美国
证券交易委员会
华盛顿，特区。20549
表格
(马克 一)
| 季度 根据1934年证券交易法第13条或15(d)条的规定提交的报告 |
截至季度结束
或
| 根据1934年证券交易所法案第13或15(d)款递交的过渡报告 |
从_________到_________的过渡期间
佣金
文件编号:
（公司章程中指定的准确公司名称）
| （公司所在州） | 佛罗里达州迈阿密市990 Biscayne Blvd.，503号套房 |
| ||
| (主要 执行人员之地址) | (邮政 编 码) |
根据交易所法规（17 CFR 240.14a-12）第14a-12规定的招股材料
根据法案第12(b)节注册的证券:
| 每一类别的名称 | 交易符号 | 在每个交易所注册的名称 | ||
请勾选标记以指示注册者是否（1）在过去12个月内（或注册者需要提交这些报告的更短时间内）已提交证券交易所法案第13或15（d）节要求提交的所有报告，及 （2）是否已被提交要求过去90天的提交要求所制约。
请在复选框中勾选：本报告期内，注册人是否已按照S-t（本章第232.405条）规则，电子提交了所需提供的所有交互式数据文件，且此期为过去的12个月（或者在该注册人被要求提交这些文件的更短期间内）提交。
请勾选说明注册公司是大型受托人、加速受托人、非加速受托人、较小的报告公司或新兴增长公司。请参见《交易法案》120亿.2规则中“大型加速文件制造者”、“加速文件制造者”、“较小的报告公司”和“新兴增长公司”的定义。
| 大型加速文件提交人 | ☐ | 加速文件提交人 | ☐ | |
| ☒ | 小型报告公司 | |||
| 新兴成长公司 |
如果是新兴成长型企业，请打勾，以表明注册人已选择不使用遵守《证券交易法》第13(a)条所规定的任何新的或修订后的财务会计准则的延长过渡期。 ☐
请勾选适用的圆圈，表示注册登记者是否是空壳公司(根据交易所法案第12b-2条的定义)。是 ☐ 否
截至2024年11月8日，登记人未清偿 普通股股票，$ 截至2024年和2023年6月30日，发行和流通的股份中有
目录
| 页 | ||
| 第一部分 - 财务信息 | ||
| 项目 1. | 基本报表（未经审计） | |
| 截至2024年9月30日和2023年12月31日的精简合并资产负债表 | 1 | |
| 截至2024年9月30日和2023年的三个月和九个月的简明合并利润表 | 2 | |
| 截至2024年9月30日和2023年的三个月和九个月的简明合并股东权益变动表 | 3 | |
| 2024年9月30日止九个月的精简合并现金流量表和2023年 | 4 | |
| 基本合并财务报表注释 | 5 | |
| 项目 2. | 分销计划 | 23 |
| 项目 3. | 有关市场风险的定量和定性披露 | 32 |
| 项目 4. | 控制和程序 | 33 |
| 第二部分- 其他信息 | ||
| 项目 1. | 法律诉讼 | 34 |
| Interest expense, net | 风险因素 | 34 |
| 项目2。 | 未注册的股票股权销售和筹款用途 | 34 |
| 项目 3. | 对优先证券的违约 | 34 |
| 项目 4. | 矿山安全披露 | 34 |
| 项目5。 | 其他信息 | 34 |
| 项目 6. | 展示资料 | 35 |
| 签名 | 36 | |
| i |
关于前瞻性声明的注意事项
本10-Q季度报告包含根据1995年《证券诉讼改革法》（“PSLRA”）、1933年修正案后的证券法（“证券法”）第27A条和1934年修正案后的证券交易法（“交易法”）第21E条定义的“前瞻性声明”。前瞻性声明包括与未来事件、结果、业绩、前景和机会有关的声明，包括与我们的战略计划、资本需求以及我们的财务状况有关的声明。前瞻性声明基于目前可获取的信息，基于我们目前的期望、估计、预测和对我们所经营的行业以及管理层的信仰和假设的投射。前瞻性声明经常包含诸如“预计”、“预测”、“可能”、“目标”、“项目”、“打算”、“相信”、“寻求”、“估计”、“可能”、“将会”、“将要”和类似表达的词语。此外，任何涉及我们未来财务业绩预测、我们预期的增长以及我们业务趋势等未来事件或情况描述的声明均为前瞻性声明。由其天性而言，前瞻性声明涉及的问题在不同程度上受到风险和不确定性的影响，这可能使实际结果与任何前瞻性声明中表达的结果存在实质性和不利的差异。对于我们而言，可能会导致或促使此类差异的特定因素包括我们年度10-k报告中于2023年12月31日提交给证券交易委员会（“SEC”）的第I部分第1A条“风险因素”中所述的风险和不确定性，以及本季度10-Q报告中的第II部分第1A条“风险因素”以及我们不时向SEC提交的其他文件中所述的风险和不确定性。
读者们 我们敦促您不要过度依赖本季度报告中的前瞻性陈述，这些陈述仅于本季度报告公布之日有效。我们在此插入这一警示说明，以适用并利用PSLRA的安全港规定。除非法律要求，我们不会在此后传播任何更新或修订任何此类前瞻性陈述，以反映任何基于此类陈述的期望或事件、条件或环境的变化。
我们认为，此季度10-Q表格中的前瞻性声明反映的预期是基于合理的假设，但是，鉴于风险和不确定性，您不应依赖于任何前瞻性声明作为实际结果、发展或其他结果的预测。您应该阅读这些前瞻性声明，并理解我们可能无法实现预期的结果、发展或其他结果，实际结果、发展或其他结果可能与我们的预期存在实质性差异。
除非另有说明或上下文另有要求，此季度10-Q表格中所有对“Eterna”的提及均指Eterna Therapeutics Inc.，对“Eterna LLC”的提及均指Eterna Therapeutics LLC，它是Eterna的一个完全拥有的子公司，对“公司”、“我们”、“我们的”引用均指Eterna及其附属公司，包括Eterna LLC、Novellus, Inc.和Novellus Therapeutics Limited。
| ii |
第I部分。财务信息
项目 1. 基本报表
ETERNA 治疗公司。
汇编简明资产负债表
(以千为单位，除每股面值金额外)
(未经审计)
| 九月三十日, 2024 | 12月31日 2023 | |||||||
| 资产 | ||||||||
| 流动资产： | ||||||||
| 现金 | $ | $ | ||||||
| 其他应收款项 | ||||||||
| 预付费用及其他流动资产 | ||||||||
| 总流动资产 | ||||||||
| 限制性现金 | ||||||||
| 房地产和设备，净额 | ||||||||
| 租赁权-运营租赁资产 | ||||||||
| 商誉 | ||||||||
| 其他资产 | ||||||||
| 资产总额 | $ | $ | ||||||
| 负债和股东(赤字)权益 | ||||||||
| 流动负债: | ||||||||
| 应付账款 | $ | $ | ||||||
| 应计费用 | ||||||||
| 应付所得税 | ||||||||
| 桥梁票据，减少债务折让 | ||||||||
| 桥梁票据衍生负债 | ||||||||
| 经营租赁负债，流动负债 | ||||||||
| 由于关联方，截至2024年6月30日和2023年12月31日，本设计为Series A可转换优先股的未偿余额是$ | ||||||||
| 递延收入，流动 | ||||||||
| 其他流动负债 | ||||||||
| 流动负债合计 | ||||||||
| 可转债，净额 | ||||||||
| 存量证券负债 | ||||||||
| 非流动经营租赁负债 | ||||||||
| 递延收入，非流动 | ||||||||
| 待定对价负债 | ||||||||
| 其他负债 | ||||||||
| 负债总额 | ||||||||
| 股东（赤字）权益： | ||||||||
| 优先股，$0.0001 面值， 已授权的股份， 2024年9月30日和2023年12月31日的A系列可转换优先股指定及未偿还金额为$ | ||||||||
| 普通股，每股面值为 $0.0001； 面值， 在2024年9月30日和2023年12月31日授权股份； 和 于2024年9月30日和2023年12月31日分别发行和流通 | ||||||||
| 额外实收资本 | ||||||||
| 累积赤字 | ( | ) | ( | ) | ||||
| 3660 | ( | ) | ||||||
| （以千元为单位，除股份及每股金额外） | $ | $ | ||||||
附注是这些简明综合财务报表的一部分。
| 1 |
ETERNA 治疗公司。
精简 合并损益表
(以千为单位，除每股数据外)
(未经审计)
| 截至三个月 9月30日， | 截至九个月 九月三十日, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 营业收入 | $ | $ | $ | $ | ||||||||||||
| 成本支出 | ( | ) | ||||||||||||||
| 总收入（损失） | ( | ) | ( | ) | ||||||||||||
| 营业费用： | ||||||||||||||||
| 研发 | ||||||||||||||||
| 总务及行政 | ||||||||||||||||
| 租赁终止收益 | ( | ) | ( | ) | ||||||||||||
| Exacis在研发过程中的收购 | ||||||||||||||||
| 总营业费用 | ||||||||||||||||
| 营业损失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他费用，净额： | ||||||||||||||||
| 债务清偿损失 | ( | ) | ( | ) | ||||||||||||
| 衍生负债的公允价值调整 | ( | ) | ( | ) | ||||||||||||
| 看涨权益负债公允价值变动 | ||||||||||||||||
| 可变报酬款项公允价值变动 | ||||||||||||||||
| 非控制投资的亏损 | ( | ) | ||||||||||||||
| 利息费用，净额 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他费用净额 | ( | ) | ( | ) | ||||||||||||
| 其他支出合计，净值 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 税前净亏损 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 所得税（负担）收益 | ( | ) | ( | ) | ( | ) | ||||||||||
| 净损失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| A轮优先股股息 | ( | ) | ( | ) | ||||||||||||
| 归属普通股东的净亏损 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Revenue | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| 基本和稀释后的流通股数平均权重 | ||||||||||||||||
附注是这些简明综合财务报表的一部分。
| 2 |
永恒的 THERAPEUTICS INC
被压缩的综合股东权益（赤字）陈述
截至2024年和2023年9月30日的三个月和九个月(未经审计)
(以千为单位)
| A系列优先股 | 普通股 | 实收资本公积 | 累计 | |||||||||||||||||||||||||
| 股份 | 金额 | 股份 | 金额 | 资本 | 赤字 | 总额 | ||||||||||||||||||||||
| 2024年7月1日的余额 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| 按普通股发行确定的远期销售合同的公平价值 | - | - | ||||||||||||||||||||||||||
| 将认股权证重新分类为负债 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| 股权奖励 | - | - | ||||||||||||||||||||||||||
| 净损失 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| 2024年9月30日的余额 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| 2024年1月1日余额 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| 根据普通股发行确认出售合同的公允价值 | - | - | ||||||||||||||||||||||||||
| 将认股权证重新分类为负债 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| 发行债券认股权 | - | - | ||||||||||||||||||||||||||
| 股票-based薪酬 | - | - | ||||||||||||||||||||||||||
| 从归属限制单位的普通股发行 | - | |||||||||||||||||||||||||||
| 向A系列优先股股东支付现金股息 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| 净损失 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| 2024年9月30日的余额 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| 截至2023年7月1日的余额 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| 与可转换票据融资相关的认股权发行 | - | - | ||||||||||||||||||||||||||
| 基于股票的补偿 | - | - | ||||||||||||||||||||||||||
| 净亏损 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| 2023年9月30日的余额 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| 2023年1月1日的余额 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| 与Exacis资产收购有关的发行普通股 | - | |||||||||||||||||||||||||||
| 与林肯公园资本基金有关的股票购买协议发行的普通股（净额） | - | |||||||||||||||||||||||||||
| 与可转换债券融资相关的权证发行 | - | - | ||||||||||||||||||||||||||
| 向A轮优先股股东发放现金分红 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| 股份为基础的薪酬 | - | - | ||||||||||||||||||||||||||
| 净损失 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| 2023年9月30日的余额 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
附注是这些简明综合财务报表的一部分。
| 3 |
ETERNA 治疗公司。
简明综合现金流量表
（以千为单位）
(未经审计)
| 截至九个月的时间 九月30日, | ||||||||
| 2024 | 2023 | |||||||
| 经营活动现金流量： | ||||||||
| 净损失 | $ | ( | ) | $ | ( | ) | ||
| 调整为净损失到经营活动现金流量净使用： | ||||||||
| 折旧和摊销 | ||||||||
| 股权奖励 | ||||||||
| 租赁权资产摊销 | ||||||||
| 租赁终止收益 | ( | ) | ||||||
| 累计利息支出 | ||||||||
| 以实物支付的利息支出 | ||||||||
| 债务贴现和债务发行成本摊销 | ||||||||
| 债务清偿损失 | ||||||||
| 衍生负债的公允价值调整 | ||||||||
| 看涨权益负债公允价值变动 | ( | ) | ( | ) | ||||
| 或有对价负债公允价值变动 | ( | ) | ( | ) | ||||
| 发行给林肯公园资本有限责任公司的认股股份 | ||||||||
| 向林肯公园资本有限责任公司出售股票的损失 | ||||||||
| Exacis收购中的无形资产研究与开发组成部分非现金组成部分 | ||||||||
| 固定资产处置收益 | ||||||||
| 非控制投资的亏损 | ||||||||
| 运营资产和负债的变化： | ||||||||
| 其他应收款项 | ( | ) | ||||||
| 预付费用及其他流动资产 | ||||||||
| 其他非流动资产 | ( | ) | ||||||
| 应付账款和应计费用 | ||||||||
| 经营租赁负债 | ( | ) | ||||||
| 应相关方付款 | ( | ) | ( | ) | ||||
| 递延收入 | ( | ) | ||||||
| 其他负债 | ( | ) | ||||||
| 用于经营活动的净现金 | ( | ) | ( | ) | ||||
| 投资活动现金流量： | ||||||||
| 购置固定资产等资产支出 | ( | ) | ||||||
| 固定资产出售所得款项 | ||||||||
| 投资活动使用的净现金 | ( | ) | ||||||
| 筹集资金的现金流量： | ||||||||
| 收到可转换票据融资的款项 | ||||||||
| 与可转换票据融资相关的费用已支付 | ( | ) | ( | ) | ||||
| 收到桥接票据融资的款项 | ||||||||
| 根据与林肯公园资本基金有限责任公司股票购买协议的约定出售普通股的所得款项 | ||||||||
| 支付给A系列优先股东的分红派息 | ( | ) | ( | ) | ||||
| 筹资活动产生的现金净额 | ||||||||
| 现金及现金等价物净减少 | ( | ) | ( | ) | ||||
| 期初现金、现金等价物及受限制的现金余额 | ||||||||
| 期末现金、现金等价物及受限制的现金余额 | $ | $ | ||||||
| 补充现金流信息披露： | ||||||||
| 期间支付的现金用于： | ||||||||
| 利益 | $ | $ | ||||||
| 所得税 | $ | $ | ||||||
| 非现金投资和筹资活动的补充披露: | ||||||||
| Note warrants | $ | $ | ||||||
| 与2023年12月融资相关而未支付的费用 | $ | $ | ||||||
| 添加到可转债本金的按利付息 | $ | $ | ||||||
| 租赁负债和ROU资产的调整 | $ | $ | ||||||
| 将认股权证重新分类为负债 | $ | $ | ||||||
| 与2023年7月融资相关的认股权证发行 | $ | $ | ||||||
| 与2023年7月融资相关的未支付费用 | $ | $ | ||||||
| 租赁资产初始计量 | $ | $ | ||||||
| 租赁负债初始计量 | $ | $ | ||||||
| Exacis资产收购的有条件对价 | $ | $ | ||||||
| 为Exacis资产收购发行的普通股 | $ | $ | ||||||
| 期末现金、现金等价物和受限现金的调节 | ||||||||
| 现金及现金等价物 | $ | $ | ||||||
| 限制性现金 | ||||||||
| 期末现金、现金等价物和受限制的现金总额 | $ | $ | ||||||
附注是这些简明综合财务报表的一部分。
| 4 |
ETERNA 治疗公司。
简明合并财务报表附注
(未经审计)
| 1) | 业务的描述 及呈现基础 |
业务描述
Eterna Therapeutics Inc.（“公司”）是一家临床前阶段的电芯治疗公司。它的愿景是通过创新、高效、安全且可获取的细胞治疗，改善难治性疾病患者的生活；其使命是开发异基因的即用型电芯治疗，利用诱导多能干细胞（“iPSC”）衍生的间充质干细胞（“iMSC”）来靶向实体肿瘤。在此，所称的“公司”或“Eterna”指的是Eterna及其全资子公司（Eterna Therapeutics LLC、Novellus, Inc. 和 Novellus Therapeutics Limited），除非另有说明或上下文另有要求。
表述基础
附带的未经审计的中期简明合并基本报表已按照美国普遍会计准则（“GAAP”）的中期财务报表及第10-Q表格和S-X规则第8条的要求进行编制。因此，它们并不包含GAAP所需的完整基本报表所需的所有信息和脚注。在管理层的意见中，未经审计的财务报表包括为公平地呈现所呈现的期间的财务状况、经营结果和现金流所必需的所有正常经常性调整。
这些简明的合并财务报表应与Eterna年度报告一起阅读，Eterna年度报告是指2023年12月31日结束的年度报告，于2024年3月14日提交给证券交易委员会（“SEC”），并通过于2024年3月18日提交给SEC的Form 10-K/A文件进行了修订（修订后称为“2023 10-K”）。截至2023年12月31日的简明合并资产负债表是根据2023 10-K中包含的审计财务报表推导得出的，但不包括所有完整财务报表中GAAP要求的所有信息和附注。截至2024年9月30日的三个月和九个月的运营结果不一定代表截至2024年12月31日或任何其他时期结束的整个年度可能出现的结果。
重新分类
可以肯定 已对公司上一年度的金额进行了重新分类，以符合本年度的列报方式。
| 2) | 流动性 和资本资源 |
公司已经遭受了重大的运营损失，并由于开发产品候选者的努力以及为运营提供一般和行政支持，导致累积赤字。截至2024年9月30日，公司的非限制性现金余额约为$
2022年10月，公司签订了在马萨诸塞州萨默维尔的一份大约xxx平方英尺的办公室和实验室空间的分租合约。根据分租合约，公司以信用证形式向分租人交付了一个安防-半导体存款，金额为$xxx。信用证由公司的商业银行发行，该银行要求公司通过向该银行存入$xxx的限制性现金账户来进行信用证的现金押证。
2024年8月5日，转租方依据信用证提取了全部$金额，用于支付过期租金、罚金和利息。
| 5 |
在2023年4月，公司与林肯公园资本基金有限公司（“林肯公园”）签署了一项备用股权购买协议（“ELOC”）和一项登记权利协议，根据该协议，林肯公园承诺购买高达$
在2023年7月和12月，公司收到了$ 的总毛收益，在2024年1月，通过额外发行可转换债券获得了额外的$100万毛收益。有关这些融资的更多信息，请参见附注5。
在 准备截至2024年9月30日的三个月和九个月的附带简明合并基本报表时，公司的管理层得出结论，关于公司能否持续经营存在重大疑虑，因为公司预计在发出这些简明合并基本报表后的十二个月内将没有足够的现金或流动资金以支持运营。公司将需要筹集额外资本，这可能通过在ELOC下出售普通股、公开或私募股权发行、债务融资、许可公司的知识产权、战略伙伴关系或其他方式实现。除了ELOC，公司目前没有资本安排，并且无法保证在需要时能够以可接受的条款或者根本无法筹集到资本。
附带的简明综合财务报表已根据持续经营假设进行编制，该假设考虑了资产的实现和负债在正常业务过程中的清偿。 附带的简明综合财务报表不包括任何调整，以反映未来可能对资产的收回能力和分类或未来可能对负债金额和分类产生影响的不确定性，该不确定性与公司能否继续作为持续经营实体有关。
| 3) | 资产 收购 |
2023年4月26日，公司与Dilos Bio（前称Exacis Biotherapeutics Inc.（“Exacis”））、股东方以及关于特定条款的Factor Limited签署了一份资产购买协议（“Exacis购买协议”）。根据Exacis购买协议，公司从Exacis收购了几乎所有Exacis的知识产权资产（“Exacis资产”），包括Exacis对Exacis与Factor Limited之间的独占许可协议（“购买许可”）的所有权、所有权利和利益。公司未承担Exacis的任何负债，除非是购买许可下在成交日期之后产生的负债。Exacis购买协议所涉及的交易（“Exacis收购”）于2023年4月26日完成。
考虑到Exacis资产，在交易的成交日期，公司向Exacis发行了大约 普通股股份，这些股份受到了一个
| 6 |
本公司将Exacis收购视为资产收购，因为它确定收购资产的公允价值几乎全部集中在购买许可证上。资产收购中的资产根据其对收购方的成本进行确认，并通常根据相对公允价值的基础分配。公司收购Exacis资产的成本包括公司普通股的发行、直接相关的收购成本和有条件的对价。下表显示支付Exacis资产的总公允价值（以千为单位）。有关收购资产公允价值计量的更多信息，请参见第4条。
| 公允价值 价值 | ||||
| 发行的股份 | $ | |||
| 有条件的考虑 | ||||
| 直接成本 | ||||
| 总公允价值 | $ | |||
该
公司分配了
在2024年9月24日，因签署与Factor Bioscience Limited（“Factor Limited”）的独家许可与合作协议（“Factor L&C协议”），购买许可已被终止。有关Factor L&C协议的更多信息，请参见附注10。
| 4) | 合同 与客户 |
开启
2023年2月21日，公司和Lineage Cell Therapeutics, Inc.（“Lineage”）签订了独家期权，
许可协议（“世系协议”），该协议为Lineage提供了以下选项（“期权权”）
从公司获得知识产权的独家分许可，并要求公司开发定制单元
line（将由Lineage进行再许可的知识产权目前由该公司从Factor Limited获得许可）。这个
世系协议于 2023 年 8 月修订，规定了与细胞系定制活动特别相关的变更
例如（i）付款条件，（ii）某些定义，（iii）Lineage选择的定制细胞系的某些行动方针
不成功以及 (iv) 文件要求。Lineage 向公司支付了 $
2024年9月24日，公司与生物技术公司（如第10条所定义）签订了一份协议（“分泌分配协议”），根据该协议，公司将分泌协议分配给了生物技术公司。公司在协议下的权利和义务现在由生物技术公司负责。
| 7 |
关于与祖传协议相关的付款将受祖传转让协议的约束，该协议规定生物科学公司支付公司30%的金额
公司根据ASC 606确认营业收入， 与客户签订合同的营业收入 （“ASC 606”）当客户获得已承诺的服务或商品的控制权，且支付的金额反映了公司预计会收到的与这些商品或服务交换的对价时。
根据ASC 606的规定，公司确定期权权利是Lineage在合同签订之初持有的未行使权利，因为在合同签订之初，电芯定制活动和转让许可证是可选购买。如果Lineage决定进行此类购买，这些可选购买的商品和服务将被视为独立合同。因此，
选项权利和电芯定制活动被视为单独的合同，公司确定上述修订条款代表对电芯定制合同的修改。由于在签署修订之前，没有向Lineage转移任何商品或服务，因此，
Lineage
将在开发期间向公司支付电芯定制活动的费用。公司仅在向定制电芯交付方面取得一定进展时，才能获得剩余的全部电芯定制费用。
公司确定，$
公司将定制活动中使用的直接劳动和耗材视为发生，并将其记录为营业成本。根据附注10讨论的A&R因子许可协议，公司有义务向Factor有限公司支付
| 5) | 可转换债券融资、桥梁融资、交易所交易和股权融资 |
于2023年7月14日，公司从定向增发中获得了 $
在2023年12月14日，公司与某些买家签订了一项购买协议，以定向增发价值 $1000000 的可转债（“2023 年 12 月可转换债券”和 2023 年 7 月可转换债券合称“可转换债券”）和认购大约 1000000 股公司普通股的权证（“2023 年 12 月权证”和 2023 年 7 月权证合称“债券权证”）。
| 8 |
根据2023年12月的购买协议，共有两次交割 - 第一次在2023年12月15日，第二次在2024年1月11日。在第一次交割中，公司收到了$1000000并发行了$2000000的2023年12月可转换债券和2023年12月认股权，以购买约1000000股普通股。在第二次交割中，公司收到了$4000000并发行了$5000000的2023年12月可转换债券和2023年12月认股权，以购买约2000000股普通股。
查看 第13条有关票据认股权证的更多信息。
2023年7月的可转换票据利率为
根据持有人的选择，可将可转换票据转换为公司普通股，初始转换价格为2023年7月可转换票据每股$
截至2024年9月30日，所有可转换票据均未转换为普通股。
可转债券规定了惯例的违约事件，其中包括（在某些情况下，受通常宽限和补救期限制），
包括但不限于：未支付本金或利息、违反可转债券中的契约或其他协议；发生
与相关证券认购协议中定义的重大不利影响事件以及某些破产事件。通常情况下，
如果可转债券发生未争议的违约事件并持续下去，持有人可以要求公司
以等于赎回价格的价格赎回他们的一部分或全部可转债券
桥梁 融资备忘录
在
2024年9月24日，公司与一些购买者签订了定向增发的购买协议，金额为$
桥接票据的唯一转化事件是在2024年10月29日公司年度股东会议上经过股东批准时（“年度会议”），在这种情况下，
桥接票据 具有与可转换票据相同的违约条款。截至2024年9月30日，没有发生任何桥接票据的违约事件。
这个
公司被要求将转换功能与Bridge Notes分开，并在展会上将其记录为衍生负债
价值。公司通过计算衍生负债公允价值之间的差额来确定衍生负债的公允价值
Bridge Notes 带有转换功能但没有转换功能，这导致公司记录了 $
2024年9月30日，公司重新计量了桥票衍生负债的公允价值，并记录了负债减少$
交易所 交易
2024年9月24日，公司与行使价格为$交易所条款的持有人达成了交易协议（“交易协议”），以购买合计约
| 9 |
主题
需经公司股东在年度会议上的批准，根据交易所协议，（i）warrants的持有者同意以交换比例将所有warrants交换为公司的普通股， 每个适用warrant可行使的普通股换取一股普通股（向上取整到最接近的整数），并且（ii）可转换票据的持有者同意以交换比例将所有可转换票据交换为公司的普通股，等于(A)以美元表示的总和，包括(1)适用可转换票据的本金金额，(2)截至适用可转换票据交换日期的所有应计和未支付利息，以及(3)如果适用可转换票据自交换日期起至到期日的期间内依然有效，则到期日应计的所有利息（A的总和约为$
公司确定对可转换债券的修改应作为债务的解除进行会计处理，因为与原债务工具的账面价值相比，修改后的债务工具的现金流发生了至少一个%s的变化，
截至2024年9月24日，在进入交易所协议之前，可转换票据的净账面金额约为$
因为交易所交易需要股东的批准
实际上，公司确定认股权证的修改导致此类认股权证与股权的分类发生了变化
追究责任。要求股东批准的条款排除了股权分类，因为这种批准不是对股权分类的投入
固定对固定的估值模型。因此，截至2024年9月24日，公司以公允价值记录了认股权证
交易所认股权证中可发行的普通股数量乘以收盘股价美元 并重新分类
大约 $
股本融资
在 2024年9月24日，公司与某些合格投资者签署了一项证券购买协议（“SPA”），以在定向增发中出售总计约有 股公司的普通股（或者，替代前，预先融资的warrants购买一股我们的普通股），购买价格为$ 每股普通股和$ 每个预先融资的warrants（“普通股定向增发”以及与桥梁票据和交易所交易一起构成“2024年9月交易”）。普通股定向增发的完成条件是 在年度会议上获得股东批准。
该
SPA代表了一项远期出售合同， obligates 公司在获得股东批准后，以固定价格出售固定数量的普通股。公司将远期出售合同的公允价值衡量为(A)公司签署SPA时预计购买的股份的公允价值与(B)股份的购买价格之间的差额，并记录了大约 $
在 2024年10月29日，公司召开了年度股东大会，公司的股东批准了2024年9月的交易，因此在2024年10月29日发生了以下情况：
| ● | 根据普通股定向增发，公司发行了大约 股普通股和预先拟定的warrants以购买 | |
| ● | 根据桥式票据，大约$ | |
| ● | 在交易所交易中，(i) 持有认股权证的持有人约交换了 |
| 10 |
| 6) | 金融工具的公允价值 |
公允价值被定义为在有序交易中，可以收到的卖出资产的价格，或支付的转移负债的价格，交易双方均愿意参与。已建立公允价值层次结构，以便对估值输入进行评级，最高优先级为活跃市场中相同资产或负债的报价，最低优先级为不可观察的输入。公允价值层次结构如下：
● 一级输入 - 根据报告实体在评估日可获取的相同资产或负债在活跃市场的报价进行估值。
● 二级输入-根据不属于一级报价价格的输入评估资产或负债，这些输入可以直接或间接观察到。这些可能包括活跃市场中类似资产或负债的报价价格，非活跃市场中相同或类似资产或负债的报价价格，对资产或负债可观察的其他输入（如利率期货，波动性，偿还速度，信用风险等）或主要来源于市场数据通过相关性或其他手段协同证实的输入。
● 三级投入 - 根据为其没有或很少市场价值的投入价值确定，这需要报告实体制定自己的假设。
资产负债表上报告的现金、其他应收款、预付资产和其他流动资产、应付账款及应计费用、其他流动负债和其他负债的携带金额接近其短期到期日的公允价值。
公司在2022年第一季度发行了约 定向增发相关发行warrants（"Q1-22 warrants"），被确认为负债。公司还记录了与Exacis收购相关的市值待摊负债。有关Exacis收购的更多信息，请参阅附注3。
关于桥接票据，公司在2024年9月24日记录了一项衍生负债。关于交易所交易，公司在2024年9月24日将交易所交易中包含的warrants从权益重新分类为负债。 有关桥接票据和交易所交易的更多信息，请参见第5节。
公司使用Black-Scholes期权定价模型来估算Q1-22认股权责任的公允价值，并使用Monte Carlo模拟模型来估算与市值相关的待定对价的公允价值，这两者均被视为3级公允价值测量。
公司通过计算带有转换功能的桥接票据的公允价值与不带转换功能的公允价值之间的差异，确定了衍生负债的公允价值。
关于交易所交易中的认股权证，公司确定了截至2024年9月24日的认股权证公允价值，方法是将可从交换认股权证发行的普通股数量乘以收盘价$。 并重新分类约$万美元，从股本转为认股权证负债。
公司重新评估认股权责任的公允价值以及桥梁票据衍生负债，在每个报告期评估和变更的公允价值将被确认在经营报表中。 以及市值从属考量，在每个报告期重新评估，公允价值的变动将被确认在经营报表中。
以下表格总结了截至2024年9月30日和2023年12月31日以公允价值计量的负债（单位：千）:
| 描述 | 级别 | 9月30日, 2024 | 2023年12月31日, 2023 | |||||||||
| 负债： | ||||||||||||
| Q1-22权证负债 | 3 | $ | $ | |||||||||
| 权证负债 – 交易所交易 | 3 | $ | $ | |||||||||
| 桥式债券衍生负债 | 3 | $ | $ | |||||||||
| 市值视为权证 | ||||||||||||
| 11 |
在布莱克-舒尔斯和蒙特卡罗模型中使用的某些输入可能会因超出公司控制范围的因素而在未来期间波动。用于计算公允价值的这些输入中的一个或多个的显著变化可能会导致公司认股权负债或或有对价负债的公允价值发生重大变化，这也可能导致公司在综合损益表中报告重大非现金收益或损失。
以下表格展示了2024年1月1日至2024年9月30日以公允价值计量的负债变动（单位：千）:
| 权证 负债 | 衍生品 负债 |
或有的 价值 | ||||||||||
| 2024年1月1日的公允价值 | $ | $ | $ | |||||||||
| 将认股权证由股本重新分类为负债 | ||||||||||||
| 桥条衍生工具负债的初始计量 | ||||||||||||
| 公允价值变动 | ( | ) | ( |
) | ( | ) | ||||||
| 2024年9月30日的公平价值 | $ | $ | $ | |||||||||
公司对截至2024年9月30日的市值或有对价进行了公允价值评估，并确定与2024年6月30日的重新计量所使用的输入没有重大变化，因此在2024年9月30日负债不会发生重大变更。因此，公司在截至2024年9月30日的三个月内未确认市值或有对价的公允价值变更。
公司根据截止到2024年9月30日的转换特征有与没有的Bridge Notes的公允价值之间的差额，重新测量了Bridge Notes衍生负债并记录了$
下表仅用于比较目的，提供了截至2024年9月30日和2023年12月31日，公司可转换票据的公平价值相对于合并资产负债表中确认的账面价值的信息（单位：千）。
| 2024年9月30日 | 2023年12月31日 | |||||||||||||||||||
| 级别 | 账面价值 价值 | 公允价值 价值 | 账面价值 价值 | 公允价值 价值 | ||||||||||||||||
| 可转换债券 | 3 | $ | $ | $ | $ | |||||||||||||||
| 桥梁票据 | 3 | $ | $ | $ | $ | |||||||||||||||
上表中可转换票据的账面价值反映了2024年9月24日达成的交易协议所规定的回购价格，该价格按照2024年9月24日的公允价值记录。公司通过将预计发行的百万股普通股（计划于2024年10月29日发行）乘以2024年9月30日每股$的收盘股价来确定可转换票据的公允价值。
上表中桥梁票据的账面值是在对桥梁票据衍生负债进行分离之前显示的。公司通过将
请参阅关于可转换票据和桥梁票据的更多信息，请参见注5。
公司截至2023年12月31日使用二项式模型评估2023年可转债的公允价值，此被视为三级计量。
| 7) | 商誉 |
在2018年，公司收购了IRX Therapeutics（“IRX”），该收购被视为业务合并。公司记录了与IRX收购相关的商誉总额为$
| 12 |
| 8) | LEASES |
The Company currently has operating leases for office in the borough of Manhattan in New York, New York, and Cambridge, Massachusetts, which expire in 2026 and 2028, respectively.
In
addition, in October 2022, the Company entered into a sublease with a subsidiary of Bristol-Myers Squibb Company, as sublessor (“Sublessor”),
for office, laboratory and research and development space of approximately
On
May 3, 2024, the Company received a notice from the Sublessor regarding past due rent payments of approximately $
The
Company also did not pay the rent for June, July or August 2024 and, as of August 1, 2024, owed approximately $
On
August 9, 2024, the Company and Sublessor entered into a sublease termination agreement, effective August 31, 2024. The sublease was
originally scheduled to expire in 2033. Pursuant to the sublease termination agreement, the Company agreed to the following: to surrender
and vacate the premises; that the Company’s right, title and interest in all furniture, fixtures and laboratory equipment at the
premises will become the property of the sublessor; and that both parties will be released of their obligations under the sublease. As
a result of the sublease termination, the Company recognized a gain on lease termination of approximately $
For the three and nine months ended September 30, 2024 and 2023, the net operating lease expenses were as follows (in thousands):
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||||||
| Sublease income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Variable lease expense | ||||||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||||
| 13 |
The tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2024 and the ending balances as of September 30, 2024, including the changes during the period (in thousands).
| Operating Lease ROU Assets | ||||
| Operating lease ROU assets at January 1, 2024 | $ | |||
| Adjustment to ROU asset for remeasurement of | ||||
| Somerville Sublease liability | ||||
| Write-off of Somerville Sublease ROU asset | ( | ) | ||
| Amortization of operating lease ROU assets | ( | ) | ||
| Operating lease ROU assets at September 30, 2024 | $ | |||
| Operating Lease Liabilities | ||||
| Operating lease liabilities at January 1, 2024 | $ | |||
| Adjustment to lease liability due to remeasurement of Somerville Sublease | ||||
| Accretion of interest for Somerville Sublease | ||||
| Write-off of Somerville Sublease liability | ( | ) | ||
| Principal payments on operating lease liabilities | ( | ) | ||
| Operating lease liabilities at September 30, 2024 | ||||
| Less non-current portion | ||||
| Current portion at September 30, 2024 | $ | |||
As
of September 30, 2024, the Company’s operating leases had a weighted-average remaining life of
| As of September 30, 2024 | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total payments | ||||
| Less imputed interest | ( | ) | ||
| Total operating lease liabilities | $ | |||
| 9) | ACCRUED EXPENSES |
Accrued expenses at September 30, 2024 and December 31, 2023 consisted of the following (in thousands):
| September 30, 2024 | December 31, 2023 | |||||||
| Professional fees | $ | $ | ||||||
| Legal fees | ||||||||
| Accrued compensation | ||||||||
| Convertible notes interest | ||||||||
| Somerville facility | ||||||||
| Other | ||||||||
| Total accrued expenses | $ | $ | ||||||
| 14 |
| 10) | RELATED PARTY TRANSACTIONS |
Agreements with Factor Bioscience Inc. and Affiliates
As of September 30, 2024, the Company had entered into the agreements described below with Factor Bioscience Inc. and/or Dr. Matthew Angel. These agreements have been deemed related party transactions because the Company’s former chief executive officer, Dr. Angel, is the chairman and chief executive officer of Factor Bioscience Inc. and a director of its subsidiary, Factor Bioscience Limited (“Factor Limited” and together with Factor Bioscience Inc. and its other affiliates, “Factor Bioscience”). Dr. Angel resigned as the Company’s chief executive officer effective December 31, 2023.
In
September 2022, the Company entered into a Master Services Agreement (the “MSA”) with Factor Bioscience, pursuant to which
Factor Bioscience agreed to provide services to the Company as agreed between the Company and Factor Bioscience and as set forth in one
or more work orders under the MSA, including the first work order included in the MSA (“WO1”). The MSA contains customary
confidentiality provisions and representations and warranties of the parties, and the MSA may be terminated by either party upon
Under
WO1, Factor Bioscience agreed to provide the Company with mRNA cell engineering research support services, including access to certain
facilities, equipment, materials and training, and the Company agreed to pay Factor Bioscience an initial fee of $
Under the terms of an amendment to WO1, the Company may terminate WO1 on or after the second anniversary of the date of the MSA, subject to providing Factor Bioscience with 75 days’ prior notice if such notice is provided no later than June 30, 2024. On June 26, 2024, the Company provided Factor Bioscience with its notice to terminate WO1, which became effective on September 9, 2024.
In
connection with entering into the MSA, Factor Limited entered into a waiver agreement with Eterna LLC, pursuant to which Factor Limited
agreed to waive payment of $
Because
the License Fee Obligation was conditionally waived until the Company paid Factor Bioscience a minimum of $
In September 2022, Novellus Inc. (“Novellus”) and the Company entered into a Second Amendment to the Limited Waiver and Assignment Agreement (the “Waiver and Assignment Agreement”) with Drs. Matthew Angel and Christopher Rohde (the “Founders”) whereby the Company agreed to be responsible for all future, reasonable and substantiated legal fees, costs, settlements and judgments incurred by the Founders, the Company or Novellus for certain claims and actions and any pending or future litigation brought against the Founders, Novellus and/or the Company by or on behalf of the Westman and Sowyrda legal matters described in Note 10 (the “Covered Claims”). The Founders will continue to be solely responsible for any payments made to satisfy a judgement or settlement of any pending or future wage act claims. Under the Waiver and Assignment Agreement, the Founders agreed that they are not entitled to, and waived any right to, indemnification or advancement of past, present or future legal fees, costs, judgments, settlement or other liabilities they may have been entitled to receive from the Company or Novellus in respect of the Covered Claims. The Company and the Founders will share in any recoveries up to the point at which the parties have been fully compensated for legal fees, costs and expenses incurred, with the Company retaining any excess recoveries. The Company has the sole authority to direct and control the prosecution, defense and settlement of the Covered Claims.
| 15 |
In
November 2022, following the expiration of one of the milestone deadlines for certain regulatory filings required under the Third Amended
and Restated Exclusive License Agreement between Novellus Limited and Factor Limited entered into in November 2020 (the “Novellus-Factor
License Agreement”), which permitted Factor Limited to terminate the license granted to Novellus Limited thereunder, the Company
entered into the first amendment to the Original Factor License Agreement (as amended, the “2021 Factor License Agreement”),
pursuant to which, among other things, Factor Limited granted to Eterna LLC an exclusive, sublicensable license under certain patents
owned by Factor Limited (the “Factor Patents”) for the purpose of identifying and pursuing certain opportunities to grant
to third parties sublicenses to the Factor Patents. The Original Factor License Agreement also (i) terminated the Novellus-Factor License
Agreement, (ii) confirmed Factor Limited’s grant to Eterna LLC of the rights and licenses Novellus Limited previously granted to
Eterna LLC under the Novellus-Factor License Agreement on the same terms and conditions as granted by Novellus Limited to Eterna LLC
under such agreement, (iii) confirmed that the sublicense granted by Novellus Limited in accordance with the Novellus-Factor License
Agreement to NoveCite, Inc., a company which the Company has a
On February 20, 2023, the Company, entered into an exclusive license agreement (the “Feb 2023 Factor Exclusive License Agreement”) with Factor Limited, pursuant to which Factor Limited granted to the Company an exclusive, sublicensable, worldwide license under certain patents owned by Factor Limited for the purpose of, among other things, identifying and pursuing certain opportunities to develop products in respect of such patents and to otherwise grant to third parties sublicenses to such patents. The Feb 2023 Factor Exclusive License Agreement, which terminated and superseded the Amended Factor License Agreement, was subsequently terminated and superseded by the A&R Factor License Agreement (as defined below).
On November 14, 2023, the Company entered into an amended and restated exclusive license agreement (the “A&R Factor License Agreement”) with Factor Limited to replace in its entirety the exclusive license agreement between the parties dated February 20, 2023 and the amendment thereto. Under the A&R Factor License Agreement, Factor Limited granted to the Company an exclusive, sublicensable license under certain patents owned by Factor Limited (the “Factor Patents”). The A&R Factor License Agreement also provides for, among other things, the expansion of the Company’s license rights to include (i) the field of use of the Factor Patents to include veterinary uses (ii) know-how that is necessary or reasonably useful to practice to the licensed patents, (iii) the ability to sublicense through multiple tiers (as opposed to only permitting a direct sublicense) and (iv) the transfer of technology to the Company, subject to the use restrictions in the A&R Factor License Agreement. The A&R Factor License Agreement was subsequently terminated and superseded by the Factor L&C Agreement discussed below.
On September 24, 2024, the Company entered into the Factor L&C Agreement, effective as of September 9, 2024, with Factor Limited. The Factor L&C Agreement terminated the A&R Factor License Agreement as well as the Purchased License that Exacis entered into with Factor Bioscience on November 4, 2020, which the Company acquired pursuant to the Exacis Purchase Agreement with Exacis and certain stockholders of Exacis on April 26, 2023.
Under the Factor L&C Agreement, the Company has obtained exclusive licenses in the fields of cancer, autoimmune disorders, and rare diseases with respect to certain licensed technology and has the right to develop the licensed technology directly or enter into co-development agreements with partners who can help bring such technology to market. The Factor L&C Agreement also provides for certain services and materials to be provided by Factor Bioscience to facilitate the development of the licensed technology and to enable the Company to scale up production at third party facilities.
The
initial term of the Factor L&C Agreement is one year after the effective date, and it automatically renews yearly thereafter. The
Company may terminate the Factor L&C Agreement for any reason upon
Pursuant
to the Factor L&C Agreement, the Company will pay Factor Bioscience approximately $
| 16 |
Exacis Asset Acquisition
On April 26, 2023, the Company closed the Exacis Acquisition. See Note 3 for additional information.
The Exacis Acquisition was deemed a related party transaction because, at the time of the acquisition, (i) Dr. Gregory Fiore was both the chief executive officer of Exacis and a member of the Company’s board of directors, (ii) Dr. Angel was both the Company’s chief executive officer and chairman of Exacis’ scientific advisory board, and (iii) an affiliate of Factor Bioscience was the majority stockholder of Exacis.
Consulting Agreement with Former Director
In
May 2023, the Company entered into a consulting agreement with Dr. Fiore, whereby Dr. Fiore agreed to provide business development consulting
services to the Company for a monthly retainer of $
July 2023, December 2023 and September 2024 Financings
Investors in the July 2023 convertible note financing included Brant Binder, Richard Wagner, Charles Cherington and Nicholas Singer, and investors in the December 2023 convertible note financing and the September 2024 financing included Messrs. Cherington and Singer. Each of them participated in the applicable financing under the same terms and subject to the same conditions as all the other investors. See Note 5 and Note 17 for additional information regarding the financings. Mr. Binder served on the Company’s board of directors from July 6, 2023 to August 8, 2023, Mr. Wagner served on the Company’s board of directors from July 6, 2023 to August 8, 2023, Mr. Cherington served on the Company’s board of directors from March 2021 to July 6, 2023, and Mr. Singer served on the Company’s board of directors from June 2022 to July 6, 2023.
| 11) | COMMITMENTS AND CONTINGENCIES |
Litigation Matters
The Company is involved in litigation and arbitrations from time to time in the ordinary course of business. Legal fees and other costs associated with such actions are expensed as incurred. In addition, the Company assesses the need to record a liability for litigation and contingencies. The Company reserves for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated.
Novellus, Inc. v. Sowyrda et al., C.A. No. 2184CV02436-BLS2
On October 25, 2021 Novellus, Inc. filed a complaint in the Superior Court of Massachusetts, Suffolk County, against former Novellus, Inc. employees Paul Sowyrda and John Westman and certain other former investors in Novellus LLC (Novellus, Inc.’s former parent company prior to our acquisition of Novellus, Inc.), alleging breach of fiduciary duty, breach of contract and civil conspiracy. Eterna acquired Novellus, Inc. on July 16, 2021. On May 27, 2022 Novellus, Inc. amended the complaint to withdraw all claims against all defendants except Paul Sowyrda and John Westman. On July 1, 2022, Westman filed a motion to compel arbitration or in the alternative, to stay the litigation pending the disposition of certain litigation in the Court of Chancery for the State of Delaware filed by Mr. Sowyrda against Novellus LLC, Dr. Christopher Rohde, Dr. Matthew Angel, Leonard Mazur and Factor Bioscience, Inc. captioned Zelickson et al., v. Angel et al., C.A. 2021-1014-JRS and by Westman against Novellus LLC captioned Westman v. Novellus LLC, C.A. No. 2021-0882-NAC (together, the “Delaware Actions”). On July 1, 2022, Sowyrda answered the complaint and asserted counterclaims against Novellus, Inc, and third-party defendants Dr. Matthew Angel and Dr. Christopher Rohde alleging violations of the Massachusetts Wage Act, Massachusetts Minimum Fair Wage Law, the Fair Labor Standards Act, breach of contract, unjust enrichment and quantum meruit. Sowyrda also joined in Westman’s motion to stay the case pending the Delaware Actions. Novellus, Inc.’s claims and Mr. Sowyrda’s counterclaims relate to alleged conduct that took place before Eterna acquired Novellus, Inc.
| 17 |
On November 15, 2022, prior to a decision on Westman’s and Sowyrda’s motion to compel or stay, the parties agreed to voluntarily dismiss and consolidate the Delaware Actions with this action. On December 15, 2022, Sowyrda filed an Amended Answer to the Amended Complaint, asserted affirmative defenses and filed Amended Counterclaims against Dr. Angel, Dr. Rohde, Novellus LLC, Novellus Inc., Factor Bioscience Inc., and Eterna Therapeutics Inc. (collectively, the “Counterclaim Defendants”) alleging against various Counterclaim Defendants breach of contract, breaches of the implied duty of good faith and fair dealing, breaches of fiduciary duty, breaches of the operating agreement, aiding and abetting breaches of fiduciary duty, tortious interference with contract, equitable accounting, violations of the Massachusetts Wage Act, Massachusetts Minimum Fair Wage Law, the Fair Labor Standards Act, unjust enrichment, and quantum meruit. Also on December 15, 2022, Westman filed an answer to the Amended Complaint and asserted similar counterclaims against the same Counterclaim Defendants. Westman and Sowyrda each asserted claims for indemnification and/or advancement against Novellus, Inc. On January 11, 2023, Westman and Sowyrda served a joint motion to enforce their advancement and/or indemnification rights against Novellus Inc. Novellus Inc. vigorously opposes this motion and served its opposition on January 27, 2023. On February 8, 2023, Westman and Sowyrda served a reply in support of their motion to enforce indemnification/advancement rights, and submitted the motion to the Court. Novellus Inc. answered Westman and Sowyrda’s counterclaims on January 27, 2023, denying liability. The remaining Counterclaim Defendants served a motion to dismiss most of the remaining counterclaims on January 27, 2023. The Court entered an order granting the Counterclaim Defendants’ motion to dismiss and denying Sowyrda and Westman’s motion to enforce on June 15, 2023. The Court’s order dismissed all of Westman’s claims against Counterclaim Defendants except his claim for indemnification, and all of Sowyrda’s claims except his claim for indemnification and his employment-related claims, which Counterclaim Defendants did not move to dismiss. On July 6, 2023, Westman and Sowyrda filed a petition for interlocutory review with a single justice of the Massachusetts Appeals Court, seeking to overturn the judge’s decision granting the Counterclaim Defendants’ motion to dismiss most of the remaining counterclaims, but not the decision denying Westman and Sowyrda’s motion to enforce advancement rights. On July 25, 2023, the parties to the appeal filed a joint motion to the single justice in the appellate court to stay the appeal to allow for amended counterclaims to be filed by Counterclaim Plaintiffs and a motion to dismiss to be filed by Counterclaim Defendants. Counterclaim Plaintiffs filed an initial set of amended counterclaims on August 15, 2023. Counterclaim Plaintiffs amended and refiled their amended counterclaims on September 29, 2023. Counterclaim Defendants served their motion to dismiss all of the amended counterclaims, except for Sowyrda’s employment-related claims, on October 13, 2023. On June 13, 2024, the motion to dismiss was denied and the court set a schedule for discovery limited to a threshold factual issue. Discovery as to all other issues pertaining to the counterclaims was stayed. On July 15, 2024, Westman and Sowyrda requested that the single justice in the appellate court continue to stay the appeal pending the outcome of the limited discovery ordered by the Court. On July 31, 2024, Counterclaim Defendants and Sowyrda informed the Court that they had reached a settlement and requested that all claims pending between them be dismissed with prejudice, and on August 9, 2024, the Court approved the motion for approval of dismissal of all such claims with prejudice. Pursuant to the Court’s order, Counterclaim Defendants are engaged in limited discovery with Westman.. The next Court conference is scheduled for November 18, 2024.
Under applicable Delaware law and Novellus Inc.’s organizational documents, the Company may be required to advance or reimburse certain legal expenses incurred by former officers and directors of Novellus, Inc. in connection with the foregoing Westman and Sowyrda matters. However, a future advance or reimbursement is not currently probable nor can it be reasonably estimated.
eTheRNA Immunotherapies NV and eTheRNA Inc. v. Eterna Therapeutics Inc. C.A. No. 123CV11732
On July 31, 2023, eTheRNA Immunotherapies NV and eTheRNA Inc. filed a complaint against the Company alleging the following claims: (1) federal trademark infringement; (2) federal unfair competition; (3) Massachusetts state common law trademark infringement; (4) Massachusetts state unfair competition. On April 2, 2024, the parties settled the claims and stipulated to dismiss the complaint with prejudice. Per the settlement agreement entered into between the parties on March 19, 2024, the Company plans to phase-out its current use of the ETERNA trademark by October 31, 2024.
On
October 6, 2024, the parties entered into an addendum to the settlement agreement extending the deadline for phasing out the Company’s
use of the ETERNA trademark until March 31, 2025. If the Company continues to use the Eterna Therapeutics name as of April 1, 2025, it
will be obligated to pay €
Licensing Agreements
On September 24, 2024, the Company entered into the Factor L&C Agreement. See Note 10 for details of this agreement.
| 18 |
Retirement Savings Plan
The
Company established a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, which allows employees
to defer up to
| 12) | STOCK-BASED COMPENSATION |
Stock Options
Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Stock options granted | ||||||||
There were no stock options granted during either of the three months ended September 30, 2024 or 2023.
On January 1, 2024, Sanjeev Luther was appointed as President, Chief Executive Officer and a director of the Company. Upon his appointment, he was granted a non-qualified stock option to purchase approximately shares of the Company’s common stock. The stock option has an exercise price of $ per share, which was equal to the fair market value (as defined in the 2020 Restated Equity Incentive Plan) of the Company’s common stock on the date of grant, will vest over , with % of the shares vesting on the first anniversary of the grant date and the remaining % of the shares vesting in equal installments over the thereafter, in each case, subject to continued service. The stock option was granted pursuant to the terms of Mr. Luther’s employment agreement and as a material inducement to his joining the Company in accordance with Nasdaq Listing Rule 5635(c)(4).
On April 26, 2024, the vesting terms of Mr. Luther’s stock option award were amended so that the option vests over , with % of the shares vesting on the first anniversary of the grant date and the remaining % of the shares will vest in equal installments over the remaining two years, in each case, subject to continued service.
Since the only modification to Mr. Luther’s stock option award was to the vesting terms, there was no change to the fair value of the stock option and the total compensation cost was unchanged. However, the total compensation cost will be recognized over three years rather than four years, and as a result, the Company recognized approximately $ million in additional stock-based compensation expense during the nine months ended September 30, 2024 as a result of the modification.
The Company recognizes stock-based compensation expense for stock options granted to employees, directors and certain consultants. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period on a straight-lined basis.
| 19 |
Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Weighted average risk-free rate | % | % | ||||||
| Weighted average volatility | % | % | ||||||
| Dividend yield | % | % | ||||||
| Expected term | years | years | ||||||
Nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Weighted average grant date fair value | $ | $ | ||||||
Vesting of all stock options is subject to continuous service with the Company through the applicable vesting date. As of September 30, 2024, there were approximately shares of the Company’s common stock subject to outstanding stock options.
Restricted Stock Units
The Company recognizes the fair value of RSUs as expense on a straight-line basis over the requisite service period. For performance-based RSUs, the Company begins recognizing the expense once the achievement of the related performance goal is determined to be probable.
Outstanding RSUs are settled in an equal number of shares of common stock on the vesting date of the award. An RSU award is settled only to the extent vested. Vesting generally requires the continued employment or service by the award recipient through the applicable vesting date. Because RSUs are settled in an equal number of shares of common stock without any offsetting payment by the recipient, the measurement of cost is based on the quoted market price of the stock at the measurement date, which is the grant date.
In lieu of paying cash to satisfy withholding taxes due upon the settlement of vested RSUs, at the Company’s discretion, an employee may elect to have shares of common stock withheld that would otherwise be issued at settlement, the value of which is equal to the amount of withholding taxes payable. During the three and nine months ended September 30, 2024 and 2023, less than RSUs vested. As of September 30, 2024, there were less than RSUs outstanding.
The Company did t grant RSUs during either of the three or nine months ended September 30, 2024 and 2023.
Stock-Based Compensation Expense
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 20 |
| 13) | WARRANTS |
As discussed in Notes 5 and 6, respectively, the Company has previously issued the note warrants and the Q1-22 warrants. The Company also has the December 2022 warrants outstanding from a private placement completed in the fourth quarter of 2022.
As of September 30, 2024, the Company has the following warrants outstanding:
| Warrants Outstanding (in thousands) | Exercise Price | Expiration Date | Classification | |||||||||
| Q1-22 warrants | $ | Liability | ||||||||||
| December 2022 Warrants | $ | Equity | ||||||||||
| July 2023 Note Warrants | $ | Equity | ||||||||||
| December 2023 Note Warrant issued December 15, 2023 | $ | Equity | ||||||||||
| December 2023 Note Warrant issued January 11, 2024 | $ | Equity | ||||||||||
As
of September 30, 2024, the weighted average remaining contractual life of the warrants outstanding was
On
October 29, 2024, all of the warrants except for the Q1-22 warrants and approximately
| 14) | NET LOSS PER SHARE |
The Company calculates basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. The convertible notes contractually entitle the holders thereof to participate in dividends but does not contractually require the holders to participate in the Company’s losses. As such, the two-class method is not applicable during periods with a net loss.
Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding plus dilutive securities. Shares of common stock issuable upon exercise, conversion or vesting of outstanding stock options, RSUs, warrants and shares of Series A convertible preferred stock are considered potential shares of common stock and are included in the calculation of diluted net loss per share using the treasury method when their effect is dilutive. The outstanding convertible notes are also considered potential shares of common stock and are included in the calculation of diluted net loss per share using the “if-converted” method, and the more dilutive of either the two-class method or the if-converted method is reported. Diluted net loss per share is the same as basic net loss per share for periods in which the effect of potentially dilutive shares of common stock is antidilutive.
| 21 |
Three and nine months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Convertible Notes converted into common stock | ||||||||
| Stock options | ||||||||
| Preferred stock converted into common stock | ||||||||
| RSUs | ||||||||
| Total potential common shares excluded from computation | ||||||||
| 15) | STANDBY EQUITY PURCHASE AGREEMENT |
On
April 5, 2023, the Company entered into the ELOC with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $
In April 2023, the Company filed a registration statement on Form S-1 to register the sale from time to time of up to shares of the Company’s common stock by Lincoln Park, including the approximately commitment shares, which was declared effective on April 24, 2023 (the “ELOC S-1”).
During
the three and nine months ended September 30, 2023, the Company issued and sold approximately shares of common stock under the
ELOC, including the approximately commitment shares, for gross proceeds of $
| 16) | RECENT ACCOUNTING PRONOUNCEMENTS |
No new Accounting Standards Updates have been issued by the Financial Accounting Standards Board since January 1, 2024 that would apply to the Company that are not disclosed in the 2023 10-K.
| 17) | SUBSEQUENT EVENT |
As discussed in Note 5, on September 24, 2024, the Company entered into the September 2024 Transactions. On October 29, 2024, the Company held its Annual Meeting, whereby the Company’s stockholders approved the September 2024 Transactions, and as a result, the following occurred:
| ● | Under
the Common Stock Private Placement, the Company issued approximately shares of common stock and pre-funded warrants to
purchase | |
| ● | Under
the Bridge Notes, approximately $ | |
| ● | Under
the Exchange Transactions, (i) the holders of the warrants exchanged approximately |
In total, the Company issued approximately million shares of common stock and million pre-funded warrants on October 29, 2024 pursuant to the September 24, 2024 Transactions and had million shares of common stock issued and outstanding.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read this discussion together with the unaudited interim condensed consolidated financial statements, related notes, and other financial information included elsewhere in this Quarterly Report on Form 10-Q together with our audited consolidated financial statements, related notes, and other information contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2023, as amended by the Form 10-K/A filed with the SEC on March 18, 2024 (as amended, the “2023 10-K”). The following discussion contains or is based on assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors,” in this report and in Part I, Item 1A of the 2023 10-K and as described from time to time in our other filings with the SEC. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements.
Overview
We are a preclinical-stage cell therapy company. Our vision is to improve the lives of patients with difficult-to-treat diseases through innovative, effective, and safe, but accessible cellular therapies, and our mission is to develop allogenic off-the-shelf cellular therapies, leveraging induced pluripotent stem cell (“iPSC”)-derived mesenchymal stem cells (“iMSCs”) to target solid tumors.
Our lead product ERNA-101 is allogenic IL-7 and IL-15-secreting iMSCs. ERNA-101 capitalizes on the intrinsic tumor-homing ability of MSCs to slip through the tumor’s defenses and to deliver potent pro-inflammatory factors directly to the tumor microenvironment (“TME”), limiting systemic exposure and potential toxicity while unleashing potent anti-cancer immune responses including enhancement of T-cell anti-tumor activity. Our initial focus is to develop ERNA-101 in triple negative breast cancer and platinum-resistant, tp53-mutant ovarian cancer. We collaborated with the University of Texas MD Anderson Cancer Center to investigate the ability of ERNA-101 to induce and modulate antitumor immunity in ovarian cancer and breast cancer model. We are expecting to complete the Investigational New Drug (“IND”) enabling studies and IND submission by 2026. We are also planning to investigate anti-inflammatory cytokine (e.g. IL-10)-secreting iMSCs in inflammatory/auto-immune disorders like Rheumatoid arthritis. We are actively seeking strategic partnerships to co-develop or out-license therapeutic assets and engage with potential collaborators to expand developmental opportunities.
Recent Developments
Private Placement
On October 29, 2024, we closed a private placement in which we sold an aggregate of 1,401,994 shares of our common stock and pre-funded warrants to purchase 115,000 shares of our common stock at a purchase price of $0.75 per share of common stock and $0.745 per pre-funded warrant. We received approximately $1.1 million in gross proceeds from the issuance of such securities. For additional information regarding this private placement, see Note 5 to the accompanying condensed consolidated financial statements.
Exchange Transactions
Also on October 29, 2024, in accordance with exchange agreements we entered into with the holders of certain of our warrants and convertible notes, we issued an aggregate of 38,302,029 shares of our common stock in exchange for: (i) warrants to purchase an aggregate of approximately 4.4 million shares of our common stock that we issued in December 2022 with an exercise price of $1.43 per share; (ii) $8.7 million in the aggregate principal amount of convertible notes that we issued in July 2023 and warrants to purchase an aggregate of approximately 6.1 million shares of our common stock that we issued in July 2023 with an exercise price of $1.43 per share; (iii) $9.2 million in the aggregate principal amount of convertible notes that we issued in December 2023 and warrants to purchase an aggregate of approximately 9.6 million shares of our common stock that we issued in December 2023 with an exercise price of $1.43 per share.
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The holders of the warrants described in the paragraph above exchanged all their warrants for shares of our common stock at an exchange ratio of 0.5 of a share of common stock for every one share of common stock issuable upon exercise of the applicable warrant (rounded up to the nearest whole number), and the holders of the convertible notes described in the paragraph above exchanged all their convertible notes for shares of our common stock at an exchange ratio equal to (A) the sum expressed in U.S. dollars of (1) the principal amount of the applicable convertible note, plus (2) all accrued and unpaid interest thereon through the date the applicable convertible note is exchanged plus (3) all interest that would have accrued through, but not including, the maturity date of applicable convertible note if it was outstanding from the date such convertible note is exchanged through its maturity date, divided by (B) $1.00 (rounded up to the nearest whole number).
For additional information regarding the exchange transactions, see Note 5 to the accompanying condensed consolidated financial statements.
Conversion of Bridge Notes
On September 24, 2024, we closed a private placement in which we sold an aggregate principal amount of approximately $3.9 million of 12.0% senior convertible notes (the “bridge notes”).
On October 29, 2024, in accordance with the terms of the bridge notes, approximately $3.0 million of the principal amount of the bridge notes plus all accrued and unpaid interest thereon, plus such amount of interest that would have accrued on the principal amount through December 24, 2024, was automatically converted at a conversion price of $0.50 into 6,244,237 shares of our common stock, and approximately $0.9 million of the principal amount of the bridge notes plus all accrued and unpaid interest thereon, plus such amount of interest that would have accrued on the principal amount through December 24, 2024, was automatically converted at a conversion price of $0.50 into pre-funded warrants to purchase 1,764,000 shares of our common stock.
For additional information regarding the private placement and conversion of the bridge notes, see Note 5 to the accompanying condensed consolidated financial statements.
In total, the Company issued approximately 45.9 million shares of common stock and 1.9 million pre-funded warrants on October 29, 2024 pursuant to the private placement, the exchange transactions and the conversion of the bridge notes discussed above and had 51.4 million shares of common stock issued and outstanding.
Agreements with Factor Bioscience
License Agreement
On September 24, 2024, we entered into the Exclusive License and Collaboration Agreement (“the Factor L&C Agreement”) with Factor Bioscience Limited (“Factor Limited”). The Factor L&C Agreement terminated the Amended and Restated Factor License Agreement (the “A&R Factor License Agreement”) entered into on November 14, 2023 as well as an exclusive license agreement we acquired from Dilos Bio (formerly known as Exacis Biotherapeutics Inc. (“Exacis”)) under an asset purchase agreement in April 2023.
Under the Factor L&C Agreement, we have obtained an exclusive license in the fields of cancer, autoimmune disorders, and rare diseases with respect to certain licensed technology and we have the right to develop the licensed technology directly or enter into co-development agreements with partners who can help bring such technology to market. The Factor L&C Agreement also provides for certain services and materials to be provided by Factor to facilitate our development of the licensed technology and to enable us to scale up production at third party facilities.
The initial term of the Factor L&C Agreement is one year after the effective date, and it automatically renews yearly thereafter. We may terminate the Factor L&C Agreement for any reason upon 90 days’ written notice to Factor, and the parties otherwise have customary termination rights, including in connection with certain uncured material breaches and specified bankruptcy events.
Pursuant to the Factor L&C Agreement, we will pay Factor $0.2 million per month for the first twelve months, $0.1 million per month for the first nine months toward patent costs, certain milestone payments, royalty payments on net sales of commercialized products and sublicensing fee payments.
Lineage Assignment Agreement
On September 24, 2024, we entered into an agreement with Factor Bioscience Inc. (“Factor”) whereby we assigned the exclusive option and license agreement (the “Lineage Agreement”) to Factor (the “Lineage Assignment Agreement”). Our rights and obligations under the agreement are now Factor’s responsibility.
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Payments related to the Lineage Agreement will now be subject to the Lineage Assignment Agreement, which provides for Factor paying us thirty percent (30%) of all amounts it actually receives from Lineage in the event that Lineage exercises its Option Right. Upon receipt of payment for the customization activities set forth in the Lineage Agreement, Factor will pay the Company twenty percent (20%) of all amounts Factor receives from Lineage.
Termination of Sublease
In October 2022, we entered into a sublease for office and laboratory space in Somerville, Massachusetts. In connection with entering into the sublease, we delivered a security deposit in the form of a letter of credit in the amount of $4.1 million. The letter of credit was collateralized with $4.1 million of cash deposited in a restricted account.
On August 5, 2024, the sublessor drew down on the letter of credit for the full $4.1 million to cover the approximately $4.0 million of past due rent payments for February 2024 through August 2024, plus interest and penalties.
On August 9, 2024, we and the sublessor entered into a sublease termination agreement pursuant to which the parties agreed to terminate the sublease effective August 31, 2024. Pursuant to the sublease termination agreement, we agreed to surrender and vacate the premises, all of our right, title and interest in all furniture, fixtures and laboratory equipment at the premises will become the property of the sublessor, and both parties will be released of their obligations under the sublease. As a result of the sublease termination, we recognized a gain on lease termination of approximately $1.6 million for the three and nine months ended September 30, 2024, and we expect to save approximately $72 million in base rental payments, parking, operating expenses, taxes and utilities that we would have paid over the remaining lease term.
Nasdaq Matters
On March 19, 2024, we received a notice from the Listing Qualifications Staff (“Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) stating that we were not in compliance with the Nasdaq listing rule 5550(b)(1) (the “Minimum Stockholders’ Equity Rule”) because we reported stockholders’ equity of less than $2.5 million as of December 31, 2023. The notice had no immediate effect on our Nasdaq listing. In May 2024, we submitted a plan to Nasdaq advising of actions we have taken or will take to regain compliance with the Minimum Stockholders’ Equity Rule. Nasdaq accepted our plan and granted us a 180-day extension, or through September 16, 2024, to regain compliance with the Minimum Stockholders’ Equity Rule. On September 17, 2024, we received a notice from the Staff stating that the Staff has determined that we did not meet the terms of the extension to confirm or demonstrate compliance with the Minimum Stockholders’ Equity Rule by September 16, 2024, and, as a result, unless we request an appeal of such determination by September 24, 2024, trading of our common stock will be suspended at the opening of business on September 26, 2024, and a Form 25-NSE will be filed with the SEC, which will remove our securities from listing and registration on Nasdaq. On September 24, 2024,we submitted a timely request for a hearing with the Nasdaq’s Hearings Panel to appeal the Staff’s determination. The request stayed the suspension of trading of our common stock and the filing of the Form 25-NSE pending the Hearing Panel’s decision. The hearing was scheduled for November 12, 2024.
After giving effect to (i) the reclassification of the debt represented by the convertible notes to equity as a result of the exchange of the convertible notes that occurred on October 29, 2024, (ii) the receipt of net proceeds we received in the October 2024 private placement of our common stock and pre-funded warrants to purchase shares of our common stock, and (iii) the reclassification of the debt represented by the bridge notes to equity as a result of the conversion of the bridge notes into shares of our common stock or pre-funded warrants to purchase shares of our common stock, and after taking into account the savings resulting from the termination of our former sublease, our stockholders’ equity exceeds $2.5 million on a proforma basis as of September 30, 2024, which we communicated in our pre-hearing submission of materials to the Hearing Panel on October 23, 2024. Additionally, due to issuing over 45.9 million shares of common stock from the transactions described above and having a total of 51.4 million shares of common stock issued and outstanding as of October 29, 2024, the market value of our listed securities has exceeded the minimum of $35 million under Nasdaq Listing Rule 5550(b)(2) for ten consecutive trading days. As a result, the Staff informed the Company that is has regained compliance with Nasdaq Listing Rule 5550(b) and our stock will continue to be listed and traded on Nasdaq. Accordingly, the Hearing Panel cancelled the November 12, 2024 hearing.
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Basis of Presentation
Revenue
In February 2023, we entered into the Lineage Agreement with Lineage, under which we granted Lineage an option to obtain an exclusive sublicense to certain of our technology for preclinical, clinical and commercial purposes in exchange for a non-refundable up-front payment to us of $0.3 million. In August 2023, Lineage requested that we begin developing certain induced pluripotent stem cell lines in exchange for a cell line customization fee. Lineage paid us $0.4 million towards the customization fee, which we were recognizing ratably over the customization period. On September 24, 2024, we entered into the Lineage Assignment Agreement with Factor Inc. to assign all our rights and obligations under that the Lineage Agreement to Factor Inc. Payments to us related to the Lineage Agreement will now be subject to the Lineage Assignment Agreement, which provides for Factor Inc. paying the us thirty percent (30%) of all amounts it receives from Lineage in the event that Lineage obtains a sublicense from Factor Inc. Upon receipt of future payments for the customization activities set forth in the Lineage Agreement, Factor Inc. will pay the us twenty percent (20%) of all amounts Factor Inc. receives from Lineage. Because we have no further obligations under the agreement with Lineage, we have fully recognized as revenue amounts previously recorded in deferred revenue of approximately $0.5 million for the three and nine months ended September 30, 2024. For additional information, see Note 4 to the accompanying condensed consolidated financial statements. We have no other revenue generating contracts at this time.
Cost of Revenues
We recognize direct labor and supplies associated with generating our revenue as cost of revenues. As provided for in the A&R Factor License Agreement discussed in Note 10 to the accompanying condensed consolidated financial statements, we were obligated to pay Factor Limited 20% of any amounts we receive from a customer that was related to the licensed technology under the A&R Factor License Agreement, which we also recognize as a cost of revenue.
Research and Development Expenses
We expense our research and development costs as incurred. Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research. Upfront payments and milestone payments we make for the in-licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended.
The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, supplies and materials, preclinical study costs, expensed licensed technology, consulting, scientific advisors and other third-party costs, and allocations of various overhead costs related to our research and development efforts.
We have contracted with third parties to perform various studies. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. We accrue for third party expenses based on estimates of the services received and efforts expended during the reporting period. If the actual timing of the performance of the services or the level of effort varies from the estimate, the accrual is adjusted accordingly. The expenses for some third-party services may be recognized on a straight-line basis if the expected costs are expected to be incurred ratably during the period. Payments under the contracts depend on factors such as the achievement of certain events or milestones, the successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs.
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Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2024 and 2023
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | |||||||||||||||||||
| Revenue | $ | 487 | $ | 51 | $ | 436 | $ | 581 | $ | 51 | $ | 530 | ||||||||||||
| Cost of revenues | (60 | ) | 120 | (180 | ) | 96 | 170 | (74 | ) | |||||||||||||||
| Gross income (loss) | 547 | (69 | ) | 616 | 485 | (119 | ) | 604 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Research and development | 1,001 | 1,387 | (386 | ) | 3,446 | 4,560 | (1,114 | ) | ||||||||||||||||
| General and administrative | 3,381 | 4,049 | (668 | ) | 11,592 | 10,231 | 1,361 | |||||||||||||||||
| Gain on lease termination | (1,576 | ) | - | (1,576 | ) | (1,576 | ) | - | (1,576 | ) | ||||||||||||||
| Acquisition of Exacis in-process research and development | - | - | - | - | 460 | (460 | ) | |||||||||||||||||
| Total operating expenses | 2,806 | 5,436 | (2,630 | ) | 13,462 | 15,251 | (1,789 | ) | ||||||||||||||||
| Loss from operations | (2,259 | ) | (5,505 | ) | 3,246 | (12,977 | ) | (15,370 | ) | 2,393 | ||||||||||||||
| Other (expense) income, net: | ||||||||||||||||||||||||
| Loss on extinguishment of debt | (22,440 | ) | - | (22,440 | ) | (22,440 | ) | - | (22,440 | ) | ||||||||||||||
| Incremental fair value of bridge note derivative liability | (1,038 | ) | - | (1,038 | ) | (1,038 | ) | - | (1,038 | ) | ||||||||||||||
| Change in fair value of warrant liabilities | 831 | 20 | 811 | 897 | 166 | 731 | ||||||||||||||||||
| Change in fair value of contingent consideration | - | - | - | 66 | 118 | (52 | ) | |||||||||||||||||
| Loss on non-controlling investment | - | - | - | - | (59 | ) | 59 | |||||||||||||||||
| Interest expense, net | (1,686 | ) | (113 | ) | (1,573 | ) | (3,269 | ) | (88 | ) | (3,181 | ) | ||||||||||||
| Other expense, net | - | (1 | ) | 1 | - | (281 | ) | 281 | ||||||||||||||||
| Total other expense, net | (24,333 | ) | (94 | ) | (24,239 | ) | (25,784 | ) | (144 | ) | (25,640 | ) | ||||||||||||
| Loss before income taxes | (26,592 | ) | (5,599 | ) | (20,993 | ) | (38,761 | ) | (15,514 | ) | (23,247 | ) | ||||||||||||
| (Provision) benefit for income taxes | (11 | ) | 8 | (19 | ) | (18 | ) | (1 | ) | (17 | ) | |||||||||||||
| Net loss | $ | (26,603 | ) | $ | (5,591 | ) | $ | (21,012 | ) | $ | (38,779 | ) | $ | (15,515 | ) | $ | (23,264 | ) | ||||||
Revenue
During the three and nine months ended September 30, 2024, we fully accelerated the recognition of approximately $0.5 million of deferred revenue related to nonrefundable payments we received from Lineage due to the Lineage Assignment Agreement we entered into on September 24, 2024 with Factor Inc. discussed earlier. For the three and nine months ended September 30, 2023, the revenue we recognized was related to customization activities performed for Lineage.
Cost of Revenue
During the nine months ended September 30, 2024, our cost of revenues included direct labor and materials to perform the customization cell line activities for Lineage. During the three months ended September 30, 2024, we recognized a credit for amounts previously accrued related to customization cell line activities that were no longer due as a result of entering into the Lineage Assignment Agreement with Factor Inc. During the three and nine months ended September 30, 2023, we recognized direct labor and materials related to the customization activities as well as the 20% license fee due to Factor Limited related to upfront payments received from Lineage under the customer agreement.
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Research and Development Expenses
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (in thousands) | ||||||||||||
| Professional fees | $ | 64 | $ | 225 | $ | (161 | ) | |||||
| Payroll-related | 58 | 134 | (76 | ) | ||||||||
| MSA/license fees | 767 | 813 | (46 | ) | ||||||||
| Stock-based compensation | 13 | 57 | (44 | ) | ||||||||
| Other expenses, net | 99 | 158 | (59 | ) | ||||||||
| Total research and development expenses | $ | 1,001 | $ | 1,387 | $ | (386 | ) | |||||
| Nine months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (in thousands) | ||||||||||||
| Professional fees | $ | 152 | $ | 675 | $ | (523 | ) | |||||
| Stock-based compensation | 74 | 177 | (103 | ) | ||||||||
| Payroll-related | 444 | 504 | (60 | ) | ||||||||
| MSA/license expense | 2,392 | 2,438 | (46 | ) | ||||||||
| Other expenses, net | 384 | 766 | (382 | ) | ||||||||
| Total research and development expenses | $ | 3,446 | $ | 4,560 | $ | (1,114 | ) | |||||
Total research and development expenses decreased by approximately $0.4 million and $1.1 million for the three and nine months ended September 30, 2024, respectively, compared to the three months ended September 30, 2023, primarily due to decreased professional fees due to a reduction in consultant services, payroll-related expenses and stock-based compensation from a reduction in headcount, MSA/license fees as a result of the new L&C Agreement and other expenses related to closing down a clinical trial we ended in 2022.
General and Administrative Expenses
| Three months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (in thousands) | ||||||||||||
| Professional fees | $ | 1,125 | $ | 1,726 | $ | (601 | ) | |||||
| Occupancy expense | 1,267 | 1,563 | (296 | ) | ||||||||
| Insurance | 93 | 209 | (116 | ) | ||||||||
| Stock-based compensation | 392 | 117 | 275 | |||||||||
| Payroll-related | 367 | 254 | 113 | |||||||||
| Other expenses, net | 137 | 180 | (43 | ) | ||||||||
| Total general and administrative expenses | $ | 3,381 | $ | 4,049 | $ | (668 | ) | |||||
| Nine months ended September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| (in thousands) | ||||||||||||
| Occupancy expense | $ | 5,068 | $ | 1,606 | $ | 3,462 | ||||||
| Stock-based compensation | 1,036 | 900 | 136 | |||||||||
| Professional fees | 3,409 | 5,054 | (1,645 | ) | ||||||||
| Insurance | 405 | 936 | (531 | ) | ||||||||
| Payroll-related | 1,234 | 1,312 | (78 | ) | ||||||||
| Other expenses, net | 440 | 423 | 17 | |||||||||
| Total general and administrative expenses | $ | 11,592 | $ | 10,231 | $ | 1,361 | ||||||
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Our general and administrative expenses decreased by approximately $0.7 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to decreases in professional fees related to legal services and consultants, rent expense due to the termination of our Somverville sublease effective August 31, 2024 and a reduction in insurance premiums. These decreases were offset by increases in payroll-related expense and stock-based compensation due to an increase in headcount as well as an inducement stock option grant given to our chief executive officer in January 2024 compared to the three months ended September 30, 2023.
Our general and administrative expenses increased by approximately $1.4 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to increased occupancy expense related to the Somerville sublease that we began to incur in July 2023 as well as increased stock-based compensation due to the chief executive officer’s inducement stock option grant. The increase in occupancy expense was partially offset by decreases in professional fees related to legal services and consultants, insurance expense due to lower premiums and payroll-related expenses resulting from a decrease severance expense during the nine months ended September 20, 2024 compared to the nine months ended September 30, 2023.
Gain on Lease Termination
On August 9, 2024, we and the sublessor of our Somerville sublease entered into a sublease termination agreement effective August 31, 2024. Pursuant to the sublease termination agreement, we agreed to surrender and vacate the premises, all of our right, title and interest in all furniture, fixtures and laboratory equipment at the premises will become the property of the sublessor, and both parties will be released of their obligations under the sublease. As a result of the sublease termination, we recognized a gain on lease termination of approximately $1.6 million for the three and nine months ended September 30, 2024 in the accompanying condensed consolidated statement of operations. There was no similar transaction during the three or nine months ended September 30, 2023.
Acquisition of Exacis In-Process Research and Development
In April 2023, we acquired from Exacis substantially all of its intellectual property assets, including all of its right, title and interest in and to the Purchased License. The Purchased License was determined to be an in-process research and development (“IPR&D”) asset that has no alternative future use and no separate economic value from its original intended purpose, which is expensed in the period the cost is incurred. As a result, we expensed the fair value of the Purchased License of approximately $0.5 million during the three and nine months ended September 30, 2023. For additional information, see Note 3 to the accompanying consolidated financial statements included in this report. There was no similar transaction during the three or nine months ended September 30, 2024.
Loss on Extinguishment of Debt
We recognized a $22.4 million loss on extinguishment of debt for the three and nine months ended September 30, 2024 related to the Exchange Agreements and common stock private placement entered into on September 24, 2024. There was no similar transaction during the three or nine months ended September 30, 2023. See Note 5 to the accompanying condensed consolidated financial statements for more information on the Exchange Transaction.
Fair Value Adjustments to Bridge Notes Derivative Liability
We recognized expense of $1.6 million related to the initial measurement at September 24, 2024 of the incremental fair value of the bridge notes derivative liability over the carrying value due to bifurcation of the conversion feature from the bridge notes. This was offset by a $0.6 million credit for the change in fair value of the bridge notes derivative liability due to remeasuring the liability as of September 30, 2024. There was no similar transaction during the three or nine months ended September 30, 2023. See Note 5 to the accompanying condensed consolidated financial statements for more information on the bridge notes.
Change in Fair Value of Warrant Liabilities
We recognized credits of less than $0.8 million and $0.9 million for the three and nine months ended September 30, 2024 for the change in the fair value of warrant liabilities, which includes certain warrants that were reclassified to a liability on September 24, 2024. The credits were due to a decrease in the market price of our common stock as of September 30, 2024.
For the three and nine months ended September 30, 2023, we recognized credits of less than $0.1 million and $0.2 million, respectively, for the change in the fair value of warrant liabilities due to a decrease in the market price of our common stock as of September 30, 2023. See Note 5 to the accompanying condensed consolidated financial statements for more information on the reclassification of the warrants.
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Change in Fair Value of Contingent Consideration
On the closing date of the acquisition of assets from Exacis in April 2023, we recognized a contingent consideration liability of $0.2 million for future payments that may be payable to Exacis, which was included as part of the $0.5 million fair value of the Purchased License asset and expensed as IPR&D for the nine months ended September 30, 2023. This contingent consideration liability is remeasured at each period end, and any change in the fair value of the contingent liability is recognized in the statement of operations. As of September 30, 2023, we remeasured the contingent liability and recognized a credit of $0.1 million for the nine months ended September 30, 2023 due to the decrease in the fair value of the contingent consideration liability. As of September 30, 2024, we remeasured the contingent liability and recognized a credit of $0.1 million for the nine months ended September 30, 2024 due to the decrease in the fair value of the contingent consideration liability. There were no amounts recognized for either of the three months ended September 30, 2023 or 2024.
Loss on Non-Controlling Investment
We account for our 25% non-controlling investment in NoveCite, Inc. (“NoveCite”) under the equity method. We have not guaranteed any obligations of NoveCite, nor are we otherwise committed to providing further financial support for NoveCite. Therefore, we only record 25% of NoveCite’s losses up to our investment carrying amount. As a result, we did not recognize additional losses related to NoveCite for the three or nine months ended September 30, 2024 or the three months ended September 30, 2023. We recognized a loss of approximately $0.1 million for the nine months ended September 30, 2023.
Interest Expense, net
We recognized an increase in interest expense for the three and nine months ended September 30, 2024 of approximately $1.6 million and $3.2 million, respectively, primarily due to interest expense and amortization of debt issuance costs associated with the 2023 convertible note financings and bridge notes when compared to the three and nine months ended September 30, 2023. As a result of the closing of the Exchange Transactions on October 29, 2024, we expect our future interest expense to be significantly decreased.
Other Expense, net
During the nine months ended September 30, 2023, we recognized $0.3 million of other expense, all of which related to the value of the commitment shares issued to Lincoln Park Capital Fund, LLC (“Lincoln Park”) under a standby equity purchase agreement (the “ELOC”) we entered into in April 2023 as well as other associated fees. We did not recognize any such expense during the three or nine months ended September 30, 2024 and a de minimus amount of other expense during the three months ended September 30, 2023.
Provision for Income Taxes
During 2024, we expect to incur state income tax liabilities related to our operations. We have established a full valuation allowance for all deferred tax assets, including our net operating loss carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets. The effective tax rate differs from the statutory tax rate due primarily to our full valuation allowance.
Liquidity and Capital Resources
As of September 30, 2024, we had cash of approximately $4.3 million, of which approximately $3.9 million was from proceeds from the bridge notes received on September 24, 2024, and we had an accumulated deficit of approximately $225.8 million. We have to date incurred operating losses, and we expect these losses to continue in the future. For the three and nine months ended September 30, 2024, we incurred a net loss of $26.6 million and $38.8 million, respectively. For the nine months ended September 30, 2024, we used $12.3 million of cash in operating activities.
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On October 29, 2024, we also received approximately $1.1 million upon the closing of the common stock private placement. Other than the proceeds raised under the bridge notes and the common stock private placement, our sole source of liquidity is through sales of our common stock under the ELOC, pursuant to which Lincoln Park committed to purchase up to $10.0 million of our common stock. Such sales of common stock by us, if any, are subject to certain conditions and limitations set forth in the ELOC, including a condition that we may not direct Lincoln Park to purchase any shares of common stock under the ELOC if such purchase would result in Lincoln Park beneficially owning more than 4.99% of our issued and outstanding shares of common stock. Sales under the ELOC may occur from time to time, at our sole discretion, through April 2025. To date, we have issued and sold approximately 214,000 shares of our common stock to Lincoln Park, including approximately 74,000 commitment shares, and have received approximately $0.3 million in gross proceeds from such sales. We sold no shares under the ELOC during the nine months ended September 30, 2024.
Based on our current financial condition and forecasts of available cash, we will not have sufficient capital to fund our operations for the 12 months following the issuance date of the accompanying condensed consolidated financial statements. We can provide no assurance that we will be able to obtain additional capital when needed, on favorable terms, or at all. If we cannot raise capital when needed, on favorable terms or at all, we will need to reevaluate our planned operations and may need to reduce expenses, file for bankruptcy, reorganize, merge with another entity, or cease operations. If we become unable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which they are carried on our financial statements, and stockholders may lose all or part of their investment in our common stock. See the risk factor in Item 1A of Part II of our 2023 10-K titled, “We will require substantial additional capital to fund our operations and execute our business strategy, and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all.”
Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of shares of our common stock and of convertible notes. We will continue to evaluate and plan to raise additional funds to support our working capital needs through public or private equity offerings, debt financings, strategic partnerships, out-licensing our intellectual property or other means. There can be no assurance that capital will be available when needed or that, if available, it will be obtained on terms favorable to us and our stockholders. Our ability to raise capital through sales of our common stock will depend on a variety of factors including, among others, market conditions, the trading price and volume of our common stock, and investor sentiment. In addition, macroeconomic factors and volatility in the financial market, which may be exacerbated in the short term by concerns over inflation, interest rates, impacts of the wars in Ukraine and the Middle East, strained relations between the U.S. and several other countries, and social and political discord and unrest in the U.S., among other things, may make equity or debt financings more difficult, more costly or more dilutive to our stockholders.
In addition, equity or debt financings may have a dilutive effect on the holdings of our existing stockholders, and debt financings may subject us to restrictive covenants, operational restrictions and security interests in our assets. If we raise capital through collaborative arrangements, we may be required to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us.
We prepared the accompanying condensed consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business. As discussed above, there is substantial doubt about our ability to continue as a going concern because we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain a going concern.
In addition, while we are not presently pursuing product development, we may do so in the future. Developing product candidates, conducting clinical trials and commercializing products requires substantial capital, and we would need to raise substantial additional funds if we were to pursue the development of one or more product candidates.
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Cash Flows
Cash flows from operating, investing and financing activities, as reflected in the accompanying condensed consolidated statements of cash flows, are summarized as follows:
| For the nine months ended September 30, | ||||||||||||
| (in thousands) | 2024 | 2023 | Change | |||||||||
| Cash (used in) provided by: | ||||||||||||
| Operating activities | $ | (12,291 | ) | $ | (15,747 | ) | $ | 3,456 | ||||
| Investing activities | (365 | ) | - | (365 | ) | |||||||
| Financing activities | 5,250 | 8,852 | (3,602 | ) | ||||||||
| Net decrease in cash and cash equivalents | $ | (7,406 | ) | $ | (6,895 | ) | $ | (511 | ) | |||
Net Cash Used in Operating Activities
There was a decrease of approximately $3.5 million in cash used in operating activities for the nine months ended September 30, 2024 compared to the same period in 2023. This change was due to a decrease in cash used in operating assets and liabilities of $2.0 million primarily related to a reduction in amounts due for the buildout costs of the Somerville facility and a $1.4 million decrease in net loss, after giving effect to adjustments made for non-cash transactions, for the nine months ended September 30, 2024 compared to the same period in 2023.
Net Cash Used in Investing Activities
We used approximately $0.3 million to pay for the purchases of property and equipment during the nine months ended September 30, 2024. There were no investing activities during the nine months ended September 30, 2023.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2024 includes approximately $5.3 million of gross proceeds received from the convertible note financings that occurred in January 2024 and September 2024. Net cash provided by financing activities for the nine months ended September 30, 2023 includes approximately $8.7 million of gross proceeds from convertible note financings and $0.3 million of proceeds received from selling approximately 214,000 shares to Lincoln Park under the ELOC. The Company did not sell any shares under the ELOC during the nine months ended September 30, 2024.
Critical Accounting Estimates
There were no significant changes in our critical accounting estimates during the three months ended September 30, 2024 from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2023 10-K.
Recent Accounting Pronouncements
No new Accounting Standards Updates have been issued by the Financial Accounting Standards Board since January 1, 2024 that would apply to us that are not disclosed in the 2023 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Under the rules and regulations of the SEC, as a smaller reporting company we are not required to provide the information otherwise required by this item.
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Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we were required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q under the supervision, and with the participation, of our management, including our President and Chief Executive Officer (who serves as our principal executive officer) and our Senior Vice President of Finance (who serves as our principal financial officer) of the effectiveness of the design and operation of our disclosure controls and procedures.
Based on that evaluation, our Chief Executive Officer and Senior Vice President of Finance concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q in providing reasonable assurance of achieving the desired control objectives due primarily to the material weakness discussed below.
Management’s Plan for Remediation of Material Weakness in Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
We were unable to timely file our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 with the SEC due to identifying errors in our financial statements reported in our Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 during our preparation of the financial statements for the quarter ended March 31, 2022. Management concluded that the errors were the result of accounting personnel’s lack of technical proficiency in complex matters. On June 30, 2022, we filed an amendment to our Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 to correct the errors in our financial statements for the years ended December 31, 2021 and 2020 and for the quarters ended June 30, 2020, September 30, 2020, March 31, 2021, June 30, 2021 and September 30, 2021.
Management has implemented measures designed to ensure that the deficiencies contributing to the ineffectiveness of our internal control over financial reporting are remediated, such that the internal controls are designed, implemented and operating effectively. The remediation actions to date include:
| ● | enhancing the business process controls related to reviews over technical, complex, and non-recurring transactions; | |
| ● | providing additional training to accounting personnel; and | |
| ● | using an external accounting advisor to review management’s conclusions on technical, complex and non-recurring matters. |
The material weakness cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. As of September 30, 2024, we continue to season and enhance such controls to ensure that they will continue to operate effectively for a sufficient period of time before management can make conclusions on the operating effectiveness.
We are committed to developing a strong internal control environment, and we believe the remediation efforts that we have implemented and will implement will result in significant improvements in our control environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary.
Changes in Internal Control over Financial Reporting
Except for the actions intended to remediate the material weakness as described above, there was no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth under “Note 11—Commitments and Contingencies—Legal Matters” to the accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated in this Item 1 by reference.
From time to time, we may become involved in legal proceedings arising in the ordinary course of business. Except as described above, are not party to any material legal proceedings.
Item 1A. Risk Factors.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described in our 2023 10-K, in addition to other information in this report, when evaluating our business and before deciding whether to purchase, hold or sell shares of our common stock. Each of these risks and uncertainties, as well as additional risks and uncertainties not presently known to us or that we currently consider immaterial, could harm our business, financial condition, results of operations and/or growth prospects, as well as adversely affect the market price of our common stock, in which case you may lose all or part of your investment. There have been no material changes to the risk factors described in the 2023 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The securities issued in connection with the closing of each of the September 2024 Transactions were exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), under Section 3(a)(9) of the Securities Act, Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D of the Securities Act. Each of the investors in the common stock private placement and the bridge notes represented to the Company that it is an accredited investor within the meaning of Rule 501(a) of Regulation D and that it is acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. Each party to an Exchange Agreement represented to the Company that it has not paid or given, and will not pay or give, to any person, any commission or other remuneration, directly or indirectly, for soliciting the exchange of securities thereunder. None of the securities offered in the September 2024 Transactions were offered through any general solicitation by the Company or its representatives. This report is not an offer to sell or a solicitation of an offer to buy any of the securities described herein.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
(a) None.
(b) None.
(c)
During the quarter covered by this report, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act)
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Item 6. Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ETERNA THERAPEUTICS INC. | ||
| Date: November 12, 2024 | By: | /s/ Sanjeev Luther |
| Sanjeev Luther | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 12, 2024 | By: | /s/ Sandra Gurrola |
| Sandra Gurrola | ||
| Senior Vice President of Finance | ||
| (Principal Financial Officer and Principal Accounting Officer) |
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