8-K/A: Tevogen Bio Secures $6 Million in Series C Preferred Stock Funding

Tevogen Bio Holdings Inc. has entered into an agreement to sell $6 million of Series C Preferred Stock to an existing investor, with the closing split into two tranches.

Summary

• Tevogen Bio Holdings Inc. has agreed to sell 600 shares of Series C Preferred Stock for a total of $6 million.
• The sale will occur in two closings: $4 million on August 30, 2024, and $2 million on September 16, 2024.
• The Series C Preferred Stock is convertible into common stock six months after issuance, with a conversion price based on the 30-day volume-weighted average price, subject to a floor of $0.6172.
• To avoid exceeding a 9.99% beneficial ownership limit, pre-funded warrants may be issued instead of common stock.
• The Series C Preferred Stock has a 7.5% annual cumulative dividend, compounded annually, payable in shares or cash, starting no later than September 30, 2024, and ending September 30, 2034.
• The company cannot amend its charter or bylaws in a way that is adverse to the Series C Preferred Stock without the consent of 50.1% of the holders.
• The investor is an existing investor and lender, associated with Dr. Manmohan Patel, a significant shareholder.

Sentiment

Score: 7

Explanation: The document indicates a positive development with the closing of a funding round, but the terms of the preferred stock and the beneficial ownership limitations introduce some complexities.

Positives

• The company has secured $6 million in funding through the sale of Series C Preferred Stock.
• The investment comes from an existing investor, indicating confidence in the company.
• The conversion feature of the preferred stock could be beneficial for the investor if the common stock price increases.
• The 7.5% cumulative dividend provides a steady return for the investor.

Negatives

• The Series C Preferred Stock is non-voting, which could limit the investor's influence.
• The conversion of preferred stock to common stock is subject to a beneficial ownership limitation, potentially limiting the investor's upside.
• The company is restricted from making certain changes to its charter or bylaws without the consent of the preferred stock holders.

Risks

• The conversion price of the preferred stock is subject to a floor price of $0.6172, which could limit the investor's potential gains if the common stock price does not increase significantly.
• The company's ability to pay dividends in cash is subject to its discretion, potentially leading to dividend payments in shares instead.
• The beneficial ownership limitation could restrict the investor's ability to convert all of their preferred stock into common stock.

Future Outlook

The company will receive $6 million in funding in two tranches, with the first closing on August 30, 2024, and the second on September 16, 2024. The Series C Preferred Stock will be convertible into common stock six months after issuance and will pay a 7.5% annual cumulative dividend.

Management Comments

• Ryan Saadi, Chief Executive Officer, signed the report on behalf of the company.

Industry Context

This funding round is a common method for biotech companies to raise capital, especially those in the development stage. The use of preferred stock with conversion features and dividends is a typical structure to attract investors.

Comparison to Industry Standards

• The use of preferred stock with a conversion feature is a common practice in the biotech industry, similar to companies like XOMA Corporation and Agenus Inc., which have used similar structures to raise capital.
• The 7.5% cumulative dividend is within the range of what is seen in similar private placements, although the specific terms vary widely based on the company's risk profile and stage of development.
• The conversion floor price of $0.6172 is a mechanism to protect the investor from significant downside risk, which is a standard practice in these types of agreements.

Related Party Transactions

• The investor is an existing investor and lender to the company and is associated with Dr. Manmohan Patel, a significant shareholder.

Stakeholder Impact

• Shareholders may see a dilution of their ownership if the preferred stock is converted to common stock.
• The company's financial position is strengthened by the $6 million investment.
• The investor gains a potential return through dividends and the possibility of converting to common stock.

Next Steps

• The first closing of the Series C Preferred Stock purchase will occur on August 30, 2024.
• The second closing of the Series C Preferred Stock purchase will occur on September 16, 2024.
• The cumulative dividend payments will begin no later than September 30, 2024.

Key Dates

Keywords

Series C Preferred Stock, Funding, Convertible Stock, Beneficial Ownership, Dividends, Securities Purchase Agreement, Tevogen Bio, Investment