What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-14 compared with 2023-11-13 · 200 added, 284 removed, 100 unchanged (83% of the section changed)

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 filed with the Securities and Exchange Commission (the “SEC”) on March 20, 2023 (the

“2022 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 Part I, Item 1A of the

2022 10-K and as described from time to time in our other filings with the SEC.

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”).

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 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.

2 unchanged sentences

patents covering key mRNA cell engineering technologies, including technologies for mRNA cell reprogramming, mRNA gene editing, the NoveSlice TM and UltraSlice TM gene-editing proteins, and the ToRNAdo TM mRNA delivery system, which we collectively

refer to as our “mRNA technology platform.” We plan to develop and advance a pipeline of therapeutic products, both internally and through strategic partnerships, with the near-term focus on deploying our mRNA technology platform through strategic

partnerships.

We license our mRNA technology platform from Factor Bioscience Limited (“Factor Limited”) under the Exclusive Factor License Agreement (as defined below).

Through strategic partnerships, we expect that our mRNA technology platform will be used for preclinical and eventual clinical development of product candidates for a variety of clinical indications.

We expect that the initial product candidates developed by our strategic partners utilizing our mRNA technology platform will include hypoimmune induced pluripotent stem cell (“iPSC”)-derived product candidates for the treatment of neurological

indications and iPSC-derived immune-modulating cells (“iIMCs”) for indications such as acute myeloid leukemia (“AML”) and solid tumors.

refer to as our “mRNA technology platform.” We refer to aspects of our mRNA technology platform as “mRNA delivery,” “mRNA gene editing” and “mRNA cell reprogramming.” We license our mRNA technology platform from Factor Bioscience Limited (“Factor

Limited”) under an exclusive license agreement.

We believe that our proprietary technology platform can be used to develop novel pharmaceutical products to treat a broad range of diseases and address unmet medical needs.

In the short term, we are planning to derive revenue by leveraging our core intellectual property (“IP”) portfolio by licensing our IP to third parties in out-licensing or co-development

arrangements.

In addition, we are also planning to enhance our developmental activities through preclinical studies in selected indications.

In the mid-term, we are planning to transform our preclinical stage company into a clinical-stage company through investigational new drug application (“IND”)-enabling studies, IND approval, and

initiation of our first-in-human study.

After achieving the initial milestones, we’ll seek to diversify our pipeline of product candidates and strengthen the mRNA technology platform with the goal of generating IND applications each year.

In the long term, we aspire to become a therapeutics company with multiple approved gene and cellular therapy products across multiple indications in oncology, autoimmune diseases, and rare

We refer to aspects of our mRNA technology platform as “mRNA delivery,” “mRNA gene editing” and “mRNA cell reprogramming.”

10 unchanged sentences

delivery of mRNA encoding gene-editing proteins and reprogramming factors, including to primary cells, insertion of exogenous sequences into genomic safe-harbor loci, and in vivo delivery of mRNA to the

brain, eye, skin, and lung, which may be useful for the development of mRNA-based therapeutics.

brain, eye, skin, and lung, which may be useful for the development of mRNA-based therapeutic.

mRNA Gene Editing

3 unchanged sentences

nucleic acid fragment is inserted at random locations in the genome.

Our mRNA gene-editing technology is instead designed to employ mRNA to express gene-editing proteins, which can potentially enable gene editing without unwanted insertional

Our mRNA gene-editing technology instead is designed to employ mRNA to express gene-editing proteins, which can potentially enable gene editing without unwanted insertional

mutagenesis, because, unlike conventional gene-editing technologies that employ viruses or DNA-based vectors, mRNA does not typically cause unwanted insertional mutagenesis.

7 unchanged sentences

We expect that this same mechanism of action can generate allogeneic stem cell-derived therapies in which mRNA encoding

gene-editing proteins could be used to inactivate one or more components of the human leukocyte antigen complex to render the cells immuno-nonreactive or “stealth,” which may be useful for the development of allogeneic cell-based therapies.

gene-editing proteins could be used to inactivate one or more components of the human leukocyte antigen (“HLA”) complex to render the cells immuno-nonreactive or “stealth,” which may be useful for the development of allogeneic cell-based therapies.

mRNA Cell Reprogramming

Our mRNA cell-reprogramming technology can generate clonal lines of pluripotent stem cells that can be expanded and differentiated into many desired cell types that may be useful for the development

of regenerative cell therapies.

Our mRNA cell-reprogramming technology is capable of generating clonal lines of pluripotent stem cells that can be expanded and differentiated into many desired cell types that may be useful for the

development of regenerative cell therapies.

Conventional cell-reprogramming technologies (e.g., using Sendai virus or episomal vectors) can result in low efficiency reprogramming, can select for cells with abnormal growth characteristics, and

4 unchanged sentences

Private Placement of Convertible Notes and Warrants

On July 13, 2023, we entered into a purchase agreement with certain purchasers for the private placement of $8.7 million in aggregate principal amount of convertible notes (the “Convertible Notes”)

and the issuance of the warrants (the “Note Warrants” and together with the Convertible Notes, the “July 2023 Financing”) to purchase an aggregate of approximately 6.1 million shares of Common Stock.

The July 2023 Financing closed on July 14, 2023

(the “Closing Date”), and we are using the net proceeds from the transaction for general working capital purposes.

The Convertible Notes bear interest at 6% per annum, payable quarterly in arrears.

At our election, we may pay interest either in cash or in-kind by increasing the outstanding principal amount of

the Convertible Notes.

The Convertible Notes mature on July 14, 2028, unless earlier converted or repurchased.

We may not redeem the Convertible Notes at our option prior to maturity.

At the option of the holders, the Convertible Notes may be converted from time-to-time in whole or in part into shares of common stock at an initial conversion rate of $2.86 per share, subject to

customary adjustments for stock splits, stock dividends, recapitalization and the like.

The Convertible Notes do not contain any ratchet or other financial antidilution provisions.

The Convertible Notes purchased by the Purchasers contain conversion limitations, providing that no

conversion may be made if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99%, 9.99% or 19.99% immediately after conversion thereof, subject to certain increases not in excess of either 9.99%

or 19.99% at the option of such holder.

The Convertible Notes provide for customary events of default (subject in certain cases to customary grace and cure periods), which include, among others, the following:

nonpayment of principal or

breach of covenants or other agreements in the Convertible Notes;

the occurrence of a material adverse effect event and certain events of bankruptcy.

Generally, if an event of default occurs and is continuing under the Convertible Notes,

the holder thereof may require us to repurchase some or all of their Convertible Notes at a repurchase price equal to 100% of the principal amount of the Convertible Notes being repurchased, plus accrued and unpaid interest thereon.

The Note Warrants are immediately exercisable, have an exercise price of $2.61 per share, expire five years following the Closing Date and are subject to customary adjustments.

The Note Warrants

purchased by the Purchasers contain a provision pursuant to which such Note Warrants may not be exercised if the aggregate number of shares of Common Stock beneficially owned by the holder thereof would exceed 4.99%, 9.99% or 19.99% immediately

after exercise thereof, subject to certain increases not in excess of either 9.99% or 19.99% at the option of such holder.

On December 14, 2023, we entered into a purchase agreement with certain purchasers for the private placement of $9.2 million of convertible notes (the “December 2023 convertible notes” and together

with the July 2023 convertible notes, the “convertible notes”) and warrants to purchase an aggregate of approximately 9.6 million shares of our common stock (the “December 2023 warrants” and together with the July 2023 warrants, the “note

There were two closings under this purchase agreement:

on December 15, 2023, we received $7.8 million and issued $7.8 million in December 2023 convertible notes and December 2023 warrants to purchase approximately 8.1 million shares of

our common stock, and on January 11, 2024, we received the remaining $1.4 million and issued an aggregate of $1.4 million in December 2023 convertible notes and December 2023 warrants to purchase approximately 1.5 million shares of our common

See Notes 4 and 12 to the accompanying condensed consolidated financial statements for additional information.

Notice of Default under Sublease

We have not paid our rent obligations under our Somerville, Massachusetts sublease for February, March, April or May 2024, and, as of the date of filing of this report, we owe approximately $2.3

million in past due rent.

On May 3, 2024, we received a notice of default from the sublessor related to the foregoing and have had subsequent discussions with the Sublessor about remedying the event of default.

See “Liquidity and Capital

Resources—Material Cash Requirements—Somerville Sublease,” below.

Basis of Presentation

We are a pre-clinical stage company and have had no revenues from product sales to date.

We will not have revenues from product sales until such time as we receive regulatory approval of our product

candidates and successfully commercialize our products.

In February 2023, we entered into an exclusive option and license agreement (the “Agreement” with Lineage

Cell Therapeutics, Inc.

(“Lineage”), which provided Lineage with the option (the “Option Right”) to obtain an exclusive sublicense to certain related technology for preclinical, clinical and commercial purposes, which would permit Lineage to further

sublicense such intellectual property, subject to payment of certain sublicense royalty fees.

Lineage paid us a $0.3 million non-refundable up-front payment (the “Option Fee”) for the Option Right.

Under the Agreement, Lineage could also request that we develop for, and deliver to, Lineage certain induced

pluripotent stem cell lines, which Lineage would use to evaluate the possible development of cell transplant therapies for treatment of diseases of the central nervous system in humans, excluding certain indications.

Lineage had until August 22,

2023 to request that we develop the customized cell line, at which point, we would be entitled to certain cell line customization fees.

Upon Lineage’s request for us to develop the customized cell line, Lineage would then have six months from

delivery to Lineage of such induced pluripotent stem cell lines to exercise the Option Right and obtain the sublicense.

If Lineage obtains the sublicense, we would be entitled to receive additional license fees, including milestone payments and

On August 21, 2023, we entered into an

amendment of the Agreement with Lineage, which provided for changes specifically related to the cell line

customization activities such as (i) payment terms, (ii) certain definitions, (iii) certain courses of action if the customized cell line selected by Lineage is not successful and (iv) documentation requirements.

Also on August 21, 2023, Lineage requested that we begin developing certain induced pluripotent stem cell

lines in exchange for a cell line customization fee.

This agreement could also include additional licensing revenues at Lineage’s discretion.

There can be no assurances that we will recognize such additional revenues or that we will enter into other

agreements with customers in the future.

For additional information, see Note 5 to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

License Costs

We recognize certain license costs payable to Factor Limited under the Exclusive Factor License Agreement in connection with contracts with customers.

Our near-term focus is on deploying our mRNA technology platform through strategic partnerships.

We are not currently developing any product candidates.

Our future revenue, if any, is primarily

expected to come from out-licensing our mRNA technology platform and/or aspects thereof.

In February 2023, we entered into an exclusive option and license agreement with a third party, under which we granted such third party 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, that third party requested that we begin developing certain induced pluripotent stem cell lines in

exchange for a cell line customization fee.

The third party paid us $0.4 million towards the customization fee, which we are recognizing ratably over the customization period, which is expected to be approximately 20 to 25 months.

earn the remaining amount of the customization fee if we make certain progress towards delivery of the customized cell line.

We estimate the amount of consideration we expect to recognize as revenue that is not probable of having a significant

reversal of such recognized revenue, and we place a constraint on the remaining contractual consideration.

As it becomes evident that the constrained amounts are no longer at risk of a significant reversal of revenue, we will remove the constraint

from the related revenue and recognize a cumulative catch-up adjustment to revenue in the period in which the constraint was removed.

For additional information, see Note 3 to the accompanying condensed consolidated financial statements.

Cost of Revenues

We recognize direct labor and supplies associated with generating our revenue as cost of revenues.

As provided for in the amended and restated exclusive license agreement we entered into with

Factor Limited (the “A&R Factor License Agreement”) discussed in Note 9 to the accompanying condensed consolidated financial statements, we are obligated to pay Factor Limited 20% of any amounts we receive from a customer that is 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

4 unchanged sentences

expected to have any alternative future uses other than the specific research and development project for which it was intended.

In-process research and development (“IPR&D”) that we acquire and which has no alternative future uses and,

therefore, no separate economic values, is expensed to research and development costs at the time the costs are incurred.

The major components of research and development costs have included preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials,

expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related to our product

development efforts.

We have contracted with third parties to perform various clinical study and trial activities in the development and testing of potential products.

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.

Preclinical and clinical study and trial associated activities such as production and testing of clinical material require significant up-front

expenditures.

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

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

2 unchanged sentences

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

Three months ended September 30,

Nine months ended September 30,

Comparison of the Three Months Ended March 31, 2024 and 2023

Three months ended March 31,

(In thousands)

3 unchanged sentences

General and administrative

Acquisition of Exacis in-process research and development

Impairment of in-process research and development

Total operating expenses

Loss from operations

Other (expense) income, net:

Other expense, net:

Change in fair value of warrant liabilities

Change in fair value of contingent consideration

Loss on non-controlling investment

Other expense, net

Total other (expense) income, net

Interest (expense) income, net

Total other expense, net

Loss before income taxes

Benefit (provision) for income taxes

During the three and nine months ended September 30, 2023, we recognized revenue related to the cell line customization activities that we are performing for Lineage.

The agreement with Lineage was

not in place during the three and nine months ended September 30, 2022.

Provision for income taxes

During the three March 31, 2024, we recognized revenue related to the cell line customization activities that we are performing for a third party.

We did not perform any such activities, or

otherwise recognize any revenue, during the three months ended March 31, 2023.

Cost of Revenue

During the three and nine months ended September 30, 2023, our cost of revenues include direct labor and materials to perform the customization cell line activities, as well as royalty expense owed

to Factor Limited in accordance with the Exclusive Factor License Agreement.

There were no comparable expenses for the three and nine months ended September 30, 2022.

During the three months ended March 31, 2024, our cost of revenues included direct labor and materials to perform the customization cell line activities for a third party.

During the three months

ended March 31 2023, we received a $0.3 upfront payment pursuant to a customer contract with this third party.

Although the $0.3 million was recorded as deferred revenue as of March 31, 2023, the obligation to pay Factor Limited the 20% license fee

was incurred upon receipt of the payment from the third party, and was therefore recognized as a cost of revenue during the three months ended March 31, 2023.

As of March 31, 2024, the $0.3 upfront payment continues to be recognized in long-term

deferred revenue in the accompanying condensed consolidated balance sheet.

Research and Development Expenses

Three months ended September 30,

Three months ended March 31,

(in thousands)

Payroll-related

Stock-based compensation

Professional fees

Other expenses, net

Total research and development expenses

Nine months ended September 30,

(in thousands)

Payroll-related

Stock-based compensation

Professional fees

Payroll-related

Other expenses, net

Total research and development expenses

Total research and development expenses decreased by approximately $3.5 million and $3.7 million for the three and nine months ended September 30, 2023, respectively, when compared to the three and

nine months ended September 30, 2022.

The decrease was primarily related to a reduction in the MSA fees paid to Factor Bioscience, as the three and nine months ended September 30, 2022 included $3.5 million of expense allocated to the license, which

has no alternative future use.

The research and development expenses incurred during the three and nine months ended September 30, 2023 also include a reduction in payroll expense and stock-based compensation expense due to employee terminations,

offset by an increase in professional fees related to consulting activities when compared to the three and nine months ended September 30, 2022.

Total research and development expenses decreased by approximately $0.2 million for the three months ended March 31, 2024 when compared to the three months ended March 31, 2023 primarily due to a

decrease in professional fees related to closing down a clinical trial we ended in 2022 and other miscellaneous expenses, partially offset by increased payroll expense due to severance recognized during the three months ended March 31, 2024.

General and Administrative Expenses

Three months ended September 30,

Three months ended March 31,

(in thousands)

Occupancy expense

Professional fees

Stock-based compensation

Payroll-related

Other expenses, net

Total general and administrative expenses

Nine months ended September 30,

(in thousands)

Payroll-related

Professional fees

Impairment of ROU asset

Stock-based compensation

Loss on disposal of fixed assets

Occupancy expense

Other expenses, net

Total general and administrative expenses

Our general and administrative expenses increased by approximately $0.6 million for the three ended September 30, 2023 when compared to the three months ended September 30, 2022 primarily due to

increased occupancy expense related to the Somerville sublease that began being incurred during the three months ended September 30, 2023, offset by decreases in payroll expenses and stock-based compensation expense resulting from lower headcount and

decreases in insurance premiums.

Our general and administrative expenses decreased by approximately $4.0 million for the nine months ended September 30, 2023 when compared to the nine months ended September 30, 2022 due to decreases

in payroll expenses and stock-based compensation expense resulting from lower headcount, a non-recurring impairment expense recognized during the nine months ended September 30, 2022 related to the ROU asset for our former San Diego facility lease,

decreased professional fees resulting from less legal and consulting fees and a reduction in the loss on disposal of fixed assets.

These decreases were offset by increased occupancy expenses related to the Somerville sublease.

Acquisition of Exacis In-Process Research and Development

As discussed in Note 3 to the unaudited accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, we acquired

from Exacis Biotherapeutics Inc.

(“Exacis”) substantially all of Exacis’ intellectual property assets, including all of Exacis’ right, title and interest in and to an exclusive license agreement by and between Exacis and Factor Limited (the

“Purchased License”).

The Purchased License was determined to be an 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.

result, we expensed the fair value of the Purchased License during the nine months ended September 30, 2023 of approximately $0.5 million.

Impairment of In-Process Research and Development

During the nine months ended September 30, 2022, we received the results from the INSPIRE phase 2 trial of IRX-2.

The IRX-2 multi-cytokine biologic immunotherapy represents substantially all the fair

value assigned to the technologies of IRX that we acquired in 2018.

Despite outcomes that favored IRX-2 in certain predefined subgroups, the INSPIRE trial did not meet the primary endpoint of event-free survival at two years of follow up.

additional clinical development work would be required to advance IRX-2 in the form of additional Phase 2 and 3 studies to further evaluate the treatment effect of IRX-2 in patient subgroups and in combination with checkpoint inhibitor therapies.

Based on the totality of available information, we determined we would not further develop the IRX-2 product candidate and that the carrying value of the IPR&D asset was impaired.

Accordingly, we recognized a non-cash impairment charge of

approximately $6.0 million during the nine months ended September 30, 2022, which reduced the value of this asset to zero.

Our general and administrative expenses increased by approximately $0.7 million for the three months ended March 31, 2024 when compared to the three months ended March 31, 2023 primarily due to

increased occupancy expense related to the Somerville sublease that we began to incur in July 2023, as well as increased payroll related to increased general and administrative headcount.

These increases were partially offset by decreases in

professional fees related to legal services, insurance expense due to lower premiums and stock-based compensation expense resulting from a decrease in the fair value of stock options expensed during the three months ended March 31, 2024 compared to

the fair value of the stock options expensed during the three months ended March 31, 2023.

Change in Fair Value of Warrant Liabilities

For the three and nine months ended September 30, 2023 and 2022, we recognized credits to expense related to the change in the fair value of warrant liabilities due to a decrease in the market price

of our common stock.

Change in Fair Value of Contingent Consideration

On the closing date of the Exacis Acquisition, 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 determined that the change in fair value for the contingent consideration liability from the June 30, 2023 remeasurement was immaterial, and therefore,

we did not recognize a credit or expense for the three months ended September 30, 2023.

For the nine months ended September 30, 2023, we recognized expense related to the decrease in the fair value of the contingent consideration liability from the

closing date.

There were no contingent consideration liabilities during the same periods in 2022.

For the three months ended March 31, 2024 and 2023, we recognized expense related to the change in the fair value of warrant liabilities due to an increase in the market price of our common stock.

Loss on Non-Controlling Investment

4 unchanged sentences

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 months ended September

For the nine months ended September 30, 2023, we recognized approximately $0.1 million of loss and for the three and nine months ended September 30, 2022, we recognized losses of approximately $21,000 and $0.9 million, respectively.

Other Expense, Net

Three months ended September 30,

(in thousands)

Interest expense, net

Total other expense, net

Nine months ended September 30,

(in thousands)

PIPE transaction fees

Liquidated damages

Interest expense, net

Other income, net

Total other expense, net

For the three months ended September 30, 2023, total other expense, net increased in expense by $0.1 million as a result of an increase in interest expense related to our Convertible Notes payable,

which was offset by increased interest income on our cash balances when compared to the three months ended September 30, 2022.

For the nine months ended September 30, 2023, we recognized approximately $0.3 million related to a stand-by equity purchase agreement (the “SEPA”) with Lincoln Park Capital Fund LLC (“Lincoln Park”)

for the commitment fees and other fees.

We also recognized interest expense related to the Convertible Notes, which was offset by interest income on our cash.

For the nine months ended September 30, 2022, we expensed fees associated with the March

2022 Private Placement, as all of the fees incurred were allocated to the warrants issued in connection with such transaction, and we accrued for a loss for the estimated liquidated damages we incurred as a result of not timely filing with the SEC

our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022.

As a result, we did not recognize additional losses related to NoveCite for the three months ended March 31,

For the three months ended March 31, 2023, we recognized approximately $0.1 million of loss.

Interest (Expense) Income, net

We recognized an increase in interest expense for the three months ended March 31, 2024 of approximately $0.8 million primarily due to approximately $0.4 million of interest related to the

convertible notes as well as the amortization of the debt discount and debt issuance costs associated with the convertible note financings of approximately $0.4 million.

There were no convertible notes (or similar debt instruments) outstanding

during the three months ended March 31, 2023.

This increase in expense was partially offset by an increase in interest income from our cash that was deposited into interest-bearing accounts.

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.

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

Liquidity and Capital Resources

At September 30, 2023, we had cash, cash equivalents and restricted cash of approximately $8.6 million, of which approximately $4.6 million was restricted cash, as discussed below.

In October 2022, we entered into a facility sublease agreement (the “Sublease”) for approximately 45,500 square feet of office and laboratory space in Somerville, Massachusetts.

The term of the

Sublease is approximately 10 years, and we will pay approximately $63.0 million in base rental payments over the 10-year term, plus our share of the Sublessor’s parking spaces and operating expenses.

As part of the Sublease, we delivered a security

deposit in the form of a letter of credit in the amount of $4.1 million, which will be reduced on an incremental basis throughout the term of the lease.

The letter of credit was issued by our commercial bank, which required that we cash

collateralize the letter of credit with $4.1 million of cash deposited in a restricted account maintained by such bank.

The amount of required restricted cash collateral will decline in parallel with the reduction in the amount of the letter of

credit over the term of the sublease.

In February 2023, we entered into the Lineage Agreement, pursuant to which we received a $0.3 million upfront, nonrefundable payment for an option right to obtain a sublicense of intellectual

property from Factor Limited under the Exclusive Factor License Agreement.

As provided for in such agreement, in August 2023, Lineage requested that we develop certain customized cell line activities, and as a result, the Company received $0.4

million in an upfront, nonrefundable progress payment for the development activities.

If Lineage exercises its right to obtain the sublicense, then the Company is entitled to receive a license fee, milestone payments, royalties, and sublicense fees.

In April 2023, we entered into the SEPA, 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 SEPA, and may occur from time to time, at our sole discretion, over a period of up to 24 months, commencing April 25, 2025, which was the date on which each of the conditions to the

Lincoln Park’s purchase obligations set forth in the SEPA were initially satisfied.

At March 31, 2024, we had cash and cash equivalents of approximately $9.2 million, of which approximately $4.1 million was restricted cash (see—Material Cash Requirements—Somerville Sublease,

below) and an accumulated deficit of approximately $193.6 million.

We have to date incurred operating losses, and we expect these losses to continue in the future.

For the three months ended March 31, 2024, we incurred a net loss of $6.6 million,

and we used $3.7 million in operating activities.

Currently, our sole source of liquidity is through sales of our common stock under the standby equity purchase agreement (the “SEPA”) we entered into with Lincoln Park Capital Fund, LLC (“Lincoln

Park”) in April 2023, 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 SEPA, including a

condition that we may not direct Lincoln Park to purchase any shares of common stock under the SEPA if such purchase would result in Lincoln Park beneficially owning more than 4.99% of our issued and outstanding shares of common stock.

the SEPA 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 the 74,000 commitment shares, and have received

approximately $0.3 million in gross proceeds from such sales.

Under applicable Nasdaq listing rules, the aggregate number of shares of common stock that we had been able to issue to Lincoln Park under the SEPA could not exceed 19.99% of our

shares of common stock issued and outstanding immediately prior to the execution of the SEPA (the “Exchange Cap”) unless certain conditions were met, including obtaining stockholder approval to issue shares of common stock in excess of the Exchange

Cap in accordance with applicable Nasdaq listing rules.

On June 16, 2023, at the Company’s 2023 Annual Meeting of Stockholders, the Company’s stockholders approved, for purposes of complying with applicable Nasdaq listing rules, the Company’s

potential issuance of shares of common stock under the SEPA in excess of the Exchange Cap.

As a result, the Exchange Cap limitation no longer applies to issuances and sales of common stock by us to Lincoln Park under the SEPA.

However, we may not

direct Lincoln Park to purchase any shares of common stock under the SEPA if such purchase would result in Lincoln Park beneficially owning more than 4.99% of our issued and outstanding shares of common stock.

On July 14, 2023, we closed the July 2023 Financing of $8.7 million in aggregate principal amount of Convertible Notes and the issuance of the Note Warrants.

We intend to use the net proceeds from

the July 2023 Financing for general working capital purposes.

The Convertible Notes bear interest at 6% per annum, payable quarterly in arrears.

At our election, we may pay interest either in cash or in-kind by increasing the outstanding principal amount of

the Convertible Notes.

The Convertible Notes mature on July 14, 2028, unless earlier converted or repurchased.

We may not redeem the Convertible Notes at our option prior to maturity.

At the option of the holders, the Convertible Notes may be converted from time-to-time in whole or in part into shares of common stock at an initial conversion rate of $2.86 per share, subject to

customary adjustments for stock splits, stock dividends, recapitalization and the like.

As of September 30, 2023, no portion of the Convertible Notes have been converted to our common stock.

We have to date incurred operating losses, and we expect these losses to continue in the future as we further develop our product development programs and operate as a publicly

traded company.

In the near-term, we intend to focus on licensing opportunities for our in-licensed technology, but there can be no assurance that we will enter into agreements with respect to such opportunities on such terms and within a timeframe

necessary to satisfy our need for working capital.

While we are not presently pursuing product development, we may do so in the future, and current and potential licensing partners may seek to do so.

Developing product candidates, conducting

clinical trials and commercializing products are expensive, and we would need to raise substantial additional funds if we were to pursue the development of one or more product candidates Based on our current financial condition and forecasts of

available cash, we do not believe that we have sufficient funds to fund our operations for the next twelve months from the filing of the financial statements contained in this Quarterly Report on Form 10-Q for the three and nine months ended

September 30, 2023.

We can provide no assurance that we will be able to satisfy our near- or long-term cash needs through licensing transactions, or that we will obtain any additional financing that we require in the future or, even if such financing

is available, that it will be obtainable on terms acceptable to us.

These conditions raise substantial doubt about our ability to continue as a going concern.

In that regard, our future funding requirements will depend on many factors, including:

the terms and timing of any collaborative, licensing and other agreements that we may establish;

the cost of filing and potentially prosecuting, defending and enforcing any patent claims and other intellectual property rights;

the cost and timing of regulatory approvals;

the cost and delays in product development as a result of any changes in regulatory oversight applicable to our products;

the cost and timing of establishing sales, marketing and distribution capabilities;

the effect of competition and market developments;

the scope, rate of progress and cost of clinical trials and other product development activities;

future clinical trial results.

We plan to raise additional funds to support our product development activities and working capital requirements through public or private equity offerings, debt financings, strategic partnerships,

out-license collaborations or other means.

Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders.

There can be no assurance that any such required additional funding will be available to us at

all or available on terms acceptable to us.

Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that are not

favorable to us.

If we are not able to secure additional funding when needed, we may have to delay the commercialization of our products or reduce the scope of or eliminate one or more research and development programs, either of which could have an

adverse effect on our business.

We sold no shares under the SEPA during the three months ended March 31, 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 if we fail to obtain the necessary financing, we may not be able to pursue our business strategy.”

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

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.

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,

For the three months ended

(in thousands)

5 unchanged sentences

Net Cash Used in Operating Activities

The increase of approximately $0.2 million in cash used in operating activities for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily

due to an increase in cash used in operating assets and liabilities of $6.5 million, primarily related to MSA fees, insurance premiums and accrued severance payments.

This $6.5 million increase in cash used in operating activities for the nine

months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was offset by a decrease in net loss of approximately $6.3 million, after giving effect to adjustments made for non-cash transactions.

There was a decrease of approximately $2.3 million in cash used in operating activities for the three months ended March 31, 2024 compared to the same period in 2023.

This change was due to a

decrease in cash used in operating assets and liabilities of $2.5 million, primarily related to accounts payable and accrued expenses, partially offset by a $0.2 million increase in net loss, after giving effect to adjustments made for non-cash

transactions, for the three months ended March 31, 2024 compared to the same period in 2023.

Net Cash Used in Investing Activities

The decrease of $0.2 million in cash used in investing activities during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily related to a

decrease in the purchase of capitalized equipment as well as a decrease in the sale of fixed assets.

We used approximately $0.1 million to pay for the purchases of property and equipment during the three months ended March 31, 2024.

There were no investing activities during the three months ended

March 31, 2023.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2023 includes approximately $8.5 million in net proceeds from the July 2023 Financing that closed in July 2023 and

proceeds of approximately $0.3 million received under the SEPA with Lincoln Park.

For the nine months ended September 30, 2022, net cash provided by financing activities included approximately $12.0 million related to proceeds received in connection

with the March 2022 Private Placement.

Net cash provided by financing activities for the three months ended March 31, 2024 includes approximately $1.4 million of proceeds received from the second closing of the December 2023 convertible

notes financing that occurred in January 2024.

There were no financing activities during the three months ended March 31, 2023.

Material Cash Requirements

Somerville Sublease

In October 2022, we entered into a sublease for approximately 45,500 square feet of office and laboratory space in Somerville, Massachusetts.

The term of the sublease is approximately 10 years,

and our base rent obligations over the term is estimated to be approximately $63.0 million, plus our share of the sublessor’s parking spaces and operating expenses.

Our base rent obligations under the sublease during 2024 are expected to be $0.5

million per month.

As part of the sublease, we delivered a security deposit in the form of a letter of credit in the amount of $4.1 million, which will be reduced on an incremental basis throughout the term of the sublease.

The letter of credit

was issued by our commercial bank, which required that we cash collateralize the letter of credit with $4.1 million of cash deposited in a restricted account maintained by such bank.

The amount of required restricted cash collateral will decline

in parallel with the reduction in the amount of the letter of credit over the term of the sublease.

On May 3, 2024, we received a notice from the sublessor regarding past due rent payments of approximately $2.3 million, including our share of amounts related to property taxes and common area

maintenance costs, that we have not paid for the months of February, March, April and May 2024.

Failure to pay the past due rent payments in full, plus approximately $70,000 in late fees and interest, within five business days from the date of the

notice constitutes an event of default under the sublease.

We had discussions with the Sublessor subsequent to receiving notice about remedying the event of default, and as a result of those discussions, we did not pay any of the past due rent

payments or any of the late fees or interest within such five business day period.

We also have been in, and intend to continue, discussions with the sublessor to renegotiate the terms of the sublease, which may include, among other things,

deferment of rent payments and/or a reduction of the lease term, square footage, and/or base rent.

If an event of default exists under the sublease, beyond applicable notice and cure periods, the sublessor may draw down the letter of credit and use, apply or retain such portion of the proceeds

from the letter of credit as may be necessary (i) for the payment of any rent or any other sum in default, (ii) for the payment of any other amount which the sublessor may, in accordance with the terms of the sublease, spend or become obligated to

spend by reason of our default, or (iii) to compensate the sublessor, in accordance with the terms of the sublease, for any other loss or damage which the sublessor may suffer by reason of our default, including costs and reasonable attorneys’ fees

incurred by the sublessor to recover possession of the premises following a default by us.

As of the date of filing of this report, the sublessor has not drawn down on the letter of credit.

The use or application of the proceeds from the letter of

credit or any portion thereof does not prevent the sublessor from exercising any other right or remedy provided under the sublease or under law.

If any portion of the letter of credit is so used or applied, we must, upon demand therefor, amend the

letter of credit, provide an additional letter of credit or deposit cash with the sublessor, in each such case in an amount sufficient to restore the security deposit within 10 business days to the appropriate amount.

See the risk factor titled,

“Our monthly rent payment obligations under our sublease are significant and we currently owe approximately $2.3 million in past due rent.

An event of default under our sublease could be an event of default under our outstanding convertible notes,”

Risk Factors of Part II of this report.

Convertible Notes

As of the date of this report, the aggregate amount outstanding under our convertible notes, including accrued interest that has been paid in-kind, is $18.5 million, of which $9.0 million and $9.5

million relates to the July 2023 convertible notes and the December 2023 convertible notes, respectively.

Unless earlier called for redemption by the holders thereof, the convertible notes mature on the five-year anniversary of their date of

We may not redeem any of the convertible notes prior to maturity.

See Note 4 to the accompanying condensed consolidated financial statements for additional information.

See also the risk factor titled, “Our monthly rent payment

obligations under our sublease are significant and we currently owe approximately $2.3 million in past due rent.

An event of default under our sublease could be an event of default under our outstanding convertible notes,” in Item 1A.

of Part II of this report.

Critical Accounting Estimates

There were no significant changes in our critical accounting estimates during the three and nine months ended September 30, 2023 from those described in “Management’s Discussion and Analysis of

Financial Condition and Results of Operations” section of the 2022 10-K, except as follows.

Contingent Consideration

Contingent consideration from an asset acquisition that is indexed to or settled in shares of our common stock and that is classified as a liability is initially measured at fair value, with

subsequent changes in fair value recognized in earnings.

Measuring the fair value requires various inputs, and a significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair

value of the contingent consideration liability, which could also result in material non-cash gains or losses being reported in the Company’s consolidated statement of operations.

There were no significant changes in our critical accounting estimates during the three months ended March 31, 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

There have been no recent Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board that would apply to us since the ASUs

disclosed in the 2022 10-K except for the following:

In October 2023, the FASB issued ASU No.

2023-06, Disclosure Improvements – Codification Amendment in Response to the SEC’s

Disclosure Update and Simplification Initiative.

This ASU modified the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations.

The amendments to the various topics should

be applied prospectively, and the effective date will be determined for each individual disclosure based on the effective date of the SEC’s removal of the related disclosure.

If the SEC has not removed the applicable requirements from Regulation S-X

or Regulation S-K by June 30, 2027, then this ASU will not become effective.

Early adoption is prohibited.

We do not expect the amendments in this ASU to have a material impact on our consolidated financial statements.

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.

Quantitative and Qualitative Disclosures About Market Risk.

1 unchanged sentence

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis