Ernexa Therapeutics Inc. 10-K

ITEM 9A. Controls and Procedures Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we were required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period covered by this Annual Report on Form 10-K under the supervision, and with the participation, of our management, including our President and Chief Executive Officer (who serves as our principal executive officer) and our Senior Vice President of Finance (who serves as our principal financial officer) of the effectiveness of the design and operation of our disclosure controls and procedures. 42 Based on that evaluation, our Chief Executive Officer and Senior Vice President of Finance concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K in providing reasonable assurance of achieving the desired control objectives. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. We previously identified a material weakness in our internal control over financial reporting. We were unable to timely file our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 due to identifying errors in our financial statements reported in our Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 during our preparation of the financial statements for the quarter ended March 31, 2022. Management concluded that the errors were the result of accounting personnel’s lack of technical proficiency in complex matters. On June 30, 2022, we filed an amendment to our Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 to correct the errors in our financial statements for the years ended December 31, 2021 and 2020 and for the quarters ended June 30, 2020, September 30, 2020, March 31, 2021, June 30, 2021 and September 30, 2021. Management implemented measures designed to ensure that the deficiencies contributing to the ineffectiveness of our internal control over financial reporting were remediated, such that the internal controls are designed, implemented and operating effectively. The remediation actions taken include the following: ● enhance the business process controls related to reviews over technical, complex, and non-recurring transactions; ● provide additional training to accounting personnel; and ● use external accounting advisors to review management’s conclusions on technical, complex and non-recurring matters. We have completed the documentation and review of the corrective actions described above, and our management has concluded that the design and operation of our financial reporting process as it relates to technical accounting proficiency in complex matters is effective and therefore that the related previously identified material weakness has been fully remediated as of December 31, 2024. We are committed to developing a strong internal control environment, and we believe the remediation efforts that we have implemented resulted in significant improvements in our control environment. Our management continues to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking actions and implementing enhancements or improvements, as necessary. Accordingly, our management, with the participation of our Chief Executive Officer and Senior Vice President of Finance, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2024, and concluded that our internal control over financial reporting was effective as of December 31, 2024. In making this assessment, we utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework (2013). Changes in Internal Control over Financial Reporting Except for the actions taken to remediate the material weakness as described above, there was no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. Other Information During the quarter ended December 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not Applicable. 43 PART III ITEM 10. Directors, Executive Officers and Corporate Governance Directors and Executive Officers The names of our directors and executive officers and their respective ages, positions, biographies and, in the case of directors, their qualifications to serve as directors, are set forth below as of March 10, 2025. Name Age Position Sanjeev Luther 63 President and Chief Executive Officer and Director Sandra Gurrola 58 Senior Vice President, Finance James Bristol 78 Chairman of the Board Peter Cicala 63 Director Elena Ratner 48 Director William Wexler 65 Director Sanjeev Luther has served as President, Chief Executive Officer and as a member of our board of directors since January 2024. Prior to that, Mr. Luther served as President, Chief Executive Officer and a board member of Cornerstone Pharmaceuticals from November 2017 to December 2023 and as its Chief Operations Officer and Chief Business Officer from December 2014 to November 2017. Prior to that, Mr. Luther served in various leadership roles at Bristol-Myers Squibb, Novartis, Bausch and Lomb and GE Healthcare. Mr. Luther holds an MBA in Marketing and a B.S. in Marketing and Business Administration from the State University of New York at Buffalo. Mr. Luther’s qualifications to serve on our board of directors include his expertise in the healthcare industry, his business training and education, and his extensive experience managing life science companies. Sandra Gurrola has served as our Senior Vice President of Finance since May 2023 and served as our Vice President of Finance from June 2021 until May 2023. Prior to that, she served as the Senior Vice President of eGames.com Holdings, LLC from March 2021 to June 2021 and as a consultant to us. Ms. Gurrola served as Senior Vice President of Finance to NTN Buzztime, Inc. from September 2019 to March 2021 and its Vice President of Finance from 2014 until 2019. From 2009 to 2014, Ms. Gurrola served NTN Buzztime, Inc. in various leadership accounting roles, including Controller, Director of Accounting, and Director of Financial Reporting and Compliance. Previously, she was a senior manager of financial reporting for Metabasis Therapeutics, Inc., a biotechnology company. Ms. Gurrola received a B.A. in English from San Diego State University. James Bristol has served as a member of our board of directors since October 2023. Dr. Bristol worked for 32 years in drug discovery, research and preclinical development at Schering - Plough Corporation, Parke - Davis, and Pfizer Inc. (“Pfizer”), serving in various senior research and development roles. From 2003 until his retirement in 2007, Dr. Bristol served as Senior Vice President of Worldwide Drug Discovery Research at Pfizer Global Research & Development, where he oversaw 3,000 scientists at seven Pfizer sites as they produced an industry leading number of drug development candidates in 11 therapeutic areas. In 2009, Dr. Bristol joined Frazier Healthcare Partners as a Senior Advisor. From August 2007 until Dec 2024, Dr. Bristol served as a member of the board of directors of Deciphera Pharmaceuticals, and since 2018 he has served as a member of the board of directors of Erasca, Inc., both of which are publicly traded life science companies. Dr. Bristol also served on the board of directors of Ignyta from 2014 until its acquisition by Roche in 2018 and served on the board of directors of SUDO Biosciences, Inc. from June 2021 until December 2023, and of Cadent Therapeutics, Inc. from 2011 until 2020. Dr. Bristol is the author of over 100 publications, abstracts and patents, and he conducted postdoctoral research at the University of Michigan (NIH Postdoctoral Fellow) and at The Squibb Institute for Medical Research. Dr. Bristol holds a Ph.D. in organic chemistry from the University of New Hampshire and a B.S. in Chemistry from Bates College. Dr. Bristol’s qualifications to serve on our board of directors include his vast experience in the biopharmaceutical industry, including in management and as a director, as well as his expertise in drug discovery and development. Peter Cicala has served as a member of our board of directors since February 2024. Mr. Cicala currently serves as General Counsel for a private biotechnology company, where he has been since March of 2021. In November of 2019, he co-founded Pretzel Therapeutics, Inc., a biotechnology company, and still serves as an executive advisor. From March 2020 until March 2021, Mr. Cicala served as Chief Intellectual Property Counsel for Intercept Pharmaceuticals, Inc. and from March 2014 until November 2019, he served as Chief Patent Counsel for Celgene Corporation, both publicly traded biopharmaceutical companies. Mr. Cicala has practiced law for over 25 years, and also has over 10 years of experience as a medicinal chemist. He received his B.S. in chemistry from Fairleigh Dickinson University and a J.D. from Seton Hall University School of Law. Mr. Cicala’s qualifications to serve on our board of directors include his expertise in pharmaceutical and biotechnology intellectual property law and in strategic management of proprietary technology and products. Elena Ratner has served as a member of our board of directors since January 2025. Since July 2019, Dr. Ratner has been serving as a professor in the Department of Obstetrics, Gynecology and Reproductive Sciences at Yale University School of Medicine and also serves as the director of the Discovery to Cure Early Ovarian Detection program. Dr. Ratner’s clinical research has focused on new targeted drugs for ovarian cancer and on reversing chemotherapy resistance in ovarian and uterine cancers. She received her B.S. in premedical studies from Columbia University and her M.D. from State University of New York Medical College. Dr. Ratner’s qualifications to serve on our board of directors include her vast expertise in obstetrics, gynecology and reproductive sciences, and specifically in ovarian cancer research and treatment. 44 William Wexler has served as a member of our board of directors since June 2022. Prior to joining our board of directors, Mr. Wexler worked on over 150 individual projects, serving in various capacities including as Chairman, Chief Executive Officer, Chief Restructuring Officer and other designated roles of senior responsibility. Mr. Wexler has served as the Managing Member of WEXLER Consulting LLC, a management consulting firm, since 2012. From 2012 to 2019, he served in various roles, including as Chairman of the Board, interim Chief Executive Officer, Chief Executive Officer and sole director and stockholder representative of Upstate New York Power Products, Inc., a holding company that owned and operated power plants throughout upstate New York. From 2012 to 2013, Mr. Wexler served as Chief Restructuring Officer of VMR Electronics, LLC, a manufacturer of cable assembly products for the electronics interconnect industry. Prior to that, he served as a Managing Director and national finance practice lead at BBK, Ltd., a turn-around advisory firm, from 2006 to 2011. Mr. Wexler served as group Managing Director of corporate restructuring at Huron Consulting Group, LLC from 2002 to 2005. Previously, he was a Managing Director at Berenson Minella & Co., a boutique investment-banking firm, from 2000 to 2002. Between 1986 and 2000 he served as a Senior Director at BNP Paribas, where he established and led Paribas Properties, Inc., a real estate investment arm of the bank, and also where he was a lead officer of the then newly created U.S. asset workout group. Mr. Wexler started his professional career in 1981 in commercial lease brokerage, asset management and investment sales at Jones Lang Wootton (now Jones Lang LaSalle) where he worked until 1986. He earned a B.A. in Political Science from Johns Hopkins University. Mr. Wexler’s qualifications to serve on our board of directors include his experience in investment and senior management roles, as well as his business training and education. Family Relationships There are no family relationships between any of our officers or directors. Involvement in Certain Legal Proceedings None of our directors or executive officers is involved in any legal proceeding that requires disclosure under Item 401(f) of Regulation S-K. Code of Ethics . Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. A copy of our Code of Business Conduct and Ethics is available under the “Governance” tab of the “Investor Relations” section of our website located at www.eternatx.com. We intend to disclose any changes in our Code of Business Conduct and Ethics or waivers from it that apply to our principal executive officer, principal financial officer, or principal accounting officer by posting such information on the same website or by filing with the SEC a Current Report on Form 8-K, in each case if such disclosure is required by SEC or Nasdaq rules. The information on our website is not intended to form a part of or be incorporated by reference into this Proxy Statement. Audit Committee We have a standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Our audit committee consists of William Wexler (Chair), James Bristol and Peter Cicala, all of whom meet the requirements for independence of audit committee members under applicable Nasdaq and SEC rules, including Rule 10A-3 promulgated under the Exchange Act. All of the members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. In addition, Mr. Wexler qualifies as our “audit committee financial expert,” as such term is defined in Item 407 of Regulation S-K. Changes in Stockholder Nomination Procedures There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors since such procedures were last described in our proxy statement filed with the SEC on October 7, 2024. Insider Trading Policy We have adopted an insider trading policy governing the purchase, sale, and other dispositions of our securities by directors, senior management, and employees. A copy of the Insider Trading Policy has been filed as exhibit 19 to this report. 45 ITEM 11. Executive Compensation Overview When determining executive officer compensation, and the various components that comprise it, our compensation committee evaluates and considers publicly available executive officer compensation survey data to present a competitive compensation package to attract and retain top talent, including an appropriate level of salary, performance-based bonus and equity incentives. Typically, our compensation committee evaluates competitive market benchmark data for a given executive role. Additionally, our compensation committee is authorized to engage outside advisors and experts to assist and advise our compensation committee on matters relating to executive compensation. In 2023, our compensation committee retained the services of Pearl Meyer, an independent compensation consultant, to review the cash and equity compensation package that was offered to Mr. Luther prior to his appointment as our President and Chief Executive Officer. Our President and Chief Executive Officer presents compensation recommendations to our compensation committee with respect to the executive officers other than himself. Our compensation committee considers such recommendations, in conjunction with possible input from our compensation committee’s independent compensation consultant, in making compensation decisions or recommendations to the full board of directors. The full board participates in evaluating the performance of our executive officers, except that our Chief Executive Officer does not participate when our board of directors evaluates his performance and is not present during voting or deliberations regarding his performance or compensation matters. Compensation-Related Risk Assessment Our compensation committee assesses and monitors whether any of our compensation policies and programs are reasonably likely to have a material adverse effect on our Company. Our compensation committee and management do not believe that the Company presently maintains compensation policies or practices that are reasonably likely to have a material adverse effect on the Company’s risk management or create incentives that could lead to excessive or inappropriate risk taking by employees. In reaching this conclusion, our compensation committee considered all components of our compensation program and assessed any associated risks. Our compensation committee also considered the various strategies and measures employed by the company that mitigate such risk, including: (i) the overall balance achieved through our use of a mix of cash and equity, annual and long-term incentives and time-and performance-based compensation; (ii) our use of multi-year vesting periods for equity grants; and (ii) the oversight exercised by our compensation committee over performance metrics, if any, established for performance-based bonuses and its administration of our equity incentive plans. Compensation Recoupment (Clawback) Policy In 2023, we adopted a clawback policy providing for the recovery of erroneously-awarded incentive-based compensation related to the three fiscal years preceding the date on which the company is required to prepare an accounting restatement. The clawback policy complies with the requirements of Nasdaq’s listing rules. Named Executive Officers Under applicable SEC rules and regulations, our “named executive officers” are all individuals who served as our principal executive officer during 2024, our two most highly compensated executive officers (other than our principal executive officer) who were serving as executive officers at December 31, 2024, and up to two additional individuals who would have been one of our top two most highly compensated executive officer had they been serving as an executive officer at the end of 2024. Our 2024 named executive officers are identified in the table below: Name Title Sanjeev Luther President and Chief Executive Officer Sandra Gurrola Senior Vice President of Finance 46 Summary Compensation Table The following table sets out the compensation for our Named Executive Officers for the years ended December 31, 2024 and December 31, 2023: 2024 Summary Compensation Table Name and Principal Position Fiscal Year Salary (US$) Bonus (US$) Stock-Based Awards (US$) (1) Option-Based Awards (US$) (1) Non-Equity Incentive Plan Compensation (US$) Nonqualified deferred compensation earnings (US$) All Other Compensation (US$) Total Compensation (US$) Sanjeev Luther, President and Chief Executive Officer 2024 $ 550,000 $ 75,000 (2) $ — $ 2,422,818 $ — $ — $ — ) $ 3,047,818 Sandra Gurrola, Sr. Vice President of Finance 2024 $ 275,000 $ — $ — $ 110,198 $ — $ — $ — $ 385,198 2023 $ 255,833 $ 50,050 (3) $ — $ — $ — $ — $ — $ 305,883 1. The amounts reported in this column represent the aggregate grant date fair value of stock options granted during the applicable year. These amounts were calculated in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, except that any estimate of forfeitures was disregarded. For a description of the assumptions used in computing the dollar amount recognized for financial statement reporting purposes, see Note 15, Stock-Based Compensation, in the Notes to the Consolidated Financial Statements contained in this Annual Report on Form 10-K. 2. Mr. Luther was appointed as our President and Chief Executive Officer effective January 1, 2024 and amount represents a cash signing bonus pursuant to his employment agreement. 3. Represents a discretionary spot bonus paid to Ms. Gurrola and approved by our board of directors. Narrative to Summary Compensation Table The following is a discussion of each component of our executive compensation program for 2024. Base Salary Each of our named executive officers receives a base salary. The base salary is the fixed cash compensation component of our executive compensation program and it recognizes individual performance, time in role, scope of responsibility, leadership skills and experience. The base salary compensates an executive for performing his or her job responsibilities on a day-to-day basis. Generally, base salaries are reviewed annually company-wide and adjusted (upward or downward) when appropriate based upon individual performance, expanded duties, changes in the competitive marketplace and, with respect to upward adjustments, if we are, financially and otherwise, able to pay it. We try to offer competitive base salaries to help attract and retain executive talent. Bonus and Incentive Compensation In addition to base salaries, our compensation committee has the authority to award discretionary annual bonuses to our named executive officers based on corporate and individual performance. Each year, our compensation committee or our board of directors may establish performance goals, which may be based on measures such as revenue, achievement of certain research and development milestones, completion of a strategic transaction, and other metrics the directors and management believe to provide proper incentives for achieving long-term shareholder value. Our board of directors retains full discretion over performance evaluation and the amount of any bonuses to be paid to a named executive officer. Annual bonuses, if any, are intended to reward the individual performance of each named executive officer. In addition to an assessment of corporate and individual performance, the determination of the amount of a named executive officer’s bonus may vary from year to year depending on our financial condition and conditions in the industry in which we operate. The amount of such bonuses increase with executive rank so that, as rank increases, a greater portion of total annual cash compensation is based on annual corporate and individual performance. For the year ended December 31, 2024, no performance goals were established for any named executive officer. As further described below in Named Executive Officer Employment Agreements and Change in Control Arrangements, in January 2024, we paid a signing bonus to Mr. Luther in the amount of $75,000 pursuant to his employment agreements. 47 Equity-Based Compensation Programs Historically we have issued stock options to our employees, including our named executive officers, to provide a means whereby our employees may develop a sense of proprietorship and personal involvement in our development and financial success, and to encourage them to devote their best efforts to us, thereby advancing our interests and the interests of stockholders. Our board of directors believes that the granting of equity awards promotes continuity of management and increases incentive and personal interest in our welfare by those who are primarily responsible for shaping and carrying out our long-range plans and pursuing our growth and financial success. We do not maintain any written policies on the timing of issuing equity-based incentive awards. Our compensation committee has responsibility for granting equity-based incentive awards to our named executive officers and considers whether there is any material nonpublic information (“MNPI”) about the Company when determining the timing and terms of stock option awards. The Compensation Committee generally does not time the grant of stock options in relation to our public disclosure of MNPI. We have not timed the release of MNPI for the purpose of affecting the value of executive compensation. Vesting of equity awards is generally tied to continuous service with us and serves as an additional retention measure. In January 2024, we granted a stock option award to Mr. Luther pursuant to his employment agreement. For more information regarding this award, see Named Executive Officer Employment Agreements and Change in Control Arrangements below. In April 2024, we granted to Ms. Gurrola a time-based non-qualified stock option covering 80,000 shares of common stock, of which one-third will vest on the one-year anniversary of the grant date and the remaining shares will vest in 24 substantially equal monthly installments thereafter, subject to her continuous service. During fiscal year 2024, no named executive officer received a grant of stock options during the period beginning four business days before, and ending one business day after, the filing of a periodic report on Form 10-Q or Form 10-K, or the filing or furnishing of a current report on Form 8-K that discloses material nonpublic information. Benefits and Perquisites Employee Benefit Plans Named executive officers are eligible to participate in our employee benefit plans, including our medical, disability and life insurance plans, in each case, on the same basis as all of our other employees. Our employee benefit plans are designed to assist in attracting and retaining skilled employees. We also maintain a 401(k) plan for the benefit of our eligible employees, including the named executive officers, as discussed below. 401(k) Plan We maintain a retirement savings plan, or 401(k) plan, that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Under the 401(k) Plan, eligible employees may defer up to 90% of their compensation subject to applicable annual contribution limits imposed by the Internal Revenue Code of 1986, as amended (the “Code”), and limits imposed by non-discrimination testing. Our employees’ pre-tax contributions are allocated to each participant’s individual account and participants are immediately and fully vested in their contributions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan. We match 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 match of 4%. Pension Benefits We do not maintain any pension benefit or retirement plans other than the 401(k) Plan. Nonqualified Deferred Compensation We do not maintain any nonqualified deferred compensation plans. 48 Named Executive Officer Employment Agreements and Change in Control Arrangements The following descriptions summarize the principal terms of our employment agreements with our named executive officers. Sanjeev Luther Sanjeev Luther was appointed as our President and Chief Executive Officer effective January 1, 2024. We entered into an employment agreement, dated as of December 19, 2023, with Mr. Luther, which provides for at-will employment until terminated by us or Mr. Luther. Mr. Luther’s employment agreement provides for an annual base salary of $550,000, which amount is subject to periodic review by our board of directors or our compensation committee. Mr. Luther also received a one-time signing bonus of $75,000. Mr. Luther is eligible to receive an annual cash bonus award in an amount up to 50% of his base salary upon achievement of agreed upon performance targets. The bonus will be determined by our board of directors or our compensation committee and paid annually by March 15 in the year following the performance year on which such bonus is based. In accordance with the terms of his employment agreement, Mr. Luther was granted an equity award on January 1, 2024, consisting of 1,685,218 non-qualified stock options, which will vest over a four-year period, with 25% of the options vesting on the first anniversary of the grant date, and the remaining options vesting monthly over the remaining three years. On April 26, 2024, the compensation committee approved a modification to Mr. Luther’s stock option award to reduce the vesting term to three years rather than four years, with 25% of the shares subject to the stock option award still vesting on the first anniversary of the grant date, and the balance of the shares vesting monthly over the remaining two years. Vesting generally requires Mr. Luther’s continued employment through the relevant vesting date. If Mr. Luther’s employment is terminated by us without Cause (as defined in his employment agreement) or by Mr. Luther for Good Reason (as defined in his employment agreement), we will pay Mr. Luther all amounts accrued but unpaid as of the effective date of such termination, as well as a lump sum payment equal to nine months of his salary, as well as up to nine months of continued benefits. Mr. Luther will also be paid a pro-rata performance bonus equal to (x) the performance bonus Mr. Luther would have received based on actual performance for such fiscal year if Mr. Luther had remained employed for the entire fiscal year multiplied by (y) a fraction, the numerator of which is the number of days Mr. Luther was employed during such fiscal year. Notwithstanding the foregoing, if a termination without Cause or for Good Reason occurs beginning upon the occurrence of a Change in Control (as defined in the employment agreement) and ending on the first anniversary of the occurrence of the Change in Control (“Change in Control Protection Period”), Mr. Luther will receive the benefits described in the preceding sentence, but the lump sum severance payment and the payment of benefits will be for a 12-month period and he will receive 100% of his target bonus. In addition, all outstanding and unvested equity awards granted to Mr. Luther during his employment will become immediately vested and exercisable upon such date of termination during the Change in Control Protection Period and will be exercisable for a period of 12 months following the date of termination during the Change in Control Protection Period. Any such severance benefits under the employment agreement are contingent on Mr. Luther entering into and not revoking a general release of claims in favor of our company. Sandra Gurrola We entered into an employment agreement, dated as of June 16, 2021, with Sandra Gurrola, which provides for our at-will employment of Ms. Gurrola commencing on June 21, 2021 and continuing until terminated by us or Ms. Gurrola. Ms. Gurrola’s employment agreement provides for an annual base salary of $220,000, which amount is subject to periodic review by our board of directors or our compensation committee. In December 2023, upon the recommendation of our compensation committee, our board of directors approved an increase to Ms. Gurrola’s annual base salary from $220,000 to $275,000. In addition, our board of directors approved a lump sum payment of $33,542 to Ms. Gurrola, representing the additional amount of salary Ms. Gurrola would have received had the increase to her annual base salary taken effect as of May 5, 2023. Ms. Gurrola is also eligible to receive an annual cash bonus award in an amount up to 35% of her base salary upon achievement of agreed upon performance targets. The bonus will be determined by our board of directors or our compensation committee and paid annually by March 15 in the year following the performance year on which such bonus is based. In accordance with her employment agreement, in June 2021, Ms. Gurrola was granted 1,750 restricted stock units, 25% of which vests on each anniversary of the grant date over four years. Vesting generally requires Ms. Gurrola’s continued employment through the relevant vesting date. If Ms. Gurrola’s employment is terminated by us without Cause (as defined in the employment agreement) or by Ms. Gurrola for Good Reason (as defined in the employment agreement), we will pay Ms. Gurrola all amounts accrued but unpaid as of the effective date of such termination, as well as continuation of her salary and benefits for the following six-month period. Notwithstanding the foregoing, if a termination of employment without Cause or for Good Reason occurs within 90 days before or 12 months after a Change in Control (as defined in the employment agreement), Ms. Gurrola will receive the benefits described in the preceding sentence, but the continuation of her salary and benefits will be for 12-month period, and, in addition, Ms. Gurrola will receive a lump-sum payment of her target bonus and the restricted stock units granted to her in June 2021 will fully vest. Any such severance benefits under the employment agreement are contingent on Ms. Gurrola entering into and not revoking a general release of claims in favor of our company. 49 Outstanding Equity Awards at 2024 Fiscal Year-End The following table summarizes the number of shares of our common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2024. Option Awards Stock Awards Name Grant Date Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested (#) Market value of shares of units of stock that have not vested ($) Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested shares ($) Sanjeev Luther, President and Chief Executive Officer 1/1/2024 (1) — 1,685,218 — 1.80 1/01/2034 — — — — Sandra Gurrola, Sr. Vice President of Finance 6/21/2021 (2) — — — — — 437 127 — — 3/11/2022 (3) 5,725 478 — 38.60 3/11/2032 — — — — 4/26/2024 (4) — 80,000 — 1.74 4/26/2034 — — — — 1. The stock option vests over three years, with 25% vesting on the one-year anniversary of the grant date, and the remaining stock options vesting in 24 substantially equal monthly installments thereafter. 2. The restricted stock units vest at a rate of 25% of the shares subject to the award in four substantially equal annual installments on the anniversary date of the grant date. 3. The stock option vests in 36 substantially equal monthly installments. 4. The stock option vests over three years, with one-third vesting on the one-year anniversary of the grant date, and the remaining stock options vesting in 24 substantially equal monthly installments thereafter. 50 Director Compensation We have a non-employee director compensation program to compensate our non-employee directors for their service in such capacity with annual retainers and equity compensation as described below. However, since August 2022, we have not compensated our non-employee directors in accordance with our non-employee director compensation program. During 2024, we did not compensate any of our directors, in either cash or equity, for their service in such capacity. On January 1, 2024, we granted to Dorothy Clarke a stock option to purchase 84,261 shares of our common stock as compensation for her services as a member of our board of directors from August 28, 2023 until December 31, 2023, for which she had previously not been compensated. In April 2024, we awarded each of Jim Bristol and Peter Cicala a stock option grant to purchase 124,525 and 88,943 shares of our common stock, respectively, which vest in full on the one-year anniversary of the grant date. In connection with her appointment as a member of our board of directors on January 7, 2025, we awarded Elena Ratner a stock option grant to purchase 140,078 shares of our common stock, which vests over three years, with one-third vesting on the one-year anniversary of the grant date and the remaining options vesting in 24 substantially equal monthly installments thereafter. Our compensation committee and Board are assessing our non-employee director compensation program, and if and when we restart compensating our non-employee directors for their service in such capacity, the elements of our non-employee director compensation program may be different from what is described below. Compensation Element Amount Annual Board Member Compensation Paid in cash or stock options at our board’s discretion. Cash paid in quarterly installments or upon the effective date of an earlier resignation of the non-employee director. Stock Options to vest quarterly over one year from grant date: Board Member: $40,000 Board Chair: $70,000 Committee Member Retainers Paid in cash or stock options at our board’s discretion. Cash paid in quarterly installments or upon the effective date of an earlier resignation of the non-employee director. Stock Options to vest quarterly over one year from grant date: Audit Committee: $7,500 Compensation Committee: $5,000 Nominating/Governance Committee: $4,000 Leadership Supplemental Retainer Paid in cash or stock options, ‘s discretion. Cash paid in quarterly installments or upon the effective date of an earlier resignation of the non- employee director. Stock Options to vest quarterly over one year from grant date: Audit Committee Chair: $15,000 Compensation Committee Chair: $10,000 Nominating/Governance Committee Chair: $8,000 New Director Equity Award (outside directors) Option for 8,290 shares of Common Stock, which option shall have an exercise price equal to the fair market value per share of common stock, as determined under the 2020 Plan, and, subject to continued service on our board of directors, vest in an initial installment of one-third of the shares on the first anniversary of the grant date, with the remaining shares to vest in 24 substantially equal installments thereafter. Our board of directors and our compensation committee designed our non-employee director compensation program to reward directors for their contributions to our success, align the director compensation program with stockholder interests, and provide competitive compensation necessary to attract and retain high quality non-employee directors. We do not pay fees to any of our directors for meeting attendance. 51 2024 Director Compensation The following table sets forth the compensation of each director, who is not a named executive officer, for service during 2024. This table excludes Mr. Luther, who is a named executive officers and does not receive any compensation from us for his service as a director. See the section above entitled “Executive Officer Compensation” for information about Mr. Luther’s compensation. (1) The amounts reported in this column represent the aggregate grant date fair value of stock options granted during 2024. These amounts were calculated in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, except that any estimate of forfeitures was disregarded. For a description of the assumptions used in computing the dollar amount recognized for financial statement reporting purposes, see Note 15, Stockholders’ Equity, in the Notes to the Consolidated Financial Statements contained in this Annual Report on Form 10-K. (2) Amount excludes compensation Ms. Clarke received as an employee. ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth information known to us regarding beneficial ownership of common stock as of March 10, 2025 (the “Measurement Date”) by: ● each person known by us to be the beneficial owner of more than 5% of outstanding common stock; ● each of our named executive officers and directors; and ● all of our executive officers and directors as a group. Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days after the Measurement Date. In computing the number of shares beneficially owned by a person or entity and the percentage ownership of that person or entity in the table below, all shares subject to options, warrants and restricted stock units held by such person or entity were deemed outstanding if such securities are currently exercisable, or exercisable or would vest based on service-based vesting conditions within 60 days of the Measurement Date, assuming that the liquidity event vesting conditions had been satisfied as of such date. These shares were not deemed outstanding, however, for the purpose of computing the percentage ownership of any other person or entity. The beneficial ownership of our common stock is based on 52,244,929 shares of our common stock outstanding as of the Measurement Date. Unless otherwise indicated, we believe that each person named in the table below has sole voting and investment power with respect to all shares of common stock beneficially owned by him. 52 Unless otherwise noted, the business address of each of these stockholders is c/o Eterna Therapeutics, Inc., 1035 Cambridge Street, Suite 18A, Cambridge, MA 02141. Name and Address of Beneficial Owner Common Shares Beneficially Owned Percentage of Common Shares Beneficially Owned Greater than 5% Stockholders: Charles Cherington (1) 16,647,302 31.86 % John Halpern (2)^ 5,228,571 9.99 % Freebird Partners LP (3)^ 5,228,571 9.99 % George Denny Estate (4) 4,954,285 9.48 % IAF, LLC (5) 2,679,214 5.13 % Regolith Capital Investments LP (6) 2,641,814 5.06 % Named Executive Officers and Directors: Sanjeev Luther (7) 631,956 1.20 % Sandra Gurrola (8) 33,577 * James Bristol (7) 124,525 * Peter Cicala (7) 88,943 * Elena Ratner — — William Wexler (7) 15,895 * All current directors and executive officers as a group (6 persons) (9) 894,896 1.68 % Less than 1% The securities beneficially owned by this stockholder include prefunded warrants that include a 9.99% blocker. The number of common shares beneficially owned, the percentage of common shares beneficially owned and the percentage of total voting power shown in the table gives effect to such blocker. Pursuant to the terms of the prefunded warrants, the number of shares of common stock that may be acquired by the holder thereof upon exercise of the prefunded warrants is limited, to the extent necessary, to ensure that following such exercise, the number of shares of common stock then beneficially owned by the holder and any other persons or entities whose beneficial ownership of common stock would be attributed to the holder for purposes of Section 13(d) of the Exchange Act does not exceed 9.99% of the total number of shares of our common stock then outstanding. Upon delivery of a written notice to us, the holder may from time-to-time increase (with such increase not effective until the 61st day after delivery of such notice) or decrease the blocker to any other percentage not in excess of 9.99%. (1) The number of common shares beneficially owned consists of (i) 16,633,205 shares of common stock and (ii) 14,097 shares of common stock issuable upon the conversion of shares of Series A convertible preferred stock (assuming a conversion rate of 5.0583 per share). Mr. Cherington’s address is c/o Ara Partners, LLC, 200 Berkeley Street, 26 th Floor, Boston, MA, 02116. (2) The number of common shares beneficially owned consists of (i) 5,136,571 shares of common stock held by the John D. Halpern Revocable Trust, of which, Mr. Halpern and Katherine H. Halpern are trustees and (ii) 92,000 shares of common stock issuable upon exercise of prefunded warrants. Mr. Halpern and Ms. Halpern share voting and dispositive powers. Mr. Halpern’s address is PO Box 540 Portsmouth, New Hampshire 03802. (3) The number of common shares beneficially owned consists of (i) 5,136,686 shares of common stock and (ii) 91,885 shares of common stock issuable upon exercise of prefunded warrants. Freebird Investments LLC serves as the general partner of Freebird Partners LP. Curtis Huff is the sole member and 100% owner of Freebird Investments LLC, the President of Freebird Partners LP and the Managing Member of Freebird Investments LLC. By virtue of these relationships, each of Freebird Investments LLC and Mr. Huff may be deemed to share beneficial ownership of the securities held of record by Freebird Partners LP. The principal business address of Freebird Partners LP is 2800 Post Oak Blvd, Suite 2000, Houston, Texas 77056. (4) Denny Family Partners II, LLC owns 270,583 shares of common stock and the George Denny III 2021 Trust (the “Denny Trust”) owns 4,720,058 shares of common stock. Amos Denny is the managing partner of Denny Family Partners II, LLC and in such capacity has the sole voting and dispositive power over the shares owned by such entity. Amos Denny disclaims beneficial ownership of the shares held by Denny Family Partners II, LLC except to the extent of his pecuniary interest therein. The Denny Trust has four trustees who share voting and dispositive power over the shares owned by the Denny Trust. Each of the trustees disclaims beneficial ownership of the shares held by the Denny Trust except to the extent of their respective pecuniary interest therein, if any. The address for each of Denny Family Partners II, LLC and Denny Trust is PO Box 423, Poland, ME 04274. The number of common shares beneficially owned consists of (i) 4,940,188 shares of common stock and (ii) 14,097 shares of common stock issuable upon the conversion of shares of Series A convertible preferred stock (assuming a conversion rate of 5.0583 per share). (5) Represents outstanding shares of common stock. David Laughlin is the manager of IAF, LLC and has sole voting and dispositive power over the shares held by such entity. Mr. Laughlin disclaims beneficial ownership of the shares held by IAF, LLC except to the extent of his pecuniary interest therein. IAF LLC’s address is 115 Church Street, Charleston, SC 29401. 53 (6) Includes (i) 2,478,881 shares of common stock held by Regolith Capital Investments LP (“Regolith”) and (ii) 162,933 shares of common stock held by Shameek Konar. Mr. Konar and his spouse are the General Partner of Regolith. By virtue of these relationships, each of Mr. Konar and his spouse may be deemed to share beneficial ownership of the shares held by Regolith. Regolith’s address is 10608 Stoppard View Way, Knoxville, TN, 37922. (7) Represents shares of common stock issuable upon exercise of options. (8) Includes 32,391 shares of common stock issuable upon exercise of options. (9) Includes 893,711 shares of common stock issuable upon exercise of options. Securities Authorized for Issuance under Equity Compensation Plans The following table contains information as of December 31, 2024 with respect to compensation plans under which our equity securities are authorized for issuance. Equity Compensation Plan Information Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted- average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by securityholders (1) 854,682 $ 3.06 380,108 Equity compensation plans not approved by securityholders (2) 1,774,826 $ 9.69 71,363 Total 2,629,508 $ 7.53 451,471 (1) At our 2021 annual meeting of stockholders, our stockholders approved a restatement of the Eterna Therapeutics Inc. Restated 2020 Stock Incentive Plan (the “Restated 2020 Plan”). The Restated 2020 Plan is a broad-based incentive plan, which allows for the grant of stock options, restricted stock, restricted stock units, performance awards, unrestricted stock awards and similar kinds of equity-based compensation to employees, directors, consultants and prospective employees. (2) In May 2021, our board of directors adopted our 2021 Inducement Stock Incentive Plan (the “2021 Inducement Plan”). The 2021 Inducement Plan was adopted without stockholder approval pursuant to Section 711 of the Company Guide of the NYSE American LLC, the stock exchange on which our common stock was listed at the time the 2021 Inducement Plan was adopted by our board of directors. The 2021 Inducement Plan provides for the grant of equity-based awards, including non-qualified stock options, performance shares, performance units, restricted stock, restricted stock units, and stock appreciation rights. The awards available for grant under the 2021 Inducement Plan are available only to new employees and incentive stock options may not be issued under the 2021 Inducement Plan. ITEM 13. Certain Relationships and Related Transactions, and Director Independence Except as described in Note 11 (Related Party Transactions) to the consolidated financial statements of this Annual Report on Form 10-K , which is incorporated by reference into this Item 13, since January 1, 2023, there has not been nor are there currently proposed any transactions or series of similar transactions to which we were or are to be a party in which the amount involved exceeds the lesser of $120,000 or one percent (1%) of the average of our total assets at year-end for the last two completed fiscal years and in which any director, executive officer, holder of more than 5% of the common stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. Related Party Transaction Policy Our audit committee is responsible for the review, approval, or ratification of any potential conflict of interest transaction involving any of our directors or executive officers, director nominees, any person known by us to be the beneficial owner of more than 5% of our outstanding capital stock, or any family member of or related party to such persons, including any transaction required to be reported under Item 404(a) of Regulation S-K promulgated by the SEC. 54 In reviewing any such proposed transaction, our audit committee is tasked with considering all relevant facts and circumstances, including the commercial reasonableness of the terms, the benefit or perceived benefit, or lack thereof, to us, opportunity costs of alternate transactions, the materiality and character of the related person’s direct or indirect interest and the actual or apparent conflict of interest of the related person. Under our policy, employees are required to report any material transaction or relationship that could result in a conflict of interest to our compliance officer. All transactions disclosed in Note 11 (Related Party Transactions) to the consolidated financial statements of this Annual Report on Form 10-K were approved by our audit committee in accordance with our related party transaction policy. Director Independence Our board of directors undertook a review of the independence of each director. Based on information provided by each director concerning his or her background, employment, and affiliations, our board of directors determined that our board of directors meets independence standards under the applicable rules and regulations of the SEC and the listing standards of Nasdaq. Our board of directors has affirmatively determined that all of our current directors are “independent” as defined in the listing standards of Nasdaq, other than Mr. Luther, who is also an employee. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our Company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. ITEM 14. Principal Accounting Fees and Services Fees and Services of Independent Registered Public Accounting Firm The table below summarizes the fees billed to us by Grant Thornton for each of the last two fiscal years. Year Audit Fees Audit- Related Fees Tax Fees All Other Fees Total 2023 $ 516,224 $ — $ — $ — $ 516,750 2024 $ 399,130 $ — $ — $ — $ 399,130 Audit Fees . Audit fees consist of fees for professional services rendered for the audit of our consolidated financial statements (including tax services performed to fulfill the auditor’s responsibility under generally accepted auditing standards), reviews of the interim financial statements included in Forms 10-Q and for services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements. Audit-Related Fees . Audit-related fees consist of fees for assurance and related services (e.g., due diligence) that are reasonably related to the performance of the audit or review of our financial statements and are not reported under audit fees. The nature of those services is comprised of services for employee benefit plan audits, due diligence related to mergers and acquisitions, accounting consultations and audits in connection with proposed or consummated acquisitions, internal control reviews, attest services related to financial reporting that are not required by statute or regulation, and consultation concerning financial accounting and reporting standards. Tax Fees . Tax fees consist of fees for professional services rendered for tax compliance, tax consulting and tax planning. All Other Fees . All other fees are fees for products and services other than services in respect of which the fees are reported as audit, audit-related or tax fees. Policy for Approval of Audit and Permitted Non-Audit Services All audit and permissible non-audit services provided by the independent auditors are pre-approved by the Audit Committee (or the Chair of the Audit Committee, pursuant to a delegation of authority). These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. 55 PART IV ITEM 15. Exhibits, Financial Statement Schedules (a) The following documents are filed as a part of this Annual Report on Form 10-K: (1) Consolidated Financial Statements. The consolidated financial statements of the Company and its consolidated subsidiaries are set forth in the “Index to Consolidated Financial Statements” on page F-1. (2) Financial Statement Schedules. None (3) Exhibits. The following exhibits are submitted with this Annual Report on Form 10-K or, where indicated, incorporated by reference to other filings. Exhibit Description Incorporated By Reference Articles of Incorporation and Bylaws 3.1 Composite Restated Certificate of Incorporation of the Company Exhibit 3.1 to Form 10-K filed on March 14, 2024 3.2 Second Amended and Restated Bylaws of the Company Exhibit 3.2 to Form 8-K filed on October 11, 2022 3.3 Certificate of Validation of Eterna Therapeutics Inc., as filed with the Secretary of State of the State of Delaware on September 3, 2021 Exhibit 3.1 to Form 8-K filed on September 13, 2021 Instruments Defining Rights of Security Holders 4.1 Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 Exhibit 4.1 to Form 10-K filed on April 15, 2022 Material Contracts 10.1 Form of Common Stock Warrant (March 2022) Exhibit 10.3 to Form 8-K filed on March 9, 2022 10.2 Form of Warrant (December 2022) Exhibit 10.1 to Form 8-K filed on December 5, 2022 10.3(a) Registration Rights Agreement, dated as of April 5, 2023, by and between Eterna Therapeutics Inc. and Lincoln Park Capital Fund, LLC Exhibit 10.2 to Form 8-K filed on April 11, 2023 10.3(b) Purchase Agreement, dated as of April 5, 2023, by and between Eterna Therapeutics Inc. and Lincoln Park Capital Fund, LLC Exhibit 10.1 to Form 8-K filed on April 11, 2023 10.4(a)# Securities Purchase Agreement, dated as of December 14, 2023, by and among Eterna Therapeutics Inc. and the purchasers party thereto. Exhibit 10.1 to Form 8-K filed on December 20, 2023 10.4(b) Registration Rights Agreement, dated as of December 14, 2023, by and among Eterna Therapeutics Inc. and the parties thereto. Exhibit 10.2 to Form 8-K filed on December 20, 2023 10.4(c) Form of 12.0% Senior Convertible Note (December 2023 and January 2024) Exhibit 4.1 to Form 8-K filed on December 20, 2023 10.4(d) Form of Warrant (December 2023 and January 2024) Exhibit 4.2 to Form 8-K filed on December 20, 2023 10.5(a) Securities purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc. and the purchaser parties thereto Exhibit 10.1 to Form 8k filed on September 25, 2024 56 10.5(b) Form of pre-funded warrant issuable under the securities purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc. and the purchaser parties thereto Exhibit 10.2 to Form 8k filed on October 29, 2024 10.5(c) Form of exchange agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc. and the parties thereto Exhibit 10.3 to Form 8k filed on September 25, 2024 10.5(d) Note purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc. and the purchaser parties thereto Exhibit 10.4 to Form 8k filed on September 25, 2024 10.5(e) Form of 12.0% senior convertible note issued under the note purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc. and the purchaser parties thereto Exhibit 10.5 to Form 8k filed on September 24, 2024 10.5(f) Form of pre-funded warrant issuable upon conversion of 12.0% senior convertible notes issued under the note purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc. and the purchaser parties thereto Exhibit 10.3 to Form 8k filed on October 29, 2024 10.5(g) Form of support agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc. and the stockholder parties thereto Exhibit 10.7 to Form 8k filed on September 24, 2024 10.5(h) Form of lock-up agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc. and the stockholder parties thereto Exhibit 10.8 to Form 8k filed on September 24, 2024 10.5(i) Registration Rights Agreement, dated October 29, 2024, between Eterna Therapeutics Inc. and the purchaser parties thereto Exhibit 10.1 to Form 8-K filed on November 25, 2022 10.6 Exclusive License and Collaboration Agreement, effective as of September 9, 2024, with Factor Bioscience Limited Exhibit 10.10 to Form 10-Q filed on August 13, 2024 10.7(a) Sublease Agreement, dated October 18, 2022, by and between E.R. Squibb & Sons, LLC and Eterna Therapeutics Inc. Exhibit 10.16 to Form 10-K filed on March 20, 2023 10.7(b) Sublease Termination Agreement, dated August 9, 2024, between Eterna Therapeutics Inc. and E.R. Squibb & Sons, L.L.C. Exhibit 10.11 to Form 10-Q filed on August 13, 2024 10.8* Employment Agreement, dated as of December 19, 2023, by and among Eterna Therapeutics Inc. and Sanjeev Luther. Exhibit 10.3 to Form 8-K filed on December 20, 2023 10.9(a)* Eterna Therapeutics Inc. 2021 Inducement Stock Incentive Plan (the “2021 Inducement Plan”) Exhibit 10.3 to Form 8-K filed on May 26, 2021 10.9(b)* Form of Stock Option Inducement Award for issuances under the 2021 Inducement Plan Exhibit 10.13(b) to Form 10-K filed on March 14, 2024 10.9(c)* Form of Restricted Stock Unit Inducement Award for issuances under the 2021 Inducement Plan Exhibit 10.13(c) to Form 10-K filed on March 14, 2024 10.10(a)* Eterna Therapeutics Inc. Restated 2020 Stock Incentive Plan (the “Restated 2020 Plan”) Exhibit 99.1 to Form 8-K filed on September 13, 2021 10.10(b)* Form of Stock Option Inducement Award for issuances under the Restated 2020 Plan Exhibit 10.14(b) to Form 10-K filed on March 14, 2024 10.1011(c)* Form of Restricted Stock Unit Inducement Award for issuances under the Restated 2020 Plan Exhibit 10.14(c) to Form 10-K filed on March 14, 2024 57 10.10(d)* Form of Restricted Award Agreement for issuances under the Restated 2020 Plan Exhibit 10.1 to Form 10-Q filed on August 13, 2024 10.11* Inducement Stock Option Award Agreement entered into with Sanjeev Luther Exhibit 99.1 to Form S-8 filed on January 16, 2024 10.12* Employment Agreement, effective January 1, 2023, by and among Eterna Therapeutics Inc. and Dorothy Clarke. Exhibit 10.16 to Form 10-K filed on March 14, 2024 10.13* Employment Agreement, dated June 16, 2021, by and among Eterna Therapeutics Inc. and Sandra Gurrola. Exhibit 10.1 to Form 8-K filed on June 21, 2021 10.14 Form of indemnification agreement for directors and officers Exhibit 10.1 to Form 8-K filed on April 16, 2021 19 Insider Trading Policy Filed herewith 23.1 Consent of the Independent Registered Accounting Firm, Grant Thornton LLP Filed herewith 31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 32.1 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Furnished herewith 32.2 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Furnished herewith 97 Eterna Therapeutics Inc. Clawback Policy Exhibit 97 to Form 10-K filed on March 14, 2024 101 Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) Filed herewith 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * Indicates management contract or compensatory plan. ** Pursuant to Item 601(a)(5) of Regulation S-K, schedules and similar attachments to this exhibit have been omitted because they do not contain information material to an investment or voting decision and such information is not otherwise disclosed in such exhibit. The Company will supplementally provide a copy of any omitted schedule or similar attachment to the U.S. Securities and Exchange Commission or its staff upon request. # Pursuant to Regulation S-K Item 601(b)(2), certain exhibits and schedules to this exhibit have been omitted. The Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request. ^ Pursuant to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit were omitted by means of marking such portions with an asterisk because such information is both not material and is the type that the Company treats as private or confidential. ITEM 16. Form 10-K Summary None. 58 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized . ETERNA THERAPEUTICS Inc. Date: March 12, 2025 By: /s/ Sanjeev Luther Sanjeev Luther President, Chief Executive Officer, and Director ( Principal Executive Officer ) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Name Title Date /s/ Sanjeev Luther President, Chief Executive Officer, and Director (Principal Executive Officer) March 12, 2025 Sanjeev Luther /s/ Sandra Gurrola Senior Vice President of Finance (Principal Financial Officer and Principal Accounting Officer) March 12, 2025 Sandra Gurrola /s/ James Bristol Chairman of the Board March 12, 2025 James Bristol /s/ Peter Cicala Director March 12, 2025 Peter Cicala /s/ Elena Ratner Director March 12, 2025 Elena Ratner /s/ William Wexler Director March 12, 2025 William Wexler 59 ETERNA THERAPEUTICS INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 248 ) F-2 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 2024 and 2023 F-3 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 F-4 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024 and 2023 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 F-6 Notes to the Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Eterna Therapeutics Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Eterna Therapeutics Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Going concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company incurred a net loss of approximately $44.5 million during the year ended December 31, 2024, and had an accumulated deficit of approximately $231.5 million as of December 31, 2024. These conditions, along with other matters as set forth in Note 2, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2022. Iselin, New Jersey March 12, 2025 F- 2 ETERNA THERAPEUTICS INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value amounts) December 31, 2024 December 31, 2023 ASSETS Current assets: Cash $ 1,729 $ 7,575 Other receivables 437 425 Prepaid expenses and other current assets 186 1,599 Total current assets 2,352 9,599 Restricted cash - 4,095 Property and equipment, net 85 493 Right-of-use assets - operating leases 670 32,781 Goodwill 2,044 2,044 Other assets 118 120 Total assets $ 5,269 $ 49,132 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,721 $ 1,067 Accrued expenses 1,007 1,893 Income taxes payable 3 2 Operating lease liabilities, current 207 2,216 Due to related party, current - 1,205 Deferred revenue, current - 190 Total current liabilities 2,938 6,573 Convertible notes, net - 6,773 Warrant liabilities 1 116 Operating lease liabilities, non-current 477 32,854 Deferred revenue, non-current - 392 Contingent consideration liability 41 107 Other liabilities 111 84 Total liabilities 3,568 46,899 Stockholders’ equity: Preferred stock, $ 0.005 par value, 1,000 shares authorized, 156 designated and outstanding of Series A convertible preferred stock at December 31, 2024 and 2023, $ 156 liquidation preference 1 1 Common stock, $ 0.005 par value, 100,000 shares authorized at December 31, 2024 and 2023; 51,386 and 5,410 issued and outstanding at December 31, 2024 and 2023, respectively 257 27 Additional paid-in capital 232,979 189,186 Accumulated deficit ( 231,536 ) ( 186,981 ) Total stockholders’ equity 1,701 2,233 Total liabilities and stockholders’ equity $ 5,269 $ 49,132 The accompanying notes are an integral part of these consolidated financial statements. F- 3 ETERNA THERAPEUTICS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) 2024 2023 Year ended December 31, 2024 2023 Revenue $ 582 $ 68 Cost of revenues 96 236 Gross profit (loss) 486 ( 168 ) Operating expenses: Research and development 4,604 5,920 General and administrative 13,132 14,587 Gain on lease termination ( 1,576 ) - Acquisition of Exacis in-process research and development - 460 Total operating expenses 16,160 20,967 Loss from operations ( 15,674 ) ( 21,135 ) Other (expense) income, net: Loss on extinguishment of debt ( 22,440 ) - Change in fair value of convertible notes 1,017 - Change in fair value of bridge notes derivative liability ( 1,459 ) - Change in fair value of warrant liabilities 414 215 Change in fair value of contingent consideration 66 118 Loss on non-controlling investment - ( 59 ) Interest income 249 138 Interest expense ( 6,752 ) ( 614 ) Other income (expense), net 70 ( 334 ) Total other expense, net ( 28,835 ) ( 536 ) Loss before income taxes ( 44,509 ) ( 21,671 ) (Provision) benefit for income taxes ( 30 ) 3 Net loss ( 44,539 ) ( 21,668 ) Series A preferred stock dividend ( 16 ) ( 16 ) Net loss attributable to common stockholders $ ( 44,555 ) $ ( 21,684 ) Net loss per common share - basic and diluted $ ( 3.26 ) $ ( 4.08 ) Weighted average shares outstanding - basic and diluted 13,647 5,314 The accompanying notes are an integral part of these consolidated financial statements. F- 4 ETERNA THERAPEUTICS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the years December 31, 2024 and 2023 (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 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 - - - - 9,014 - 9,014 Repricing of warrants in connection with convertible notes financing - - - - 766 - 766 Cash dividends to Series A preferred stockholders - - - - - ( 16 ) ( 16 ) Stock-based compensation - - - - 1,242 - 1,242 Net loss - - - - - ( 21,668 ) ( 21,668 ) Balances at December 31, 2023 156 $ 1 5,410 $ 27 $ 189,186 $ ( 186,981 ) $ 2,233 Balance 156 $ 1 5,410 $ 27 $ 189,186 $ ( 186,981 ) $ 2,233 Issuance of note warrants - - - - 720 - 720 Fair value of forward sale contract pursuant to common stock offering - - - - 576 - 576 Reclassification of warrants to liability - - - - ( 11,244 ) - ( 11,244 ) Issuance of common stock in exchange of convertible notes - - 28,351 142 31,045 - 31,187 Issuance of common stock in exchange of warrants - - 9,951 50 10,895 - 10,945 Issuance of common stock and prefunded warrants upon the conversion of bridge notes - - 6,244 31 9,247 - 9,278 Issuance of common stock and prefunded warrants upon the conversion of Bridge Notes - - 6,244 31 9,247 - 9,278 Issuance of common stock and prefunded warrants in connection with private placement, net - - 1,402 7 995 - 1,002 Issuance of common stock and prefunded warrants in connection with private placement, net - - 1,402 7 995 - 1,002 Issuance of common stock to consultant for services - - 17 - 23 - 23 Stock-based compensation - - - - 1,520 - 1,520 Issuance of common stock to Series A preferred stockholders in lieu of cash dividends - - 11 - 16 ( 16 ) - Issuance of common stock to Series A preferred stockholders in lieu of cash dividends - - 11 - 16 ( 16 ) - Net loss - - - - - ( 44,539 ) ( 44,539 ) Balances at December 31, 2024 156 $ 1 51,386 $ 257 $ 232,979 $ ( 231,536 ) $ 1,701 Balance 156 $ 1 51,386 $ 257 $ 232,979 $ ( 231,536 ) $ 1,701 The accompanying notes are an integral part of these consolidated financial statements. F- 5 ETERNA THERAPEUTICS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) 2024 2023 For years ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 44,539 ) $ ( 21,668 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 139 84 Stock-based compensation 1,520 1,242 Amortization of right-of-use asset 1,499 1,039 Gain on lease termination ( 1,576 ) - Accrued interest expense 174 176 Paid-in-kind interest expense 1,261 113 Amortization of debt discount and debt issuance costs 5,259 303 Loss on extinguishment of debt 22,440 - Change in fair value of convertible notes ( 1,017 ) - Change in fair value of bridge notes derivative liability 1,459 - Change in fair value of warrant liabilities ( 414 ) ( 215 ) 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 Loss on disposal of fixed assets - 1 Loss on non-controlling investment - 59 Changes in operating assets and liabilities: Other receivables ( 12 ) 527 Prepaid expenses and other current assets 1,319 ( 556 ) Other non-current assets 2 1,014 Accounts payable and accrued expenses 183 ( 2,898 ) Operating lease liability ( 1,707 ) 1,338 Due to related party ( 1,205 ) ( 1,750 ) Deferred revenue ( 582 ) 582 Other liabilities 27 ( 374 ) Net cash used in operating activities ( 15,836 ) ( 20,408 ) Cash flows from investing activities: Purchase of property and equipment ( 369 ) ( 19 ) Proceeds received from the sale of fixed assets 4 - Net cash used in investing activities ( 365 ) ( 19 ) Cash flows from financing activities: Proceeds received from bridge notes financing 3,887 - Proceeds received from common stock and prefunded warrants offering 1,137 - Fees paid related to the common stock and prefunded warrant offering ( 135 ) - Proceeds received from convertible notes financings 1,405 16,503 Fees paid related to convertible notes financings ( 34 ) ( 251 ) Proceeds received under promissory note - 1,500 Payment made on promissory note - ( 1,500 ) Proceeds from sale of common stock pursuant to stock purchase agreement with Lincoln Park Capital Fund, LLC - 320 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 - ( 16 ) Net cash provided by financing activities 6,260 16,556 Net decrease in cash and cash equivalents ( 9,941 ) ( 3,871 ) Cash, cash equivalents and restricted cash at beginning of period 11,670 15,541 Cash, cash equivalents and restricted cash at end of period $ 1,729 $ 11,670 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 48 $ 20 Income taxes $ 2 $ 4 Supplemental disclosure of non-cash investing and financing activities: Exchange of warrants for common stock $ 10,945 $ - Exchange of convertible notes for common stock $ 31,187 $ - Conversion of bridge notes for common stock $ 9,278 $ - Reclassification of warrants to liabilities $ 11,244 $ - Note warrants issued $ 755 $ 9,219 Unpaid fees incurred in connection with the convertible note financings $ 32 $ 116 Paid in-kind interest added to convertible notes principal $ 1,447 $ 113 Repricing of warrants in connection with the December 2023 financing $ - $ 766 Adjustment to lease liability and ROU asset due to remeasurement $ 4,245 $ ( 1,620 ) Stock issued to Series A preferred stockholders in lieu of cash dividend $ 16 $ - Initial measurement of ROU assets $ - $ 34,410 Initial measurement of lease liability $ - $ 34,170 Accrual for purchase of property and equipment $ - $ 323 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 $ 1,729 $ 7,575 Restricted cash - 4,095 Total cash, cash equivalents and restricted cash at end of period $ 1,729 $ 11,670 The accompanying notes are an integral part of these consolidated financial statements. F- 6 ETERNA THERAPEUTICS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended December 31, 2024 and 2023 1) Organization and Description of Business Operations Eterna Therapeutics Inc. (the “Company”) is a preclinical-stage synthetic allogeneic iMSC 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 and autoimmune diseases. 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. 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 provide general and administrative support for operations. As of December 31, 2024, the Company had a cash balance of approximately $ 1.7 million and an accumulated deficit of approximately $ 231.5 million. For the year ended December 31, 2024, the Company incurred a net loss of $ 44.5 million, which includes a $ 22.4 million non-cash charge for loss on extinguishment of debt, and the Company used cash of $ 15.8 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. In April 2023, the Company entered into a standby equity purchase agreement (the “SEPA”) 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 SEPA for gross proceeds of $ 0.3 million. No shares were sold under the SEPA during the year ended December 31, 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 $ 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 bridge 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 and prefunded warrants. See Note 6 for additional information regarding these financings. On March 11, 2025, the Company received $ 1.5 million in exchange for the issuance of a promissory note with an aggregate principal amount of $ 1.5 million to an investor. See Note 19 for more information on this subsequent event. In connection with preparing the accompanying consolidated financial statements as of and for the year ended December 31, 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 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, or at all. The accompanying 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 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. F- 7 3) Basis of Accounting Presentation and Summary of Significant Accounting Policies Basis of Accounting Presentation The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). All significant intercompany balances and transactions have been eliminated in consolidation. Summary of Significant Accounting Policies Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect: (a) the reported amounts of assets and liabilities; (b) disclosure of contingent assets and liabilities at the date of the consolidated financial statements; (c) the reported amounts of expenses during the reporting period; and (d) the reported amount of the fair value of assets acquired in connection with business combinations. On an ongoing basis, the Company evaluates its estimates, including those related to the recoverability and useful lives of long-lived assets; stock-based compensation assumptions; valuation assumptions of warrants and liabilities associated with the September 2024 Transactions; contingencies; contingent consideration and the provision for income taxes, including the valuation allowance. The Company bases its estimates on a combination of historical experience and various other assumptions that it believes are reasonable under the circumstances. Actual results may differ materially from these estimates. Cash, Cash Equivalents and Restricted Cash The Company classifies highly liquid investments with a remaining contractual maturity at date of purchase of three months or less as cash equivalents. The Company had no cash equivalents as of December 31, 2024 or 2023. Restricted cash as of December 31, 2023 consisted of a cash collateralization of $ 4.1 million for a security deposit in the form of a letter of credit issued by the Company’s commercial bank and delivered to the sublessor of office and laboratory space the Company subleases in Somerville, Massachusetts. Property and Equipment Property and equipment are recorded at cost and are depreciated over their estimated useful lives using the straight-line method. Laboratory and manufacturing equipment are depreciated over an estimated useful life of seven years . Leasehold improvements are depreciated over the shorter of their estimated useful life, or the lease term. Furniture and fixtures are depreciated over an estimated useful life of five years . Computer equipment are depreciated over an estimated useful life of three years . Upon retirement or other disposition of these assets, the cost and related accumulated depreciation of these assets are removed from the accounts and the resulting gain or losses are reflected in the results of operations. Expenditures for maintenance and repairs are charged to operations. Renewals and betterments are capitalized. Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment annually or more frequently if events occur or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. Management evaluates the Company as a single reporting unit, therefore, goodwill is tested for impairment at the entity level. Goodwill is tested for impairment as of December 31 st of each year, or more frequently as warranted by events or changes in circumstances mentioned above. Accounting guidance also permits an optional qualitative assessment for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit exceeds its fair value. If, after this qualitative assessment, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then no further quantitative testing will be necessary. A quantitative assessment is performed if the qualitative assessment results in a more likely than not determination or if a qualitative assessment is not performed. The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value. F- 8 Revenue Recognition 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. In general, the Company applies the following steps when recognizing revenue from contracts with customers: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when a performance obligation is satisfied. Recognition of revenue is driven by satisfaction of the performance obligations using one of two methods: revenue is either recognized over time or at a point in time. Contracts containing multiple performance obligations classify those performance obligations into separate units of account either as standalone or combined units of account. Allocation of revenue to individual elements that qualify for separate accounting is based on the separate selling prices determined for each component, and total contract consideration is then allocated across the components of the arrangement. If separate selling prices are not available, the Company will use its best estimate of such selling prices, consistent with the overall pricing strategy and after consideration of relevant market factors. The Company estimates the amount of consideration it expects to recognize as revenue that is not probable of having a significant reversal of such recognized revenue, and it places a constraint on the remaining contractual consideration. As it becomes evident that the constrained amounts are no longer at risk of a significant reversal of revenue, the Company will remove the constraint from the related revenue and recognize a cumulative catch-up adjustment to revenue in the period in which the constraint was removed. The Company had one revenue generating contract relating to an option and license agreement as well as certain development activities. See Note 5. Contract Assets : A contract asset is an entity’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. Generally, an entity will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment. Contract assets consist primarily of the cost of project contract work performed by third parties whereby the Company expects to recognize any related revenue at a later date, upon satisfaction of the contract obligations. The Company had no contract assets as of December 31, 2024 or 2023. Contract Liabilities : Contract liabilities consist primarily of consideration received, usually in the form of payment, on project work to be performed whereby the Company expects to recognize the related revenue at a later date, upon satisfaction of the contract obligations. As of December 31, 2023, contract liabilities were $ 0.6 million and were recognized as deferred revenue in the accompanying consolidated balance sheet. The Company recognized $ 0.6 million and $ 0.1 million of revenue during the years ended December 31, 2024 and 2023, respectively, from contract liabilities that arose in 2023. There were no contract liabilities that arose during the year ended December 31, 2024, and there was no contract liabilities balance as of December 31, 2024. Research and Development The Company expenses its research and development costs as incurred. Research and development expenses consist of costs incurred for company-sponsored research and development activities. Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended. The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, supplies and materials, preclinical study costs, expensed licensed technology, consulting, scientific advisors and other third-party costs, as well as allocations of various overhead costs related to our product development efforts. The Company has contracted with third parties to perform various studies. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. The Company accrues for third party expenses based on estimates of the services received and efforts expended during the reporting period. If the actual timing of the performance of the services or the level of effort varies from the estimate, the accrual is adjusted accordingly. The expenses for some third-party services may be recognized on a straight-line basis if the expected costs are expected to be incurred ratably during the period. Payments under the contracts depend on factors such as the achievement of certain events or milestones, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the preclinical study or similar conditions. F- 9 Income Taxes The Company records deferred tax liabilities and assets based on the differences between the consolidated financial statements carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse and establishing a valuation allowance when it was more likely than not that some portion or all of the deferred tax assets would not be realized. Income tax expense consists of the tax payable for the period and the change during the period in deferred tax assets and liabilities. Tax benefits from uncertain tax positions are recognized only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company has no material uncertain tax positions for any of the reporting periods presented. 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 Company’s convertible notes contractually entitled the holders of such notes to participate in dividends but did 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, including the weighted average effect of prefunded warrants the Company issued in connection with the September 2024 Transactions (see Note 6 and Note 16), and without consideration for potentially dilutive securities. The Company determined that the exercise of the prefunded warrants requires nominal consideration for the delivery of shares of common stock, and as a result, has considered the 1,879,000 shares underlying the prefunded warrants to be outstanding effective October 29, 2024 for purposes of calculated basic net loss per share. 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, including the weighted average effect of the prefunded warrants, plus dilutive securities. Shares of common stock issuable upon exercise, conversion or vesting of stock options, restricted stock units, warrants and the outstanding 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 Company’s convertible notes were also considered potential shares of common stock for the year ended December 31, 2023 and were included in the calculation of diluted net loss per share using the “if-converted” method as of such period, and the more dilutive of either the two-class method or the if-converted method was reported. There were no convertible notes outstanding as of December 31, 2024. 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. Segment Reporting The Company operates within a single reportable operating segment being the research and development of cellular therapies. The Company has identified its president and chief executive officer as its chief operating decision maker (“CODM”), who regularly reviews the Company’s performance and allocates resources based on information reported at the consolidated entity level. Concentration of Credit Risk The Company maintains its cash balances in financial institutions located in the United States. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 . The Company’s cash balances are uninsured for deposit accounts that exceed the FDIC insurance limit. In the Company’s business, vendor concentrations could be indicative of vulnerabilities in the Company’s supply chain, which could ultimately impact the Company’s ability to continue its research and development activities. For the years ended December 31, 2024 and 2023, there was no vendor concentration related to the Company’s research and development activities. F- 10 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 consolidated balance sheet for cash and restricted cash, other receivables, prepaid assets and other current assets, accounts payable and accrued expenses, other current liabilities and other liabilities approximate fair value due to their short maturities. Leases The Company accounts for its leases under ASC Topic 842, Leases. Operating lease liabilities represent the present value of lease payments not yet paid. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs, lease incentives and impairment of operating lease assets. If the interest rate implicit in the lease is not readily determinable, the Company uses the incremental borrowing rates for collateralized borrowings in an amount equal to the lease payments under similar terms. The Company has elected the practical expedient to not separate non-lease components from the lease components to which they relate and instead account for each as a single lease component for all underlying asset classes. Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance, tax payments and other miscellaneous costs. The variable portion of payments contemplated in the lease that do not depend on an index or rate are not included in the ROU assets or lease liabilities. Rather, variable payments that do not depend on an index or rate are expensed when the obligation for those payments is incurred and are included in lease expenses. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses. The Company has also elected not to recognize ROU and lease liabilities for short-term leases that have a term of 12 months or less. The Company accounts for lease modifications as a separate contract when the modification (i) grants the lessee an additional right of use not included in the original lease contract, and (ii) increases the lease payments commensurate with the stand-alone price for the additional right of use. In this case, the Company would be treated as a new lease and measured in accordance with ASC 842 at the commencement date of the new lease without any impact on the existing lease. Otherwise, the Company accounts for lease modifications as a continuance of the existing lease, in which case, the Company reassesses the lease classification, remeasures the lease liability using an updated discount rate, and unless there is a full or partial termination of the lease, adjusts the ROU asset by the amount of change to the lease liability. For a full or partial lease termination, the lessee reduces the carrying amount of the ROU asset on a basis proportionate to the full or partial termination of the lease, and any difference between the adjustment to the ROU asset and the lease liability is recognized as a gain or loss in the current period. Commitment and Contingencies The Company follows ASC 450-20, Loss Contingencies , to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. F- 11 Stock-Based Compensation The Company recognizes stock-based compensation expense for equity awards 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-line basis. Warrants The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity , and ASC 815 , Derivatives and Hedging . The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, or meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. Convertible Notes The Company accounts for its convertible notes as a long-term liability equal to the proceeds received from issuance, including the embedded conversion feature, plus any interest paid-in-kind, net of the unamortized debt issuance costs and debt discount on the consolidated balance sheets. The Company evaluates all embedded features contained in the convertible notes, such as the conversion feature, the paid-in-kind feature and the redemption feature in the event of a default, to determine if such features require bifurcation as a derivative. The conversion feature included in the convertible notes is not required to be accounted for separately as an embedded derivative because the conversion feature is considered both indexed to the Company’s own stock and qualifies to be classified in stockholders’ equity. The paid-in-kind feature is considered to be a commitment to originate a loan, and the terms of the additional loans have the same terms as the original debt instrument. Therefore, the paid-in-kind feature qualifies for the scope exception under the applicable accounting guidance and is not required to be bifurcated as a derivative. The redemption feature in the event of a default was determined to be clearly and closely related to the convertible notes and not required to be bifurcated as a derivative. Proceeds from the sale of convertible notes with stock purchase warrants are allocated to the two elements based on their relative fair values. The portion of the proceeds allocated to warrants are recorded as a debt discount to the convertible note proceeds and presented on a net basis in the consolidated balance sheet. Debt issuance costs directly attributable to the transaction are capitalized and allocated to the convertible notes and warrants in the same manner as the proceeds. The amount of debt issuance costs allocated to the convertible notes represent a reduction of the face value of the convertible note proceeds. The Company amortizes debt issuance costs and debt discounts over the contractual term of the convertible notes, using the effective interest method, as interest expense on the consolidated statements of operations. Recent Accounting Standards Recently Adopted Accounting Standards In June 2022, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). The FASB issued ASU 2022-03 to (1) clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity related securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance was effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years with early adoption permitted. The adoption of this ASU did not have a material impact to the Company’s consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures , which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others. ASU No. 2023-07 was effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. Early adoption was permitted, and the amendments should be applied retrospectively. The adoption of this ASU did not have an impact to the Company’s consolidated financial statements, but it did result in additional disclosures made in the notes to the consolidated financial statements. F- 12 Recently Issued Accounting Standards to be Adopted In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements – Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU modified the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations. The amendments to the various topics should be applied prospectively, and the effective date will be determined for each individual disclosure based on the effective date of the SEC’s removal of the related disclosure. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then this ASU will not become effective. Early adoption is prohibited. The Company does not expect the amendments in this ASU to have a material impact on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures , which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements. In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). This ASU is intended to improve disclosures about a public business entity’s expenses by requiring disaggregated disclosure, in the notes to the financial statements, of prescribed categories of expenses within relevant income statement captions. ASU No. 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027 (as clarified in ASU No. 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date) . Early adoption is permitted. The new standard may be applied either on a prospective or retrospective basis. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements. In November 2024, the FASB issued ASU No. 2024-04, Debt – Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. This ASU clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU No. 2024-04 is effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. Early adoption is permitted, and the amendments may be applied on either a prospective or retrospective basis. The Company does not expect the amendments in this ASU to have a material impact on its consolidated financial statements. 4) 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. F- 13 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. Additionally, the Company agreed to make the following contingent payments: (i) if, 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 $ 100.0 million divided by the number of the Company’s then issued and outstanding shares of common stock; (ii) if, 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”); and (iii) during 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 such 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; provided, that the License Contingent Consideration shall not in any event exceed $ 45.0 million. 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 Market Cap Contingent Consideration is indexed to or settled in the Company’s own shares. As a result, the Company classified the Market Cap Contingent Consideration as a liability measured at fair value because the financial instrument embodied a conditional obligation (the Company would only issue the shares on the condition that the market capitalization thresholds are met), and at inception, the monetary value of the obligation is based solely on a fixed monetary amount ($ 2.0 million of shares for each target), which will be settleable with a variable number of the Company’s shares. The Company used a Monte Carlo simulation model to estimate the fair value of the Market Cap Contingent Consideration as of the acquisition date using the following assumptions: Schedule of Fair Valuation of Assumptions Stock price $ 3.00 Risk-free rate 3.58 % Volatility 100 % Dividend yield 0 % Warrants, Measurement Input 0 % Expected term 3.0 years See Note 9 for more information on the fair value measurement of the Market Cap Contingent Consideration as of December 31, 2024 and 2023.. The License Contingent Consideration is to be settled in cash and is generally recognized when the liability is probable and estimable. As of the acquisition date, the Company concluded that paying the License Contingent Consideration was not probable or estimable. Therefore, there was no initial liability recognized for the License Contingent Consideration. The Company also did not record a liability at December 31, 2024 or 2023, as the Company continued to conclude that such payment was not probable. The table below shows the total fair value of the consideration paid for the Exacis Assets (in thousands). 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 year ended December 31, 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 Purchased License was assigned back to Factor Limited. See Note 11 for more information on the Factor L&C Agreement. F- 14 5) 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 11) 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. 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. Prior to the Lineage Assignment Agreement entered into on September 24, 2024, the Company accounted for the Lineage Agreement under ASC 606 and 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 year ended December 31, 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 $ 0.3 million during the year ended December 31, 2024. The Company recognized approximately $ 0.1 million in revenue during the year ended December 31, 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 11, 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 year ended December 31, 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 year ended December 31, 2024. As provided for in the Lineage Assignment Agreement, the Company recorded a receivable of approximately $ 0.1 million during the year ended December 31, 2024 related to amounts Factor Bioscience owes to the Company related to the customization activities, which is recognized in other income (expense), net in the accompanying consolidated statement of operations. There were no amounts due from Factor Bioscience during the year ended December 31, 2023. F- 15 6) Debt and Equity Financings Promissory Notes On December 8, 2023, the Company received $ 1.5 million in exchange for the issuance of 6 % promissory note with an aggregate principal amount of $ 1.5 million to an investor. The promissory note was to mature on January 8, 2024 , and interest accrued at a rate of 6.0 % per annum, payable at maturity. On December 14, 2023, the Company repaid the $ 1.5 million of principal and $ 1,500 of accrued interest due under the promissory note. There are no further obligations under the promissory note. On March 11, 2025, the Company received $ 1.5 million in exchange for the issuance of a promissory note with an aggregate principal amount of $ 1.5 million to an investor. See Note 19 for more information on this subsequent event. Convertible Notes Financings 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”). 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 of its common stock. See Note 16 for more information on the Note Warrants. The interest rates for the July 2023 Convertible Notes and the December 2023 Convertible Notes were 6 % per year and 12 % per year, respectively, both of which were 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 were to mature on the five -year anniversary of the date of their issuance, unless earlier converted or repurchased. The Company did not have the option to redeem any of the Convertible Notes prior to maturity. The Company recognized approximately $ 2.8 million and $ 0.6 million in interest expense for the years ended December 31, 2024 and 2023 for the Convertible Notes, respectively, which includes both the amortization of debt issuance costs and interest recognized on the Convertible Notes as follows (in thousands): Schedule of Interest Expense 2024 2023 Year ended December 31, 2024 2023 Interest $ 1,399 $ 291 Debt issuance costs 1,372 303 Total interest expense $ 2,771 $ 594 The $ 1.4 million and $ 0.3 million in interest for the years ended December 31, 2024 and 2023, respectively, were paid in-kind and added to the principal of the Convertible Notes, which became part of the Exchange Transactions discussed below. F- 16 At the option of the holders, the Convertible Notes may be converted 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. In connection with the issuance of the December 2023 Convertible Notes, the Company agreed to reduce the exercise price of the warrants the Company issued in a private placement in December 2022 (the “December 2022 Warrants”) (see Note 16) to purchase an aggregate of approximately 4.4 million shares of the Company’s common stock from $ 3.28 to $ 1.43 per share and of the July 2023 Warrants from $ 2.61 to $ 1.43 per share. The effect of the reduction of the exercise price of these warrants was approximately $ 1.6 million and measured as the excess of the fair value of the modified instruments over the fair value of the instruments immediately before they were modified. The change in the fair value of the repriced warrants was considered an issuance cost to the December 2023 Convertible Notes and December 2023 Warrants. As such, the $ 1.6 million was allocated to each of those respective instruments based on their relative fair values, or approximately $ 0.8 million to each of the December 2023 Convertible Notes and December 2023 Warrants. The Company determined that there were no embedded derivatives within the Convertible Notes that required bifurcation from the host agreement. The Company allocated the gross proceeds received, the fees incurred, and as applicable, the impact of repricing the warrants discussed above, over the July 2023 Convertible Notes and July 2023 Warrants and over the December 2023 Convertible Notes and December 2023 Warrants, as applicable, based on their relative fair values as follows (in thousands): Schedule of Based on Relative Fair Value Allocation of Proceeds and Costs Allocation of Proceeds and Costs: Allocation of Relative Fair Value Allocation Percentage Proceeds Costs Proceeds, Net July 2023 Convertible Notes $ 8,715 39.94 % $ 3,481 $ ( 80 ) ( 766 ) $ 3,401 July 2023 Warrants 13,103 60.06 % 5,234 ( 121 ) 5,113 $ 21,818 100.00 % $ 8,715 $ ( 201 ) $ 8,514 Allocation of Proceeds and Costs: Allocation of December 2023 Closing Relative Fair Value Allocation Percentage Proceeds Costs Warrant Repricing Proceeds, Net December 2023 Convertible Notes $ 9,059 48.83 % $ 3,803 $ ( 81 ) $ ( 766 ) $ 2,956 December 2023 Warrants 9,495 51.17 % 3,985 ( 85 ) ( 802 ) 3,098 $ 18,554 100.00 % $ 7,788 $ ( 166 ) $ ( 1,568 ) $ 6,054 Allocation of Proceeds and Costs: Allocation of January 2024 Closing Relative Fair Value Allocation Percentage Proceeds Costs Proceeds, Net December 2023 Convertible Notes $ 1,750 46.24 % $ 650 $ ( 31 ) $ 619 December 2023 Warrants 2,035 53.76 % 755 ( 35 ) 720 $ 3,785 100.00 % $ 1,405 $ ( 66 ) $ 1,339 The Company estimated the fair values of the Convertible Notes as of July 14, 2023, December 15, 2023 and January 11, 2024 based off a valuation performed by a third-party specialist using a binomial tree model and the following assumptions: Schedule of Fair Value Assumptions Date Stock Price Credit Spread Volatility Risk-Free Rate July 2023 Convertible Notes 7/14/2023 $ 2.81 2,500 108 % 4.60 % December 2023 Convertible Notes 12/15/2023 $ 1.51 2,000 109 % 3.90 % December 2023 Convertible Notes 1/11/2024 $ 1.75 2,000 109 % 3.90 % F- 17 The fair value of the Note Warrants, all of which qualified for equity classification, was determined using the Black-Scholes pricing model as of each of July 14, 2023, December 15, 2023 and January 11, 2024 using the following assumptions: Date Stock Price Exercise Price Expected Life Volatility Dividend Risk-Free Rate July 2023 warrants 7/14/2023 $ 2.81 $ 2.61 5 years 98 % 0.00 % 4.04 % December 2023 warrants 12/15/2023 $ 1.51 $ 1.43 5 years 101 % 0.00 % 3.91 % December 2023 warrants 1/11/2024 $ 1.75 $ 1.43 5 years 102 % 0.00 % 3.90 % The 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. On October 29, 2024, all of the Convertible Notes were exchanged for common stock pursuant to the Exchange Transactions (as discussed further below) and as part of the September 2024 Transactions (as defined below) that the Company’s stockholders approved at the Company’s annual meeting of stockholders on October 29, 2024 (the “Annual Meeting). As of December 31, 2024, there were no Convertible Notes outstanding. 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 interest rate on the Bridge Notes was 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 were to mature on the one -year anniversary of the date of their issuance, unless earlier converted or repurchased. The Company did 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 was upon stockholder approval at 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, would automatically convert into shares of the Company’s common stock at a conversion price of $ 0.50 . Otherwise, the Bridge Notes could only be paid in cash upon maturity. 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 resulted 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 was amortized as a component of interest expense. The Company remeasured the fair value of the Bridge Notes derivative liability at each reporting period and recorded a reduction in the liability of $ 0.2 million for the year ended December 31, 2024. On October 29, 2024, all of the Bridge Notes were converted to common stock as part of the September 2024 Transactions (as defined below) that the Company’s stockholders approved at the Annual Meeting. The Company recognized $ 3.9 million in interest expense for the year ended December 31, 2024 for the Bridge Notes, which includes both the acceleration of the amortized debt issuance costs as a result of the conversion of the Bridge Notes to common stock and interest recognized on the Bridge notes as follows (in thousands): Schedule of Interest Expense Year ended December 31, 2024 Interest $ 45 Debt issuance costs 3,887 Total interest expense $ 3,932 There was no interest expense recognized on the Bridge Notes for the year ended December 31, 2023. The interest recognized on the Bridge Notes of less than $ 0.1 million was paid in-kind and added to the principal of the Bridge Notes as part of the conversion to common stock that occurred in October 2024. As of December 31, 2024, there were no Bridge Notes outstanding. F- 18 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 Note Warrants (and when combined with the December 2022 Warrants, the “Exchanged Warrants”); and (iii) the Convertible Notes. The parties to the Exchange Agreements represented the holders of all the outstanding Convertible Notes and all the outstanding Exchanged Warrants described above except for a December 2022 Warrant to purchase approximately 0.1 million shares of our common stock. Subject to approval by the Company’s stockholders at the Annual Meeting, under the Exchange Agreements (i) the holders of the Exchanged 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 at September 24, 2024 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 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. As discussed further below, upon conversion of the Convertible Notes to shares of common stock on October 29, 2024, the Company recorded $ 1.0 million in income for the change in fair value of the shares of common stock being issued. Because shareholder approval was required for the Exchange Transactions to occur, the Company determined that the modifications to the Exchanged Warrants resulted in a change in classification 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 Exchanged 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 reclassifying approximately $ 11.2 million from equity to warrant liabilities. The Company then marked-to-market the Exchanged Warrants at each reporting period by taking the same quantity of shares multiplied by the closing stock price on such date and for the year ended December 31, 2024, recognized a reduction to the warrant liabilities of $ 0.3 million. 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 represented 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 year ended December 31, 2024. F- 19 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 Exchanged 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. 7) Property and Equipment Property and equipment consist of the following (in thousands): Schedule of Property and Equipment 2024 2023 As of December 31, 2024 2023 Laboratory and manufacturing equipment $ 28 $ 40 Furniture and fixtures 19 19 Leasehold improvements - 274 Computer equipment and programs 210 274 Property and equipment, gross 257 607 Less accumulated depreciation and amortization ( 172 ) ( 114 ) Property and equipment, net $ 85 $ 493 During the year ended December 31, 2024, the Company recognized a loss on disposal of assets of approximately $ 0.5 million in connection with the sublease termination agreement related to the Somerville, Massachusetts lease, which is recorded as part of the gain on lease termination on the accompanying consolidated statement of operations for the year ended December 31, 2024 (See Note 8 for more details on the sublease termination agreement). During the year ended December 31, 2023, the Company recognized a de minimis loss on disposal of fixed assets. Depreciation expense was approximately $ 0.1 million for each of the years ended December 31, 2024 and 2023. No depreciation expense is recorded on fixed assets in process until such time as the assets are completed and are placed into service. F- 20 8) Leases Operating Leases T he 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. The Sublessor provided the Company with a tenant improvement allowance (“TIA”) of $ 190 per rentable square foot, or $ 8.6 million, for assets that were determined to be owned by the sublessor/lessor and considered a reimbursement rather than a lease incentive. As of December 31, 2023, the Company received the entire $ 8.6 million TIA. The Company incurred out-of-pocket tenant improvements costs of approximately $ 1.6 million, which was in excess of the $ 8.6 million TIA. These out-of-pocket expenses were considered non-cash lease payments and were added to the consideration in the contract. The Company recorded an initial lease liability of $ 34.1 million and a corresponding ROU asset of $ 34.4 million during the year ended December 31, 2023. During the years ended December 31, 2023 and 2024, the Company remeasured the lease liability due to changes in out-of-pocket expenses for sublessor/lessor owned assets and timing of rent payments and recorded adjustments to the lease liability and ROU asset of approximately a $ 1.6 million reduction as of December 31, 2023 and an increase of $ 4.2 million for the year ended December 31, 2024. 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 constituted 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 year ended December 31, 2024, which includes a loss on disposal of fixed assets of approximately $ 0.5 million. For the years ended December 31, 2024 and 2023, the net operating lease expenses were as follows (in thousands): Schedule of Net Operating Lease Expense 2024 2023 Years ended December 31, 2024 2023 Operating lease expense $ 4,447 $ 3,399 Sublease income ( 84 ) ( 84 ) Variable lease expense 893 136 Total lease expense $ 5,256 $ 3,451 F- 21 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 December 31 2024, including the changes during the period (in thousands). Schedule of 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 ( 1,499 ) Operating lease ROU assets at December 31, 2024 $ 670 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 ( 4,172 ) Operating lease liabilities at December 31, 2024 684 Less non-current portion 477 Current portion at December 31, 2024 $ 207 As of December 31, 2024, the Company’s operating leases had a weighted-average remaining life of 3.1 years with a weighted-average discount rate of 10.23 %. The maturities of the operating lease liabilities are as follows (in thousands): Schedule of Maturities of Operating Lease Liabilities As of December 31, 2024 2025 $ 274 2026 267 2027 163 2028 82 Total payments 786 Less imputed interest ( 102 ) Total operating lease liabilities $ 684 Manhattan Sublease In April 2019, the Company entered into a sublease with an unaffiliated third party (the “Subtenant”), whereby the Subtenant agreed to sublease approximately 999 square feet of space rented by the Company in the borough of Manhattan in New York, New York commencing on May 15, 2019. The term of this sublease expires on October 31, 2026 with no option to extend. Rent payments by the Subtenant under the sublease began on September 1, 2019. The sublease stipulates an annual rent increase of 2.25 %. The Subtenant is also responsible for paying to the Company all tenant energy costs, annual operating costs, and annual tax costs attributable to the subleased space during the term of the sublease. The Company received sublease payments of approximately $ 0.1 million for each of the years ended December 31, 2024 and 2023, respectively. The Company treats the sublease as a separate lease, as the Company was not relieved of the primary obligation under the related lease. The Company continues to account for the related lease as a lessee and in the same manner as prior to the commencement date of the sublease. The Company accounts for the sublease as a lessor of the lease. The sublease is classified as an operating lease, as it does not meet the criteria of a sale-type or direct financing lease. F- 22 The following tables shows the future payments the Company expects to receive from the Subtenant over the remaining term of the sublease (in thousands): Schedule of Future Lease Payments from Sublease Agreement As of December 31, 2024 2025 $ 88 2026 75 Total payments $ 163 9) Fair Value of Financial Instruments 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 4 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 Exchanged Warrants from equity to a liability. See Note 6 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. Pursuant to the approval of the September 2024 Transactions by the Company’s stockholders at the Annual Meeting, the Bridge Notes were converted to shares of the Company’s common stock, and the outstanding principal and interest of the Bridge Notes as well as the derivative liability were reclassified to equity. As of December 31, 2024, there was no derivative liability balance. The Company determined the fair value of the Exchanged 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 consolidated statement of operations. The following tables summarize the liabilities that are measured at fair value as of December 31, 2024 and December 31, 2023 (in thousands): Schedule of Liabilities Measured at Fair Value Description Level December 31, 2024 December 31, 2023 Liabilities: Warrant liabilities - Q1-22 warrants 3 $ 1 $ 116 Market Cap Contingent Consideration 3 $ 41 $ 107 Liability fair value disclosure 3 $ 41 $ 107 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. F- 23 The following table presents the changes in the liabilities measured at fair value from January 1, 2024 through December 31, 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 Exchanged Warrants from equity to liability 11,244 - - Initial measurement of Bridge Notes derivative liability - 5,566 - Change in fair value ( 414 ) ( 220 ) ( 66 ) Reclassification of Exchanged Warrants and Bridge Notes derivative liability to equity ( 10,945 ) ( 5,346 ) - Reclassification of Exchanged Warrants and Bridge Notes derivative liability to equity ( 10,945 ) ( 5,346 ) - Fair value at December 31, 2024 $ 1 $ - $ 41 Based off valuations performed during 2024 and as of December 31, 2024, the Company recognized a change in fair value of the Market Cap Contingent Consideration of approximately $ 0.1 million for the year ended December 31, 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 at each reporting period and recorded a $ 0.2 million credit for the change in fair value during the year ended December 31, 2024. In connection with the approval of the September 2024 Transactions by the Company’s stockholders at the Annual Meeting on October 29, 2024, the Exchanged Warrants were exchanged for and the Bridge Notes were converted to shares of the Company’s common stock. The liability related to the Exchanged Warrants and the outstanding principal and interest of the Bridge Notes as well as the derivative liability were reclassified to equity. As of December 31, 2024, there were no liability balances related to the derivative liability or the Exchange Warrants. 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 December 31, 2023 (in thousands). Schedule of Fair Value and Carrying Values of Convertible Notes December 31, 2023 Level Carrying Value Fair Value Convertible Notes 3 $ 16,616 $ 17,594 In connection with the approval of the September 2024 Transactions by the Company’s stockholders at the Annual Meeting on October 29, 2024, the Convertible Notes were exchanged for shares of the Company’s common stock. As of December 31, 2024, there were no Convertible Notes outstanding. The Company assessed the fair value of the Convertible Notes as of December 31, 2023 using a binomial model, which is considered a Level 3 measurement. The inputs used for the assessment were risk-free rate of 4.07 %, expected term of 2.3 years, stock price of $ 1.80 , volatility of 108 % and dividend yield of 0 % done. 10) Goodwill The Company recorded goodwill in the amount of $ 2.0 million related to a 2018 acquisition that was accounted for as a business combination. The Company performed its annual qualitative assessment as of December 31, 2024, and based on that assessment, the Company was unable to conclude that it was more likely than not that the fair value of the entity exceeded its carrying value as of such date. As a result, the Company performed a step-one quantitative assessment and concluded that the fair value of the reporting unit was greater than the carrying value as of December 31, 2024, and the goodwill was considered not impaired. Therefore, the Company did not recognize an impairment charge during the year ended December 31, 2024. . The Company performed its annual qualitative assessment as of December 31, 2023, and based on that assessment, the Company determined that it was more likely than not that the fair value of the entity exceeded its carrying value for such year and that the performance of the quantitative impairment test was not required. Therefore, no impairment was required for the year ended December 31, 2023. F- 24 11) Related Party Transactions Agreements with Factor Bioscience Inc. and Affiliates As of December 31, 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 May 2024, the Company entered into the First Amendment to Work Order 1 (the “Amended Work Order”) under a Master Services Agreement (the “MSA”) that the Company entered into with Factor Bioscience in September 2022, including the first work order under the MSA (“Work Order 1”). The Amended Work Order allowed the Company to terminate Work Order 1 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, rather than 120 days’ notice originally required. On June 26, 2024, the Company provided Factor Bioscience with its notice to terminate Work Order 1, which became effective on September 9, 2024. Under Work Order 1, Factor Bioscience was providing the Company with mRNA cell engineering research support services, including access to certain facilities, equipment, materials and training, and the Company paid 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 continued paying Factor Bioscience the monthly fee of $ 0.4 million until such time as Work Order 1 was terminated. 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 11 (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, settlements 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. 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. F- 25 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. Exacis Asset Acquisition On April 26, 2023, the Company closed the Exacis Acquisition. See Note 4 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 6 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. 12) Accrued Expenses Accrued expenses at December 31, 2024 and 2023 consisted of the following (in thousands): Schedule of Accrued Expenses December 31, 2024 December 31, 2023 Professional fees $ 238 $ 239 Legal fees 323 643 Accrued compensation 12 109 Convertible notes interest - 176 Somerville facility - 218 Other 434 508 Total accrued expenses $ 1,007 $ 1,893 F- 26 13) 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. 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 June 13, 2024 order, Counterclaim Defendants engaged in limited discovery with Westman.. The Counterclaim Defendants and Westman are currently in settlement discussions, and the Counterclaim Defendants and Westman requested a stay of all remaining deadlines pending memorialization of such discussions. The Court granted that motion on February 11, 2025. The Company has accrued approximately $ 0.2 million for this matter in the year ended December 31, 2024. F- 27 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 planned 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 11 for details of this agreement. 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 %. The Company matched less than $ 0.1 million towards employees’ 401k contributions for each of the years ended December 31, 2024 and 2023. 14) Basic and Diluted Net Loss per Common Share The following table sets forth the computation of the net loss per share attributable to common stockholders, basic and diluted (in thousands, except per share data): Schedule of Computation of Net Loss Per Share Basic and Diluted 2024 2023 Years ended December 31, 2024 2023 Numerator: Net loss attributable to common stockholders $ ( 44,555 ) $ ( 21,684 ) Denominator: Weighted average shares outstanding - basic and diluted 13,647 5,314 Net loss per common share - basic and diluted $ ( 3.26 ) $ ( 4.08 ) Since the Company was in a net loss position for all periods presented, the net loss per share attributable to common stockholders was the same on a basic and diluted basis, as the inclusion of all potential common equivalent shares outstanding would have been anti-dilutive. The following table presents the amount of stock options, warrants, convertible preferred stock, convertible notes and restricted stock units (“RSUs”) that were excluded from the computation of diluted net loss per share of common stock for the years ended December 31, 2024 and 2023, as their effect was anti-dilutive (in thousands): Schedule of Securities Excluded from the Computation of Diluted Net Loss per Common Stock 2024 2023 Years ended December 31, 2024 2023 Stock options 2,629 389 Warrants 484 18,922 Preferred stock converted into common stock 31 18 Convertible Notes converted into common stock - 7,877 RSUs - 1 Total potential common shares excluded from computation 3,144 27,207 F- 28 15) Stock-Based Compensation Equity Incentive Plans The Company’s stock-based compensation plans consist of the Restated 2020 Equity Incentive Plan (the “Restated 2020 Plan”) and the 2021 Inducement Equity Incentive Plan (the “2021 Inducement Plan”). The Company’s board of directors has designated its compensation committee as the administrator of the foregoing plans (the “Plan Administrator”). Among other things, the Plan Administrator selects persons to receive awards under the foregoing plans and determines the number of shares subject to each award and the terms, conditions, performance measures, if any, and other provisions of the award. The Restated 2020 Plan provides for (a) approximately 724,000 shares of common stock that can be issued under the Restated 2020 Plan, which includes an increase to the Restated 2020 Plan of 300,000 that was approved by the Company’s stockholders at the 2023 annual meeting of stockholders in June 2023, and (b) an annual increase in the number of shares reserved for issuance on January 1 of each year from 2022 through 2031 equal to the lesser of (i) 5 % of the number of shares of common stock outstanding on the immediately preceding December 31 and (ii) such smaller number of shares of common stock as may be determine by the board of directors (the provision providing for the increase described in clause (b) is referred to as the “evergreen provision”). Pursuant to the evergreen provision, shares issuable under the Restated 2020 Plan was increased by approximately 527,000 in the aggregate. Awards under the Restated 2020 Plan may be granted to officers, directors, employees and consultants of the Company. Stock options granted under the Restated 2020 Plan may either be incentive stock options or nonqualified stock options, may have a term of up to ten years , and are exercisable at a price per share not less than the fair market value, as defined in the Restated 2020 Plan, on the date of grant. As of December 31, 2024, there were approximately 855,000 stock options outstanding and no RSUs outstanding under the Restated 2020 Plan. As of December 31, 2024, there were approximately 380,000 shares of common stock remaining to be issued under the Restated 2020 Plan. The 2021 Inducement Plan provides for the grant of up to 75,000 share-based awards as material inducement awards to new employees in accordance with the employment inducement grant rules set forth in Section 711(a) of the NYSE American LLC Company Guide (the Company’s common stock was listed on the NYSE American at the time the 2021 Inducement Plan was adopted). The 2021 Inducement Plan expires in May 2031. As of December 31, 2024, there were approximately 71,000 shares of common stock remaining to be issued under the 2021 Inducement Plan. As of December 31, 2023, there were no stock options outstanding and less than 1,000 RSUs outstanding under the 2021 Inducement Plan. Equity Awards Stock Options The following weighted-average assumptions were used for stock options granted during the years ended December 31, 2024 and 2023: Schedule of Weighted-Average Assumptions Used for Stock Options Granted 2024 2023 Year ended December 31, 2024 2023 Weighted average risk-free rate 4.44 % 3.82 % Weighted average volatility 98.09 % 95.15 % Dividend yield 0 % 0 % Expected term 6.04 years 5.44 years The risk-free rate is based on the observed interest rates appropriate for the expected life. The expected life (estimated period of time outstanding) of the stock options granted is estimated using the “simplified” method as permitted by the SEC’s Staff Accounting Bulletin No. 110, Share-Based Payment . Expected volatility is based on the volatility of the Company’s peer group over the expected life of the stock option granted, and the Company assumes no dividends. Forfeitures are recognized as incurred. F- 29 The following table summarizes stock option activity for the years ended December 31, 2024 and 2023 (in thousands except for per-share and remaining contractual life data): Schedule of Stock Option Activity Outstanding Options Weighted Average Exercise Price per Share Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Outstanding January 1, 2023 359 $ 57 7.57 $ - Granted 237 4 Cancelled ( 207 ) 19 Outstanding December 31, 2023 389 45 7.04 - Granted 2,488 2 Cancelled ( 248 ) 8 Outstanding December 31, 2024 2,629 $ 8 8.77 $ - Options vested and exercisable at December 31, 2024 257 $ 61 5.58 $ - The per-share weighted average grant-date fair value of stock options granted during the year ended December 31, 2024 and 2023 was $ 1.39 and $ 2.99 , respectively. As of December 31, 2024, the unamortized stock-based compensation expense related to outstanding unvested options was approximately $ 2.3 million with a weighted average remaining requisite service period of 1.91 years. The Company expects to amortize this expense over the remaining requisite service period of these stock options. Vesting of all stock options is subject to continuous service with the Company through their applicable vesting dates. 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 year ended December 31, 2024 as a result of the modification. F- 30 Restricted Stock Units The following table summarizes RSU activity for the years ended December 31, 2024 and 2023 (in thousands except for per-share data): Schedule of RSU Activity Outstanding Restricted Stock Units Weighted Average Fair Value per Share January 1, 2023 4 $ 236 Cancelled ( 3 ) 199 December 31, 2023 1 322 Cancelled - - December 31, 2024 1 $ 322 Balance expected to vest at December 31, 2024 1 $ 322 The Company recognizes the fair value of RSUs granted 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 respective 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 years ended December 31, 2024 and 2023, less than 1,000 RSUs vested in each year. Stock-Based Compensation Expense For the years ended December 31, 2024 and 2023, the Company recognized stock-based compensation expense as follows (in thousands): Schedule of Stock-Based Compensation Expense 2024 2023 Years ended December 31, 2024 2023 Research and development $ 89 $ 234 General and administrative 1,431 1,008 Total $ 1,520 $ 1,242 16) Stockholders’ Equity and Warrants Warrants During the year ended December 31, 2024, the Company had the following warrant activity (in thousands): Schedule of Warrants Outstanding Outstanding January 1, 2024 Granted Exchanged Warrants Outstanding December 31, 2024 Q1-22 Warrants 343 - - 343 December 2022 Warrants 4,370 - ( 4,228 ) 142 July 2023 Warrants 6,094 - ( 6,094 ) - December 2023 Warrants 8,115 1,464 ( 9,579 ) - Prefunded Warrants - 1,879 - 1,879 Total 18,922 3,343 ( 19,901 ) 2,364 As discussed in Note 6 and further below, as a result of stockholder approval of the September 2024 Transactions at the Annual Meeting on October 29, 2024, the Exchanged Warrants were exchanged for approximately 9,951,000 shares of common stock, and 1,879,000 prefunded warrants were issued in connection with the conversion of the Bridge Notes and the closing of the Common Stock Private Placement. The prefunded warrants have an exercise price of $ 0.005 per share, are exercisable at any time and will not expire until exercised in full. F- 31 The Q1-22 Warrants are classified as a liability, have an exercise price of $ 38.20 per share and expire on September 9, 2027 . The remaining December 2022 Warrants qualify for equity classification, have an exercise price of $ 1.43 per warrant share and expire on June 2, 2028 . As of December 31, 2024, the weighted average remaining contractual life of the warrants outstanding was 2.90 years and the weighted average exercise price was $ 27.45 , which does not include the prefunded warrants. Cumulative Convertible Preferred Stock The Company has authorized 156,000 shares of preferred stock, all of which is designated as Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), and all of which were issued and outstanding as of December 31, 2024 and 2023. The Series A Preferred Stock provides for a cumulative annual dividend of $ 0.10 per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock. The Company paid approximately $ 8,000 in cash and issued approximately 11,000 shares of common stock for payment of dividends during the year ended December 31, 2024. The Company paid approximately $ 16,000 in cash for payment of dividends during the year ended December 31, 2023. The Series A Preferred Stock has no voting rights and has a $ 1.00 per share liquidation preference over the Company’s common stock. The holder of shares of Series A Preferred Stock has the right at any time to convert such shares into that number of shares of common stock that equals the number of shares of Series A Preferred Stock divided by the conversion rate. At December 31, 2024, the conversion rate was 5.0670 and, based on that conversion rate, one share of Series A Preferred Stock would have converted into approximately 0.20 shares of common stock, and all the outstanding shares of the Series A Preferred Stock would have converted into approximately 31,000 shares of common stock in the aggregate. There were no conversions during the years ended December 31, 2024 and 2023. There is no mandatory conversion term, date or any redemption features associated with the Series A Preferred Stock. The conversion rate will adjust under the following circumstances: 1. If the Company (a) pays a dividend or makes a distribution in shares of its common stock, (b) subdivides its outstanding shares of common stock into a greater number of shares, (c) combines its outstanding shares of common stock into a smaller number of shares, or (d) issues by reclassification of its shares of common stock any shares of its common stock (other than a change in par value, or from par value to no par value, or from no par value to par value), then the conversion rate in effect immediately prior to the applicable event will be adjusted so that the holders of the Series A Preferred Stock will be entitled to receive the number of shares of common stock which they would have owned or have been entitled to receive immediately following the happening of the event, had the Series A Preferred Stock been converted immediately prior to the record or effective date of the applicable event. 2. If the outstanding shares of the Company’s common stock are reclassified (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision, combination or stock dividend), or if the Company consolidates with or merge into another corporation and the Company is not the surviving entity, or if the Company sells all or substantially all of its property, assets, business and goodwill, then the holders of the Series A Preferred Stock will thereafter be entitled upon conversion to the kind and amount of shares of stock or other equity securities, or other property or assets which would have been receivable by such holders upon such reclassification, consolidation, merger or sale, if the Series A Preferred Stock had been converted immediately prior thereto. 3. If the Company issues common stock without consideration or for a consideration per share less than the then applicable Equivalent Preference Amount (as defined below), then the Equivalent Preference Amount will immediately be reduced to the amount determined by dividing (A) an amount equal to the sum of (1) the number of shares of common stock outstanding immediately prior to such issuance multiplied by the Equivalent Preference Amount in effect immediately prior to such issuance and (2) the consideration, if any, received by the Company upon such issuance, by (B) the total number of shares of common stock outstanding immediately after such issuance. The “Equivalent Preference Amount” is the value that results when the liquidation preference of one share of Series A Preferred Stock (which is $ 1.00 ) is multiplied by the conversion rate in effect at that time; thus the conversion rate applicable after the adjustment in the Equivalent Preference Amount as described herein will be the figure that results when the adjusted Equivalent Preference Amount is divided by the liquidation preference of one share of Series A Preferred Stock. F- 32 SEPA On April 5, 2023, the Company entered into the SEPA with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $ 10.0 million of the Company’s common stock. Such sales of common stock by the Company, if any, are subject to certain conditions and limitations set forth in the SEPA, including a condition that the Company may not direct Lincoln Park to purchase any shares of common stock under the SEPA if such purchase would result in Lincoln Park beneficially owning more than 4.99 % of the Company’s issued and outstanding shares of common stock. Sales under the SEPA may occur from time to time, at the Company’s sole discretion, through April 2025. In consideration of Lincoln Park’s entry into the SEPA, the Company issued to Lincoln Park approximately 74,000 shares of common stock (the “Commitment Shares”). The value of the Commitment Shares was recorded as a period expense and included in other expense, net, in the accompanying consolidated statements of operations for year ended December 31, 2023. The Company evaluated the contract that includes the right to require Lincoln Park to purchase shares of common stock in the future (“put right”) considering the guidance in ASC 815-40, Derivatives and Hedging — Contracts on an Entity’s Own Equity and concluded that it is an equity-linked contract that does not qualify for equity classification, and therefore requires fair value accounting. The Company analyzed the terms of the freestanding put right and concluded that it has an immaterial value as of December 31, 2024 and 2023. During the year ended December 31, 2023, the Company issued and sold approximately 214,000 shares of common stock under the SEPA, including the 74,000 Commitment Shares, for gross proceeds of approximately $ 0.3 million. The Company did not sell any shares of common stock under the SEPA during the year ended December 31, 2024. As of December 31, 2024, there were approximately 2,860,000 shares remaining to be sold under the SEPA. September 2024 Transactions As discussed in Note 6, 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 Company issued approximately 45,948,000 shares of common stock and 1,879,000 prefunded warrants and had approximately 51,386,000 shares of common stock issued and outstanding following such transactions. See Note 6 for details on the September 2024 Transactions. Stock Repurchase Program In November 2024, the Company’s Board authorized a stock repurchase program (the “Repurchase Program”) of up to $ 1.0 million of the Company’s outstanding common stock. Under the Repurchase Program, the repurchases may be made by the Company from time to time through open market purchases, privately negotiated transactions or other means in accordance with applicable securities laws. The timing and amount of repurchases will be determined by the Company, taking into consideration market conditions, stock price, and other factors. The Repurchase Program does not have a set expiration date and may be suspended, modified or discontinued at any time without prior notice. The Company did no t repurchase any of its shares under the Repurchase Program during the year ended December 31, 2024. There was no such repurchase program during the year ended December 31, 2023. F- 33 17) Income Taxes Loss before income taxes consist of the following (in thousands): Schedule of Loss Before Income Taxes 2024 2023 Years ended December 31, 2024 2023 (in thousands) Domestic $ ( 44,529 ) $ ( 21,654 ) Foreign 20 ( 17 ) Total loss before income taxes $ ( 44,509 ) $ ( 21,671 ) For each of the years ended December 31, 2024 and 2023, current tax provisions and current deferred tax provisions were recorded as follows (in thousands): Schedule of Income Tax Provision 2024 2023 Years ended December 31, 2024 2023 Current Tax Provision Federal $ - $ - State 3 1 Foreign - - Current tax provision 3 1 Deferred Tax Provision Federal - - State 27 ( 4 ) Foreign - - Deferred tax provision 27 ( 4 ) Total tax provision (benefit) for income taxes $ 30 $ ( 3 ) Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of net deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. The table below consists of the Company’s net deferred tax assets and liabilities as of December 31, 2024 and December 31, 2023 (in thousands). Deferred tax assets have been substantially reserved for by a valuation allowance since it is more likely than not that such tax benefits will not be realized. Schedule of Deferred Tax Assets and Liabilities 2024 2023 As of December 31, 2024 2023 Deferred Tax Assets: Net operating losses $ 16,496 $ 12,740 Foreign net operating losses 782 784 Stock compensation 2,646 2,141 In-process research and development 1,030 1,009 Capitalized research and development expenses 4,548 3,105 Accrued expenses 192 - R&D credit carryforwards 437 437 ROU Liabilities 187 8,932 Other 29 135 Total gross deferred tax assets 26,347 29,283 Valuation allowance ( 26,023 ) ( 18,302 ) Net deferred tax assets 324 10,981 Deferred Tax Liabilities: Fixed assets - ( 6 ) ROU Assets ( 183 ) ( 8,349 ) Convertible debt - ( 2,507 ) Intangibles - goodwill ( 229 ) ( 179 ) Total deferred tax liabilities ( 412 ) ( 11,041 ) Net deferred taxes $ ( 88 ) $ ( 60 ) F- 34 The reconciliation between the Company’s effective tax rate on income from continuing operations and the federal statutory tax rate of 21 % for the years ended December 31, 2024 and 2023 is as follows: Schedule of Reconciliation of Computed Expected Income Taxes to Effective Income Taxes 2024 2023 As of December 31, 2024 2023 Tax at federal income tax rate 21.00 % 21.00 % State income tax, net of federal tax 2.95 % 4.92 % Foreign tax differential 0.00 % ( 0.01 %) Non-deductible expenses/excludable items ( 0.05 %) ( 0.74 %) Convertible debt ( 9.16 %) ( 11.92 %) Credits ( 0.18 %) 0.00 % Other 2.72 % ( 3.34 %) Change in valuation allowance ( 17.35 %) ( 9.90 %) (Provision) benefit for income taxes ( 0.07 %) 0.01 % The net increase in the total valuation allowance for the year ended December 31, 2024 was an increase of approximately $ 7.7 million. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income and planning strategies in making this assessment. Based on the level of historical operating results and projections for the taxable income for the future, management has determined that it is more likely than not that the deferred taxes assets will not be utilized. Accordingly, the Company has recorded a full valuation allowance. The net deferred tax liability represents an indefinite life intangible liability related to tax deductible goodwill, partially offset by an indefinite life deferred tax asset. At December 31, 2024 and 2023, the Company has available net operating loss (“NOL”) carryforwards of approximately $ 62.1 million and $ 48.4 million for federal income tax purposes, respectively, of which approximately $ 61.4 million can be carried forward indefinitely. The Company has available $ 52.6 million and $ 39.6 million state NOLs for the years ended December 31, 2024 and 2023, respectively, which begin to expire in 2041 . The Company also has foreign NOL carryforwards of approximately $ 6.3 million for each of the years ended December 31, 2024 and 2023, which carry forward indefinitely . Section 382 of the Internal Revenue Code (“IRC”) imposes limits on the ability to use NOL carryforwards that existed prior to a change in control to offset future taxable income. Such limitations would reduce, potentially significantly, the gross deferred tax assets disclosed in the table above related to the NOL carryforwards. The Company continues to disclose the NOL carryforwards at their original amount in the table above as no potential limitation has been quantified. The Company has also established a full valuation allowance for all deferred tax assets, including the NOL carryforwards, since the Company could not conclude that it was more likely than not able to generate future taxable income to realize these assets. The Company has federal and state income tax credit carryforwards of approximately $ 0.4 million at both December 31, 2024 and 2023.. The credits begin to expire in 2041 . In accordance with authoritative guidance, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. The following table summarizes amounts the Company recorded for uncertain tax positions as of December 31, 2024 and 2023 (in thousands): Schedule of Uncertain Tax Positions 2024 2023 As of December 31, 2024 2023 Beginning balance of uncertain tax positions $ 393 $ 121 Additions based on current year’s tax positions - - Net changes based on prior year’s tax positions - 272 Ending balance of uncertain tax positions $ 393 $ 393 It is reasonably possible that unrecognized tax benefits may increase or decrease within the next twelve months due to tax examination changes, expiration of statute of limitations, or changes in tax law. The Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months. The Company recognizes interest and penalties related to unrecognized tax positions within the income tax expense line in the accompanying consolidated statements of operations. There were no accrued interest and penalties associated with uncertain tax positions as of December 31, 2024 or December 31, 2023. The Company is subject to U.S. federal, state, and foreign income tax. The Company’s income tax returns are subject to examination by the relevant taxing authorities. As of December 31, 2024, the 2021 – 2024 tax years remain subject to examination in the U.S. federal tax, various state, and foreign tax jurisdictions. The Company is not currently under examination by federal state, or foreign jurisdictions. On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted into law. Among other changes to the tax code, the IRA imposes a 1% excise tax on certain repurchases of corporate stock by certain publicly traded corporations. The 1% stock buyback tax applies to redemptions by domestic corporations occurring in taxable years beginning after December 31, 2022. A number of exceptions to the stock buyback tax are available including exceptions to certain reorganizations. However, while these exceptions may be helpful in limiting the application of the stock buyback tax in situations in which it was not intended to apply, more guidance will be necessary for taxpayers to analyze the potential application of these exceptions and whether they will be able to rely upon them. F- 35 18) Segment Reporting The CODM uses consolidated net loss as a measure of profit and loss and assesses Company performance through the achievement of its business strategy goals. The CODM is regularly provided with forecasted expense information that is used to determine the Company’s liquidity needs and cash allocation to execute its business strategy, and he uses cash as a measure of segment assets in managing the Company. The Company operates in the United States, and all of its assets are located in the United States. The table below provides a breakdown of the Company’s significant operating expenses for the years ended December 31, 2024 and 2023 with a reconciliation to net loss for each of those years. The Company’s revenue and its cost of revenues for the years ended Decembe4 2024 and 2023 relate to the Lineage Agreement. Depreciation and amortization expense was $ 0.1 million for each of the years ended December 31, 2024 and 2023. During the year ended December 31, 2024, the Company recognized $ 22.6 million in other expense, net, related to the September Transactions. There were no such transactions for the year ended December 31, 2023. The Company recognized $ 6.5 million in interest expense, net, during the year ended December 31, 2024 compared to $ 0.5 million during the year ended December 31, 2023. Schedule of Breakdown of Significant Operating Expenses 2024 2023 Year ended December 31, 2024 2023 Revenue $ 582 $ 68 Cost of revenues 96 236 Gross profit (loss) 486 ( 168 ) Operating expenses: Research and development by significant expense: MSA/license fees 3,017 3,250 Professional fees 759 1,181 Payroll and related 502 701 Other 1 326 788 Research and development 4,604 5,920 General and administrative by significant expense: Occupancy expense 5,074 3,306 Professional fees 4,168 6,464 Payroll and related 1,607 2,045 Stock-based compensation 1,431 1,008 Other 2 852 1,764 General and administrative 13,132 14,587 Gain on lease termination ( 1,576 ) - Acquisition of Exacis in-process research and development - 460 Total operating expenses 16,160 20,967 Loss from operations ( 15,674 ) ( 21,135 ) Other expense, net ( 28,835 ) ( 536 ) Loss before income taxes ( 44,509 ) ( 21,671 ) (Provision) benefit for income taxes ( 30 ) 3 Net loss $ ( 44,539 ) $ ( 21,668 ) Cash $ 1,729 $ 7,575 1 Other includes certain lab supply expenses, amounts related to the close out of a former clinical trial, allocated occupancy costs, stock-based compensation, and depreciation. 2 Other includes expenses related to insurance, information technology, travel, banking, depreciation and other miscellaneous expenses. 19) Subsequent Event On March 11, 2025, the Company received $ 1.5 million in exchange for the issuance of a promissory note with an aggregate principal amount of $ 1.5 million to an investor. The promissory note matures on the earlier of (i) June 15, 2025 or (ii) upon the Company receiving $ 5 million in gross proceeds from a subsequent capital raise. Interest accrues at a rate of 5.0 % per annum, payable at maturity. F- 36