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Item 1. Financial Statements

2024-11-12 compared with 2024-08-13 · 592 added, 472 removed, 519 unchanged (67% of the section changed)

Financial Statements

ETERNA THERAPEUTICS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

June 30, 2024

December 31, 2023

THERAPEUTICS INC.

CONSOLIDATED BALANCE SHEETS

thousands, except par value amounts)

September 30,

Current assets:

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Income taxes payable

Bridge notes, net of debt discount

Bridge notes derivative liability

Operating lease liabilities, current

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Stockholders’ (deficit) equity:

Preferred stock, $ 0.005 par value, 1,000 shares authorized, 156 designated and outstanding of Series

A convertible preferred stock at June 30, 2024 and December 31, 2023, $ 156 liquidation preference

Common stock, $ 0.005 par value, 100,000 shares authorized at June 30, 2024 and December 31, 2023;

5,411 and 5,410 issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Preferred stock, $ 0.005 par value, 1,000 shares authorized, 156 designated and outstanding of Series A

convertible preferred stock at September 30, 2024 and December 31, 2023, $ 156 liquidation preference

Common stock, $ 0.005 par value, 100,000 shares authorized at September 30, 2024 and December 31, 2023;

5,411 and 5,410 issued

and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

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accompanying notes are an integral part of these condensed consolidated financial statements.

ETERNA THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Three months ended June 30,

Six months ended June 30,

THERAPEUTICS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

thousands, except per share amounts)

Three months ended

September 30,

Nine months ended

September 30,

Cost of revenues

Gross income (loss)

Operating expenses:

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General and administrative

Gain on lease termination

Acquisition of Exacis in-process research and development

1 unchanged sentence

Loss from operations

Other (expense) income, net:

Other expense, net:

Loss on extinguishment of debt

Fair value adjustments to bridge notes derivative liability

Change in fair value of warrant liabilities

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Loss on non-controlling investment

Interest (expense) income, net

Interest expense, net

Other expense, net

Total other (expense) income, net

Total other expense, net

Loss before income taxes

Provision for income taxes

(Provision) benefit for income taxes

Series A preferred stock dividend

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accompanying notes are an integral part of these condensed consolidated financial statements.

ETERNA THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(DEFICIT) EQUITY

For the three and six months ended June 30, 2024

and 2023 (unaudited)

(in thousands)

THERAPEUTICS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

the three and nine months ended September 30, 2024 and 2023 (unaudited)

Series A Preferred Stock

Additional Paid-in

Balances at April 1, 2024

Balances at July 1, 2024

$ ( 199,165 )

Issuance of common stock from vested restricted stock units

Fair value of forward sale contract pursuant to common stock offering

Reclassification of warrants to liability

Stock-based compensation

Cash dividends to Series A preferred stockholders

Balances at June 30, 2024

Balances at September 30, 2024

$ ( 225,769 )

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$ ( 186,981 )

Fair value of forward sale contract pursuant to common stock offering

Reclassification of warrants to liability

Issuance of note warrants

Issuance of common stock from vested restricted stock units

Stock-based compensation

Issuance of common stock from vested restricted units

Cash dividends to Series A preferred stockholders

Balances at June 30, 2024

Balances at September 30, 2024

$ ( 225,769 )

Balances at April 1, 2023

Balances at July 1, 2023

$ ( 175,229 )

Issuance of common stock in connection with Exacis asset acquisition

Issuance of common stock related to stock purchase agreement with Lincoln Park Capital Fund, LLC,

Cash dividends to Series A preferred stockholders

Issuance of warrants in connection with convertible notes financing

Stock-based compensation

Balances at June 30, 2023

Balances at September 30, 2023

$ ( 180,820 )

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$ ( 165,297 )

Issuance of common stock in connection with Exacis asset acquisition

Issuance of common stock related to stock purchase agreement with Lincoln Park Capital Fund, LLC,

Issuance of warrants in connection with convertible notes financing

Cash dividends to Series A preferred stockholders

Stock-based compensation

Balances at June 30, 2023

$ ( 175,229 )

Balances at September 30, 2023

$ ( 180,820 )

accompanying notes are an integral part of these condensed consolidated financial statements.

ETERNA THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For the six months ended

THERAPEUTICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended

September 30,

Cash flows from operating activities:

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Stock-based compensation

Commitment shares issued to Lincoln Park Capital, LLC

Loss on shares sold to Lincoln Park Capital, LLC

Non-cash component of acquisition of Exacis in-process research and development

Amortization of right-of-use asset

(Gain) loss on disposal of fixed assets

Gain on lease termination

Accrued interest expense

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Amortization of debt discount and debt issuance costs

Loss on extinguishment of debt

Fair value adjustments to bridge notes derivative liability

Change in fair value of warrant liabilities

Change in fair value of contingent consideration liability

Commitment shares issued to Lincoln Park Capital, LLC

Loss on shares sold to Lincoln Park Capital, LLC

Non-cash component of acquisition of Exacis in-process research and development

Gain on disposal of fixed assets

Loss on non-controlling investment

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Cash flows from financing activities:

Proceeds received from the convertible notes financing

Fees paid related to the convertible notes financing

Proceeds received from convertible note financings

Fees paid related to convertible note financings

Proceeds received from bridge notes financings

Proceeds from sale of common stock pursuant to stock purchase agreement with Lincoln Park Capital Fund, LLC

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Adjustment to lease liability and ROU asset due to remeasurement

Property and equipment purchased but not paid

Reclassification of warrants to liability

Warrants issued in connection with July 2023 Financing

Unpaid fees incurred in connection with the July 2023 Financing

Initial measurement of ROU assets

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TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

1) DESCRIPTION

OF BUSINESS AND BASIS OF PRESENTATION

Therapeutics Inc.

is a life science company committed to realizing the potential of mRNA cell engineering to provide patients with

transformational new medicines.

Eterna has in-licensed a portfolio of over 100

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

Eterna collectively refers to as our “mRNA technology platform.” Eterna refers to aspects of its mRNA technology

platform as “mRNA delivery,” “mRNA gene editing” and “mRNA cell reprogramming.” Eterna licenses

its mRNA technology platform from Factor Bioscience Limited (“Factor Limited”) under an exclusive license agreement.

used herein, the “Company” or “Eterna” refers collectively to Eterna and its consolidated subsidiaries

(Eterna Therapeutics LLC, Novellus, Inc.

and Novellus Therapeutics Limited) unless otherwise stated or the context otherwise

(the “Company”) is a preclinical-stage cell therapy company.

Its vision is to improve the lives

of patients with difficult-to-treat diseases through innovative, effective, and safe, but accessible cellular therapies, and its 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.

As used herein, the “Company” or “Eterna” refers collectively

to Eterna and its consolidated subsidiaries (Eterna Therapeutics LLC, Novellus, Inc.

and Novellus Therapeutics Limited) unless otherwise

stated or the context otherwise requires .

of Presentation

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statements contained in the 2023 10-K but does not include all of the information and footnotes required by GAAP for complete financial

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results

to be anticipated for the entire year ending December 31, 2024, or any other period.

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reclassifications have been made to the Company’s prior year amounts to conform to the current year presentation.

2) LIQUIDITY AND CAPITAL RESOURCES

Company has incurred significant operating losses and has an accumulated deficit as a result of its efforts to develop product candidates,

including conducting clinical trials and providing general and administrative support for operations.

As of June 30, 2024, the Company

had an unrestricted cash balance of approximately $ 2.6 million and an accumulated deficit of approximately $ 199.2 million.

For the three

and six months ended June 30, 2024, the Company incurred a net loss of $ 5.5 million and $ 12.2 million, respectively, and for the six

months ended June 30, 2024, the Company used cash of $ 6.0 million in operating activities.

AND CAPITAL RESOURCES

has incurred significant operating losses and has an accumulated deficit as a result of its efforts to develop product candidates

and providing general and administrative support for operations.

As of September 30, 2024, the Company had an unrestricted cash

balance of approximately $ 4.3 million and an

accumulated deficit of approximately $ 225.8

For the three and nine months ended September 30, 2024, the Company incurred a net loss of $ 26.6

million and $ 38.8

million, respectively, and for the nine months ended September 30, 2024, the Company used cash of $ 12.3

million in operating activities.

October 2022, the Company entered into a sublease for approximately 45,500 square feet of office and laboratory space in Somerville,

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in the amount of $ 4.1 million.

The letter of credit

was issued by the Company’s commercial bank, which required that the Company cash collateralize the letter of credit by depositing

$ 4.1 million in a restricted cash account with such bank.

On August 5, 2024, the

sublessor drew down on the letter of credit for the full $ 4.1 million to cover past

due rent, plus penalties and interest.

The letter of credit was issued by the Company’s commercial bank, which required that the Company

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

August 5, 2024, the sublessor drew down on the letter of credit for the full $ 4.1 million to cover past due rent, plus penalties and

On August 9, 2024, the Company and the sublessor entered into a sublease termination agreement, effective August 31, 2024.

See Note 8 for additional

information regarding the sublease, and see Note 17 for additional information regarding the sublease termination agreement.

April 2023, the Company entered into a standby equity purchase agreement (the “SEPA”) and a registration rights agreement

See Note 8 for additional information regarding the sublease and sublease termination agreement..

April 2023, the Company entered into a standby equity purchase agreement (the “ELOC”) and a registration rights agreement

with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park committed to purchase up to $ 10.0 million

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During the year ended December 31, 2023, the

Company issued and sold approximately 214,000 shares of common stock under the SEPA for gross proceeds of $ 0.3 million.

No shares have

been sold under the SEPA during the three and six months ended June 30, 2024.

July and December 2023, the Company received $ 16.5

million in aggregate gross proceeds from the issuance of convertible notes and in January 2024 received an additional $ 1.4

million in gross proceeds from the issuance of additional convertible notes.

See Note 5 for additional information regarding these

connection with preparing the accompanying condensed consolidated financial statements as of and for the three and six months ended June

30, 2024, the Company’s management concluded that there is substantial doubt regarding the Company’s ability to continue

as a going concern because it does not expect to have sufficient cash or working capital resources to fund operations for the twelve-month

period subsequent to the issuance date of these condensed consolidated financial statements.

The Company will need to raise additional

capital, which could be through the sales of shares of its common stock under the SEPA, public or private equity offerings, debt financings,

out-licensing the Company’s intellectual property, strategic partnerships or other means.

Other than the SEPA, the Company currently

has no arrangements for capital, and no assurances can be given that it will be able to raise capital when needed, on acceptable terms,

Company issued and sold approximately 214,000 shares of common stock under the ELOC for gross proceeds of $ 0.3 million.

No shares were sold under the ELOC during the three or nine months ended September 30, 2024.

July and December 2023, the Company received $ 16.5 million in aggregate gross proceeds from the issuance of convertible notes, and on

January 11, 2024 it received an additional $ 1.4 million in gross proceeds from the issuance of additional convertible notes.

24, 2024, the Company received $ 3.9 million in aggregate gross proceeds from the issuance of convertible notes, and on October 29, 2024,

the Company received $ 1.1 million in gross proceeds from the sale of shares of the Company’s common stock.

See Note 5 and Note

17 for additional information regarding these financings.

connection with preparing the accompanying condensed consolidated financial statements as of and for the three and nine months ended

September 30, 2024, the Company’s management concluded that there is substantial doubt regarding the Company’s ability to

continue as a going concern because it does not expect to have sufficient cash or working capital resources to fund operations for the

twelve-month period subsequent to the issuance date of these condensed consolidated financial statements.

The Company will need to raise

additional capital, which could be through the sales of shares of its common stock under the ELOC, public or private equity offerings,

debt financings, out-licensing the Company’s intellectual property, strategic partnerships or other means.

Other than the ELOC,

the Company currently has no arrangements for capital, and no assurances can be given that it will be able to raise capital when needed,

on acceptable terms, or at all.

accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization

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and classifications of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

3) ASSET ACQUISITION

April 26, 2023, the Company entered into an asset purchase agreement (the “Exacis Purchase Agreement”), with Exacis

Biotherapeutics Inc.

(“Exacis”), the stockholders party thereto and, with respect to specified provisions therein, Factor

Pursuant to the Exacis Purchase Agreement, the Company acquired from Exacis substantially

all of Exacis’ intellectual property assets (the “Exacis 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”).

Company assumed none of Exacis’ liabilities, other than liabilities under the Purchased License that accrue subsequent to the closing

The transactions contemplated by the Exacis Purchase Agreement (the “Exacis Acquisition”) closed on April

consideration for the Exacis Assets, on the closing date of the transaction, the Company issued to Exacis an aggregate of approximately

69,000 shares of common stock, which shares were subject to a 12 -month lockup that expired in April 2024.

The shares were issued to Exacis at a price based on the Company having an assumed equity valuation of $ 75.0 million, divided

by the number of issued and outstanding shares of common stock as of the close of business two trading days prior to the closing date.

For accounting purposes, the shares issued were valued at $ 3.00 per share, which was the closing price of the Company’s common

stock on the date of issuance.

The Company additionally agreed to make the following contingent payments:

at any time during the three -year period commencing on the closing date and ending on the

three -year anniversary of the closing date, the Company’s market capitalization equals

or exceeds $ 100.0 million for at least ten consecutive trading days, then the Company will

issue to Exacis a number of shares of common stock equal to (x) $ 2.0 million divided by (y)

the quotient of $ 100.00 million divided by the number of the Company’s then issued

and outstanding shares of common stock;

at any time during the three -year period commencing on the closing date and ending on the

three -year anniversary of the closing date, the Company’s market capitalization equals

or exceeds $ 200.0 million for at least ten consecutive trading days, then the Company will

issue to Exacis a number of additional shares of common stock equal to (x) $ 2.0 million divided

by (y) the quotient of $ 200.00 million divided by the number of the Company’s then

issued and outstanding shares of common stock (collectively with (i) above, the “Market

Cap Contingent Consideration”);

the five -year period commencing on the closing date and ending on the five -year anniversary

of the closing date, the Company will pay or deliver to Exacis 20 % of all cash or other consideration

(collectively, “License Contingent Consideration”) actually received by the Company

during the five-year period from (i) third-party licensees or sublicensees of the intellectual

property rights acquired by the Company from Exacis pursuant to the Exacis Purchase Agreement,

or (ii) subject to certain exceptions, the sale of such intellectual property rights;

that the License Contingent Consideration shall not in any event exceed $ 45.0 million.

April 26, 2023, the Company entered into an asset purchase agreement (the “Exacis Purchase Agreement”), with Dilos Bio (formerly

known as Exacis Biotherapeutics Inc.

(“Exacis”)), the stockholders party thereto and, with respect to specified provisions

therein, Factor Limited.

Pursuant to the Exacis Purchase Agreement, the Company acquired from Exacis substantially all of Exacis’

intellectual property assets (the “Exacis Assets”), including all of Exacis’ right, title and interest in and to an

exclusive license agreement between Exacis and Factor Limited (the “Purchased License”).

The Company assumed none

of Exacis’ liabilities, other than liabilities under the Purchased License that accrue subsequent to the closing date.

The transactions

contemplated by the Exacis Purchase Agreement (the “Exacis Acquisition”) closed on April 26, 2023.

consideration for the Exacis Assets, on the closing date of the transaction, the Company issued to Exacis approximately 69,000

shares of common stock, which shares were subject

to a 12 -month

lockup that expired in April 2024.

The shares were issued to Exacis at a price based on the Company having an assumed equity valuation

million, divided by the number of issued and

outstanding shares of common stock as of the close of business two trading days prior to the closing date.

For accounting purposes, the

shares issued were valued at $ 3.00

per share, which was the closing price of the

Company’s common stock on the date of issuance.

The Company additionally agreed to make certain contingent payments through April

23, 2026 related to achieving a market capitalization of $ 100 million and $ 200 million for a consecutive period of time (the “Market

Cap Contingent Consideration”), as well as contingent payments related to the Company receiving proceeds related to the Purchased

License through April 23, 2028.

Company accounted for the Exacis Acquisition as an asset acquisition because it determined that substantially all of the fair value of

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future uses and no separate economic values from their original intended purpose are expensed in the period the cost is incurred.

a result, the Company expensed the fair value of the Purchased License during the three and six months ended June 30, 2023.

4) CONTRACT WITH CUSTOMER

a result, the Company expensed the fair value of the Purchased License during the three and nine months ended September 30, 2023.

September 24, 2024, in connection with entering into the Exclusive License and Collaboration Agreement (“the Factor L&C Agreement”)

with Factor Bioscience Limited (“Factor Limited”), the Purchase License was terminated.

See Note 10 for more information

on the Factor L&C Agreement.

WITH CUSTOMER

February 21, 2023, the Company and Lineage Cell Therapeutics, Inc.

(“Lineage”) entered into an exclusive option and license

agreement (the “Lineage Agreement”), which provided Lineage with the option (the “Option Right”) to obtain an

exclusive sublicense of intellectual property from the Company and to request the Company to develop a customized cell line.

Agreement was amended in August 2023 to provide 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.

Lineage paid the Company a $ 0.3 million non-refundable up-front payment (the “Option Fee”)

for the Option Right and paid an initial payment of $ 0.4 million to commence the cell line customization activities, per the amended

payment terms.

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

payments and royalties.

Company recognizes revenue

under ASC 606, Revenue from Contracts with Customers (“ASC 606”) when a customer obtains control of promised

services or goods in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or

(“Lineage”) entered into an exclusive option and

license agreement (the “Lineage Agreement”), which provided Lineage with the option (the “Option Right”) to

obtain an exclusive sublicense of intellectual property from the Company and to request the Company to develop a customized cell

line (the intellectual property that would be sublicensed by Lineage is currently licensed by the Company from Factor Limited).

Lineage Agreement was amended in August 2023 to provide 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.

Lineage paid the Company a $ 0.3

million non-refundable up-front payment (the “Option Fee”) for the Option Right and paid an initial payment of $ 0.4

million to commence the cell line customization activities, per the amended payment terms.

If Lineage obtained the sublicense, the

Company would be entitled to receive additional license fees, including milestone payments and royalties.

September 24, 2024, the Company and Factor Bioscience (as defined in Note 10) entered into an agreement (the “Lineage Assignment

Agreement”) under which the Company assigned the Lineage Agreement to Factor Bioscience.

The Company’s rights and obligations

under the agreement are now the responsibility of Factor Bioscience.

to the Company related to the Lineage Agreement will be subject to the Lineage Assignment Agreement, which provides for Factor Bioscience

paying the Company thirty percent ( 30 %) of all amounts it actually receives from Lineage in the event that Lineage exercises its Option

Upon receipt of payment for the customization activities set forth in the Lineage Agreement, Factor Bioscience will pay the Company

twenty percent ( 20 %) of all amounts Factor Bioscience receives from Lineage.

Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”) when a customer obtains

control of promised services or goods in an amount that reflects the consideration to which the Company expects to receive in exchange

for those goods or services.

to ASC 606, the Company determined that the Option Right was an unexercised right held by Lineage under the Lineage Agreement at contract

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These optional

purchases of goods and services would be treated as separate

contracts if and when Lineage determines that it will make such purchases.

Therefore, 100 % of the

Option Fee was allocated to the Option Right.

The Option Fee will remain in deferred revenue until such time that Lineage enters into

the sublicense or when the Option Right expires.

Option Right and the cell line customization activities are accounted for as separate contracts, and the Company has determined that

the amended terms discussed above represent a modification to the cell line customization contract.

purchases of goods and services would be treated as separate contracts if and when Lineage determines that it would make such purchases.

Therefore, 100 % of the Option Fee was allocated to the Option Right.

The Option Fee would remain in deferred revenue until such time

that Lineage entered into the sublicense or when the Option Right expired.

However, as a result of the Lineage Assignment Agreement,

and there being no further obligations regarding the nonrefundable payment related to the Option Right, the Company recognized the $ 0.3

million Option Right payment in full as revenue during the three and nine months ended September 30, 2024.

Option Right and the cell line customization activities were accounted for as separate contracts, and the Company determined that the

amended terms discussed above represented a modification to the cell line customization contract.

Because there were no goods or services

transferred to Lineage before entering

into the amendment, and therefore, no previously recognized revenue, there was no catch-up adjustment to revenue required at the time

of the amendment.

will make payments to the Company for the cell line customization activities over the development period.

The Company will only earn

the remaining full amount of the cell line customization fee if it makes certain progress towards delivery of the customized cell

The Company has determined that $ 0.4

million of consideration received could be recognized without the probability of being reversed, and it has placed a constraint on

the remaining contractual customization fee.

million is being recognized equally over the development period, which is expected to be approximately 20 to 25 months, as the level

of effort to perform the services is happening at the same rate over time.

If the development period is expected to be longer or

shorter than originally planned, the Company will recognize a cumulative catch-up adjustment in the period that such determination

For the three and six months ended June 30, 2024, the Company recognized less than $ 0.1

million and $ 0.1

million of revenue, respectively, for the customization activities.

The Company did no t

recognize any revenue for either of the three or six months ended June 30, 2023.

granting of the license that the Company may provide to Lineage if Lineage exercises the Option Right is not considered a performance

obligation at this time, as it is an optional request that the customer may make in the future and will be accounted for as a separate

contract when the customer exercises the Option Right.

Company recognizes

direct labor and supplies used in the customization activities as incurred and are recorded as a cost of revenue.

for in the A&R Factor License Agreement discussed in Note 9, the Company is obligated to pay Factor Limited 20 % of any amounts the

Company receives from a customer that is related to the licensed technology under the A&R Factor License Agreement, which is also

recorded as a cost of revenue.

For the six months ended June 30, 2023, the Company recognized less than $ 0.1 million in license fees,

which is recorded in cost of revenues, due to Factor Limited as a result of receiving the $ 0.3 million Option Fee payment from Lineage.

There was no such license fee incurred during the three months ended June 30, 2023 or during the three or six months ended June 30,

5) CONVERTIBLE NOTES FINANCINGS

transferred to Lineage before entering into the amendment, and therefore, no previously recognized revenue, there was no catch-up adjustment

to revenue required at the time of the amendment.

was to make payments to the Company for the cell line customization activities over the development period.

The Company would only earn

the remaining full amount of the cell line customization fee if it made certain progress towards delivery of the customized cell line.

The Company determined that $ 0.4 million of consideration received could be recognized without the probability of being reversed, and

it placed a constraint on the remaining contractual customization fee.

The $ 0.4 million was being recognized equally over the development

However, as a result of the Lineage Assignment Agreement, and there being no further obligations the Company must fulfill for

the customization activities, the Company accelerated the recognition of the remaining deferred revenue and recognized approximately

$ 0.2 million during the three and nine months ended September 30, 2024.

The Company recognized approximately $ 0.1 million in revenue during

the three and nine months ended September 30, 2023 related to the customization activities.

Company recognized direct labor and supplies used in the customization activities as incurred, which are recorded as a cost of revenue.

As provided for in the A&R Factor License Agreement discussed in Note 10, the Company was obligated to pay Factor Limited 20 % of

any amounts the Company received from a customer that was related to the licensed technology under the A&R Factor License Agreement,

which is also recorded as a cost of revenue.

For the three and nine months ended September 30, 2023, the Company recognized $ 0.1 million

in license fees, which is recorded in cost of revenues, due to Factor Limited.

There was no such license fee incurred during the three

or nine months ended September 30, 2024.

5) CONVERTIBLE

NOTES FINANCINGS, BRIDGE FINANCING, EXCHANGE TRANSACTION AND EQUITY FINANCING

July 14, 2023, the Company received $ 8.7 million from a private placement in which the Company issued $ 8.7 million in aggregate principal

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million shares of its common stock (the “July 2023 Warrants”).

The Company recognized approximately $ 0.2 million in fees

associated with the transaction.

The Company recognized approximately $ 0.2 million in fees associated

with the transaction.

December 14, 2023, the Company entered into a purchase agreement with certain purchasers for the private placement of $ 9.2 million of

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Note 13 for more information on the Note Warrants.

July 2023 convertible notes bear interest at 6 % per annum, and the December 2023 convertible notes bear interest at 12 % per annum, both

July 2023 Convertible Notes bear interest at 6 % per year, and the December 2023 Convertible Notes bear interest at 12 % per year, both

of which are payable quarterly in arrears.

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The Company does not have the option to redeem any of the Convertible Notes prior

the option of the holders, the convertible notes may be converted from time-to-time in whole or in part into shares of the Company’s

common stock at an initial conversion rate of, with respect to the July 2023 convertible notes, $ 2.86 per share and, with respect to

the option of the holders, the Convertible Notes may be converted from into shares of the Company’s

common stock at an initial conversion price of, with respect to the July 2023 Convertible Notes, $ 2.86 per share and, with respect to

the December 2023 Convertible Notes, $ 1.9194 per share, subject to customary adjustments for stock splits, stock dividends, recapitalization

and the like.

As of June 30, 2024, none of the convertible notes were converted into shares of common stock.

convertible notes do not contain any ratchet or other financial antidilution provisions.

The convertible notes contain conversion limitations

such 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.

of September 30, 2024, none of the Convertible Notes were converted into shares of common stock.

Convertible Notes provide for customary events of default which include (subject in certain cases to customary grace and cure periods),

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a material adverse effect event (as defined in the related securities purchase agreement) and certain events of bankruptcy.

if an undisputed event of default occurs and is continuing under the convertible notes, the holder thereof may require the Company to

if an undisputed event of default occurs and is continuing under the Convertible Notes, the holder may require the Company to

redeem some or all of their Convertible Notes at a redemption price equal to 100 % of the principal amount of the Convertible Notes being

redeemed, plus accrued and unpaid interest thereon.

As of June 30, 2024, there were no events of default that occurred under the convertible

Company determined that there were no embedded derivatives within the convertible notes that required bifurcation from the host agreement.

In connection with the December 2023 convertible notes that were issued on January 11, 2024, the Company allocated the gross proceeds

received and the fees incurred over the applicable convertible notes and warrants based on their relative fair values as follows (in

SCHEDULE OF BASED ON RELATIVE FAIR VALUE ALLOCATION OF PROCEEDS AND COSTS

Allocation of Proceeds and Costs

Allocation of Proceeds,

Convertible notes

Note warrants

Company estimated the fair values of the convertible notes as of January 11, 2024 based off a valuation performed by a third-party specialist

as of December 15, 2023 using a binomial tree model and the following assumptions:

SCHEDULE OF FAIR VALUE ASSUMPTIONS

Convertible notes

fair value of the note warrants, all of which qualified for equity classification, was determined using the Black-Scholes pricing model

as of January 11, 2024 using the following assumptions:

amount of proceeds allocated to the note warrants resulted in a corresponding reduction in the carrying value of the respective convertible

notes as a debt discount, which is amortized with the debt issuance costs as a component of interest expense based on the effective interest

rate method over the contractual terms of the convertible notes.

following table shows the activity that occurred during the six months ended June 30, 2024 for the convertible notes on the accompanying

condensed consolidated balance sheet:

SCHEDULE OF ACTIVITY OF CONVERTIBLE NOTES

Gross convertible notes

Debt discount and debt issuance costs

Convertible notes, net

Beginning balance as of January 1, 2024

December 2023 notes issued in January 2024

Paid-in-kind interest added to principal

Amortization of debt discount and debt issuance costs

Ending balance as of June 30, 2024

date, the Company has elected to pay in-kind the accrued interest payable on the convertible notes and has added the accrued and

unpaid interest to the principal amount of the applicable convertible note.

For the three months ended June 30, 2024, the Company

has recognized approximately $ 0.9

million in interest expense for the convertible notes, which includes $ 0.5

million for the amortization of the debt discount and debt issuance costs and $ 0.4

million for accrued and unpaid interest on the convertible notes recorded in accrued expenses in the accompanying condensed

consolidated balance sheet.

For the six months ended June 30, 2024, the Company has recognized approximately $ 1.7

million in interest expense, which includes $ 0.9

million for the amortization of the debt discount and debt issuance costs, $ 0.4

million recorded for accrued and unpaid interest on the convertible notes recorded in accrued expenses in the accompanying condensed

consolidated balance sheet and $ 0.4

million of accrued interest that was paid in-kind and added to the principal of the convertible notes.

6) FAIR VALUE OF FINANCIAL INSTRUMENTS

As of September 30, 2024, there were no events of default that occurred under any

of the Convertible Notes.

Notes Financing

September 24, 2024, the Company entered into a purchase agreement with certain purchasers for the private placement of $ 3.9 million of

convertible notes (the “Bridge Notes”).

The Bridge Notes bear interest at 12% per year, payable quarterly in arrears.

the Company’s election, it may pay interest either in cash or in-kind by increasing the outstanding principal amount of the Bridge

The Bridge Notes mature on the one -year anniversary of the date of their issuance, unless earlier converted or repurchased.

Company does not have the option to redeem any of the Bridge Notes prior to maturity.

The Bridge Notes financing closed on September

only conversion event for the Bridge Notes is upon stockholder approval at the Company’s annual meeting of stockholders on October

29, 2024 (the “Annual Meeting), in which case, 100 % of the principal amount of the Bridge Notes plus all accrued and unpaid interest

thereon and, interest that would have accrued on the principal amount through December 24, 2024, will automatically convert into shares

of the Company’s common stock at a conversion price of $ 0.50 .

Otherwise, the Bridge Notes may be paid in cash upon maturity.

The Bridge Notes

have the same customary events of default provision as the Convertible Notes.

As of September 30, 2024, there were no events of default

that occurred under any of the Bridge Notes.

Company was required to bifurcate the conversion feature from the Bridge Notes and record it as a derivative liability at its fair

The Company determined the fair value of the derivative liability by taking the difference between the fair value of the

Bridge Notes with the conversion feature and without the conversion feature, which resulting in the Company recording a $ 5.5

million derivative liability, with a corresponding $ 3.9

million reduction in the carrying value of the Bridge Notes recorded as a debt discount

million charge to expense for the incremental fair value of the derivative liability as of September 24, 2024.

The debt discount is are amortized over the

contractual terms of the Bridge Note as a component of interest expense.

At September 30, 2024, the Company

remeasured the fair value of the Bridge Notes derivative liability and recorded a reduction in the liability of $ 0.6 million.

The corresponding credit of $ 0.6 million is recorded as a component of the fair value adjustments to Bridge

Notes derivative liability on the accompanying condensed consolidated statement of operations for the three and nine months ended September

30, 2024, which also includes the $ 1.6 million incremental expense noted above.

September 24, 2024, the Company entered into exchange agreements (the “Exchange Agreements”) with the holders of (i) warrants

to purchase an aggregate of approximately 4.4 million shares of our common stock the Company issued in December 2022 with an exercise

price of $ 1.43 per share (the “December 2022 warrants”);

(ii) the July 2023 convertible notes and July 2023 warrants;

(iii) the December 2023 convertible notes and the December 2023 warrants (the “Exchange Transactions”).

The parties to the

Exchange Agreements represent the holders of all the outstanding convertible notes and all the outstanding warrants described above except

for a December 2022 warrant to purchase approximately 0.1 million shares of our common stock.

to approval by the Company’s stockholders at the Annual Meeting, under the Exchange Agreements (i) the holders of the warrants

agreed to exchange all their warrants for shares of the Company’s 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 (ii) the holders of the convertible notes agreed to exchange all their convertible notes for shares of the Company’s 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 (the sum of (A) totaling approximately $ 28.4 million), divided by (B) $ 1.00

(rounded up to the nearest whole number) (the “Exchange Transactions”).

Company determined that the modifications to the convertible notes should be accounted for as an extinguishment of debt because there

was at least a 10 % change in the cash flows of the modified debt instrument compared to the carrying amount of the original debt instrument,

and as such, the difference between the reacquisition price (which includes any premium) and the net carrying amount of the debt being

extinguished (which includes any deferred debt issuance costs) should be recognized as a gain or loss when the debt is extinguished.

of September 24, 2024, prior to entering into the Exchange Agreements, there was approximately $ 10.1 million of net carrying amount of

the convertible notes, which was comprised of $ 19.4 million of principal and accrued interest through such date, offset by approximately

$ 9.3 million of unamortized debt issuance costs.

The fair value of the reacquired convertible notes was $ 32.0 million and was determined

by multiplying approximately 28,351,000 shares the Company would be issuing on October 29, 2024 by the closing stock price of $ 1.13 per

share on September 24, 2024.

The difference between the reacquisition price and the net carrying amount of the convertible notes being

extinguished was approximately $ 21.9 million.

Accordingly, the Company increased the carrying value of the reacquired convertible notes

to $ 32.0 million and recognized a loss on extinguishment of debt of approximately $ 21.9 million during the three and nine months ended

September 30, 2024.

Because shareholder approval was required for the Exchange Transactions

to occur, the Company determined that the modifications to the warrants resulted in a change in classification of such warrants from equity

to liability.

A provision that requires shareholder approval precludes equity classification because such approval is not an input into

a fixed-for-fixed valuation model.

As a result, the Company recorded the warrants at fair value as of September 24, 2024 by taking the

number of shares of common stock issuable from the exchanged warrants multiplied by the closing stock price of $ 1.13 and reclassified

approximately $ 11.2 million from equity to warrant liabilities.

The Company then marked-to-market the warrants as of September 30, 2024

by taking the same quantity of shares multiplied by the closing stock price on such date and recognized a reduction to the warrant liabilities

of $ 0.8 million.

A corresponding credit of $ 0.8 million was recognized as a change in fair value of warrant liabilities for the three

and nine months ended September 30, 2024 on the accompanying condensed consolidated statement of operations.

September 24, 2024, the Company entered into a securities purchase agreement (the “SPA”) with certain accredited investors

to sell in a private placement an aggregate of approximately 1,517,000 shares of the Company’s common stock (or, in lieu thereof,

pre-funded warrants to purchase one share of our common stock) for a purchase price of $ 0.75 per share of common stock and $ 0.745 per pre-funded warrant (the “Common Stock Private Placement” and together with the Bridge Notes

and the Exchange Transactions, the “September 2024 Transactions”).

The closing of the Common Stock Private Placement was

conditioned upon receiving stockholder approval at the Annual Meeting.

SPA represents a forward sale contract obligating the Company to sell a fixed number of shares of its common stock at a fixed price per

share upon obtaining shareholder approval at the Annual Meeting.

The Company measured the fair value of the forward sale contract as

the difference between (A) the fair value of the expected shares to be purchased by the investors as of the date the Company entered

into the SPA and (B) the purchase price of the shares, and recorded approximately $ 0.6 million to additional paid-in capital as of September

Because of the concurrent execution of the SPA and the Exchange Agreements, and because the investors in the SPA are also parties

to the Exchange Transactions, the $ 0.6 million was added to the $ 21.9 million loss on extinguishment of debt discussed above for a total

loss of $ 22.4 million during the three and nine months ended September 30, 2024.

October 29, 2024, the Company held its Annual Meeting, the Company’s stockholders approved the September 2024 Transactions, and

as a result, the following occurred on October 29, 2024:

the Common Stock Private Placement, the Company issued approximately 1,402,000 shares of

common stock and pre-funded warrants to purchase 115,000 shares of common stock and received

approximately $ 1.1 million in gross proceeds from the issuance of such securities.

The pre-funded

warrants have an exercise price of $ 0.005 per share, are exercisable at any

time and will not expire until exercised in full.

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 approximately 6,244,000 shares of the Company’s 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 common stock.

pre-funded warrants have an exercise price of $ 0.005 per share, are exercisable

at any time and will not expire until exercised in full.

As of October 29, 2024, there were

no Bridge Notes outstanding.

the Exchange Transactions, (i) the holders of the warrants exchanged approximately 19,902,000

warrants for approximately 9,951,000 shares of the Company’s common stock, and (ii)

the holders of the convertible notes exchanged all their convertible notes for approximately

28,351,000 shares of our common stock for a total of 38,302,000 shares of our common stock

under the Exchange Transactions.

As of October 29, 2024, there were no Convertible Notes

VALUE OF FINANCIAL INSTRUMENTS

value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between

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is as follows:

● Level 1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the

reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability,

either directly or indirectly.

These might include quoted prices for similar assets or liabilities in active markets, quoted prices for

identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the

asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally

from or corroborated by market data by correlation or other means.

Level 3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to develop

its own assumptions.

carrying amounts reported on the balance sheet for cash and cash equivalents, other receivable, prepaid assets and other current assets,

accounts payable and accrued expenses, other current liabilities and other liabilities approximate fair value based due to their short

Level 1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity

has the ability to access at the measurement date.

Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or

liability, either directly or indirectly.

These might include quoted prices for similar assets or liabilities in active markets,

quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that

are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs

that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to

develop its own assumptions.

carrying amounts reported on the balance sheet for cash, other receivable, prepaid assets and other current assets, accounts payable

and accrued expenses, other current liabilities and other liabilities approximate fair value based due to their short maturities.

Company issued approximately 343,000 warrants in connection with a private placement during the first quarter of 2022 (the “Q1-22

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See Note 3 for more information related to the Exacis Acquisition.

Both of these liabilities

are remeasured at each reporting period, with changes in their fair values recognized in earnings.

Company uses a Black-Scholes option pricing model to estimate the fair value of its warrant liabilities and a

Monte Carlo simulation model to estimate the fair value of the contingent consideration related to the Market Cap Contingent Consideration ,

both of which are considered a Level 3 fair value measurement.

The Company remeasures the fair value of the warrant liabilities and the

Market Cap Contingent Consideration at each reporting period and changes in the fair values

are recognized in the statement of operations.

following tables summarize the liabilities that are measured at fair value as of June 30, 2024 and December 31, 2023 (in thousands):

connection with the Bridge Notes, the Company recorded a derivative liability as of September 24, 2024.

In connection with the Exchange

Transactions, on September 24, 2024, the Company reclassified the warrants included in the Exchange Transactions from equity to a liability.

See Note 5 for more information related to the Bridge Notes and Exchange Transactions.

Company uses a Black-Scholes option pricing model to estimate the fair value of the Q1-22 warrant liabilities and a Monte Carlo simulation

model to estimate the fair value of the contingent consideration related to the Market Cap Contingent Consideration, both of which are

considered a Level 3 fair value measurement.

Company determined the fair value of the derivative liability by taking the difference between the fair value of the Bridge Notes with

the conversion feature and without the conversion feature.

respect to the warrants in the Exchange Transactions, the Company determined the fair value of the warrants as of September 24, 2024

by taking the number of shares of common stock issuable from the exchanged warrants multiplied by the closing stock price of $ 1.13 and

reclassified approximately $ 11.2 million from equity to warrant liabilities.

The Company remeasures the fair value of the warrant liabilities , the Bridge Notes derivative liability and the Market Cap Contingent

Consideration at each reporting period and changes in the fair values are recognized in the statement of operations.

following tables summarize the liabilities that are measured at fair value as of September 30, 2024 and December 31, 2023 (in thousands):

SCHEDULE OF LIABILITIES MEASURED AT FAIR VALUE

June 30, 2024

December 31, 2023

September 30,

Warrant liabilities - Q1-22 warrants

Warrant liabilities – Exchange Transactions

Bridge Notes derivative liability

Market Cap Contingent Consideration

Liabilities, fair value disclosure

Liability fair value disclosure

inputs used in Black-Scholes and Monte Carlo models may fluctuate in future periods based upon factors that are outside of the Company’s

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non-cash gains or losses being reported in the Company’s condensed consolidated statement of operations.

following table presents the changes in the liabilities measured at fair value from January 1, 2024 through June 30, 2024 (in thousands):

SCHEDULE OF CHANGES IN WARRANT LIABILITIES

following table presents the changes in the liabilities measured at fair value from January 1, 2024 through September 30, 2024 (in thousands):

OF CHANGES IN WARRANT LIABILITIES

Consideration

Fair value at January 1, 2024

Reclassification of warrants from equity to liability

Initial measurement of Bridge Notes derivative liability

Change in fair value

Fair value at June 30, 2024

Fair value at September 30, 2024

Company assessed the fair value of the Market Cap Contingent Consideration at September 30, 2024 and determined that there were no material

changes to the inputs used in the June 30, 2024 remeasurement that would have resulted in a material change to the liability at September

Therefore, the Company did not recognize a change in fair value of the Market Cap Contingent Consideration for the three months

ended September 30, 2024.

Company remeasured the Bridge Notes derivative

liability by taking the difference between the fair value of the Bridge Notes with the conversion feature and without the conversion feature

as of September 30, 2024 and recorded a $ 0.6 million credit for the change in fair value during the three months ended September 30, 2024.

table below is provided for comparative purposes only and presents information about the fair value of the Company’s convertible

notes relative to the carrying values recognized in the condensed consolidated balance sheet as of June 30, 2024 and December 31, 2023

notes relative to the carrying values recognized in the condensed consolidated balance sheet as of September 30, 2024 and December 31,

2023 (in thousands).

SCHEDULE OF FAIR VALUE AND CARRYING VALUES OF CONVERTIBLE NOTES

June 30, 2024

September 30, 2024

December 31, 2023

Carrying Value

Convertible Notes

carrying value in the table above is shown before the allocation of the proceeds to the note warrants.

The Company assesses the fair

value of the convertible notes as of June 30, 2024 using a Monte Carlo simulation model and as of December 31, 2023 using a binomial

model, both of which are considered a Level 3 measurement.

carrying value of the Convertible Notes in the table above is reflective of the reacquisition price of the Convertible Notes as a

result of the Exchange Agreements entered into on September 24, 2024, which was recorded at its fair value as of September 24, 2024.

The Company determined the fair value of the Convertible Notes by multiplying the 28.4 million shares expected to

be issued in common stock on October 29, 2024 by the closing stock price of $ 1.05 per share on September 30, 2024.

carrying value of the Bridge Notes in the table above is shown before the bifurcation of the Bridge Notes derivative liability.

determined the fair value of the Bridge Notes by multiplying the 8.0

million shares expected to be issued in common stock (or in pre-funded warrants)

on October 29, 2024 by the closing stock price of $ 1.05

per share on September 30, 2024 .

Note 5 for more information on the Convertible Notes and the Bridge Notes.

Company assessed the fair value of the 2023 convertible notes as of December 31, 2023 using a binomial model, which is considered a Level

3 measurement.

2018, the Company acquired IRX Therapeutics (“IRX”), which was accounted for as a business combination.

The Company recorded

goodwill in the amount of $ 2.0 million

related to the IRX acquisition.

Goodwill is not amortized but is tested for impairment annually, or more frequently if the Company becomes

aware of any events occurring or changes in circumstances that indicate that the fair value of the entity is less than its carrying value.

As of June 30, 2024, the Company did not identify potential triggering events that could indicate that the fair value of the entity is

less than its carrying value and determined there were no such events that occurred.

Company currently has operating leases for office and laboratory space in the borough of Manhattan in

New York, New York, and Cambridge, Massachusetts, which expire in 2026 and 2028,

respectively.

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 45,500 square

feet in Somerville, Massachusetts.

The sublease provides for base rental payments of approximately $ 0.5 million

per month as well as monthly payments for parking and the Company’s share of traditional lease expenses, including certain

taxes, operating expenses and utilities.

The Company paid the Sublessor a security deposit in the form of a letter of credit

in the amount of approximately $ 4.1 million.

Sublessor provided the Company with a tenant improvement allowance (“TIA”) of $ 190

per rentable square foot, or $ 8.6

As of June 30, 2024, the Company received

the entire $ 8.6

The Company incurred out-of-pocket tenant improvements costs of approximately $ 1.6 million, which were in excess

of the $ 8.6 million TIA.

May 3, 2024, the Company received a notice from the Sublessor regarding past due rent payments of approximately $ 2.3 million,

including amounts related to property taxes and common area maintenance costs, that the Company did not pay 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.

Company also did not pay the rent for June, July or August 2024, and as of August 1, 2024, owed approximately $ 4.0

million in the aggregate in past due rent.

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, plus interest and penalties.

On August 9, 2024, the Company and Sublessor entered into a sublease termination agreement, effective August 31,

The sublease was originally scheduled to expire in 2033.

See Note 17 for more information on the sublease termination agreement.

the three and six months ended June 30, 2024 and 2023, the net operating lease expenses were as follows (in thousands):

goodwill in the amount of $ 2.0 million related to the IRX acquisition.

Goodwill is not amortized but is tested for impairment annually,

or more frequently if the Company becomes aware of any events occurring or changes in circumstances that indicate that the fair value

of the entity is less than its carrying value.

As of September 30, 2024, the Company did not identify potential triggering events that

could indicate that the fair value of the entity is less than its carrying value and determined there were no such events that occurred.

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.

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 45,500 square feet in Somerville, Massachusetts.

provided for base rental payments of approximately $ 0.5 million per month as well as monthly payments for parking and the Company’s

share of traditional lease expenses, including certain taxes, operating expenses and utilities.

The Company paid the Sublessor a security

deposit in the form of a letter of credit in the amount of approximately $ 4.1 million.

May 3, 2024, the Company received a notice from the Sublessor regarding past due rent payments of approximately $ 2.3 million, including

amounts related to property taxes and common area maintenance costs, that the Company did not pay 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.

Company also did not pay the rent for June, July or August 2024 and, as of August 1, 2024, owed approximately $ 4.0 million in the aggregate

in past due rent.

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, plus interest and penalties.

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:

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.

a result of the sublease termination, the Company recognized a gain on lease termination of approximately $ 1.6 million for the three

and nine months ended September 30, 2024, which includes a loss on disposal of fixed assets of approximately $ 0.5 million.

the three and nine months ended September 30, 2024 and 2023, the net operating lease expenses were as follows (in thousands):

OPERATING LEASE EXPENSE

Three months ended June 30,

Six months ended June 30,

Three months ended

September 30,

Nine months ended

September 30,

Operating lease expense

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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 June 30, 2024, including the changes during the period (in thousands).

as of September 30, 2024, including the changes during the period (in thousands).

LEASE RIGHT-OF-USE ASSETS AND LIABILITIES

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Operating lease ROU assets at January 1, 2024

Adjustment to ROU asset for remeasurement of Somerville Sublease liability

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 June 30, 2024

Operating lease ROU assets at September 30, 2024

Operating Lease

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Accretion of interest for Somerville Sublease

Write-off of Somerville Sublease liability

Principal payments on operating lease liabilities

Operating lease liabilities at June 30, 2024

Operating lease liabilities at September 30, 2024

Less non-current portion

Current portion at June 30, 2024

of June 30, 2024, the Company’s operating leases had a weighted-average remaining life of 9.3 years with a weighted-average discount

rate of 11.07 % .

Current portion at September 30, 2024

of September 30, 2024, the Company’s operating leases had a weighted-average remaining life of 3.3 years with a weighted-average

discount rate of 10.23 %.

The maturities of the operating lease liabilities are as follows (in thousands):

OF OPERATING LEASE LIABILITIES

June 30, 2024

September 30, 2024

Total payments

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Total operating lease liabilities

9) ACCRUED EXPENSES

expenses at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

expenses at September 30, 2024 and December 31, 2023 consisted of the following (in thousands):

OF ACCRUED EXPENSES

June 30, 2024

December 31, 2023

Somerville facility

Convertible notes interest

September 30,

Professional fees

Accrued compensation

Convertible notes interest

Somerville facility

Total accrued expenses

10) RELATED PARTY TRANSACTIONS

PARTY TRANSACTIONS

with Factor Bioscience Inc.

and Affiliates

of June 30, 2024, the Company had the agreements described below with Factor Bioscience Inc.

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”).

Angel resigned as the Company’s chief

executive officer effective December 31, 2023.

of September 30, 2024, the Company had entered into the agreements described below with Factor Bioscience Inc.

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”).

Angel resigned as the Company’s chief executive officer effective December 31, 2023.

September 2022, the Company entered into a Master Services Agreement (the “MSA”) with Factor Bioscience, pursuant to which

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or more work orders under the MSA, including the first work order included in the MSA (“WO1”).

MSA contains customary confidentiality provisions and representations and warranties of the parties, and the MSA may be terminated by

either party upon 30 days’ prior notice, subject to any superseding termination provisions contained in a particular work order.

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 $ 5.0 million, payable in 12 equal monthly installments of approximately

$ 0.4 million.

Of the $ 5.0 million, the Company allocated $ 3.5 million to the License Fee Obligation (as defined below).

Following the

initial 12-month period, the Company agreed to continue paying Factor Bioscience the monthly fee of $ 0.4 million until such time as WO1

is terminated.

Upon entering into the MSA, the Company paid a deposit of $ 0.4 million, which will be applied to the last month of WO1.

The MSA contains customary

confidentiality provisions and representations and warranties of the parties, and the MSA may be terminated by either party upon 30 days’

prior notice, subject to any superseding termination provisions contained in a particular work order.

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 $ 5.0 million, payable

in 12 equal monthly installments of approximately $ 0.4 million.

Of the $ 5.0 million, the Company allocated $ 3.5 million to the License

Fee Obligation (as defined below).

Following the initial 12-month period, the Company agreed to continue paying Factor Bioscience the

monthly fee of $ 0.4 million until such time as WO1 is terminated.

Upon entering into the MSA, the Company paid a deposit of $ 0.4 million,

which will be applied to the last month of WO1.

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 will be effective on September 9, 2024.

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 $ 3.5 million otherwise payable to

it (the “License Fee Obligation”) in October 2022 by Eterna LLC under the exclusive license agreement entered into in April

2021 by and among Eterna LLC, Novellus Limited and Factor Limited (the “Original Factor License Agreement”).

Under the terms

of the waiver agreement, the License Fee Obligation is waived conditionally on the Company paying Factor Bioscience a minimum of $ 3.5

million due under the MSA.

On June 26, 2024,

the Company provided Factor Bioscience with its notice to terminate WO1, which became effective on September 9, 2024.

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 $ 3.5 million otherwise payable to it (the “License Fee Obligation”) in October 2022 by Eterna

LLC under the exclusive license agreement entered into in April 2021 among Eterna LLC, Novellus Limited and Factor Limited (the

“Original Factor License Agreement”).

Under the waiver agreement, the License Fee Obligation is waived conditionally

on the Company paying Factor Bioscience a minimum of $ 3.5 million due under the MSA.

the License Fee Obligation was conditionally waived until the Company paid Factor Bioscience a minimum of $ 3.5 million under the MSA,

the Company recorded a liability of $ 3.5 million.

As of June 30, 2024, there was approximately $ 0.3 million of the unamortized License

Fee Obligation remaining, which is recorded on the accompanying condensed consolidated balance sheet in the “due to related party,

current” line item.

As of September 30, 2024, there was no License Fee Obligation liability remaining.

September 2022, Novellus Inc.

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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.

Company has the sole authority to direct and control the prosecution, defense and settlement of the Covered Claims.

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

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.

November 2022, following the expiration of one of the milestone deadlines for certain regulatory filings required under the Third Amended

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with Factor Limited to replace in its entirety the exclusive license agreement between the parties dated February 20, 2023 and the amendment

Under the terms of the A&R Factor License Agreement, Factor Limited granted to the Company an exclusive, sublicensable license

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”).

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subject to the use restrictions in the A&R Factor License Agreement.

The term of the A&R Factor License Agreement expires on

November 22, 2027, but will be automatically extended for an additional five years (such period, the “Renewal Term”) if the

Company pays at least $ 6.0 million to Factor Limited from fees from sublicenses to the Factor Patents (“Sublicense Fees”),

other cash on hand or a combination of both sources of funds.

The Company will pay to Factor Limited 20 % of any Sublicense Fee received

by the Company during the term of the A&R Factor License Agreement.

Beginning in September 2024, the Company will also begin paying

Factor Limited a monthly maintenance fee of approximately $ 0.4 million until the expiration of the A&R Factor License Agreement,

including any Renewal Term.

The Company may terminate the A&R Factor License Agreement upon 120 days’ written notice to Factor

Limited, and both parties have additional customary termination rights.

Under the A&R Factor License Agreement, the Company is obligated

to pay the expenses incurred by Factor Limited in preparing, filing, prosecuting and maintaining the Factor Patents and the Company agreed

to bear all costs and expenses associated with enforcing and defending the Factor Patents in any action or proceeding arising from pursuit

of sublicensing opportunities under the license granted under 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.

September 24, 2024, the Company entered into the Factor L&C Agreement, effective as of September 9, 2024, with Factor Limited.

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.

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.

initial term of the Factor L&C Agreement is one year after the effective date, and it automatically renews yearly thereafter.

Company may terminate the Factor L&C Agreement for any reason upon 90 days’ written notice to Factor Bioscience, and the parties

otherwise have customary termination rights, including in connection with certain uncured material breaches and specified bankruptcy

to the Factor L&C Agreement, the Company will pay Factor Bioscience approximately $ 0.2 million per month for the first twelve months,

approximately $ 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.

Asset Acquisition

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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.

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

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board of directors from June 2022 to October 4, 2023.

2023 and December 2023 Financings

2023, December 2023 and September 2024 Financings

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 included Messrs.

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.

Note 4 for additional information regarding the financings.

participated in the applicable financing under the same terms and subject to the same conditions as all the other investors.

5 and Note 17 for additional information regarding the financings.

Binder served on the Company’s board of directors from July

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of directors from June 2022 to July 6, 2023.

11) COMMITMENTS AND CONTINGENCIES

11) COMMITMENTS

AND CONTINGENCIES

Company is involved in litigation and arbitrations from time to time in the ordinary course of business.

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On June 13, 2024, the motion to dismiss was denied and the court set a schedule for discovery limited to a threshold factual issue.

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.

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..

A status conference has been set for September 12, 2024.

The next Court conference is scheduled for November 18, 2024.

applicable Delaware law and Novellus Inc.’s organizational documents, the Company may be required to advance or reimburse certain

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trademark by October 31, 2024.

November 14, 2023, the Company entered into the A&R Factor License Agreement with Factor Limited.

See Note 9 for details of this

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 € 667 per day that it continues to do so.

September 24, 2024, the Company entered into the Factor L&C Agreement.

See Note 10 for details of this agreement.

Company established a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, which allows employees

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a maximum Company match of 4 %.

12) STOCK-BASED COMPENSATION

the three and six months ended June 30, 2024 and 2023, the Company granted stock options to purchase the number of shares of the

Company’s common stock set forth in the table below (in thousands):

12) STOCK-BASED

the nine months ended September 30, 2024 and 2023, the Company granted options to purchase the number of shares of the Company’s

common stock set forth in the table below (in thousands):

OF STOCK OPTION GRANTED

Three months ended June 30,

Six months ended June 30,

Nine months ended

September 30,

Stock options granted

were no stock options granted during either of the three months ended September 30, 2024 or 2023.

January 1, 2024, Sanjeev Luther was appointed as President, Chief Executive Officer and a director of the Company.

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April 26, 2024, the vesting terms of Mr.

Luther’s stock option award were amended so that the stock option vests over three years ,

Luther’s stock option award were amended so that the option vests over three years ,

with 25 % of the shares vesting on the first anniversary of the grant date and the remaining 75 % of the shares will vest in equal monthly

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stock option and the total compensation cost was unchanged.

However, the total compensation cost will now be recognized over three years

However, the total compensation cost will be recognized over three years

rather than four years, and as a result, the Company recognized approximately $ 0.1 million in additional stock-based compensation expense

during the three and six months ended June 30, 2024 as a result of the modification.

during the nine months ended September 30, 2024 as a result of the modification.

Company recognizes stock-based compensation expense for stock options granted to employees, directors and certain consultants.

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as expense over the requisite service period on a straight-lined basis.

following weighted-average assumptions were used for stock options granted during the three and six months ended June 30, 2024 and 2023:

following weighted-average assumptions were used for stock options granted during the nine months ended September 30, 2024 and 2023:

OF WEIGHTED-AVERAGE ASSUMPTIONS USED FOR STOCK OPTIONS GRANTED

Three months ended June 30,

Six months ended June 30,

Nine months ended

September 30,

Weighted average risk-free rate

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Expected term

per-share weighted average grant-date fair value of stock options granted during the three and six months ended June 30, 2024 and

2023 were as follows:

per-share weighted average grant-date fair value of stock options granted during the nine months ended September 30, 2024 and 2023 were

OF WEIGHTED AVERAGE GRANT-DATE FAIR VALUE OF STOCK OPTIONS

Three months ended June 30,

Six months ended June 30,

Nine months ended

September 30,

Weighted average grant date fair value

of all stock options is subject to continuous service with the Company through the applicable vesting date.

As of June 30, 2024,

there were approximately 2,536,000 shares

of the Company’s common stock subject to outstanding stock options.

As of September 30, 2024,

there were approximately 2,516,000 shares of the Company’s common stock subject to outstanding stock options.

Company recognizes the fair value of RSUs as expense on a straight-line basis over the requisite service period.

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of withholding taxes payable.

During the three and six months ended June 30, 2024 and 2023, less than 1,000 RSUs vested.

As of June 30,

2024, there were less than 1,000 RSUs outstanding.

Company did no t grant RSUs during either of the three or six months ended June 30, 2024 and 2023.

During the three and nine months ended September 30, 2024 and 2023, less than 1,000 RSUs vested.

September 30, 2024, there were less than 1,000 RSUs outstanding.

Company did no t grant RSUs during either of the three or nine months ended September 30, 2024 and 2023.

Compensation Expense

the three and six months ended June 30, 2024 and 2023, the Company recognized stock-based compensation expense as follows (in thousands):

the three and nine months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense as follows (in thousands):

OF STOCK-BASED COMPENSATION EXPENSE

Three months ended June 30,

Six months ended June 30,

Three months ended

September 30,

Nine months ended

September 30,

Research and development

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5 and 6, respectively, the Company has previously issued the note warrants and the Q1-22 warrants.

The Company also has warrants outstanding

from a private placement completed in the fourth quarter of 2022 (the “Q4-22 warrants”).

of June 30, 2024, the Company has the following warrants outstanding:

The Company also has the December

2022 warrants outstanding from a private placement completed in the fourth quarter of 2022.

of September 30, 2024, the Company has the following warrants outstanding:

OF WARRANTS OUTSTANDING

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September 9, 2027

Q4-22 warrants

December 2022 Warrants

July 2023 Note Warrants

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January 11, 2029

of June 30, 2024, the weighted average remaining contractual life of the warrants outstanding was 4.21 years and the weighted average

of September 30, 2024, the weighted average remaining contractual life of the warrants outstanding was 3.95 years and the weighted average

exercise price was $ 2.05 .

14) NET LOSS PER SHARE

October 29, 2024, all of the warrants except for the Q1-22 warrants and approximately 142,000 of the December 2022 Warrants were exchanged

for common stock at a rate of one-half share of common stock for every one warrant share pursuant to the Exchange Transactions.

5 and 17 for more information regarding the Exchange Transactions.

LOSS PER SHARE

Company calculates basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required

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following table presents the number of shares subject to outstanding warrants, stock options, RSUs, Series A convertible preferred stock

and convertible notes that were excluded from the computation of diluted net loss per share of common stock for the three and six months

ended June 30, 2024 and 2023, as their effect was anti-dilutive (in thousands):

and convertible notes that were excluded from the computation of diluted net loss per share of common stock for the three and nine months

ended September 30, 2024 and 2023, as their effect was anti-dilutive (in thousands):

SCHEDULE OF COMPUTATION OF DILUTED

NET LOSS PER SHARE OF COMMON STOCK

Three and six months ended June 30,

Three and nine months ended

September 30,

Convertible Notes converted into common stock

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Total potential common shares excluded from computation

15) STANDBY EQUITY PURCHASE AGREEMENT

April 5, 2023, the Company entered into the SEPA with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $ 10.0

EQUITY PURCHASE AGREEMENT

April 5, 2023, the Company entered into the ELOC with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $ 10.0

million of the Company’s common stock, subject to the terms and conditions contained in the appliable agreements.

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to time, at the Company’s sole discretion, over a period of up to 24 -months, commencing April 25, 2023, which was the date on which

each of the conditions to the Lincoln Park’s purchase obligations set forth in the purchase agreement were initially satisfied.

In consideration of Lincoln Park’s entry into the purchase agreement, the Company issued to Lincoln Park approximately 74,000 shares

each of the conditions to Lincoln Park’s purchase obligations set forth in the purchase agreement were initially satisfied.

consideration of Lincoln Park’s entry into the purchase agreement, the Company issued to Lincoln Park approximately 74,000 shares

of common stock as commitment shares.

The value of the commitment shares was recorded as a period expense and included in other expense,

net, in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2023.

April 2023, the Company filed a registration statement on Form S-1 (File No.

333-271279) to register the sale from time to time of up

net, in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2023.

April 2023, the Company filed a registration statement on Form S-1 to register the sale from time to time of up

to 2,930,237 shares of the Company’s common stock by Lincoln Park, including the approximately 74,000 commitment shares, which

was declared effective on April 24, 2023 (the “SEPA S-1”).

the three and six months ended June 30, 2023, the Company issued and sold approximately 214,000

shares of common stock under the SEPA, including the approximately 74,000

commitment shares, for gross proceeds of $ 0.3

shares have been sold under the SEPA during the three or six months ended June 30, 2024.

As of June 30, 2024, there were

approximately 2,716,000

shares remaining to be sold under the SEPA that are registered for resale by Lincoln Park under the SEPA S-1.

16) RECENT ACCOUNTING PRONOUNCEMENTS

was declared effective on April 24, 2023 (the “ELOC S-1”).

the three and nine months ended September 30, 2023, the Company issued and sold approximately 214,000 shares of common stock under the

ELOC, including the approximately 74,000 commitment shares, for gross proceeds of $ 0.3 million.

No shares were sold under the ELOC

during the three or nine months ended September 30, 2024.

As of September 30, 2024, there were approximately 2,716,000 shares remaining

to be sold under the ELOC that are registered for resale by Lincoln Park under the ELOC S-1.

ACCOUNTING PRONOUNCEMENTS

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

On August 5, 2024, the sublessor

of the Company’s sublease for the property located in Somerville, Massachusetts drew down on the letter of credit related to the

sublease for the full $ 4.1 million to cover the approximately $ 4.0 million of past due rent payments, plus interest and penalties.

On August 9, 2024, the Company

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, the Company agreed to surrender and vacate the premises, all of 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 both parties will be released of their obligations under the sublease.

As a result of the sublease termination, the Company expects to save approximately $ 58.5 million in base rental payments

plus parking, operating expenses, taxes and utilities that it would have paid over the remaining lease term.

17) SUBSEQUENT

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

the Common Stock Private Placement, the Company issued approximately 1,402,000 shares of common stock and pre-funded warrants to

purchase 115,000 shares of common stock and received approximately $ 1.1 million in gross proceeds from the issuance of such securities.

The pre-funded warrants have an exercise price of $ 0.005 per share, are exercisable at any time and will not expire

until exercised in full.

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 approximately 6,244,000 shares of the Company’s 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 common stock.

The pre-funded warrants have an exercise price of $ 0.005 per share, are exercisable at any time and will not expire until exercised in full.

the Exchange Transactions, (i) the holders of the warrants exchanged approximately 19,902,000 warrants for approximately 9,951,000

shares of the Company’s common stock at an exchange ratio of one-half 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 (ii) the holders of the

convertible notes exchanged all their convertible notes for approximately 28,351,000 shares of the Company’s 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).

The Company issued approximately 38,302,000

shares of our common stock at the closing of the Exchange Transactions.

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 September

24, 2024 Transactions and had 51.4 million shares of common stock issued and outstanding.

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 1. Financial Statements