part II – Other Information	31
Item 1. Legal Proceedings.	31
Item 1A. Risk Factors.	31
Item 5. Other Information.	32
Item 6. Exhibits.	33
Signatures	34

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Tevogen Bio Holdings Inc.

UNAUDITED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2024			2023
Assets
Current assets:
Cash	$	1,135,390		$	1,052,397
Prepaid expenses and other assets		1,152,554			670,582
Due from related party		158,819			—
Total current assets		2,446,763			1,722,979

Property and equipment, net		377,547			458,651
Right-of-use assets - operating leases		352,673			469,862
Deferred transaction costs		—			2,582,870
Other assets		133,276			271,141
Total assets	$	3,310,259		$	5,505,503

Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	6,666,229		$	3,418,378
Accrued expenses and other liabilities		1,776,047			1,096,450
Operating lease liabilities		268,672			252,714
Notes payable		1,651,000			—
Convertible promissory notes		—			80,712,000
Due to related party		250,000			—
Total current liabilities		10,611,948			85,479,542

Convertible promissory notes		—			14,220,000
Operating lease liabilities		96,809			234,858
Derivative warrant liabilities		22,185			—
Written call option derivative liabilities		213,214			—
Total liabilities		10,944,156			99,934,400

Stockholders’ deficit
Series A Preferred Stock, $0.0001 par value; 2,000 shares authorized; 500 shares issued and outstanding as of June 30, 2024		2,799,990			—
Common stock, $0.0001 par value; 800,000,000 shares authorized; 168,826,402 and 119,999,989 shares issued and outstanding at June 30, 2024 and December 31, 2023		16,883			12,000
Additional paid-in capital		87,605,572			5,216,840
Accumulated deficit		(98,056,342	)		(99,657,737	)
Total stockholders’ deficit		(7,633,897	)		(94,428,897	)
Total liabilities and stockholders’ deficit	$	3,310,259		$	5,505,503

See accompanying notes to the unaudited consolidated financial statements.

TEVOGEN BIO HOLDINGS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

	2024			2023			2024			2023
	Three months ended June 30,						Six months ended June 30,
	2024			2023			2024			2023
Operating expenses:
Research and development	$	4,124,450		$	1,031,393		$	24,936,032		$	2,378,566
General and administrative		4,474,577			1,153,073			13,179,719			2,130,182
Total operating expenses		8,599,027			2,184,466			38,115,751			4,508,748
Loss from operations		(8,599,027	)		(2,184,466	)		(38,115,751	)		(4,508,748	)
Interest income (expense), net		6			(299,887	)		(155,780	)		(588,884	)
Merger transaction costs		—			—			(7,499,353	)		—
Change in fair value of warrants		38,788			—			6,815			—
Change in fair value of convertible promissory notes		—			(19,700,000	)		48,468,678			(47,842,865	)
Change in fair value of written call option derivative liabilities		(213,214	)		—			(213,214	)		—
Loss on issuance of commitment shares		(890,000	)		—			(890,000	)		—
Net income (loss)	$	(9,663,447	)	$	(22,184,353	)	$	1,601,395		$	(52,940,497	)

Net income (loss) attributable to common stockholders, basic	$	(6,075,379	)	$	(22,184,353	)	$	5,044,907		$	(52,940,497	)
Net loss attributable to common stockholders, diluted	$	(6,075,379	)	$	(22,184,353	)	$	(43,124,798	)	$	(52,940,497	)
Net income (loss) per share attributable to common stockholders, basic	$	(0.04	)	$	(0.18	)	$	0.03		$	(0.44	)
Net loss per share attributable to common stockholders, diluted	$	(0.04	)	$	(0.18	)	$	(0.29	)	$	(0.44	)
Weighted-average common stock outstanding, basic		154,167,090			119,999,989			145,655,205			119,999,989
Weighted-average common stock outstanding, diluted		154,167,090			119,999,989			148,154,361			119,999,989

See accompanying notes to the unaudited consolidated financial statements.

Tevogen Bio Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

	Shares		Amount		Shares			Amount			Shares		Amount		capital			deficit			Total
	Series A Preferred Stock				Series B Preferred Stock						Common Stock				Additional paid-in			Accumulated
	Shares		Amount		Shares			Amount			Shares		Amount		capital			deficit			Total
Balance at January 1, 2024		—	$	—		—		$	—			119,999,989	$	12,000	$	5,216,840		$	(99,657,737	)	$	(94,428,897	)
Issuance of Series A preferred stock		500		2,799,990		—			—			—		—		—			—			2,799,990
Nonrefundable prepaid proceeds towards anticipated Series A-1 preferred stock issuance		—		—		—			—			—		—		200,000			—			200,000
Issuance of Series B preferred stock		—		—		3,613			3,613,000			—		—		—			—			3,613,000
Conversion of convertible promissory notes into common stock in connection with merger		—		—		—			—			10,337,419		1,034		46,621,593			—			46,622,627
Merger, net of redemptions and transaction costs		—		—		—			—			14,778,056		1,478		(2,885,459	)		—			(2,883,981	)
Issuance of restricted common stock		—		—		—			—			19,348,954		1,935		(1,935	)		—			—
Issuance of common stock for Sponsor advisory service fee		—		—		—			—			150,000		15		676,485			—			676,500
Stock-based compensation		—		—		—			—			—		—		26,333,249			—			26,333,249
Net income		—		—		—			—			—		—		—			11,264,842			11,264,842
Balance at March 31, 2024		500		2,799,990		3,613			3,613,000			164,614,418		16,462		76,160,773			(88,392,895	)		(5,802,670	)
Issuance of commitment shares in connection with the Loan Agreement		—		—		—			—			1,000,000		100		889,900			—			890,000
Issuance of common stock in connection with Polar note payable		—		—		—			—			1,500,000		150		(150	)		—			—
Issuance of common stock in settlement of vested restricted stock units		—		—		—			—			1,711,984		171		(171	)		—			—
Nonrefundable prepaid proceeds towards anticipated Series A-1 preferred stock issuance		—		—		—			—			—		—		2,800,000			—			2,800,000
Repurchase of Series B preferred stock		—		—		(3,613	)		(3,613,000	)		—		—		3,613,000			—			—
Stock-based compensation		—		—		—			—			—		—		4,142,220			—			4,142,220
Net loss		—		—		—			—			—		—		—			(9,663,447	)		(9,663,447	)
Balance at June 30, 2024		500	$	2,799,990		—		$	—			168,826,402	$	16,883	$	87,605,572		$	(98,056,342	)	$	(7,633,897	)

	Series A Preferred Stock				Series B Preferred Stock				Common Stock				Additional paid-in		Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		capital		deficit			Total
Balance at January 1, 2023		—	$	—		—	$	—		119,999,989	$	12,000	$	5,216,840	$	(39,180,057	)	$	(33,951,217	)
Net loss		—		—		—		—		—		—		—		(30,756,144	)		(30,756,144	)
Balance at March 31, 2023		—		—		—		—		119,999,989		12,000		5,216,840		(69,936,201	)		(64,707,361	)
Balance		—	$	-		—		—		119,999,989	$	12,000	$	5,216,840	$	(69,936,201	)	$	(64,707,361	)
Net loss		—		—		—		—		—		—		—		(22,184,353	)		(22,184,353	)
Net income (loss)		—		—		—		—		—		—		—		(22,184,353	)		(22,184,353	)
Balance at June 30, 2023		—	$	—		—	$	—		119,999,989	$	12,000	$	5,216,840	$	(92,120,554	)	$	(86,891,714	)
Balance		—	$	-		—	$	-		119,999,989	$	12,000	$	5,216,840	$	(92,120,554	)	$	(86,891,714	)

See accompanying notes to the unaudited consolidated financial statements.

Tevogen Bio Holdings Inc.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	2024			2023
	Six months ended June 30,
	2024			2023
Cash flows from operating activities:
Net income (loss)	$	1,601,395		$	(52,940,497	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation expense		81,104			79,471
Stock-based compensation expense		30,475,469			—
Non-cash interest expense		159,305			589,135
Merger transaction costs		7,099,353			—
Change in fair value of convertible promissory notes		(48,468,678	)		47,842,865
Loss on Series A Preferred Stock issuance		799,990			—
Loss on issuance of commitment shares		890,000			—
Change in fair value of warrants		(6,815	)		—
Issuance of written call option		375,000			—
Change in fair value of written call option derivative liabilities		(161,786	)		—
Amortization of right-of-use asset		117,189			104,438
Change in operating assets and liabilities:
Prepaid expenses and other assets		(479,471	)		144,472
Other assets		(68,446	)		21,343
Accounts payable		3,151,676			372,614
Accrued expenses and other liabilities		(589,529	)		(500,656	)
Operating lease liabilities		(122,091	)		(107,839	)
Net cash used in operating activities		(5,146,335	)		(4,394,654	)
Cash flows from investing activities:
Purchases of property and equipment		—			(133,000	)
Net cash used in investing activities		—			(133,000	)
Cash flows from financing activities:
Cash acquired in connection with the reverse recapitalization		229,328			—
Proceeds from issuance of Series A Preferred Stock		2,000,000			—
Nonrefundable prepaid proceeds towards anticipated Series A-1 Preferred Stock Issuance		3,000,000			—
Proceeds from issuance of convertible promissory notes		—			2,500,000
Net cash provided by financing activities		5,229,328			2,500,000
Net increase (decrease) in cash		82,993			(2,027,654	)
Cash – beginning of period		1,052,397			5,484,265
Cash – end of period	$	1,135,390		$	3,456,611
Supplementary disclosure of noncash investing and financing activities:
de-SPAC transaction fees included in accrued expenses and other liabilities		—			276,000
Conversion of convertible promissory notes into common stock in connection with Merger		46,622,627			—
Repurchase of Series B preferred stock		3,613,000			—
Issuance of common stock for net liabilities upon reverse recapitalization, net of transaction costs		(3,113,309	)		—

See accompanying notes to the unaudited consolidated financial statements.

TEVOGEN BIO HOLDINGS INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS

Tevogen Bio Holdings Inc., a Delaware corporation (the “Company”), is a clinical-stage specialty immunotherapy company harnessing the power of CD8+ cytotoxic T lymphocytes to develop off-the-shelf, precision T cell therapies for the treatment of infectious diseases, cancers, and neurological disorders. The Company’s precision T cell technology platform, ExacTcell, is a set of processes and methodologies to develop, enrich, and expand single human leukocyte antigen-restricted CTL therapies with proactively selected, precisely defined targets. The Company has completed a Phase 1 proof-of-concept trial for the first clinical product of ExacTcell, TVGN 489, for the treatment of ambulatory, high-risk adult COVID-19 patients, and has other product candidates in its pipeline.

On February 14, 2024 (the “Closing Date”), pursuant to the agreement and plan of merger dated June 28, 2023 (the “Merger Agreement”), by and among Semper Paratus Acquisition Corporation (“Semper Paratus”), Semper Merger Sub, Inc., a wholly owned subsidiary of Semper Paratus (“Merger Sub”) SSVK Associates, LLC, (the “Sponsor”) Tevogen Bio Inc (n/k/a Tevogen Bio Inc.) (“Tevogen Bio”), and Dr. Ryan Saadi in his capacity as seller representative, Merger Sub merged with and into Tevogen Bio with Tevogen Bio being the surviving company and a wholly owned subsidiary of the Company (the “Merger,” and together with the other transactions contemplated by the Merger Agreement, the “Business Combination”), and Semper Paratus was renamed Tevogen Bio Holdings Inc.

In connection with the closing of the Business Combination (the “Closing”), the then-outstanding shares of common stock of Tevogen Bio, were converted into shares of the common stock of the Company at an exchange ratio of approximately 4.85 shares of Company common stock for each share of Tevogen Bio common stock (the “Exchange Ratio”). See Note 4 for more information on the Business Combination.

As discussed in Note 4, the Merger was accounted for as a reverse recapitalization under which the historical financial statements of the Company prior to the Merger are those of Tevogen Bio. All information related to the common stock of Tevogen Bio prior to the Closing and presented in the consolidated financial statements and notes thereto has been retroactively adjusted to reflect the Exchange Ratio.

Following the Merger, the former equity holders and holders of convertible promissory notes of Tevogen Bio held 91.0% of the outstanding shares of common stock of the Company and the former shareholders, creditors, and other contractual counterparties of Semper Paratus held 9.1% of the Company.

NOTE 2. DEVELOPMENT-STAGE RISKS AND LIQUIDITY

The Company has generally incurred losses and negative cash flows from operations since inception and had an accumulated deficit of $98,056,342 as of June 30, 2024. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales from its product candidates currently in development. Management believes that cash of $1,135,390 as of June 30, 2024 and the Loan Agreement entered into in June 2024 (as defined in Note 7), which allows the Company to draw down term loans of $1,000,000 per month over thirty-six months for a total of $36,000,000, will allow the Company to have adequate cash and financial resources to operate for at least the next 12 months from the date of issuance of these unaudited consolidated financial statements. In July 2024, the Company drew $500,000 under the Loan Agreement. In August 2024, the Company drew an additional $500,000 under the Loan Agreement. The Company does not plan to initiate a clinical trial until additional funding is received.

Management is currently evaluating different strategies to obtain the additional funding for future operations for subsequent periods. These strategies may include but are not limited to private placements of equity and/or debt, licensing and/or marketing arrangements, and public offerings of equity and/or debt securities. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain additional funding, the Company could be required to delay, reduce or eliminate research and development programs, product portfolio expansion, or future commercialization efforts, which could adversely affect its business prospects.

Operations since inception have consisted primarily of organizing the Company, securing financing, developing licensed technologies, performing research, conducting pre-clinical studies and clinical trials, and pursuing the Business Combination. The Company is subject to risks associated with any specialty biotechnology company that has substantial expenditures for research and development. There can be no assurance that the Company’s research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants.

Tevogen Bio Holdings Inc.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies included in the Company’s annual financial statements that can be found in Exhibit 99.1 of the Company’s Current Report on Form 8-K/A filed with the SEC on April 29, 2024 (the “Form 8-K”), have not materially changed, except as reflected in the following:

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company are presented in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of a normal recurring nature, (which consist primarily of accruals, estimates, and assumptions that impact the consolidated financial statements) that are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations of Tevogen Bio filed as Exhibits 99.1 and 99.2 to the Form 8-K. The interim results for the period presented are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or for any future interim periods.

Use of Estimates

In preparing unaudited consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of expenses. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed, and the effects of revisions are reflected in the unaudited consolidated financial statements in the period they are determined to be necessary.

Significant areas that require management’s estimates include the fair value of the common stock and convertible promissory notes prior to the Merger, the fair value of the Series A Preferred Stock and Series B Preferred Stock, fair value of the purchase options under the Loan Agreement, stock-based compensation assumptions, the estimated useful lives of property and equipment and accrued research and development expenses.

Freestanding and Embedded Common Stock Purchase Options

Equity-linked purchase options issued in connection with the Loan Agreement (as defined below) are assessed to determine whether they are freestanding or embedded with the host instrument under ASC 815, Derivatives and Hedging-Contracts in Entity’s Own Equity (“ASC 815”). Each type of purchase option is then assessed for equity or liability classification under ASC 815. The Company’s embedded and freestanding purchase options were determined to be liability-classified derivative instruments and are measured at fair value both on the date of issuance and at each subsequent balance sheet date, with changes in fair value recorded to ‘Change in fair value of written call option derivative liabilities’ within the consolidated statements of operations and consolidated statements of cash flows.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash.

Segment Reporting

Operating segments are defined as components of an entity for which discrete financial information is both available and regularly reviewed by its chief operating decision maker or decision-making group. The Company views its operations and manages its business in one segment.

Tevogen Bio Holdings Inc.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Warrants

As the result of the Merger, the Company accounts for its warrants originally sold as part of Semper Paratus’s initial public offering (the “IPO”) in accordance with ASC 815, and considering ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). The assessment considers whether the warrants are freestanding financial instruments and meet the definition of a liability pursuant to ASC 480 and meet all of the conditions for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of common stock, among other conditions. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter until settlement. Changes in the estimated fair value of the warrants are recognized as a non-cash loss on the consolidated statements of operations. Under these standards, the Company’s private placement warrants sold at the time of the IPO do not meet the criteria for equity classification and must be recorded as liabilities while the public warrants sold in connection with the IPO do meet the criteria for equity classification and must be recorded as equity.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar, but not identical, assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data;

Level 3	Unobservable inputs in which there is little or no market data available and which require the Company to develop its own assumptions that market participants would use in pricing an asset or liability.

Financial instruments recognized at historical amounts in the balance sheets consist of accounts payable and notes payable. The Company believes that the carrying value of accounts payable and notes payable approximates their fair values due to the short-term nature of these instruments.

The Company’s recurring fair value measurements consist of the convertible promissory notes prior to the Merger, for which the Company elected the fair value option to reduce accounting complexity and private warrants after the Merger. Such fair value measurements are Level 3 inputs. The following table provides a roll-forward of the aggregate fair values of the Company’s convertible promissory notes.

SCHEDULE OF FAIR VALUE MEASUREMENT

Balance at January 1, 2024	$	94,932,000
		-
Accrued interest expense		159,305
Change in fair value		(48,468,678	)
Derecognition upon conversion of convertible promissory notes		(46,622,627	)
Balance at June 30, 2024	$	—

Balance at January 1, 2023	$	39,297,000
Initial fair value at issuance		2,500,000
Accrued interest expense		589,135
Change in fair value		47,842,865
Balance at June 30, 2023	$	90,229,000

The Company used the probability weighted expected return method valuation methodology to determine the fair value of the convertible promissory notes prior to the Merger. Significant assumptions and ranges used in determining the fair value of convertible promissory notes prior to the Merger included volatility (80%), discount rate (35% - 36%), and probability of a future liquidity event (85% - 95%). The Company used its stock price on the Closing Date to determine the fair value for the conversion derecognition of the convertible promissory notes on the Closing Date.

There were no transfers between levels during the six months ended June 30, 2024 and 2023.

Tevogen Bio Holdings Inc.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Upon the Closing, the Company acquired private warrants the fair value of which decreased by $6,815 between the Closing Date and June 30, 2024. Such fair value measurements are Level 3 inputs. The following table provides a roll-forward of the aggregate fair values of the warrants.

SCHEDULE OF FAIR VALUES OF WARRANTS

	Derivative warrant liabilities
Balance at February 15, 2024	$	—
Initial fair value at issuance		29,000
Change in fair value		(6,815	)
Balance at June 30, 2024	$	22,185

In June 2024, the Company acquired written call options, the fair value of which decreased by $161,786 between the issuance and June 30, 2024. Such fair value measurements are Level 3 inputs. The following table provides a roll-forward of the aggregate fair values of the written call options.

	Written call option derivative liabilities
Balance at February 15, 2024	$	—
Initial fair value at issuance		375,000
Change in fair value		(161,786	)
Balance at June 30, 2024	$	213,214

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

	Level		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Liabilities:
Derivative warrant liabilities		3	$	—	$	—	$	22,185
Written call option derivative liabilities		3	$	—	$	—	$	213,214

The Company’s nonrecurring fair value measurements consist of Series A Preferred Stock. Such fair value measurements are Level 3 inputs. The Company determined the fair value of Series A Preferred Stock using a Monte Carlo simulation. Key inputs utilized in the Monte Carlo simulation to estimate fair value of Series A Preferred Stock included a range of volatility between 75% to 85%, a holding period to a deemed liquidation event, as defined in the Series A Preferred Stock agreement, ranging from 0.5 to 10.0 years, and a risk-free interest rate between 4.3% and 5.3%. The difference between the cash received of $2,000,000 upon issuance of the Series A Preferred Stock and its estimated fair value was recognized as general and administrative expense on the consolidated statements of operations.

In June 2024, the Company entered into a Loan Agreement (the “Loan Agreement”) with The Patel Family, LLP (the “Lender”), a related party of the Company, providing for an unsecured line of credit facility (the “Facility”) for term loans of up to $36,000,000. The Company used a Monte Carlo simulation to determine the fair value of the freestanding $14,000,000 purchase option and embedded $36,000,000 purchase option associated with the Loan Agreement. The Monte Carlo simulation methodology simulates the Company’s future stock price to estimate if and when the Trailing VWAP (as defined below) will reach $10.00 per share, and discounts the resulting payoff back to each valuation date using a present value factor. Significant assumptions used in determining the fair value of these options include volatility of 72.5% and discount rate of 4.94%.

Net Income (Loss) Per Share

The Company computes basic net income (loss) per share by dividing net income (loss) by the weighted-average common stock outstanding during the period. The Company determined that each outstanding share of preferred stock and restricted common stock would participate in earnings available to common stockholders but would not participate in losses. The Company computes diluted net income (loss) per share by dividing the net income (loss) by the sum of the weighted-average number of common stock outstanding during the period, plus the potential dilutive effects, if any, of potentially dilutive securities.

Recently Issued Accounting Standards

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 the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. ASU 2020-06 also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. Effective January 1, 2024, the Company adopted ASU 2020-06 and that adoption did not have an impact on its consolidated financial statements and related disclosures.

Tevogen Bio Holdings Inc.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 enhances reportable segment disclosures by requiring disclosures such as significant segment expenses, information on the chief operating decision maker and disclosures for entities with a single reportable segment. Additionally, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, and contain other disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company does not expect the adoption of ASU 2023-07 to have a material impact on its consolidated financial statements and related disclosures.

NOTE 4. BUSINESS COMBINATION

On the Closing Date, the Company completed the Business Combination described in Note 1. The Merger was accounted for as a reverse recapitalization under GAAP because Tevogen Bio was determined to be the accounting acquirer based upon the terms of the Merger and other factors, including that following the Merger, former Tevogen Bio (i) equityholders and holders of convertible promissory notes owned approximately 91.0% of the Company, (ii) directors constituted the majority (six of seven) of the directors of the Company, and (iii) management held all key positions of management of the Company. Accordingly, the Merger was treated as the equivalent of Tevogen Bio issuing stock to acquire the net assets of Semper Paratus. As a result of the Merger, the net liabilities of Semper Paratus were recorded at their acquisition-date fair value in the consolidated financial statements and the reported operating results prior to the Merger are those of Tevogen Bio. Immediately after the Merger, there were 164,614,418 shares of the Company’s common stock outstanding.

The following table shows the net liabilities acquired in the Merger:

	February 14, 2024
Cash	$	229,328
Due from Sponsor		158,819
Prepaid expenses and other assets		2,501
Accounts payable		(96,175	)
Accrued expenses		(1,269,126	)
Notes payable		(1,651,000	)
Derivative warrant liabilities		(29,000	)
Total net liabilities acquired		(2,654,653	)
Plus: Merger transaction costs limited to cash acquired		(229,328	)
Total net liabilities acquired plus transaction costs	$	(2,883,981	)

Total transaction costs of $7,728,681 were incurred in relation to the Merger through the Closing Date, of which $229,328 were charged directly to equity to the extent of the cash received from the Merger, with the balance of $7,499,353 charged to Merger transaction costs for the six months ended June 30, 2024.

Former holders of Tevogen Bio common stock and the Sponsor are eligible to receive up to an aggregate of 24,500,000 shares of common stock (“Earnout Shares”) if the volume-weighted average price (the “VWAP”) of the Company’s common stock reaches specified threshold levels during the three-year period commencing on the Closing Date. Refer to Note 5, Earnout Shares, for further details of the earnout arrangement.

In connection with the Merger, the Company issued Series B Preferred Stock to the Sponsor in return for the Sponsor assuming $3,613,000 of liabilities and obligations (“Assumed Liabilities”) of Semper Paratus and Tevogen Bio. The issuance date fair value of the Series B Preferred Stock was recorded to Merger transaction costs within the consolidated statements of operations. All of the issued Series B Preferred Stock was repurchased by the Company during the three months ended June 30, 2024 in exchange for the Sponsor being released from their obligation to repay the Assumed Liabilities. See Note 9 for additional information.

NOTE 5. EARNOUT SHARES

Following the Closing, former holders of Tevogen Bio common stock may receive up to 20,000,000 Earnout Shares in tranches of 6,666,667, 6,666,667, and 6,666,666 shares of common stock per tranche, respectively. The first, second, and third tranches are issuable if the VWAP per share of the Company’s common stock is greater or equal to $15.00, $17.50, and $20.00, respectively, over any twenty trading days within any thirty consecutive day trading period during the three-year period after the Closing.

Tevogen Bio Holdings Inc.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Sponsor received the right to Earnout Shares with the same terms above, except that each of the Sponsor’s three earnout tranches are for 1,500,000 shares of common stock, for an aggregate of 4,500,000 shares across the entire Sponsor earnout. The Earnout Shares are a form of dividend for holders of Tevogen Bio common stock, and the Earnout Shares earnable by the Sponsor are treated as contingent consideration in a reverse recapitalization. In accordance with ASC 815, the Earnout Shares were considered to be indexed to the Company’s common stock and are classified within permanent equity.

NOTE 6. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consisted of the following:

	June 30,		December, 31
	2024		2023
Professional services	$	1,387,446	$	976,301
Other		388,601		120,149
Total	$	1,776,047	$	1,096,450

NOTE 7. DEBT

Loan Agreement

On June 6, 2024, the Company entered into the Loan Agreement with the Lender, providing for an unsecured line of credit facility for term loans of up to $36,000,000. Under the Facility, the Company may draw up to $1,000,000 in term loans per calendar month over a draw period of 36 months. Each term loan draw will have a maturity date of 48 months and will accrue interest at the lower of (i) daily SOFR plus 2.00% and (ii) 7.00%. Interest accrues quarterly and is payable on the three-month anniversary of the draw date. Interest is payable in shares of common stock at an effective price of $1.50 per share. Principal may be prepaid prior to the maturity date without penalty, and repayments or prepayments may be made in cash or common stock at the Company’s election. Payments of principal in common stock would be made at an effective price of the greater of $1.50 per share and the ten-day trailing volume weighted average price per share of the common stock (the “Trailing VWAP”) as of the trading day prior to payment. As an incentive to enter into the Loan Agreement, the Company issued 1,000,000 shares of common stock to the Lender during June 2024.

The Loan Agreement includes a purchase option whereby the Lender has the option to purchase up to $14,000,000 of shares of common stock at a purchase price equal to 70% of the Trailing VWAP per share (the “$14.0 million Purchase Option”). The $14.0 million Purchase Option only becomes exercisable once Trailing VWAP reaches $10.00 per share. The $14.0 million Purchase Option was determined to be a freestanding derivative liability under ASC 815 and is carried at fair value, with changes in fair value recorded to change in fair value of written call option derivatives liabilities within the consolidated statements of operations.

The Loan Agreement also includes a purchase option (the “Additional Amount Purchase Option”) that is identical to the $14.0 million Purchase Option, except that the option is exercisable for an amount up to the then-remaining undrawn term loan amount under the Loan Agreement at the time Trailing VWAP reaches $10.00 per share. The Additional Amount Purchase Option was determined to be an embedded derivative within the written loan commitment that requires bifurcation under ASC 815, and is carried at fair value with changes in fair value recorded to change in fair value of written call option derivatives liabilities within the consolidated statements of operations.

The $14.0 million Purchase Option and the Additional Amount Purchase Option are recorded to written call option derivative liabilities within the consolidated balance sheet.

The Loan Agreement is a written loan commitment that is not eligible for the fair value option under ASC 825, Financial Instruments. However, management intends to elect the fair value option for future draws under this commitment, and therefore has expensed all issuance costs associated with the Loan Agreement, which are comprised of the fair value of the 1,000,000 shares of common stock issued to the Lender of $890,000, as well as the issuance date fair value of $105,000 and $270,000 for the $14.0 million Purchase Option and Additional Amount Purchase Option, respectively.

Tevogen Bio Holdings Inc.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Notes Payable

As a result of the Merger, the Company assumed notes payable held by Polar Multi-Strategy Master Fund (“Polar”) for which the proceeds were to be used for working capital purposes by Semper Paratus with an outstanding balance of $1,651,000 on the Closing Date and remain outstanding at June 30, 2024. The notes payable do not accrue interest. The outstanding balance of the notes was required to be repaid in full within five business days of the Merger, and the Company is therefore in default of its obligations at June 30, 2024. The notes’ default provisions do not require the Company to transfer any shares or pay any amounts to Polar. In May 2024, the Company issued 1,500,000 shares of common stock as loan consideration to Polar under a subscription agreement as a result of the Merger.

NOTE 8. STOCK-BASED COMPENSATION

In connection with the Closing, the Company adopted the Tevogen Bio Holdings Inc. 2024 Omnibus Incentive Plan (the “2024 Plan”) and no longer grants awards pursuant to the 2020 Equity Incentive Plan (the “2020 Plan”). Each restricted stock unit (“RSU”) award granted under the 2020 Plan that was outstanding and unvested as of the Closing Date was automatically canceled and converted into an award under the 2024 Plan with respect to the common stock of the Company (the “Rollover RSUs”). Such Rollover RSUs remain subject to the same terms and conditions as set forth under the applicable award agreement prior to the Closing.

In addition to covering the Rollover RSUs, under the 2024 Plan, the Company is authorized to grant awards up to an aggregate 40,000,000 shares of common stock. The 2024 Plan provides for the grant of options, stock appreciation rights, restricted stock, restricted stock units, and other equity-based awards. As of June 30, 2024, awards for 20,651,046 shares remained available to be granted under the 2024 Plan.

The Company has issued RSUs that are subject to either service-based vesting conditions or service-based and performance-based vesting conditions. Compensation expense for service-based RSUs are recognized on a straight-line basis over the vesting period of the award. Compensation expense for service-based and performance-based RSUs (“Performance-Based RSUs”) are recognized when the performance condition, which is based on a liquidity event condition being satisfied, is deemed probable of achievement.

On the Closing Date, the Company issued an aggregate of 19,348,954 RSUs under the 2024 Plan to the Company’s Chief Executive Officer, Dr. Ryan Saadi (the “Special RSU Award”). Such RSUs immediately converted into shares of restricted common stock (“Restricted Stock”), the restrictions on which lapse in four equal annual installments beginning on February 14, 2031 (“Vesting Period”). Pursuant to the terms of the Special RSU Award, Dr. Saadi will be entitled to vote the Restricted Stock, but the shares may not be sold, assigned, transferred, pledged, hypothecated, or otherwise encumbered, subject to forfeit. Dr. Saadi will automatically forfeit all unvested Restricted Stock in the event he departs the Company. The fair value per share for the Special RSU Award was determined to be $4.51 per share, equivalent to the Company’s stock price on the Closing Date, resulting in a total grant date fair value of $87,263,783. In accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”), the Company will recognize compensation expense on a straight-line basis from the Closing Date until the completion of the Vesting Period.

Restricted Stock and RSU activity was as follows:

	Service-Based Restricted Stock				Performance-Based RSUs
	Shares		Weighted average grant-date fair value		Shares			Weighted average grant-date fair value
Nonvested as of January 1, 2024		—	$	—		10,900,128		$	2.97
Granted		19,348,954		4.51		—			—
Vested		—		—		(7,174,362	)		2.85
Forfeited		—		—		—			—
Nonvested as of June 30, 2024		19,348,954	$	4.51		3,725,766		$	3.19

As a result of the Merger, the liquidity event performance condition was achieved and therefore compensation cost of $1,966,603 the three months ended June 30, 2024 and $27,200,090 for the six months ended June 30, 2024 was recognized for the Performance-Based RSUs, of which 1,711,984 shares were issued as of June 30, 2024, and 5,462,378 shares will be issued subsequent to June 30, 2024. There was $83,988,402 of unrecognized compensation cost related to Restricted Stock as of June 30, 2024 which will be expensed over a weighted average period of 9.6 years. There was $5,138,040 of unrecognized compensation cost related to Performance-Based RSUs as of June 30, 2024, which will be expensed over a weighted average period of 0.9 years.

Tevogen Bio Holdings Inc.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded stock-based compensation expense in the following expense categories in the accompanying consolidated statements of operations:

	Three months ended		Six months ended
	June 30, 2024		June 30, 2024
Research and development	$	3,010,944	$	22,746,840
General and administrative		1,131,276		7,728,629
Total	$	4,142,220	$	30,475,469

No stock-based compensation expense was recognized during the three or six months ended June 30, 2023.

NOTE 9. STOCKHOLDERS’ DEFICIT

Common Stock

As of February 15, 2024, the Company’s common stock and warrants began trading on The Nasdaq Stock Market LLC under the symbols “TVGN” and “TVGNW”, respectively.

As of June 30, 2024, the Company had 168,826,402 shares of common stock issued and outstanding. For accounting purposes related to earnings per share, only shares that are fully vested or are not subject to repurchase are considered issued and outstanding.

Below is a reconciliation of shares of common stock issued and outstanding:

	June 30,
	2024
Total shares of common stock legally issued and outstanding		168,826,402
Plus: shares to be issued:
Vested Performance-Based RSUs from satisfaction of liq

SEC Form 10-Q filed by Tevogen Bio Holdings Inc.