Ernexa Therapeutics Inc. 10-Q

Item 1. Financial Statements ETERNA THERAPEUTICS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value amounts) (unaudited) September 30, 2024 December 31, 2023 ASSETS Current assets: Cash $ 4,264 $ 7,575 Other receivables 187 425 Prepaid expenses and other current assets 279 1,599 Total current assets 4,730 9,599 Restricted cash - 4,095 Property and equipment, net 105 493 Right-of-use assets - operating leases 719 32,781 Goodwill 2,044 2,044 Other assets 120 120 Total assets $ 7,718 $ 49,132 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY Current liabilities: Accounts payable $ 2,193 $ 1,067 Accrued expenses 1,166 1,893 Income taxes payable 18 2 Bridge notes, net of debt discount 776 - Bridge notes derivative liability 4,926 - Operating lease liabilities, current 201 2,216 Due to related party, current 559 1,205 Deferred revenue, current - 190 Other current liabilities 113 - Total current liabilities 9,952 6,573 Convertible notes, net 32,037 6,773 Warrant liabilities 10,463 116 Operating lease liabilities, non-current 534 32,854 Deferred revenue, non-current - 392 Contingent consideration liability 41 107 Other liabilities 84 84 Total liabilities 53,111 46,899 Stockholders’ (deficit) equity: 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 1 1 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 27 27 Additional paid-in capital 180,348 189,186 Accumulated deficit ( 225,769 ) ( 186,981 ) Total stockholders’ (deficit) equity ( 45,393 ) 2,233 Total liabilities and stockholders’ (deficit) equity $ 7,718 $ 49,132 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 ETERNA THERAPEUTICS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (unaudited) 2024 2023 2024 2023 Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Revenue $ 487 $ 51 $ 581 $ 51 Cost of revenues ( 60 ) 120 96 170 Gross income (loss) 547 ( 69 ) 485 ( 119 ) Operating expenses: Research and development 1,001 1,387 3,446 4,560 General and administrative 3,381 4,049 11,592 10,231 Gain on lease termination ( 1,576 ) - ( 1,576 ) - Acquisition of Exacis in-process research and development - - - 460 Total operating expenses 2,806 5,436 13,462 15,251 Loss from operations ( 2,259 ) ( 5,505 ) ( 12,977 ) ( 15,370 ) Other expense, net: Loss on extinguishment of debt ( 22,440 ) - ( 22,440 ) - Fair value adjustments to bridge notes derivative liability ( 1,038 ) - ( 1,038 ) - Change in fair value of warrant liabilities 831 20 897 166 Change in fair value of contingent consideration - - 66 118 Loss on non-controlling investment - - - ( 59 ) Interest expense, net ( 1,686 ) ( 113 ) ( 3,269 ) ( 88 ) Other expense, net - ( 1 ) - ( 281 ) Total other expense, net ( 24,333 ) ( 94 ) ( 25,784 ) ( 144 ) Loss before income taxes ( 26,592 ) ( 5,599 ) ( 38,761 ) ( 15,514 ) (Provision) benefit for income taxes ( 12 ) 8 ( 19 ) ( 1 ) Net loss ( 26,604 ) ( 5,591 ) ( 38,780 ) ( 15,515 ) Series A preferred stock dividend - - ( 8 ) ( 8 ) Net loss attributable to common stockholders $ ( 26,604 ) $ ( 5,591 ) $ ( 38,788 ) $ ( 15,523 ) Net loss per common share - basic and diluted $ ( 4.92 ) $ ( 1.03 ) $ ( 7.17 ) $ ( 2.94 ) Weighted average shares outstanding - basic and diluted 5,410 5,410 5,410 5,281 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 ETERNA THERAPEUTICS INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY For the three and nine months ended September 30, 2024 and 2023 (unaudited) (in thousands) Shares Amount Shares Amount Capital Deficit Total Series A Preferred Stock Common Stock Additional Paid-in Accumulated Shares Amount Shares Amount Capital Deficit Total Balances at July 1, 2024 156 $ 1 5,411 $ 27 $ 190,611 $ ( 199,165 ) $ ( 8,526 ) Fair value of forward sale contract pursuant to common stock offering - - - - 576 - 576 Reclassification of warrants to liability - - - - ( 11,244 ) - ( 11,244 ) Stock-based compensation - - - - 405 - 405 Net loss - - - - - ( 26,604 ) ( 26,604 ) Balances at September 30, 2024 156 $ 1 5,411 $ 27 $ 180,348 $ ( 225,769 ) $ ( 45,393 ) Balances at January 1, 2024 156 $ 1 5,410 $ 27 $ 189,186 $ ( 186,981 ) $ 2,233 Fair value of forward sale contract pursuant to common stock offering - - - - 576 - 576 Reclassification of warrants to liability - - - - ( 11,244 ) - ( 11,244 ) Issuance of note warrants - - - - 720 - 720 Stock-based compensation - - - - 1,110 - 1,110 Issuance of common stock from vested restricted units - - 1 - - - - Cash dividends to Series A preferred stockholders - - - - - ( 8 ) ( 8 ) Net loss - - - - - ( 38,780 ) ( 38,780 ) Balances at September 30, 2024 156 $ 1 5,411 $ 27 $ 180,348 $ ( 225,769 ) $ ( 45,393 ) Balances at July 1, 2023 156 $ 1 5,410 $ 27 $ 179,067 $ ( 175,229 ) $ 3,866 Issuance of warrants in connection with convertible notes financing - - - - 5,113 - 5,113 Stock-based compensation - - - - 174 - 174 Net loss - - - - - ( 5,591 ) ( 5,591 ) Balances at September 30, 2023 156 $ 1 5,410 $ 27 $ 184,354 $ ( 180,820 ) $ 3,562 Balances at January 1, 2023 156 $ 1 5,127 $ 26 $ 177,377 $ ( 165,297 ) $ 12,107 Issuance of common stock in connection with Exacis asset acquisition - - 69 - 208 - 208 Issuance of common stock related to stock purchase agreement with Lincoln Park Capital Fund, LLC, net - - 214 1 579 - 580 Issuance of warrants in connection with convertible notes financing - - - - 5,113 - 5,113 Cash dividends to Series A preferred stockholders - - - - - ( 8 ) ( 8 ) Stock-based compensation - - - - 1,077 - 1,077 Net loss - - - - - ( 15,515 ) ( 15,515 ) Balances at September 30, 2023 156 $ 1 5,410 $ 27 $ 184,354 $ ( 180,820 ) $ 3,562 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 ETERNA THERAPEUTICS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) 2024 2023 For the nine months ended September 30, 2024 2023 Cash flows from operating activities: Net loss $ ( 38,780 ) $ ( 15,515 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 120 62 Stock-based compensation 1,110 1,077 Amortization of right-of-use asset 1,450 580 Gain on lease termination ( 1,576 ) - Accrued interest expense 441 113 Paid-in-kind interest expense 829 - Amortization of debt discount and debt issuance costs 2,148 52 Loss on extinguishment of debt 22,440 - Fair value adjustments to bridge notes derivative liability 1,038 Change in fair value of warrant liabilities ( 897 ) ( 166 ) Change in fair value of contingent consideration liability ( 66 ) ( 118 ) Commitment shares issued to Lincoln Park Capital, LLC - 249 Loss on shares sold to Lincoln Park Capital, LLC - 11 Non-cash component of acquisition of Exacis in-process research and development - 433 Gain on disposal of fixed assets - 1 Loss on non-controlling investment - 59 Changes in operating assets and liabilities: Other receivables 238 ( 825 ) Prepaid expenses and other current assets 1,225 340 Other non-current assets 1 ( 2,911 ) Accounts payable and accrued expenses 758 1,099 Operating lease liability ( 1,656 ) 795 Due to related party ( 646 ) ( 1,313 ) Deferred revenue ( 582 ) 599 Other liabilities 113 ( 369 ) Net cash used in operating activities ( 12,291 ) ( 15,747 ) Cash flows from investing activities: Purchase of property and equipment ( 369 ) - Proceeds received from the sale of fixed assets 4 - Net cash used in investing activities ( 365 ) - Cash flows from financing activities: Proceeds received from convertible note financings 1,405 8,715 Fees paid related to convertible note financings ( 34 ) ( 175 ) Proceeds received from bridge notes financings 3,887 - Proceeds from sale of common stock pursuant to stock purchase agreement with Lincoln Park Capital Fund, LLC - 320 Dividends paid to Series A preferred stockholders ( 8 ) ( 8 ) Net cash provided by financing activities 5,250 8,852 Net decrease in cash and cash equivalents ( 7,406 ) ( 6,895 ) Cash, cash equivalents and restricted cash at beginning of period 11,670 15,541 Cash, cash equivalents and restricted cash at end of period $ 4,264 $ 8,646 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 46 $ 13 Income taxes $ 2 $ 4 Supplemental disclosure of non-cash investing and financing activities: Note warrants issued $ 755 $ - Unpaid fees incurred in connection with the December 2023 financing $ 32 $ - Paid in-kind interest added to convertible notes principal $ 1,006 $ - Adjustment to lease liability and ROU asset due to remeasurement $ 4,245 $ - Reclassification of warrants to liability $ 11,244 $ - Warrants issued in connection with July 2023 Financing $ - $ 5,234 Unpaid fees incurred in connection with the July 2023 Financing $ - $ 27 Initial measurement of ROU assets $ - $ 34,410 Initial measurement of lease liability $ - $ 34,170 Contingent consideration for Exacis asset acquisition $ - $ 225 Issuance of common stock for Exacis asset acquisition $ - $ 208 Reconciliation of cash, cash equivalents and restricted cash at end of period: Cash and cash equivalents $ 4,264 $ 4,551 Restricted cash - 4,095 Total cash, cash equivalents and restricted cash at end of period $ 4,264 $ 8,646 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 ETERNA THERAPEUTICS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business Eterna Therapeutics Inc. (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 . Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited financial statements include all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. These condensed consolidated financial statements should be read together with the audited consolidated financial statements and notes thereto contained in Eterna’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2024, as amended by the Form 10-K/A filed with the SEC on March 18, 2024 (as amended, the “2023 10-K”). The accompanying condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited financial statements contained in the 2023 10-K but does not include all of the information and footnotes required by GAAP for complete financial statements. 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. Reclassifications Certain reclassifications have been made to the Company’s prior year amounts to conform to the current year presentation. 2) LIQUIDITY AND CAPITAL RESOURCES The Company 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 million. 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. In October 2022, the Company entered into a sublease for approximately 45,500 square feet of office and laboratory space in Somerville, Massachusetts. Pursuant to the sublease, the Company delivered to the sublessor a security deposit in the form of a letter of credit 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. 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 sublease termination agreement.. 5 In 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 of the Company’s common stock in an “equity line” financing arrangement. During the year ended December 31, 2023, the 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. In 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. On September 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. In 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. The accompanying condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern. 3) ASSET ACQUISITION On 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. In 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 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 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. 6 The Company accounted for the Exacis Acquisition as an asset acquisition because it determined that substantially all of the fair value of the assets acquired was concentrated in the Purchased License. Assets acquired in an asset acquisition are recognized based on their cost to the acquirer and generally allocated to the assets on a relative fair value basis. The Company’s cost for acquiring the Exacis Assets includes the issuance of the Company’s common stock, direct acquisition-related costs and contingent consideration. The table below shows the total fair value of the consideration paid for the Exacis Assets (in thousands). See Note 4 for more information on the fair value measurement of the assets acquired. SCHEDULE OF FAIR VALUE MEASUREMENT OF ASSETS ACQUIRED Fair Value of Consideration Shares issued $ 208 Contingent consideration 225 Direct costs 27 Total fair value $ 460 The Company allocated 100 % of the fair value of the consideration to the Purchased License, which the Company determined is an in-process research and development (“IPR&D”) asset. IPR&D assets acquired through an asset purchase that have no alternative future uses and no separate economic values from their original intended purpose are expensed in the period the cost is incurred. As a result, the Company expensed the fair value of the Purchased License during the three and nine months ended September 30, 2023. On 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. 4) CONTRACT WITH CUSTOMER On 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 (the intellectual property that would be sublicensed by Lineage is currently licensed by the Company from Factor Limited). The 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. On 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. 7 Payments 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 Right. 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. The 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. Pursuant to ASC 606, the Company determined that the Option Right was an unexercised right held by Lineage under the Lineage Agreement at contract inception, as the cell line customization activities and the sublicense were optional purchases at contract inception. These optional 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. The 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. Lineage 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 period. 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. The 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 On July 14, 2023, the Company received $ 8.7 million from a private placement in which the Company issued $ 8.7 million in aggregate principal amount of convertible notes (the “July 2023 Convertible Notes”) and warrants to purchase an aggregate of approximately 6.1 million shares of its common stock (the “July 2023 Warrants”). The Company recognized approximately $ 0.2 million in fees associated with the transaction. On December 14, 2023, the Company entered into a purchase agreement with certain purchasers for the private placement of $ 9.2 million of convertible notes (the “December 2023 Convertible Notes” and together with the July 2023 Convertible Notes, the “Convertible Notes”) and warrants to purchase an aggregate of approximately 9.6 million shares of the Company’s common stock (the “December 2023 Warrants” and together with the July 2023 Warrants, the “Note Warrants”). 8 There were two closings under the December 14, 2023 purchase agreement – one on December 15, 2023 and the second on January 11, 2024. At the first closing, the Company received $ 7.8 million and issued $ 7.8 million of December 2023 Convertible Notes and December 2023 Warrants to purchase approximately 8.1 million shares of its common stock. At the second closing, the Company received $ 1.4 million and issued $ 1.4 million of December 2023 Convertible Notes and December 2023 Warrants to purchase approximately 1.5 million shares its common stock. See Note 13 for more information on the Note Warrants. The 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. At the Company’s election, it may pay interest either in cash or in-kind by increasing the outstanding principal amount of the Convertible Notes. The Convertible Notes mature on the five -year anniversary of the date of their issuance, unless earlier converted or repurchased. The Company does not have the option to redeem any of the Convertible Notes prior to maturity. At 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 September 30, 2024, none of the Convertible Notes were converted into shares of common stock. The Convertible Notes provide for customary events of default which include (subject in certain cases to customary grace and cure periods), among others: nonpayment of principal or interest, breach of covenants or other agreements in the Convertible Notes; the occurrence of a material adverse effect event (as defined in the related securities purchase agreement) and certain events of bankruptcy. Generally, 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 September 30, 2024, there were no events of default that occurred under any of the Convertible Notes. Bridge Notes Financing On 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. At the Company’s election, it may pay interest either in cash or in-kind by increasing the outstanding principal amount of the Bridge Notes. The Bridge Notes mature on the one -year anniversary of the date of their issuance, unless earlier converted or repurchased. The Company does not have the option to redeem any of the Bridge Notes prior to maturity. The Bridge Notes financing closed on September 24, 2024. The 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. The Company was required to bifurcate the conversion feature from the Bridge Notes and record it as a derivative liability at its fair value. 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 and a $ 1.6 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. Exchange Transaction On 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; and (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. 9 Subject 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”). The 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. As 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. Equity Financing On 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. The 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 24, 2024. 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. On 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: ● Under 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. ● Under 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. As of October 29, 2024, there were no Bridge Notes outstanding. ● Under 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 outstanding. 10 6) FAIR VALUE OF FINANCIAL INSTRUMENTS Fair 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 willing market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy 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. The 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. The Company issued approximately 343,000 warrants in connection with a private placement during the first quarter of 2022 (the “Q1-22 warrants”), which were determined to be classified as a liability. The Company also recorded the Market Cap Contingent Consideration liability related to the Exacis Acquisition. See Note 3 for more information related to the Exacis Acquisition. In 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. The 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. 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. With 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. The 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 Description Level September 30, 2024 December 31, 2023 Liabilities: Warrant liabilities - Q1-22 warrants 3 $ 15 $ 116 Warrant liabilities – Exchange Transactions 3 $ 10,448 $ - Bridge Notes derivative liability 3 $ 4,926 $ - Market Cap Contingent Consideration - - Liability fair value disclosure - - 11 Certain inputs used in Black-Scholes and Monte Carlo models may fluctuate in future periods based upon factors that are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of the Company’s warrant liabilities or contingent consideration liabilities, which could also result in material non-cash gains or losses being reported in the Company’s condensed consolidated statement of operations. The following table presents the changes in the liabilities measured at fair value from January 1, 2024 through September 30, 2024 (in thousands): SCHEDULE OF CHANGES IN WARRANT LIABILITIES Warrant Liabilities Derivative Liability Contingent Consideration Fair value at January 1, 2024 $ 116 $ - $ 107 Reclassification of warrants from equity to liability 11,244 - - Initial measurement of Bridge Notes derivative liability - 5,566 - Change in fair value ( 897 ) ( 640 ) ( 66 ) Fair value at September 30, 2024 $ 10,463 $ 4,926 $ 41 The 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 30, 2024. 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. The 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. The 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 September 30, 2024 and December 31, 2023 (in thousands). SCHEDULE OF FAIR VALUE AND CARRYING VALUES OF CONVERTIBLE NOTES September 30, 2024 December 31, 2023 Level Carrying Value Fair Value Carrying Value Fair Value Convertible Notes 3 $ 32,037 $ 29,768 $ 16,616 $ 17,594 Bridge Notes 3 $ 3,887 $ 8,409 $ - $ - The 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. The carrying value of the Bridge Notes in the table above is shown before the bifurcation of the Bridge Notes derivative liability. The Company 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 . See Note 5 for more information on the Convertible Notes and the Bridge Notes. The 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. 7) GOODWILL In 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 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. 12 8) LEASES The Company currently has operating leases for office in the borough of Manhattan in New York, New York, and Cambridge, Massachusetts, which expire in 2026 and 2028, respectively. In addition, in October 2022, the Company entered into a sublease with a subsidiary of Bristol-Myers Squibb Company, as sublessor (“Sublessor”), for office, laboratory and research and development space of approximately 45,500 square feet in Somerville, Massachusetts. The sublease 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. On 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. The 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, 2024. The sublease was originally scheduled to expire in 2033. Pursuant to the sublease termination agreement, the Company agreed to the following: to surrender and vacate the premises; that the Company’s right, title and interest in all furniture, fixtures and laboratory equipment at the premises will become the property of the sublessor; and that both parties will be released of their obligations under the sublease. As a result of the sublease termination, the Company recognized a gain on lease termination of approximately $ 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. For the three and nine months ended September 30, 2024 and 2023, the net operating lease expenses were as follows (in thousands): NET OPERATING LEASE EXPENSE 2024 2023 2024 2023 Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Operating lease expense $ 1,110 $ 1,623 $ 4,380 $ 1,758 Sublease income ( 21 ) ( 21 ) ( 63 ) ( 63 ) Variable lease expense 225 6 887 18 Total lease expense $ 1,314 $ 1,608 $ 5,204 $ 1,713 13 The tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2024 and the ending balances as of September 30, 2024, including the changes during the period (in thousands). OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES Operating Lease ROU Assets Operating lease ROU assets at January 1, 2024 $ 32,781 Adjustment to ROU asset for remeasurement of Somerville Sublease liability 4,245 Write-off of Somerville Sublease ROU asset ( 34,857 ) Amortization of operating lease ROU assets ( 1,450 ) Operating lease ROU assets at September 30, 2024 $ 719 Operating Lease Liabilities Operating lease liabilities at January 1, 2024 $ 35,070 Adjustment to lease liability due to remeasurement of Somerville Sublease 4,245 Accretion of interest for Somerville Sublease 2,465 Write-off of Somerville Sublease liability ( 36,924 ) Principal payments on operating lease liabilities ( 4,121 ) Operating lease liabilities at September 30, 2024 735 Less non-current portion 534 Current portion at September 30, 2024 $ 201 As 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): MATURITIES OF OPERATING LEASE LIABILITIES As of September 30, 2024 2024 $ 69 2025 274 2026 267 2027 163 2028 82 Total payments 855 Less imputed interest ( 120 ) Total operating lease liabilities $ 735 9) ACCRUED EXPENSES Accrued expenses at September 30, 2024 and December 31, 2023 consisted of the following (in thousands): SCHEDULE OF ACCRUED EXPENSES September 30, 2024 December 31, 2023 Professional fees $ 290 $ 239 Legal fees 267 643 Accrued compensation 108 109 Convertible notes interest 38 176 Somerville facility - 218 Other 463 508 Total accrued expenses $ 1,166 $ 1,893 14 10) RELATED PARTY TRANSACTIONS Agreements with Factor Bioscience Inc. and Affiliates As of September 30, 2024, the Company had entered into the agreements described below with Factor Bioscience Inc. and/or Dr. Matthew Angel. These agreements have been deemed related party transactions because the Company’s former chief executive officer, Dr. Angel, is the chairman and chief executive officer of Factor Bioscience Inc. and a director of its subsidiary, Factor Bioscience Limited (“Factor Limited” and together with Factor Bioscience Inc. and its other affiliates, “Factor Bioscience”). Dr. Angel resigned as the Company’s chief executive officer effective December 31, 2023. In September 2022, the Company entered into a Master Services Agreement (the “MSA”) with Factor Bioscience, pursuant to which Factor Bioscience agreed to provide services to the Company as agreed between the Company and Factor Bioscience and as set forth in one or more work orders under the MSA, including the first work order included in the MSA (“WO1”). The MSA contains customary confidentiality provisions and representations and warranties of the parties, and the MSA may be terminated by either party upon 30 days’ prior notice, subject to any superseding termination provisions contained in a particular work order. Under WO1, Factor Bioscience agreed to provide the Company with mRNA cell engineering research support services, including access to certain facilities, equipment, materials and training, and the Company agreed to pay Factor Bioscience an initial fee of $ 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. Under the terms of an amendment to WO1, the Company may terminate WO1 on or after the second anniversary of the date of the MSA, subject to providing Factor Bioscience with 75 days’ prior notice if such notice is provided no later than June 30, 2024. On June 26, 2024, the Company provided Factor Bioscience with its notice to terminate WO1, which became effective on September 9, 2024. In connection with entering into the MSA, Factor Limited entered into a waiver agreement with Eterna LLC, pursuant to which Factor Limited agreed to waive payment of $ 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. Because 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 September 30, 2024, there was no License Fee Obligation liability remaining. In September 2022, Novellus Inc. (“Novellus”) and the Company entered into a Second Amendment to the Limited Waiver and Assignment Agreement (the “Waiver and Assignment Agreement”) with Drs. Matthew Angel and Christopher Rohde (the “Founders”) whereby the Company agreed to be responsible for all future, reasonable and substantiated legal fees, costs, settlements and judgments incurred by the Founders, the Company or Novellus for certain claims and actions and any pending or future litigation brought against the Founders, Novellus and/or the Company by or on behalf of the Westman and Sowyrda legal matters described in Note 10 (the “Covered Claims”). The Founders will continue to be solely responsible for any payments made to satisfy a judgement or settlement of any pending or future wage act claims. Under the Waiver and Assignment Agreement, the Founders agreed that they are not entitled to, and waived any right to, indemnification or advancement of past, present or future legal fees, costs, judgments, settlement or other liabilities they may have been entitled to receive from the Company or Novellus in respect of the Covered Claims. The Company and the Founders will share in any recoveries up to the point at which the parties have been fully compensated for legal fees, costs and expenses incurred, with the Company retaining any excess recoveries. The Company has the sole authority to direct and control the prosecution, defense and settlement of the Covered Claims. 15 In November 2022, following the expiration of one of the milestone deadlines for certain regulatory filings required under the Third Amended and Restated Exclusive License Agreement between Novellus Limited and Factor Limited entered into in November 2020 (the “Novellus-Factor License Agreement”), which permitted Factor Limited to terminate the license granted to Novellus Limited thereunder, the Company entered into the first amendment to the Original Factor License Agreement (as amended, the “2021 Factor License Agreement”), pursuant to which, among other things, Factor Limited granted to Eterna LLC an exclusive, sublicensable license under certain patents owned by Factor Limited (the “Factor Patents”) for the purpose of identifying and pursuing certain opportunities to grant to third parties sublicenses to the Factor Patents. The Original Factor License Agreement also (i) terminated the Novellus-Factor License Agreement, (ii) confirmed Factor Limited’s grant to Eterna LLC of the rights and licenses Novellus Limited previously granted to Eterna LLC under the Novellus-Factor License Agreement on the same terms and conditions as granted by Novellus Limited to Eterna LLC under such agreement, (iii) confirmed that the sublicense granted by Novellus Limited in accordance with the Novellus-Factor License Agreement to NoveCite, Inc., a company which the Company has a 25 % non-controlling interest (“NoveCite”), survived termination of the Novellus-Factor License Agreement; and (iv) removed Novellus Limited from the Original Factor License Agreement and the license agreement entered into on October 6, 2020 between Novellus Limited and NoveCite, Inc, as amended, and replaced Novellus Limited with Factor Limited as the direct licensor to Eterna LLC and NoveCite under such agreements, respectively. On February 20, 2023, the Company, entered into an exclusive license agreement (the “Feb 2023 Factor Exclusive License Agreement”) with Factor Limited, pursuant to which Factor Limited granted to the Company an exclusive, sublicensable, worldwide license under certain patents owned by Factor Limited for the purpose of, among other things, identifying and pursuing certain opportunities to develop products in respect of such patents and to otherwise grant to third parties sublicenses to such patents. The Feb 2023 Factor Exclusive License Agreement, which terminated and superseded the Amended Factor License Agreement, was subsequently terminated and superseded by the A&R Factor License Agreement (as defined below). On November 14, 2023, the Company entered into an amended and restated exclusive license agreement (the “A&R Factor License Agreement”) with Factor Limited to replace in its entirety the exclusive license agreement between the parties dated February 20, 2023 and the amendment thereto. Under the A&R Factor License Agreement, Factor Limited granted to the Company an exclusive, sublicensable license under certain patents owned by Factor Limited (the “Factor Patents”). The A&R Factor License Agreement also provides for, among other things, the expansion of the Company’s license rights to include (i) the field of use of the Factor Patents to include veterinary uses (ii) know-how that is necessary or reasonably useful to practice to the licensed patents, (iii) the ability to sublicense through multiple tiers (as opposed to only permitting a direct sublicense) and (iv) the transfer of technology to the Company, subject to the use restrictions in the A&R Factor License Agreement. The A&R Factor License Agreement was subsequently terminated and superseded by the Factor L&C Agreement discussed below. On September 24, 2024, the Company entered into the Factor L&C Agreement, effective as of September 9, 2024, with Factor Limited. The Factor L&C Agreement terminated the A&R Factor License Agreement as well as the Purchased License that Exacis entered into with Factor Bioscience on November 4, 2020, which the Company acquired pursuant to the Exacis Purchase Agreement with Exacis and certain stockholders of Exacis on April 26, 2023. Under the Factor L&C Agreement, the Company has obtained exclusive licenses in the fields of cancer, autoimmune disorders, and rare diseases with respect to certain licensed technology and has the right to develop the licensed technology directly or enter into co-development agreements with partners who can help bring such technology to market. The Factor L&C Agreement also provides for certain services and materials to be provided by Factor Bioscience to facilitate the development of the licensed technology and to enable the Company to scale up production at third party facilities. The initial term of the Factor L&C Agreement is one year after the effective date, and it automatically renews yearly thereafter. The Company may terminate the Factor L&C Agreement for any reason upon 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 events. Pursuant 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. 16 Exacis Asset Acquisition On April 26, 2023, the Company closed the Exacis Acquisition. See Note 3 for additional information. The Exacis Acquisition was deemed a related party transaction because, at the time of the acquisition, (i) Dr. Gregory Fiore was both the chief executive officer of Exacis and a member of the Company’s board of directors, (ii) Dr. Angel was both the Company’s chief executive officer and chairman of Exacis’ scientific advisory board, and (iii) an affiliate of Factor Bioscience was the majority stockholder of Exacis. Consulting Agreement with Former Director In May 2023, the Company entered into a consulting agreement with Dr. Fiore, whereby Dr. Fiore agreed to provide business development consulting services to the Company for a monthly retainer of $ 20,000 . The consulting agreement was terminable for any reason by either party upon 15 days’ written notice. The Company terminated the consulting agreement, effective July 31, 2023. Dr. Fiore served on the Company’s board of directors from June 2022 to October 4, 2023. July 2023, December 2023 and September 2024 Financings Investors in the July 2023 convertible note financing included Brant Binder, Richard Wagner, Charles Cherington and Nicholas Singer, and investors in the December 2023 convertible note financing and the September 2024 financing included Messrs. Cherington and Singer. Each of them participated in the applicable financing under the same terms and subject to the same conditions as all the other investors. See Note 5 and Note 17 for additional information regarding the financings. Mr. Binder served on the Company’s board of directors from July 6, 2023 to August 8, 2023, Mr. Wagner served on the Company’s board of directors from July 6, 2023 to August 8, 2023, Mr. Cherington served on the Company’s board of directors from March 2021 to July 6, 2023, and Mr. Singer served on the Company’s board of directors from June 2022 to July 6, 2023. 11) COMMITMENTS AND CONTINGENCIES Litigation Matters The Company is involved in litigation and arbitrations from time to time in the ordinary course of business. Legal fees and other costs associated with such actions are expensed as incurred. In addition, the Company assesses the need to record a liability for litigation and contingencies. The Company reserves for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated. Novellus, Inc. v. Sowyrda et al., C.A. No. 2184CV02436-BLS2 On October 25, 2021 Novellus, Inc. filed a complaint in the Superior Court of Massachusetts, Suffolk County, against former Novellus, Inc. employees Paul Sowyrda and John Westman and certain other former investors in Novellus LLC (Novellus, Inc.’s former parent company prior to our acquisition of Novellus, Inc.), alleging breach of fiduciary duty, breach of contract and civil conspiracy. Eterna acquired Novellus, Inc. on July 16, 2021. On May 27, 2022 Novellus, Inc. amended the complaint to withdraw all claims against all defendants except Paul Sowyrda and John Westman. On July 1, 2022, Westman filed a motion to compel arbitration or in the alternative, to stay the litigation pending the disposition of certain litigation in the Court of Chancery for the State of Delaware filed by Mr. Sowyrda against Novellus LLC, Dr. Christopher Rohde, Dr. Matthew Angel, Leonard Mazur and Factor Bioscience, Inc. captioned Zelickson et al., v. Angel et al., C.A. 2021-1014-JRS and by Westman against Novellus LLC captioned Westman v. Novellus LLC , C.A. No. 2021-0882-NAC (together, the “Delaware Actions”). On July 1, 2022, Sowyrda answered the complaint and asserted counterclaims against Novellus, Inc, and third-party defendants Dr. Matthew Angel and Dr. Christopher Rohde alleging violations of the Massachusetts Wage Act, Massachusetts Minimum Fair Wage Law, the Fair Labor Standards Act, breach of contract, unjust enrichment and quantum meruit. Sowyrda also joined in Westman’s motion to stay the case pending the Delaware Actions. Novellus, Inc.’s claims and Mr. Sowyrda’s counterclaims relate to alleged conduct that took place before Eterna acquired Novellus, Inc. 17 On November 15, 2022, prior to a decision on Westman’s and Sowyrda’s motion to compel or stay, the parties agreed to voluntarily dismiss and consolidate the Delaware Actions with this action. On December 15, 2022, Sowyrda filed an Amended Answer to the Amended Complaint, asserted affirmative defenses and filed Amended Counterclaims against Dr. Angel, Dr. Rohde, Novellus LLC, Novellus Inc., Factor Bioscience Inc., and Eterna Therapeutics Inc. (collectively, the “Counterclaim Defendants”) alleging against various Counterclaim Defendants breach of contract, breaches of the implied duty of good faith and fair dealing, breaches of fiduciary duty, breaches of the operating agreement, aiding and abetting breaches of fiduciary duty, tortious interference with contract, equitable accounting, violations of the Massachusetts Wage Act, Massachusetts Minimum Fair Wage Law, the Fair Labor Standards Act, unjust enrichment, and quantum meruit. Also on December 15, 2022, Westman filed an answer to the Amended Complaint and asserted similar counterclaims against the same Counterclaim Defendants. Westman and Sowyrda each asserted claims for indemnification and/or advancement against Novellus, Inc. On January 11, 2023, Westman and Sowyrda served a joint motion to enforce their advancement and/or indemnification rights against Novellus Inc. Novellus Inc. vigorously opposes this motion and served its opposition on January 27, 2023. On February 8, 2023, Westman and Sowyrda served a reply in support of their motion to enforce indemnification/advancement rights, and submitted the motion to the Court. Novellus Inc. answered Westman and Sowyrda’s counterclaims on January 27, 2023, denying liability. The remaining Counterclaim Defendants served a motion to dismiss most of the remaining counterclaims on January 27, 2023. The Court entered an order granting the Counterclaim Defendants’ motion to dismiss and denying Sowyrda and Westman’s motion to enforce on June 15, 2023. The Court’s order dismissed all of Westman’s claims against Counterclaim Defendants except his claim for indemnification, and all of Sowyrda’s claims except his claim for indemnification and his employment-related claims, which Counterclaim Defendants did not move to dismiss. On July 6, 2023, Westman and Sowyrda filed a petition for interlocutory review with a single justice of the Massachusetts Appeals Court, seeking to overturn the judge’s decision granting the Counterclaim Defendants’ motion to dismiss most of the remaining counterclaims, but not the decision denying Westman and Sowyrda’s motion to enforce advancement rights. On July 25, 2023, the parties to the appeal filed a joint motion to the single justice in the appellate court to stay the appeal to allow for amended counterclaims to be filed by Counterclaim Plaintiffs and a motion to dismiss to be filed by Counterclaim Defendants. Counterclaim Plaintiffs filed an initial set of amended counterclaims on August 15, 2023. Counterclaim Plaintiffs amended and refiled their amended counterclaims on September 29, 2023. Counterclaim Defendants served their motion to dismiss all of the amended counterclaims, except for Sowyrda’s employment-related claims, on October 13, 2023. On June 13, 2024, the motion to dismiss was denied and the court set a schedule for discovery limited to a threshold factual issue. Discovery as to all other issues pertaining to the counterclaims was stayed. On July 15, 2024, Westman and Sowyrda requested that the single justice in the appellate court continue to stay the appeal pending the outcome of the limited discovery ordered by the Court. On July 31, 2024, Counterclaim Defendants and Sowyrda informed the Court that they had reached a settlement and requested that all claims pending between them be dismissed with prejudice, and on August 9, 2024, the Court approved the motion for approval of dismissal of all such claims with prejudice. Pursuant to the Court’s order, Counterclaim Defendants are engaged in limited discovery with Westman.. The next Court conference is scheduled for November 18, 2024. Under applicable Delaware law and Novellus Inc.’s organizational documents, the Company may be required to advance or reimburse certain legal expenses incurred by former officers and directors of Novellus, Inc. in connection with the foregoing Westman and Sowyrda matters. However, a future advance or reimbursement is not currently probable nor can it be reasonably estimated. eTheRNA Immunotherapies NV and eTheRNA Inc. v. Eterna Therapeutics Inc. C.A. No. 123CV11732 On July 31, 2023, eTheRNA Immunotherapies NV and eTheRNA Inc. filed a complaint against the Company alleging the following claims: (1) federal trademark infringement; (2) federal unfair competition; (3) Massachusetts state common law trademark infringement; (4) Massachusetts state unfair competition. On April 2, 2024, the parties settled the claims and stipulated to dismiss the complaint with prejudice. Per the settlement agreement entered into between the parties on March 19, 2024, the Company plans to phase-out its current use of the ETERNA trademark by October 31, 2024. On October 6, 2024, the parties entered into an addendum to the settlement agreement extending the deadline for phasing out the Company’s use of the ETERNA trademark until March 31, 2025. If the Company continues to use the Eterna Therapeutics name as of April 1, 2025, it will be obligated to pay € 667 per day that it continues to do so. Licensing Agreements On September 24, 2024, the Company entered into the Factor L&C Agreement. See Note 10 for details of this agreement. 18 Retirement Savings Plan The Company established a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, which allows employees to defer up to 90 % of their pay on a pre-tax basis. Beginning on January 1, 2023, the Company began matching employees’ contributions at a rate of 100 % of the first 3 % of the employee’s contribution and 50 % of the next 2 % of the employee’s contribution, for a maximum Company match of 4 %. 12) STOCK-BASED COMPENSATION Stock Options During 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): SCHEDULE OF STOCK OPTION GRANTED Nine months ended September 30, 2024 2023 Stock options granted 2,375 237 There were no stock options granted during either of the three months ended September 30, 2024 or 2023. On January 1, 2024, Sanjeev Luther was appointed as President, Chief Executive Officer and a director of the Company. Upon his appointment, he was granted a non-qualified stock option to purchase approximately 1,685,000 shares of the Company’s common stock. The stock option has an exercise price of $ 1.80 per share, which was equal to the fair market value (as defined in the 2020 Restated Equity Incentive Plan) of the Company’s common stock on the date of grant, will vest over four years , with 25 % of the shares vesting on the first anniversary of the grant date and the remaining 75 % of the shares vesting in equal monthly installments over the three years thereafter, in each case, subject to continued service. The stock option was granted pursuant to the terms of Mr. Luther’s employment agreement and as a material inducement to his joining the Company in accordance with Nasdaq Listing Rule 5635(c)(4). On April 26, 2024, the vesting terms of Mr. Luther’s stock option award were amended so that the option vests over 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 installments over the remaining two years, in each case, subject to continued service. Since the only modification to Mr. Luther’s stock option award was to the vesting terms, there was no change to the fair value of the stock option and the total compensation cost was unchanged. However, the total compensation cost will be recognized over three years rather than four years, and as a result, the Company recognized approximately $ 0.1 million in additional stock-based compensation expense during the nine months ended September 30, 2024 as a result of the modification. The Company recognizes stock-based compensation expense for stock options granted to employees, directors and certain consultants. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period on a straight-lined basis. 19 The following weighted-average assumptions were used for stock options granted during the nine months ended September 30, 2024 and 2023: SCHEDULE OF WEIGHTED-AVERAGE ASSUMPTIONS USED FOR STOCK OPTIONS GRANTED Nine months ended September 30, 2024 2023 Weighted average risk-free rate 4.45 % 3.82 % Weighted average volatility 97.91 % 95.15 % Dividend yield 0.00 % 0 % Expected term 5.85 years 5.44 years The per-share weighted average grant-date fair value of stock options granted during the nine months ended September 30, 2024 and 2023 were as follows: SCHEDULE OF WEIGHTED AVERAGE GRANT-DATE FAIR VALUE OF STOCK OPTIONS Nine months ended September 30, 2024 2023 Weighted average grant date fair value $ 1.44 $ 2.99 Vesting of all stock options is subject to continuous service with the Company through the applicable vesting date. As of September 30, 2024, there were approximately 2,516,000 shares of the Company’s common stock subject to outstanding stock options. Restricted Stock Units The Company recognizes the fair value of RSUs as expense on a straight-line basis over the requisite service period. For performance-based RSUs, the Company begins recognizing the expense once the achievement of the related performance goal is determined to be probable. Outstanding RSUs are settled in an equal number of shares of common stock on the vesting date of the award. An RSU award is settled only to the extent vested. Vesting generally requires the continued employment or service by the award recipient through the applicable vesting date. Because RSUs are settled in an equal number of shares of common stock without any offsetting payment by the recipient, the measurement of cost is based on the quoted market price of the stock at the measurement date, which is the grant date. In lieu of paying cash to satisfy withholding taxes due upon the settlement of vested RSUs, at the Company’s discretion, an employee may elect to have shares of common stock withheld that would otherwise be issued at settlement, the value of which is equal to the amount of withholding taxes payable. During the three and nine months ended September 30, 2024 and 2023, less than 1,000 RSUs vested. As of September 30, 2024, there were less than 1,000 RSUs outstanding. The Company did no t grant RSUs during either of the three or nine months ended September 30, 2024 and 2023. Stock-Based Compensation Expense For the three and nine months ended September 30, 2024 and 2023, the Company recognized stock-based compensation expense as follows (in thousands): SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE Three months ended September 30, Nine months ended September 30, 2024 2023 2024 2023 Research and development $ 13 $ 57 $ 74 $ 177 General and administrative 392 117 1,036 900 Total $ 405 $ 174 $ 1,110 $ 1,077 20 13) WARRANTS As discussed in Notes 5 and 6, respectively, the Company has previously issued the note warrants and the Q1-22 warrants. The Company also has the December 2022 warrants outstanding from a private placement completed in the fourth quarter of 2022. As of September 30, 2024, the Company has the following warrants outstanding: SCHEDULE OF WARRANTS OUTSTANDING Warrants Outstanding (in thousands) Exercise Price Expiration Date Classification Q1-22 warrants 343 $ 38.20 September 9, 2027 Liability December 2022 Warrants 4,370 $ 1.43 June 2, 2028 Equity July 2023 Note Warrants 6,094 $ 1.43 July 14, 2028 Equity December 2023 Note Warrant issued December 15, 2023 8,115 $ 1.43 December 15, 2028 Equity December 2023 Note Warrant issued January 11, 2024 1,464 $ 1.43 January 11, 2029 Equity 20,386 As 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 . On 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. See Note 5 and 17 for more information regarding the Exchange Transactions. 14 ) NET LOSS PER SHARE The Company calculates basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. The convertible notes contractually entitle the holders thereof to participate in dividends but does not contractually require the holders to participate in the Company’s losses. As such, the two-class method is not applicable during periods with a net loss. Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding plus dilutive securities. Shares of common stock issuable upon exercise, conversion or vesting of outstanding stock options, RSUs, warrants and shares of Series A convertible preferred stock are considered potential shares of common stock and are included in the calculation of diluted net loss per share using the treasury method when their effect is dilutive. The outstanding convertible notes are also considered potential shares of common stock and are included in the calculation of diluted net loss per share using the “if-converted” method, and the more dilutive of either the two-class method or the if-converted method is reported. Diluted net loss per share is the same as basic net loss per share for periods in which the effect of potentially dilutive shares of common stock is antidilutive. 21 The 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 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 nine months ended September 30, 2024 2023 Warrants 20,386 10,807 Convertible Notes converted into common stock 16,106 3,087 Stock options 2,516 510 Preferred stock converted into common stock 31 12 RSUs - 1 Total potential common shares excluded from computation 39,039 14,417 15) STANDBY EQUITY PURCHASE AGREEMENT On April 5, 2023, the Company entered into the ELOC with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $ 10.0 million of the Company’s common stock, subject to the terms and conditions contained in the appliable agreements. Such sales of common stock by the Company, if any, are subject to certain limitations set forth in the purchase agreement, and may occur from time 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 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 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 nine months ended September 30, 2023. In 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 “ELOC S-1”). During 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. 16) RECENT ACCOUNTING PRONOUNCEMENTS No new Accounting Standards Updates have been issued by the Financial Accounting Standards Board since January 1, 2024 that would apply to the Company that are not disclosed in the 2023 10-K. 17) SUBSEQUENT EVENT As discussed in Note 5, on September 24, 2024, the Company entered into the September 2024 Transactions. On October 29, 2024, the Company held its Annual Meeting, whereby the Company’s stockholders approved the September 2024 Transactions, and as a result, the following occurred: ● Under the Common Stock Private Placement, the Company issued approximately 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. ● Under 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. ● Under 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. 22