What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-13 compared with 2025-03-12 · 320 added, 291 removed, 191 unchanged (76% of the section changed)

11 unchanged sentences

are a preclinical-stage synthetic allogeneic iMSC therapy company.

Our vision is to improve the lives of patients with difficult-to-treat

diseases through innovative, effective, and safe, but accessible cellular therapies, and our mission is to develop allogenic off-the-shelf

cellular therapies, leveraging induced pluripotent stem cell (“iPSC”)-derived mesenchymal stem cells (“iMSCs”)

to target solid tumors and autoimmune diseases.

2024 Transactions

to exchange agreements we entered into on September 24, 2024 with the holders of certain of our warrants and convertible notes, on October

29, 2024, we issued an aggregate of 38.3 million shares of our common stock in exchange for:

(i) warrants to purchase an aggregate of

approximately 4.4 million shares of our common stock that we issued in December 2022 with an exercise price of $1.43 per share;

$8.7 million in the aggregate principal amount of convertible notes that we issued in July 2023 and warrants to purchase an aggregate

of approximately 6.1 million shares of our common stock that we issued in July 2023 with an exercise price of $1.43 per share;

$9.2 million in the aggregate principal amount of convertible notes that we issued in December 2023 and warrants to purchase an aggregate

of approximately 9.6 million shares of our common stock that we issued in December 2023 with an exercise price of $1.43 per share (the

“exchange transactions”).

holders of the warrants described in the paragraph above exchanged all their warrants for shares of our common stock at an exchange ratio

of 0.5 of a share of common stock for every one share of common stock issuable upon exercise of the applicable warrant (rounded up to

the nearest whole number), and the holders of the convertible notes described in the paragraph above exchanged all their convertible

notes for shares of our common stock at an exchange ratio equal to (A) the sum expressed in U.S.

dollars of (1) the principal amount

of the applicable convertible note, plus (2) all accrued and unpaid interest thereon through the date the applicable convertible note

is exchanged plus (3) all interest that would have accrued through, but not including, the maturity date of applicable convertible note

if it was outstanding from the date such convertible note is exchanged through its maturity date, divided by (B) $1.00 (rounded up to

the nearest whole number).

of Bridge Notes

September 24, 2024, we closed a private placement in which we sold an aggregate principal amount of approximately $3.9 million of 12.0%

senior convertible notes (the “bridge notes”).

October 29, 2024, in accordance with the terms of the bridge notes, approximately $3.0 million of the principal amount of the bridge

notes plus all accrued and unpaid interest thereon, plus such amount of interest that would have accrued on the principal amount through

December 24, 2024, was automatically converted at a conversion price of $0.50 into 6.2 million shares of our common stock, and approximately

$0.9 million of the principal amount of the bridge notes plus all accrued and unpaid interest thereon, plus such amount of interest that

would have accrued on the principal amount through December 24, 2024, was automatically converted at a conversion price of $0.50 into

pre-funded warrants to purchase 1.8 million shares of our common stock.

to a securities purchase agreement we entered into with certain investors on September 24, 2024, on October 29, 2024, we closed a private

placement (the “common stock private placement” and together with the bridge notes and the exchange transactions, the “September

2024 Transactions”) in which we sold an aggregate of 1.4 million shares of our common stock and pre-funded warrants to purchase

0.1 million shares of our common stock at a purchase price of $0.75 per share of common stock and $0.745 per pre-funded warrant.

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

For additional information regarding this private

placement, see Note 6 to the accompanying consolidated financial statements.

additional information regarding the September 2024 Transactions, see Note 6 to the accompanying consolidated financial statements.

total, the Company issued approximately 45.9 million shares of common stock and 1.9 million pre-funded warrants on October 29, 2024 pursuant

to the private placement, the exchange transactions and the conversion of the bridge notes discussed above and had 51.4 million shares

of common stock issued and outstanding after the closing of the September 2024 Transactions.

October 2022, we entered into a sublease for office and laboratory space in Somerville, Massachusetts.

In connection with entering into

the sublease, we delivered a security deposit in the form of a letter of credit in the amount of $4.1 million.

The letter of credit was

collateralized with $4.1 million of cash deposited in a restricted account.

August 5, 2024, the sublessor drew down on the letter of credit for the full $4.1 million to cover the approximately $4.0 million of

past due rent payments for February 2024 through August 2024, plus interest and penalties.

August 9, 2024, we and the sublessor entered into a sublease termination agreement pursuant to which the parties agreed to terminate

the sublease effective August 31, 2024.

Pursuant to the sublease termination agreement, we agreed to surrender and vacate the premises,

all of our right, title and interest in all furniture, fixtures and laboratory equipment at the premises will become the property of

the sublessor, and both parties will be released of their obligations under the sublease.

As a result of the sublease termination, we

recognized a gain on lease termination of approximately $1.6 million for the year ended December 31, 2024, and we expect to save approximately

$72 million in base rental payments, parking, operating expenses, taxes and utilities that we would have paid over the remaining lease

iMSCs are induced pluripotent stem cell-derived mesenchymal stem cells.

We envision a future where cell therapies powered by synthetic iMSCs can offer new options for patients with limited treatment paths,

and our mission is to transform the treatment of cancer and autoimmune disease by developing scalable, affordable, off-the-shelf cell

therapies that restore hope.

Public Offering

February 6, 2026, we entered into a placement agency agreement (the “Placement Agency Agreement”) with Brookline Capital

Markets, a division of Arcadia Securities, LLC (the “Placement Agent”), pursuant to which we engaged the Placement Agent

for the public offering of (i) 19.0 million shares (the “Shares”) of our common stock and accompanying warrants to purchase 19.0 million shares of common stock (the “Milestone Warrants”), at a

combined offering price of $0.50 per share of common stock and accompanying Milestone Warrant and (ii) pre-funded warrants (the “Pre-Funded

Warrants”) to purchase 2.0 million shares of common stock and accompanying Milestone Warrants to purchase 2.0 million shares of

common stock, at a combined offering price of $0.49 per Pre-Funded Warrant and accompanying Milestone Warrant ( the “2026 Offering”).

In connection with the 2026 Offering, we also entered into a securities purchase agreement (each, a “Purchase Agreement”)

with certain investors who purchased Shares, Pre-Funded Warrants and Milestone Warrants in the 2026 Offering.

Pre-Funded Warrants are immediately exercisable subject to certain ownership limitations, have an exercise price of $0.01 per share,

and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.

On February 11, 2026 and February 18, 2026, the holder of the Pre-Funded Warrants exercised 1.3 million and 0.7 million Pre-Funded Warrants,

respectively, for an aggregate exercise price of approximately $20,000.

There are no remaining Pre-Funded Warrants related to the 2026

Offering outstanding.

February 6, 2026, the Milestone Warrants commenced trading on The Nasdaq Capital Market under the symbol “ERNAW.” The Milestone

Warrants are immediately exercisable subject to certain ownership limitations, have an exercise price of $0.68 per share, and expire

on the earlier of (i) the five (5)-year anniversary of the original issuance date or (ii) the 180 th calendar day following

the public release by us of clinical trial data from the first cohort of the Phase 1 study of ERNA-101.

to the Placement Agency Agreement, we paid the Placement Agent an aggregate cash fee of approximately $0.5 million, which was equal to

6.5% of the aggregate purchase price paid by investors in the Offering (or 1.5% with respect to certain existing investors).

also pay the Placement Agent a cash fee as compensation for gross proceeds we receive from any exercise of any Milestone Warrants sold

in connection with the 2026 Offering, payable quarterly on each January 1, April 1, July 1 and October 1 following the closing of the

2026 Offering (or the following business day if such day is not a business day), at the same percentage and as calculated in the manner

as set forth above.

We also issued approximately 0.2 million shares of common stock to the Placement Agent, which was equal to 1.5% of

the aggregate number of Shares and Pre-Funded Warrants sold in the Offering (or 0.5% with respect to sales to certain existing investors).

In addition, we reimbursed the Placement Agent for its accountable offering-related legal expenses in an amount of $125,000.

2026 Offering closed on February 10, 2026, for aggregate gross proceeds of approximately $10.5 million before deducting Placement Agent

fees and other offering expenses payable by us.

We intend to use the net proceeds from the 2026 Offering to support the advancement of

our development programs, working capital and general corporate purposes.

Placement Agency Agreement and the Purchase Agreements contain customary representations, warranties and agreements by us, customary

conditions to closing, indemnification obligations of us, the Placement Agent, or the investors, as the case may be, and other obligations

of the parties.

to the terms of the Purchase Agreements and the Placement Agency Agreement, we have agreed that for a period of ninety (90) days from

the closing of the 2026 Offering, that neither we nor any subsidiary may (i) issue, enter into any agreement to issue or announce the

issuance or proposed issuance of any shares of common stock or common stock equivalents or (ii) file any registration statement or prospectus,

or any amendment or supplement thereto, in each case, subject to certain exceptions.

We have also agreed not to effect or enter into

an agreement to effect any issuance of common stock or common stock equivalents involving a Variable Rate Transaction, as defined in

the Purchase Agreements, for a period of ninety (90) days following the closing of the 2026 Offering, subject to certain exceptions,

unless waived by the Placement Agent.

In addition, as part of the Purchase Agreement, subject to certain exceptions, our officers and

directors entered into lock-up agreements, pursuant to which they agreed not to sell or otherwise dispose of any of the common stock

for a period of ninety (90) days following the date of closing of the 2026 Offering.

February 10, 2026, we also entered into a Warrant Agent Agreement with the transfer agent

pursuant to which the transfer agent agreed to act as warrant agent with respect to the Milestone Warrants.

to Restated Articles of Incorporation, as Amended

June 2, 2025, we filed a certificate of amendment to our Restated Certificate of Incorporation, as amended (the “Amended COI”),

with the Secretary of State of Delaware to increase the authorized shares of our common stock from 100 million to 150 million (the “Authorized

Shares Amendment”).

effective June 2, 2025, we filed a certificate of amendment to our Amended COI with the Secretary of State of Delaware to allow for action

required or permitted to be taken by our stockholders to be effected by written consent of such stockholders in addition to duly called

annual or special meetings of such stockholders (“the Written Consent Amendment”)

June 10, 2025, we filed a certificate of amendment to our Amended COI with the Secretary of State of Delaware to effect a reverse stock

split of our common stock at a ratio of 1-for-15 effective at 12:01 a.m.

(the “Reverse Stock Split”).

Upon the effectiveness

of the Reverse Stock Split, every fifteen shares of the issued and outstanding common stock were automatically combined and reclassified

into one issued and outstanding share of common stock.

The Reverse Stock Split did not alter the par value of the common stock, and the

number of authorized shares of common stock remains unchanged at 150 million.

No fractional shares were issued in connection with the

Reverse Stock Split, and no cash or other consideration was paid in connection with any fractional shares.

Stockholders who otherwise

would have held a fractional share after giving effect to the Reverse Stock Split instead owned one whole share of the post-reverse stock

split common stock.

We issued an aggregate of 153 shares for rounding up fractional shares to whole shares.

share and per share data in this Annual Report have been adjusted for all periods presented to reflect the Reverse Stock Split.

Authorized Shares Amendment, Written Consent Amendment, and Reverse Stock Split Amendment were approved by our stockholders at our 2025

Annual Meeting of Stockholders on June 2, 2025 (the “Annual Meeting”).

Private Placement of Equity

March 31, 2025, we entered into a securities purchase agreement (the “SPA”) with certain accredited investors and a related

registration rights agreement.

Pursuant to the SPA, we agreed to issue and sell to the investors, and the investors agreed to purchase,

in a private placement, an aggregate of approximately 4,621,000 shares of common stock at a purchase price of $1.569 per share (or pre-funded

warrants in lieu of common stock at a purchase price of $1.494 per pre-funded warrant).

The pre-funded warrants will be exercisable until

exercised in full at a nominal exercise of $0.075 per share and may not be exercised to the extent such exercise would cause the holder

to beneficially own more than 4.99% or 9.99%, as applicable, of our outstanding common stock.

the initial closing of the SPA on April 2, 2025 (the “First Closing”), we sold to the investors an aggregate of approximately

662,000 shares of common stock and 34,000 pre-funded warrants (such shares, including the shares underlying the pre-funded warrants,

equal to 19.99% of our outstanding shares as of March 31, 2025).

Following shareholder approval at the Annual Meeting, on June 9, 2025,

we sold to the investors an aggregate of approximately 3,182,000 shares of common stock and 622,000 pre-funded warrants, and on June

27, 2025, we sold the remaining approximately 121,000 shares of common stock (the June 9, 2025 and June 27, 2025 issuances collectively

referred to as the “Second Closing”).

The Company raised approximately $7.2 million in gross proceeds under the SPA.

of Presentation

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

(“Lineage”), under which we granted Lineage an option to obtain an exclusive sublicense to certain of our technology

for preclinical, clinical and commercial purposes in exchange for a non-refundable up-front payment to us of $0.3 million.

2023, Lineage requested that we begin developing certain induced pluripotent stem cell lines in exchange for a cell line customization

Lineage paid us $0.4 million towards the customization fee, which we were recognizing ratably over the customization period.

September 24, 2024, we entered into an agreement with Factor Bioscience whereby we assigned the Lineage Agreement to Factor Bioscience

(the “Lineage Assignment Agreement”).

The Lineage Assignment Agreement with Factor Bioscience.

assigns all our rights and

obligations under that the Lineage Agreement to Factor Bioscience.

Payments to us related to the Lineage Agreement will now be subject

to the Lineage Assignment Agreement, which provides for Factor Bioscience paying us thirty percent (30%) of all amounts it receives from

Lineage in the event that Lineage obtains a sublicense from Factor Bioscience.

Upon receipt of future payments for the customization

activities set forth in the Lineage Agreement, Factor Bioscience will pay us twenty percent (20%) of all amounts Factor Bioscience receives

from Lineage.

Because we have no further obligations under the agreement with Lineage, we have fully recognized as revenue amounts previously

recorded in deferred revenue of approximately $0.5 million for the year ended December 31, 2024.

For additional information, see Note

5 to the accompanying consolidated financial statements.

We have no other revenue generating contracts at this time.

is related to an exclusive option and license agreement we had with a customer, under which we granted the customer an option to obtain

an exclusive sublicense to certain of our technology for preclinical, clinical and commercial purposes in exchange for a non-refundable

up-front payment to us of $0.3 million.

We also began developing certain induced pluripotent stem cell lines in exchange for a cell line

customization fee.

The customer paid us $0.4 million towards the customization fee, which we were recognizing ratably over the customization

period for the year ended December 31, 2024.

The Company did not recognize any revenue during the year ended December 31, 2025.

September 2024, we entered into an agreement with Factor Limited (and together with Factor Bioscience Inc.

and its other affiliates,

“Factor Bioscience”) whereby we assigned the customer contract to Factor Bioscience (the “Assignment Agreement”).

The Assignment Agreement with Factor Bioscience assigned all our rights and obligations under the customer contract to Factor Bioscience.

Payments to us related to the customer contract will now be subject to the Assignment Agreement, which provides for Factor Bioscience

paying us thirty percent (30%) of all amounts it receives from the customer in the event that the customer obtains a sublicense from

Factor Bioscience.

Upon receipt of future payments for the customization activities set forth in the customer contract, Factor Bioscience

will pay us twenty percent (20%) of all amounts Factor Bioscience receives from the customer.

For the year ended December 31, 2025, we

received approximately $0.5 million from Factor Bioscience under the Assignment Agreement, which is recognized as other income in the

consolidated statements of operations, as this income did not qualify as revenue.

we have no further obligations under the agreement with the customer, there is no revenue recognized for the year ended December 31,

For additional information, see Note 4 to the accompanying consolidated financial statements.

We have no other revenue generating

contracts at this time.

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

As provided for in the A&R Factor

License Agreement discussed in Note 11 to the accompanying consolidated financial statements, we were obligated to pay Factor Limited

20% of any amounts we receive from a customer that was related to the licensed technology under the A&R Factor License Agreement,

which we also recognize as a cost of revenue.

We were also obligated to pay Factor

Bioscience 20% of any amounts we received from the customer contract discussed above under a previous license agreement we had

with Factor Bioscience, which has since been terminated, and such costs were also recognized as cost of revenues.

and Development Expenses

8 unchanged sentences

well as allocations of various overhead costs related to our product development efforts.

have contracted with third parties to perform various studies.

have contracted with third parties to perform various services.

The financial terms of these agreements vary from contract to contract

16 unchanged sentences

Cost of revenues

Gross income (loss)

Operating expenses:

2 unchanged sentences

Gain on lease termination

Acquisition of Exacis

Total operating expenses

Loss from operations

Other (expense) income, net:

Loss on extinguishment of debt

Other expense, net:

Forward sales contract expense

Gain (loss) on extinguishment of debt

Change in fair value of convertible notes

Change in fair value of bridge notes derivative

Change in fair value to bridge notes derivative

Change in fair value of warrant liabilities

Change in fair value of contingent consideration

Loss on non-controlling investment

Interest income

Interest expense

Other income (expense),

other expense, net

Other income, net

Total other expense, net

Loss before income taxes

(Provision) benefit for income taxes

the years ended December 31, 2024 and 2023, we recognized revenue related to the cell line customization activities we performed for

The increase in revenue is due to accelerating the recognition of approximately $0.5 million of deferred revenue related to

nonrefundable payments we received from Lineage due to the Lineage Assignment Agreement we entered into on September 24, 2024 with Factor

Bioscience discussed earlier.

As of December 31, 2024, we did not have any deferred revenue balances on our consolidated balance sheet.

the years ended December 31, 2024 and 2023, our cost of revenues included direct labor and materials to perform the customization cell

line activities for Lineage.

The decrease in cost of revenue was primarily related to a 20% license fee paid to Factor Bioscience during

the year ended December 31, 2023 related to the Lineage Agreement, which was not repeated in 2024.

Benefit (provision) for income taxes

the year ended December 31, 2024, we recognized revenue related to the cell line customization activities we performed for a customer,

including the acceleration of recognizing approximately $0.5 million of deferred revenue related to nonrefundable payments we received

from the customer due to the Assignment Agreement we entered into on September 24, 2024 with Factor Limited discussed earlier.

not have any revenue recognizing contracts during the year ended December 31, 2025.

the year ended December 31, 2024, our cost of revenues included direct labor and materials to perform customization cell line activities

for a customer.

We did not have any cost of revenues during the year ended December 31, 2025.

and Development Expenses

ended December 31,

Professional fees

MSA/license expense

(in thousands)

MSA/license fees

Payroll-related

Stock-based compensation

Allocated occupancy expense

Professional fees

Other expenses, net

1 unchanged sentence

research and development expenses decreased by approximately $0.5 million for the year ended December 31, 2025 compared to the year ended

December 31, 2023, primarily due to decreased professional fees due to a reduction in consultant services, MSA/license fees as a result

of the new Factor L&C Agreement, payroll-related expenses and stock-based compensation from a reduction in headcount, and other expenses

incurred during 2023 related to closing down a clinical trial we ended in 2022.

December 31, 2024, primarily due to decreased MSA/license fees as a result of the new Factor L&C Agreement and payroll-related expenses,

offset by increased professional fees due to an increase in consulting services, third party study fees related to our development programs,

and other expenses incurred for the year ended December 31, 2025 compared to the year ended December 31, 2024.

and Administrative Expenses

ended December 31,

(in thousands)

Occupancy expense

Professional fees

1 unchanged sentence

Stock-based compensation

Occupancy expense

Other expenses, net

general and administrative expenses

Total general and administrative

general and administrative expenses decreased by approximately $8.0 million for the year ended December 31, 2025 compared to the year

ended December 31, 2023 primarily due to decreases in professional fees related to legal services and consultants, insurance expense

due to lower premiums and payroll-related expenses resulting from less severance expense during the year ended December 31, 2024 compared

to the year ended December 31, 2023.

These decreases were offset by increased occupancy expense related to our Somerville sublease that

we began to incur expense for in July 2023 and was terminated effective August 31, 2024, as well as increased stock-based compensation

due to stock option awards granted to the chief executive officer during the year ended December 31, 2024.

ended December 31, 2024 primarily due to decreases in occupancy expense as a result of terminating our Somerville sublease effective

August 31, 2024, professional fees related to a reduction in legal services for litigation matters and consultants, insurance expense

due to lower premiums and payroll-related expenses during the year ended December 31, 2025 compared to the year ended December 31, 2024.

on Lease Termination

August 2024, we and the sublessor of our Somerville sublease entered into a sublease termination agreement effective August 31, 2024.

Pursuant to the sublease termination agreement, we agreed to surrender and vacate the premises, all of our right, title and interest

Pursuant to this sublease termination agreement, we agreed to surrender and vacate the premises, all of our right, title and interest

in all furniture, fixtures and laboratory equipment at the premises will become the property of the sublessor, and both parties will

3 unchanged sentences

There was no similar transaction during the year ended December 31,

of Exacis In-Process Research and Development

April 2023, we acquired from Exacis substantially all of its intellectual property assets, including all of its right, title and interest

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

The Purchased License was

determined to be an in-process research and development (“IPR&D”) asset that has no alternative future use and no separate

economic value from its original intended purpose, which is therefore expensed in the period the cost is incurred.

As a result, we expensed

the fair value of the Purchased License of approximately $0.5 million during the year ended December 31, 2023.

For additional information,

see Note 4 to the accompanying financial statements included in this report.

There was no similar transaction during the year ended December

on Extinguishment of Debt

recognized a $22.4 million loss on extinguishment of debt for the year ended December 31, 2024 related to the exchange transaction and

common stock private placement entered into on September 24, 2024.

There was no similar transaction during the year ended December 31,

See Note 6 to the accompanying consolidated financial statements for more information on the exchange transaction and common stock

private placement.

in Fair Value of Convertible Notes

the modification of our convertible notes was accounted for as an extinguishment of debt and marked to fair value as of September

24, 2024 upon modification, we recognized income of approximately $1.0 million during the year ended December 31, 2024 related to

the change in fair value of the convertible notes.

This was due to such convertible notes being marked to fair value as of October 29, 2024

when such convertible notes were converted to shares of common stock.

There was no similar transaction during the year ended

sales contract expense

the year ended December 31, 2025, we recognized $5.8 million in expense related to a forward sales contract for the sale of shares of

the Company’s common stock and prefunded warrants (the “2025 Private Placement”), $5.3 million of which was initially

recognized at the contract inception date because the fair value of the shares that were expected to be issued under a securities purchase

agreement (the “2025 SPA”) exceeded the proceeds, and the remaining $0.5 million loss was related to the change in fair value

that was remeasured immediately prior to the respective settlement of the shares issued under the 2025 SPA.

See Note 15 to the accompanying

consolidated financial statements for more information on the 2025 Private Placement.

There was no similar transaction for the year ended

December 31, 2024.

(Loss) on Extinguishment of Debt

the year ended December 31, 2025, we recognized a gain on extinguishment of debt of approximately $0.8 million related to liabilities

that have been deemed to be time-barred from collection under the respective state laws.

See Note 10 to the accompanying consolidated

financial statements for more information.

the year ended December 31, 2024, we recognized a $22.4 million loss on extinguishment of debt related to (i) agreements to exchange

certain convertible notes and warrants into shares of our common stock (the “Exchange Agreements”) and (ii) a securities

purchase agreement for the sale of common stock (the “2024 Private Placement”), both of which were entered into on September

See Note 15 to the accompanying consolidated financial statements for more information on these transactions.

in Fair Value of Convertible Notes

the modification of our convertible notes was accounted for as an extinguishment of debt and marked to fair value upon entering into

the Exchange Agreements, we recognized income of approximately $1.0 million during the year ended December 31, 2024 related to the change

in fair value of the convertible notes.

This was due to such convertible notes being marked to fair value as of October 29, 2024 when

such convertible notes were converted to shares of common stock.

There was no similar transaction during the year ended December 31,

in Fair Value of Bridge Notes Derivative Liability

recognized expense of $1.6 million related to the initial measurement at September 24, 2024 of the incremental fair value of the bridge

notes derivative liability over the carrying value due to bifurcation of the conversion feature (recognized as a derivative liability)

from the bridge notes.

This was offset by $0.1 million in income recognized for the change in fair value of the bridge notes derivative

liability due to remeasuring the liability during the year ended December 31, 2024.

There was no similar transaction during the year

ended December 31, 2023.

recognized expense of $1.6 million during the year ended December 31, 2024 related to the initial measurement of the incremental fair

value of a derivative liability for convertible bridge notes we entered into (the “Bridge Notes”) over the carrying value

of the Bridge Notes due to bifurcation of an embedded conversion feature.

This expense was offset by a $0.2 million credit for the change

in fair value of the Bridge Notes derivative liability due to remeasuring the liability at each reporting period or immediately prior

to converting the Bridge Notes into shares of our common stock.

There was no similar transaction during the year ended December 31, 2025.

See Note 11 to the accompanying consolidated financial statements for more information on the Bridge Notes.

in Fair Value of Warrant Liabilities

recognized income of $0.4 million and $0.2 million for the years ended December 31, 2024 and 2023, respectively, for the change in the

fair value of our warrant liabilities.

The change in fair value of warrant liabilities for the year ended December 31, 2024 includes

certain warrants that were reclassified to a liability in September 2024 and then exchanged for shares of common stock in October 2024

as part of the September 2024 Transactions described above.

See Note 6 to the accompanying consolidated financial statements for more

information on the exchanged warrants.

change in the fair value of the warrant liabilities for the year ended December 31, 2025 was de minimis.

We recognized income

of $0.4 million for the year ended December 31, 2024 for the change in the fair value of our warrant liabilities, which includes certain

warrants under the Exchange Agreements that were reclassified to a liability in September 2024 and then exchanged for shares of common

stock in October 2024.

See Note 15 to the accompanying consolidated financial statements for more information on the exchanged warrants.

in Fair Value of Contingent Consideration

the closing date of the acquisition of assets from Exacis in April 2023, we recognized a contingent consideration liability of $0.2 million

for future payments that may be payable to Exacis, which was included as part of the $0.5 million fair value of the Purchased License

asset and expensed as IPR&D during the year ended December 31, 2023.

This contingent consideration liability is remeasured at each

period end, and any change in the fair value of the contingent liability is recognized in the statement of operations.

As of December

31, 2024 and 2023, we remeasured the contingent liability and recognized income of $0.1 million for each of the years ended December

31, 2024 and 2023 due to the decrease in the fair value of the contingent consideration liability.

on Non-Controlling Investment

account for our 25% non-controlling investment in NoveCite, Inc.

(“NoveCite”) under the equity method.

We have not guaranteed

any obligations of NoveCite, nor are we otherwise committed to providing further financial support for NoveCite.

Therefore, we only record

25% of NoveCite’s losses up to our investment carrying amount.

As a result, we did not recognize additional losses related to NoveCite

for the year ended December 31, 2024.

We recognized a loss of approximately $0.1 million for the year ended December 31, 2023.

recognized an increase in interest income for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to having

our cash into interest bearing accounts for the full year of 2024 compared to 2023.

recognized an increase in interest expense for the year ended December 31, 2024 of approximately $6.1 million compared to the year ended

December 31, 2023 primarily due to interest expense and amortization of debt issuance costs associated with the 2023 convertible note

financings and the 2024 bridge notes.

Income (Expense), Net

ended December 31,

Other income (expense),

the year ended December 31, 2024, we recognized other income related to amounts earned from Factor Bioscience under the Lineage Assignment

Agreement entered into in September 2024.

For the year ended December 31, 2023, we recognized (a) commitment fees and other fees related

to the SEPA we entered into with Lincoln Park in April 2023 and (b) other miscellaneous expense.

for Income Taxes

2024, we expect to incur state income tax liabilities related to our operations.

We have established a full valuation allowance for all

deferred tax assets, including our net operating loss carryforwards, since we could not conclude that we were more likely than not able

to generate future taxable income to realize these assets.

The effective tax rate differs from the statutory tax rate due primarily to

our full valuation allowance.

of December 31, 2024, we remeasured a contingent liability and recognized a credit of less than $0.1 million for the year ended December

31, 2024 due to a decrease in the fair value of the liability.

There were no amounts recognized for the year ended December 31, 2025.

The contingent consideration liability will expire in April 2026.

recognized a decrease in interest income of approximately $0.2 million for the year ended December 31, 2025 compared to the year ended

December 31, 2024 due to lower cash balances in interest-bearing accounts.

recognized a decrease in interest expense for the year ended December 31, 2025 of approximately $6.7 million compared to the year ended

December 31, 2024 primarily due to no longer having convertible notes outstanding during the year ended December 31, 2025 as a result

of the Exchange Agreements entered into during the year ended December 31, 2024.

the year ended December 31, 2025, we recognized approximately $0.5 million of income from Factor Limited as a result of the Assignment

Agreement, offset by approximately $0.2 million of financing fees that we expensed for the 2025 Private Placement, as the related securities

purchase agreement was accounted for as a liability until its settlement.

See Note 15 to the accompanying consolidated statement of operations

for more information on the 2025 Private Placement.

the year ended December 31, 2024, we recognized other income related to amounts earned from Factor Limited under the Assignment Agreement

of approximately $0.1 million.

(Provision) for Income Taxes

the year ended December 31, 2025, we incurred state minimum income tax liabilities related to our operations.

However, we recognized

an overall income tax benefit due to a reduction of a deferred tax liability, which was recorded through the accompanying consolidated

statement of operations.

We continue to maintain a full valuation allowance for all deferred tax assets, including our net operating

loss carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these

The effective tax rate differs from the statutory tax rate due primarily to our full valuation allowance.

and Capital Resources

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incurred a net loss of $14.1 million, and we used $7.0 million of cash in operating activities.

On March 11, 2025,

we 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 us receiving greater than $5 million in aggregate proceeds

from a subsequent capital raise.

Interest accrues at a rate of 5.0% per annum, payable at maturity.

October 29, 2024, we also received approximately $1.1 million upon the closing of the common stock private placement.

Other than the

proceeds raised under the bridge notes and the common stock private placement, our sole source of liquidity is through sales of our common

stock under the SEPA, pursuant to which Lincoln Park committed to purchase up to $10.0 million of our common stock.

Such sales of common

stock by us, if any, are subject to certain conditions and limitations set forth in the SEPA, including a condition that we may not direct

Lincoln Park to purchase any shares of common stock under the SEPA if such purchase would result in Lincoln Park beneficially owning

more than 4.99% of our issued and outstanding shares of common stock.

Sales under the SEPA may occur from time to time, at our sole discretion,

through April 2025.

To date, we have issued and sold approximately 214,000 shares of our common stock to Lincoln Park, including approximately

74,000 commitment shares, and have received approximately $0.3 million in gross proceeds from such sales.

We sold no shares under the

SEPA during the year ended December 31, 2024.

March 11, 2025 and March 20, 2025, we received $1.5 million and $0.8 million, respectively, for the issuance of two promissory notes

with an aggregate principal amount of $2.3 million to an investor.

The promissory notes had a maturity date of the earlier of (i) June

15, 2025 or (ii) upon us receiving greater than $5 million in aggregate proceeds from a subsequent capital raise.

Interest accrued at

a rate of 5.0% per annum, payable at maturity.

During the year ended December 31, 2025, the Company repaid the notes in full for $2.3

million, including accrued interest.

the year ended December 31, 2025, we raised $7.2 million in gross proceeds from the 2025 Private Placement.

We used a portion of the

proceeds from this financing to repay the notes, as discussed above.

May 1, 2025, our $10.0 million standby equity purchase agreement (“SEPA”) with Lincoln Park Capital Fund, LLC

(“Lincoln Park”) expired.

The Company did not sell any shares of common stock under the SEPA during either of the years

ended December 31, 2025 or 2024.

We do not currently have a new SEPA in place.

February 10, 2026, we received approximately $9.6 million in net proceeds from the 2026 Offering of (i) 21.0 million shares of the Company’s

common stock or pre-funded warrants and (ii) accompanying warrants to purchase 21.0 million shares of the Company’s common stock

(the “Milestone Warrants”).

on our current financial condition and forecasts of available cash, we will not have sufficient capital to fund our operations for the

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We will continue to evaluate and plan to raise additional funds to support our working capital needs through public

or private equity offerings, debt financings, strategic partnerships, out-licensing our intellectual property or other means.

be no assurance that capital will be available when needed or that, if available, it will be obtained on terms favorable to us and our

stockholders.

Our ability to raise capital through sales of our common stock will depend on a variety of factors including, among others,

market conditions, the trading price and volume of our common stock, and investor sentiment.

In addition, macroeconomic factors and volatility

in the financial market, which may be exacerbated in the short term by concerns over inflation, interest rates, impacts of the wars in

Ukraine and the Middle East, strained relations between the U.S.

and several other countries, and social and political discord and unrest

in the U.S., among other things, may make equity or debt financings more difficult, more costly or more dilutive to our stockholders.

or private equity offerings, debt financings, strategic partnerships, out-licensing our intellectual property, grants or other means.

There can be no assurance that capital will be available when needed or that, if available, it will be obtained on terms favorable to

us and our stockholders.

Our ability to raise capital through sales of our common stock will depend on a variety of factors including,

among others, market conditions, the trading price and volume of our common stock, and investor sentiment.

In addition, macroeconomic

factors and volatility in the financial market, which may be exacerbated in the short term by concerns over inflation, interest rates,

impacts of the wars in Ukraine and the Middle East, strained relations between the U.S.

and several other countries, and social and political

discord and unrest in the U.S., among other things, may make equity or debt financings more difficult, more costly or more dilutive to

our stockholders.

addition, equity or debt financings may have a dilutive effect on the holdings of our existing stockholders, and debt financings may

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arrangements, we may be required to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to

prepared the accompanying condensed consolidated financial statements on a going concern basis, which assumes that we will realize our

assets and satisfy our liabilities in the normal course of business.

As discussed above, there is substantial doubt about our ability

to continue as a going concern because we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements

over at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements.

The accompanying

condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability

and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty

of our ability to remain a going concern.

addition, while we are not presently pursuing product development, we may do so in the future.

Developing product candidates, conducting

clinical trials and commercializing products requires substantial capital, and we would need to raise substantial additional funds if

we were to pursue the development of one or more product candidates.

flows from operating, investing and financing activities, as reflected in the accompanying condensed consolidated statements of cash

flows, are summarized as follows:

prepared the accompanying consolidated financial statements on a going concern basis, which assumes that we will realize our assets and

satisfy our liabilities in the normal course of business.

As discussed above, there is substantial doubt about our ability to continue

as a going concern because we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over

at least the next 12 months from the date of issuance of the accompanying consolidated financial statements.

The accompanying consolidated

financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification

of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain

a going concern.

flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are

summarized as follows:

the years ended

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Investing activities

Net decrease in cash

and cash equivalents

Financing activities

Net increase (decrease)

in cash and cash equivalents

Cash Used in Operating Activities

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This change was due a $6.8 million decrease in net loss, after giving effect to adjustments made for non-cash

transactions, primarily due to an increase in recognition of revenue as well as a reduction in professional and consulting expenses,

offset by a slight increase of $0.1 million in cash used in operating assets and liabilities for the year ended December 31, 2024 compared

to the year ended December 31, 2023.

transactions, primarily due to a decrease in occupancy expense and professional fees, and by a decrease of $2.0 million in cash used

in operating assets and liabilities for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily related

to terminating our facility sublease and reduced payments to Factor limited.

Cash Used in Investing Activities

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Cash Provided by Financing Activities

cash provided by financing activities for the year ended December 31, 2024 includes approximately $6.4 million of gross proceeds received

from the convertible note financing, the bridge note financing and the common stock private placement that occurred in January 2024,

September 2024 and October 2024, respectively.

Net cash provided by financing activities for the year ended December 31, 2023 includes

approximately $16.5 million of gross proceeds from convertible note financings and $0.3 million of proceeds received from selling approximately

214,000 shares to Lincoln Park under the SEPA.

The Company did not sell any shares under the SEPA during the year ended December 31,

cash provided by financing activities for the year ended December 31, 2025 includes $2.3 million of gross proceeds received from the

issuance of two promissory notes and $4.9 million of proceeds received from the 2025 Private Placement, net of offsetting $2.3 million

of a receivable related to 2025 Private Placement due from a related party with the outstanding notes payable, including accrued interest,

due to the same related party.

cash provided by financing activities for the year ended December 31, 2024 includes $6.3 million of gross proceeds received from (i)

the issuance of convertible notes in January 2024 and the fees related to such issuance and (ii) proceeds received from the Bridge Notes

and 2024 Private Placement.

Sheet Arrangements

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and estimates used in the preparation of our consolidated financial statements.

Impairment Evaluation

represents the excess of the purchase price over the fair value of identifiable assets acquired and the liabilities assumed.

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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.

in an amount equal to the excess fair value.

Company performed its annual qualitative assessments as of December 31, 2025 and 2024, and based on those assessments, 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.

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, 2025 and 2024, and the goodwill was considered not impaired.

Therefore, the Company did not

recognize an impairment charge during the years ended December 31, 2025 and 2024.

However, the decline in the Company’s stock price

during the first quarter of 2026 has increased the likelihood that the fair value of the reporting unit may be below its carrying value

as of March 31, 2026, which could result in the recognition of a goodwill impairment charge for the three months ended March 31, 2026.

Accounting Pronouncements

Adopted Accounting Standards

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.

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 our consolidated financial statements.

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.

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 our consolidated financial statements,

but did result in additional disclosures made in the notes to the consolidated financial statements.

December 2023, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”)

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.

2023-09 was effective for fiscal years beginning after December 15, 2024 and allowed for adoption on a prospective basis, with a

retrospective option.

We adopted this ASU on a prospective basis, and it did not have an impact to our consolidated financial statements,

but it did result in additional disclosures made in the notes to the consolidated financial statements.

Issued Accounting Standards to be Adopted

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Early adoption is prohibited.

The Company does not expect the amendments in this ASU to have a material

impact on its consolidated financial statements.

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.

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.

We do not expect the adoption of this ASU to have a material

impact on our consolidated financial statements.

We do not expect the amendments in this ASU to have a material impact on

our consolidated financial statements.

November 2024, the FASB issued ASU No.

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instruments should be accounted for as an induced conversion.

2024-04 is effective for annual reporting periods beginning

after December 15, 2025 and interim reporting periods within those annual reporting periods.

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

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on our consolidated financial statements.

September 2025, the FASB issued ASU No.

2025-06, Intangibles—Goodwill and Other—Internal-Use

Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software.

This ASU modernizes the accounting

for internal-use software costs by removing all references to prescriptive and sequential software development stages and instead requires

capitalization when (i) management has authorized and committed to funding the software project and (ii) it is probable that the project

will be completed and the software will be used to perform the function intended have both occurred.

2025-06 is effective for

fiscal years beginning after December 15, 2027, and interim reporting periods, with early adoption permitted.

We do not expect the amendments

in this ASU to have a material impact on our consolidated financial statements.

December 2025, the FASB issued ASU No.

2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements.

This ASU includes a

disclosure principle that requires entities to disclose events since the end of the last reporting period that have a material impact

on the entity, which is modeled after the SEC disclosure requirement.

This ASU also clarifies the applicability of Topic 270, the types

of interim reporting, and the form and content of interim financial statements in accordance with GAAP.

For public business entities,

this ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption

is permitted.

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

December 2025, the FASB issued ASU No.

2025-12, Codification Improvements.

The amendments in this update represent changes to

the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements.

The amendments in this ASU are varied in nature

and may affect the application of guidance in cases in which the original guidance may have been unclear.

This ASU is effective for all

entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting

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

and Qualitative Disclosures about Market Risk

SEC rules and regulations, as a smaller reporting company we are not required to provide the information otherwise required by this item.

Statements and Supplementary Data

“Index to Consolidated Financial Statements” on page F-1 for the consolidated financial statements filed with this report.

in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 7. Management’s Discussion and Analysis