What changed in this filing

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Item 9A. Controls and Procedures

2026-03-13 compared with 2025-03-12 · 1458 added, 1635 removed, 1111 unchanged (74% of the section changed)

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in accordance with generally accepted accounting principles.

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.

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:

the business process controls related to reviews over technical, complex, and non-recurring

transactions;

additional training to accounting personnel;

external accounting advisors to review management’s conclusions on technical, complex

and non-recurring matters.

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.

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.

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).

of December 31, 2025, our management assessed the effectiveness of our internal control over financial reporting using the criteria set

forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework (2013)

(the “2013 Framework”).

In adopting the 2013 Framework, management assessed the applicability of the principles within each

component of internal control and determined whether they have been adequately addressed within the current system of internal control

and adequately documented.

Based on this assessment, management, under the supervision and with the participation of our Chief Executive

Officer and Senior Vice President of Finance, concluded that, as of December 31, 2025, our internal control over financial reporting

was effective based on these criteria.

in Internal Control over Financial Reporting

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.

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.

the quarter ended December 31, 2025, 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.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

March 10, 2026, the Compensation Committee approved increases to the compensation of our President and Chief Executive Officer, Sanjeev

Luther, and our Senior Vice President of Finance, Sandra Gurrola, effective April 1, 2026.

Luther’s annual base salary increased

from $550,000 to $670,000.

Gurrola’s annual base salary increased from $275,000 to $300,000.

Additionally, the Committee approved

a bonus payment for Ms.

Gurrola in the amount of $68,000 and a bonus in the amount of $319,000 for Mr.

There were no other changes

to any other component of Mr.

Luther’s or Ms.

Gurrola’s executive compensation under our compensation plans and programs

as previously disclosed.

Regarding Foreign Jurisdictions that Prevent Inspections

Executive Officers and Corporate Governance

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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

Life Sciences as a Senior Advisor.

From August 2007 until December 2024, Dr.

Bristol has 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.

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.

He is currently a member of the board of directors of Genuiti.

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.

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.

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.

Bristol holds a Ph.D.

organic chemistry from the University of New Hampshire and a B.S.

in Chemistry from Bates College.

in organic chemistry from the University of New Hampshire and a B.S.

from Bates College.

Bristol’s qualifications to serve on our board of directors include his vast experience in the biopharmaceutical industry, including

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Cicala has served as a member of our board of directors since February 2024.

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.

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.

Cicala has practiced law for over 25 years, and

also has over 10 years of experience as a medicinal chemist.

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.

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

from Seton Hall University School of Law.

in chemistry from Fairleigh Dickinson University and a J.D.

from Seton Hall

University School of Law.

Cicala’s qualifications to serve on our board of directors include his expertise in pharmaceutical and biotechnology intellectual

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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

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.

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in premedical

studies from Columbia University and her M.D.

from State University of New York Medical College.

studies from Barnard College at Columbia University, her MBA at Yale University and her M.D.

from the University of Buffalo.

Ratner’s qualifications to serve on our board of directors include her vast expertise in obstetrics, gynecology and reproductive

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Conduct and Ethics is available under the “Governance” tab of the “Investor Relations” section of our website

located at www.eternatx.com.

located at www.ernexatx.com.

We intend to disclose any changes in our Code of Business Conduct and Ethics or waivers from it that apply

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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

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.

were last described in our proxy statement filed with the SEC on April 14, 2025.

Trading Policy

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.

Executive Compensation

determining executive officer compensation, and the various components that comprise it, our compensation committee evaluates and considers

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Recoupment (Clawback) Policy

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.

clawback policy provides 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.

Executive Officers

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Summary Compensation Table

Name and Principal Position

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

Sandra Gurrola, Sr.

Sandra Gurrola,

Vice President of Finance

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.

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.

a discretionary spot bonus paid to Ms.

Gurrola and approved by our board of directors.

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 14, Stock-Based

Compensation, in the Notes to the Consolidated Financial Statements contained in this Annual Report on Form 10-K.

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.

The amounts reported in this

column represent the Company’s 401(k) match contribution.

to Summary Compensation Table

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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.

salary compensates an executive for performing his or her job responsibilities on a day-to-day basis.

Generally, base salaries are reviewed

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in the competitive marketplace and, with respect to upward adjustments, if we are financially and otherwise able to pay it.

to offer competitive base salaries to help attract and retain executive talent.

offer competitive base salaries to help attract and retain executive talent.

March 2026, our compensation committee approved (i) an increase to Mr.

Luther’s annual base salary from $550,000 to $670,000 and

(ii) an increase to Ms.

Gurrola’s annual base salary from $275,000 to $300,000.

and Incentive Compensation

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executive officer.

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.

In March 2026, our compensation committee approved discretionary bonuses to be paid to Mr.

Luther and Ms.

in the amount of $319,000 and $68,000, respectively, to reward their individual performance during the 2025 fiscal year.

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

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serves as an additional retention measure.

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.

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.

February 2025, we granted to Mr.

Luther and Ms.

Gurrola a time-based non-qualified stock option covering 74,890 shares of common stock

and 10,000 shares of common stock, respectively, 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 each of their continuous service.

fiscal year 2025, no named executive officer received a grant of stock options during the period beginning four business days before,

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as discussed below.

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

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)

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%.

do not maintain any pension benefit or retirement plans other than the 401(k) Plan.

offer to our eligible employees a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, through our

co-employment arrangement with its professional employer organization (“PEO”).

Under this arrangement, the PEO serves as

the plan sponsor and administrator.

Eligible employees may defer up to 100% of their annual compensation or a specific amount imposed

by the Internal Revenue Service, whichever is less.

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 Company match of 4%.

do not maintain any pension benefits or retirement plans other than the 401(k) Plan.

Deferred Compensation

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following the performance year on which such bonus is based.

discussed above, in March 2026, the compensation committee approved an increase to Mr.

Luther’s base salary to $670,000 and a discretionary

bonus of $319,000.

accordance with the terms of his employment agreement, Mr.

Luther was granted an equity award on January 1, 2024 consisting of 112,347

non-qualified stock options, which will vest over a four-year period, with 25% of the options vesting on the first anniversary of the

non-qualified stock options, which would 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.

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release of claims in favor of our company.

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’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.

entered into an employment agreement, dated June 16, 2021, with Sandra Gurrola, which provides for our at-will employment of Ms.

commencing on June 21, 2021 and continuing until terminated by us or 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.

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.

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.

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

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15 in the year following the performance year on which such bonus is based.

discussed above, in March 2026, the compensation committee approved an increase to Ms.

Gurrola’s base salary to $300,000 and a

discretionary bonus of $68,000.

accordance with her employment agreement, in June 2021, Ms.

Gurrola was granted 1,750 restricted stock units, 25% of which vests on each

Gurrola was granted 117 restricted stock units, 25% of which vested on each

anniversary of the grant date over four years.

Vesting generally requires Ms.

Gurrola’s continued employment through the relevant

vesting date.

Gurrola’s employment is terminated by us without Cause (as defined in the employment agreement) or by Ms.

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executive officer as of December 31, 2025.

Option Awards

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 (#)

exercise price ($)

expiration date

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

Market or payout value of unearned shares, units or other rights that have not vested shares ($)

unexercisable

Sanjeev Luther,

President and Chief Executive Officer

President and

Chief Executive Officer

Sandra Gurrola,

Vice President of Finance

6/21/2021 (2)

Vice President

3/11/2022 (3)

4/26/2024 (4)

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.

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.

stock option vests in 36 substantially equal monthly installments.

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.

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.

stock option vested in 36 substantially equal monthly installments.

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.

have a non-employee director compensation program to compensate our non-employee directors for their service in such capacity with annual

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in accordance with our non-employee director compensation program.

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.

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.

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.

compensation committee and Board are assessing our non-employee director compensation program, and if and when we restart compensating

compensation committee and Board continue to assess 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

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Stock Options to vest quarterly over one year from grant date:

Board Member:

Member Retainers

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Stock Options to vest quarterly over one year from grant date:

Nominating/Governance

Audit Committee:

Compensation Committee:

Nominating/Governance Committee:

Supplemental Retainer

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Stock Options to vest quarterly over one year from grant date:

Committee Chair:

Nominating/Governance

Committee Chair:

Audit Committee Chair:

Compensation Committee Chair:

Nominating/Governance Committee Chair:

Director Equity Award (outside directors)

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

substantially equal installments thereafter.

for 553 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.

board of directors and our compensation committee designed our non-employee director compensation program to reward directors for their

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following table sets forth the compensation of each director, who is not a named executive officer, for service during 2025.

Luther, who is a named executive officers and does not receive any compensation from us for his service as a director.

Luther, who is a named executive officer and does not receive any compensation from us for his service as a director.

the section above entitled “Executive Officer Compensation” for information about Mr.

Luther’s compensation.

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.

excludes compensation Ms.

Clarke received as an employee.

Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Director Compensation Table

earned or paid in cash ($)

William Wexler

amounts reported in this column represent the aggregate grant date fair value of stock options

granted during 2025.

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 14, Stockholders’ Equity, in the Notes to the

Consolidated Financial Statements contained in this Annual Report on Form 10-K.

options granted during 2025 were as follows:

James Bristol

William Wexler

options granted vest over three years, with one-third vesting on the one-year anniversary of the grant date, and the remaining shares

vesting in 24 substantially equal monthly installments thereafter.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

following table sets forth information known to us regarding beneficial ownership of common stock as of March 12, 2026 (the “Measurement

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of common stock beneficially owned by him.

otherwise noted, the business address of each of these stockholders is c/o Eterna Therapeutics, Inc., 1035 Cambridge Street, Suite 18A,

otherwise noted, the business address of each of these stockholders is c/o Ernexa Therapeutics, Inc., 1035 Cambridge Street, Suite 18A,

Cambridge, MA 02141.

Name and Address of Beneficial Owner

Name and Address

of Beneficial Owner

Shares Beneficially

of Common Shares Beneficially Owned

Greater than 5% Stockholders:

of Common Shares

than 5% Stockholders:

Charles Cherington (1)

John Halpern (2)^

Regolith Capital Investments

Freebird Partners LP (3)^

George Denny Estate (4)

Regolith Capital Investments LP (6)

Named Executive Officers and Directors:

John Halpern (4)^

Executive Officers and Directors:

Sanjeev Luther (5)

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Peter Cicala (5)

Elena Ratner (5)

William Wexler (5)

current directors and executive officers as a group (6 persons) (7)

securities beneficially owned by this stockholder include prefunded warrants that include a 9.99% blocker.

The securities beneficially owned by this

stockholder include warrants, prefunded warrants or a combination of both securities 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 warrants and prefunded

warrants, the number of shares of common stock that may be acquired by the holder thereof upon exercise of the warrants

and 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%.

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%.

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).

Cherington’s address is c/o Ara Partners, LLC, 200 Berkeley Street, 26 th Floor, Boston, MA, 02116.

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.

beneficially owned consists of (i) 6,779,440 shares of common stock, (ii) 4,000,000 shares of common stock issuable upon the exercise

of warrants and (iii) 11,910 shares of common stock issuable upon the conversion of shares of Series A convertible preferred stock

(assuming a conversion rate of 5.987 per share).

Cherington’s address is c/o Ara Partners, LLC, 200 Berkeley Street, 26 th

Floor, Boston, MA, 02116.

The number of common shares

beneficially owned consists of (i) 1,747,668 shares of common stock held by Regolith Capital Investments LP (“Regolith”)

(ii) 10,863 shares of common stock held by Shameek Konar and (iii) 1,200,000 shares of common stock issuable upon the exercise of

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.

The number of common shares

beneficially owned consists of (i) 2,035,414 shares of common stock, (ii) 599,075 shares of common stock issuable upon the exercise

of warrants and (ii) 375,384 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

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.

of common shares beneficially owned consists of (i) 1,161,113 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.

Halpern are trustees, (ii) 500,000 shares of common stock issuable upon the exercise of warrants

and (ii) 7,667 shares of common stock issuable upon exercise of prefunded warrants.

Halpern and Ms.

Halpern share voting and dispositive powers.

Halpern’s address is PO Box 540

Portsmouth, New Hampshire 03802.

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.

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.

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.

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).

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.

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.

(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.

Konar and his spouse are the General Partner of Regolith.

By virtue of these relationships,

Konar and his spouse may be deemed to share beneficial ownership of the shares held by Regolith.

address is 10608 Stoppard View Way, Knoxville, TN, 37922.

shares of common stock issuable upon exercise of options.

32,391 shares of common stock issuable upon exercise of options.

893,711 shares of common stock issuable upon exercise of options.

Authorized for Issuance under Equity Compensation Plans

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

of securities to be issued upon exercise of outstanding options, warrants and rights

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))

Equity compensation plans approved by securityholders (1)

Equity compensation plans not approved by securityholders (2)

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.

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.

Relationships and Related Transactions, and Director Independence

Halpern’s address is PO Box 540 Portsmouth, New Hampshire

Consists of shares of common

stock issuable upon exercise of options.

Includes 4,234 shares of

common stock issuable upon exercise of options.

Certain Relationships and Related Transactions, and Director Independence

as described in Note 17 (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

this 2025 Annual Report , which is incorporated by reference into this Item 13, since January 1, 2024, 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

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determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

Accounting Fees and Services

Principal Accounting Fees and Services

in Certifying Accountant

June 30, 2025, the Company dismissed Grant Thornton as the Company’s independent registered

public accounting firm effective immediately.

The Audit Committee of the Company’s board of directors approved Grant Thornton’s

dismissal on June 30, 2025.

Thornton performed audits of the Company’s consolidated financial statements for the years ended December 31, 2024 and 2023.

Thornton’s reports for such years did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified

as to uncertainty, audit scope, or accounting principles, except that, the reports included an explanatory paragraph describing that

substantial doubt was raised as to the Company’s ability to continue as a going concern.

the two years ended December 31, 2024 and the subsequent interim period through June 30, 2025, there were no (i) disagreements (as defined

in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K promulgated by the SEC pursuant to

the Securities Exchange Act of 1934, as amended) between the Company and Grant Thornton on any matter of accounting principles or practices,

financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to satisfaction of Grant Thornton,

would have caused Grant Thornton to make reference to the subject matter of such disagreements in connection with its report, or (ii)

“reportable events,” as described in Item 304(a)(1)(v) of Regulation S-K, that would require disclosure under Item 304(a)(1)(v)

of Regulation S-K, except for the material weakness in the Company’s internal control over financial reporting as of and for the

year ended December 31, 2023, stemming from a lack of technical accounting proficiency in complex matters.

Company previously furnished Grant Thornton with a copy of the disclosure contained in this “Changes In and Disagreements with

Accountants on Accounting and Financial Disclosure” section of this annual report.

July 1, 2025, the Company engaged Haskell & White LLP as the Company’s independent registered

public accounting firm.

The decision to engage Haskell & White was approved by the Audit Committee of the Company’s board of

the two years ended December 31, 2024 and the subsequent interim period through June 30, 2025, neither the Company nor anyone acting

on its behalf has consulted Haskell & White regarding either:

(i) the application of accounting principles to a specified transaction,

either completed or proposed;

or the type of audit opinion that might be rendered on the Company’s financial statements, and no

written report or oral advice was provided to the Company by Haskell & White that Haskell & White concluded was an important

factor considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue;

or (ii) any matter

that was either subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions

to Item 304 of Regulation S-K, or a “reportable event,” as that term is described in Item 304(a)(1)(v) of Regulation S-K.

and Services of Independent Registered Public Accounting Firm

table below summarizes the fees billed to us by Grant Thornton for each of the last two fiscal years.

Audit- Related Fees

All Other Fees

table below summarizes the fees billed to us by Haskell & White and Grant Thornton for the years ended December 31, 2025 and 2024.

Audit fees consist of fees for professional services rendered for the audit of our consolidated financial statements (including

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The Audit Committee may also pre-approve particular services on a case-by-case basis.

Financial Statement Schedules

Exhibits, Financial Statement Schedules

The following documents are filed as a part of this Annual Report on Form 10-K:

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Financial Statement Schedules.

The following exhibits are submitted with this Annual Report on Form 10-K or, where indicated, incorporated by reference

to other filings.

The following exhibits are submitted with this Annual Report on Form 10-K or, where indicated, incorporated by reference to

other filings.

of Incorporation and Bylaws

Composite Restated Certificate of Incorporation of the Company

Third Amended and Restated Bylaws of the Company

3.2 to Form 8-K filed on March 26, 2025

Second Amended and Restated Bylaws of the Company

3.2 to Form 8-K filed on October 11, 2022

Certificate of Validation of Eterna Therapeutics Inc., as filed with the Secretary of State of the State of Delaware on September 3, 2021

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Defining Rights of Security Holders

Form of Pre-Funded Warrant (Feb 2026)

4.1 to Form 8-K filed on February 11, 2026

Form of Common Warrant (Feb 2026)

4.2 to Form 8-K filed on February 11, 2026

Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

4.1 to Form 10-K filed on April 15, 2022

Filed herewith

Form of Common Stock Warrant (March 2022)

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10.1 to Form 8-K filed on December 5, 2022

Registration Rights Agreement, dated as of April 5, 2023, by and between Eterna Therapeutics Inc.

and Lincoln Park Capital Fund, LLC

10.2 to Form 8-K filed on April 11, 2023

Purchase Agreement, dated as of April 5, 2023, by and between Eterna Therapeutics Inc.

and Lincoln Park Capital Fund, LLC

10.1 to Form 8-K filed on April 11, 2023

Securities Purchase Agreement, dated as of December 14, 2023, by and among Eterna Therapeutics Inc.

and the purchasers party thereto.

10.1 to Form 8-K filed on December 20, 2023

Registration Rights Agreement, dated as of December 14, 2023, by and among Eterna Therapeutics Inc.

and the parties thereto.

10.2 to Form 8-K filed on December 20, 2023

Form of 12.0% Senior Convertible Note (December 2023 and January 2024)

4.1 to Form 8-K filed on December 20, 2023

Form of Warrant (December 2023 and January 2024)

4.2 to Form 8-K filed on December 20, 2023

Securities purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

Placement Agency Agreement by and between Ernexa Therapeutics Inc.

and Brookline Capital Markets, a division of Arcadia Securities, LLC, dated as of February 6, 2026.

1.1 to Form 8-K filed on February 11, 2026

Form of Securities Purchase Agreement by and between Ernexa Therapeutics Inc.

and certain investors, dated as of February 6, 2026.

10.1 to Form 8-K filed on February 11, 2026

Warrant Agent Agreement, by and among Ernexa Therapeutics Inc., Computershare Inc.

and Computershare Trust Company, N.A., dated as of February 10, 2026.

10.2 to Form 8-K filed on February 11, 2026

purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

and the purchaser parties thereto

10.1 to Form 8k filed on September 25, 2024

Form of pre-funded warrant issuable under the securities purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

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

10.2 to Form 8k filed on October 29, 2024

Form of exchange agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

of exchange agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

and the parties thereto

10.3 to Form 8k filed on September 25, 2024

Note purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

and the purchaser parties thereto

10.4 to Form 8k filed on September 25, 2024

Form of 12.0% senior convertible note issued under the note purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

of 12.0% senior convertible note issued under the note purchase agreement, dated as of September 24, 2024, between Eterna Therapeutics

and the purchaser parties thereto

10.5 to Form 8k filed on September 24, 2024

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.

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

10.3 to Form 8k filed on October 29, 2024

Form of support agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

of support agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

and the stockholder parties thereto

10.7 to Form 8k filed on September 24, 2024

Form of lock-up agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

of lock-up agreement, dated as of September 24, 2024, between Eterna Therapeutics Inc.

and the stockholder parties thereto

10.8 to Form 8k filed on September 24, 2024

Registration Rights Agreement, dated October 29, 2024, between Eterna Therapeutics Inc.

Rights Agreement, dated October 29, 2024, between Eterna Therapeutics Inc.

and the purchaser parties thereto

10.1 to Form 8-K filed on November 25, 2022

Exclusive License and Collaboration Agreement, effective as of September 9, 2024, with Factor Bioscience Limited

License and Collaboration Agreement, effective as of September 9, 2024, with Factor Bioscience Limited

10.10 to Form 10-Q filed on August 13, 2024

Sublease Agreement, dated October 18, 2022, by and between E.R.

Agreement, dated October 18, 2022, by and between E.R.

Squibb & Sons, LLC and Eterna Therapeutics Inc.

10.16 to Form 10-K filed on March 20, 2023

Sublease Termination Agreement, dated August 9, 2024, between Eterna Therapeutics Inc.

Termination Agreement, dated August 9, 2024, between Eterna Therapeutics Inc.

Squibb & Sons, L.L.C.

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99.1 to Form S-8 filed on January 16, 2024

Employment Agreement, effective January 1, 2023, by and among Eterna Therapeutics Inc.

and Dorothy Clarke.

10.16 to Form 10-K filed on March 14, 2024

Employment Agreement, dated June 16, 2021, by and among Eterna Therapeutics Inc.

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Insider Trading Policy

Consent of the Independent Registered Accounting Firm, Haskell & White LLP

Consent of the Independent Registered Accounting Firm, Grant Thornton LLP

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the Inline XBRL document)

Cover Page Interactive

Data File (formatted as inline XBRL and contained in Exhibit 101)

Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

management contract or compensatory plan.

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and Exchange Commission or its staff upon request.

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.

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.

to Item 601(b)(10) of Regulation S-K, certain confidential portions of this exhibit were

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not material and is the type that the Company treats as private or confidential.

Form 10-K Summary

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

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TO CONSOLIDATED FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2025 and 2024

Consolidated Statements of Operations for the years ended December 31, 2025 and 2024

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025 and 2024

Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024

Notes to the Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders

Therapeutics, Inc.

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheet of Ernexa Therapeutics, Inc.

(the “Company”) as of December 31,

2025, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, 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 consolidated financial position of the Company as of December 31,

2025, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles

generally accepted in the United States of America.

Doubt About the Company’s Ability to Continue as a Going Concern

accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

in Note 2 to the consolidated financial statements, the Company has recurring losses from operations, an accumulated deficit, and requires

additional working capital to achieve its operating plans.

These conditions 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 to the consolidated

financial statements.

Balance Sheets as of December 31, 2024 and 2023

Statements of Operations for the years ended December 31, 2024 and 2023

Statements of Stockholders’ Equity for the years ended December 31, 2024 and 2023

Statements of Cash Flows for the years ended December 31, 2024 and 2023

to the Consolidated Financial Statements

The 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 classification of liabilities that may result from the outcome of

this uncertainty.

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 audit.

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.

conducted our audit 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 consolidated 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.

of our audit, 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.

audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued)

Audit Matters

audit matters are matters arising from the current period audit of the consolidated 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 consolidated financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit

/s/ Haskell & White LLP

HASKELL & WHITE LLP

We served as the Company’s auditor since 2025.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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on the financial statements

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.

have audited the accompanying consolidated balance sheet of Ernexa Therapeutics Inc.

(formerly known as “Eterna Therapeutics Inc.”)

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024, the related consolidated statements

of operations, stockholders’ equity, and cash flows for the year 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 the results of

its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles

generally accepted in the United States of America.

accompanying 2024 consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

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the year ended December 31, 2024, and had an accumulated deficit of approximately $231.5 million as of December 31, 2024.

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.

These conditions,

along with other matters as set forth in Note 2 to the 2024 consolidated financial statements, 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 to the 2024

consolidated financial statements.

The 2024 consolidated financial statements do not include any adjustments that might result from the

outcome of this uncertainty.

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.

on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public

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and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

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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

As part of our audit

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

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Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

audit 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.

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the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

Our audit 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.

audit matters

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.

We believe that our audit

provides a reasonable basis for our opinion.

GRANT THORNTON LLP

have served as the Company’s auditor since 2022.

Iselin, New Jersey

We served as the Company’s auditor from 2022 to 2025.

12, 2025 (except for Note 3B, as to which the date is February 2, 2026)

THERAPEUTICS INC.

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Other receivables

expenses and other current assets

Due from related party

Prepaid expenses and other current assets

Total current assets

Restricted cash

Property and equipment,

Right-of-use assets - operating

Property and equipment, net

Right-of-use assets - operating leases, net

LIABILITIES AND STOCKHOLDERS’

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Income taxes payable

Operating lease liabilities,

Due to related party, current

revenue, current

Due to related party

Operating lease liabilities, current

Contingent consideration liability, current

Other current liabilities

Total current liabilities

Convertible notes, net

Warrant liabilities

Operating lease liabilities,

Deferred revenue, non-current

Contingent consideration

Operating lease liabilities, non-current

Contingent consideration liability, non-current

Other liabilities

Total liabilities

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authorized, 156 designated and outstanding of Series A convertible preferred stock at December 31, 2025 and 2024, $ 156 liquidation

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

Common stock, $ 0.005 par value, 150,000 and

100,000 shares authorized at December 31, 2025 and 2024, respectively, 7,854 and 3,426 issued and outstanding at December

31, 2025 and 2024, respectively

Additional paid-in capital

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Total stockholders’ equity

Total liabilities and

stockholders’ equity

Total liabilities and stockholders’ equity

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

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Cost of revenues

Gross profit (loss)

Operating expenses:

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Gain on lease termination

Acquisition of Exacis

in-process research and development

operating expenses

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

Series A preferred stock

Net loss attributable

to common stockholders

Net loss per common

share - basic and diluted

Weighted average shares outstanding -

basic and diluted

Benefit (provision) for income taxes

Series A preferred stock dividend

Net loss attributable to common stockholders

Net loss per common share - basic and diluted

Weighted average shares outstanding - basic and diluted

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

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$ ( 231,536 )

Issuance of common stock to Series A preferred

in lieu of cash dividends

of common stock to Series A preferred stockholders in lieu of cash dividends

Issuance of common stock in connection with

Exacis asset acquisition

Issuance of common stock related to stock

purchase agreement with Lincoln Park Capital Fund, LLC, net

Issuance of warrants in connection with convertible

notes financing

Repricing of warrants in connection with convertible

notes financing

Cash dividends to Series A preferred stockholders

prefunded warrants

Issuance of common stock in connection with

exercise of prefunded warrants

Issuance of common stock to consultant for

Issuance of common stock in connection with

Issuance of common stock and prefunded warrants

connection with private placement

Issuance of common stock and prefunded warrants

in connection with private placement

Stock-based compensation

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$ ( 245,636 )

A Preferred Stock

Balances at January 1, 2024

$ ( 186,981 )

Issuance of note warrants

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the conversion of Bridge Notes

Issuance of common stock and prefunded warrants

upon the conversion of Bridge Notes

of common stock and prefunded warrants upon the conversion of Bridge Notes

Issuance of common stock and prefunded warrants

connection with private placement, net

Issuance of common stock and

prefunded warrants in connection with private placement, net

of common stock and prefunded warrants in connection with private placement, net

Issuance of common stock to consultant for

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in lieu of cash dividends

Issuance of common stock to

Series A preferred stockholders in lieu of cash dividends

of common stock to Series A preferred stockholders in lieu of cash dividends

Balances at December 31, 2024

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STATEMENTS OF CASH FLOWS

the years ended

Cash flows from operating activities:

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Stock-based compensation

Amortization of right-of-use

Amortization of right-of-use asset

Impairment of right-of-use asset

Gain on lease termination

Loss on disposal of fixed assets

Accrued interest expense

Paid-in-kind interest expense

Amortization of debt discount

and debt issuance costs

Loss on extinguishment

Change in fair value of

convertible notes

Change in fair value of

bridge notes derivative liability

Change in fair value of

warrant liabilities

Change in fair value of

contingent consideration liability

Commitment shares issued

to Lincoln Park Capital, LLC

Loss on shares sold to

Lincoln Park Capital, LLC

Non-cash component of acquisition

of Exacis in-process research and development

Loss on disposal of fixed

Loss on non-controlling

Changes in operating assets

and liabilities:

Amortization of debt discount and debt issuance

Forward sales contract expense

(Gain) loss on extinguishment of debt

Change in fair value of convertible notes

Fair value adjustments to bridge notes derivative

Issuance of common stock in connection with

Issuance of common stock to consultant for

Change in fair value of warrant liabilities

Change in fair value of contingent consideration

Changes in operating assets and liabilities:

Other receivables

Prepaid expenses and other

current assets

Prepaid expenses and other current assets

Other non-current assets

Accounts payable and accrued

Accounts payable and accrued expenses

Operating lease liability

Due from related party

Due to related party

Deferred revenue

Net cash used in operating

Other liabilities

Net cash used in operating activities

Cash flows from investing activities:

Purchase of property and

received from the sale of fixed assets

Net cash used in investing

Purchase of property and equipment

Proceeds received from the sale of fixed assets

Net cash used in investing activities

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

THERAPEUTICS INC.

STATEMENTS OF CASH FLOWS (continued)

the years ended

Cash flows from financing activities:

Proceeds received from

bridge notes financing

Proceeds received from

common stock and prefunded warrants offering

Fees paid related to the

common stock and prefunded warrant offering

Proceeds received from

convertible notes financings

Fees paid related to convertible

notes financings

Proceeds received under

promissory note

Payment made on promissory

Proceeds from sale of common

stock pursuant to stock

purchase agreement with

Lincoln Park Capital Fund, LLC

Proceeds from sale of common

stock pursuant to stock purchase agreement with

Lincoln Park Capital Fund, LLC

paid to Series A preferred stockholders

cash provided by financing activities

Net decrease in cash and cash equivalents

Cash, cash equivalents

and restricted cash at beginning of period

Cash, cash equivalents

and restricted cash at end of period

Proceeds received from notes payable

Proceeds received from issuance of common stock

and prefunded warrants

Fees paid related to the common stock and prefunded

warrant offering

Proceeds received from exercise of prefunded

Proceeds received from the convertible notes

Fees paid related to the convertible notes

Proceeds received from bridge notes financing

Net cash provided by financing activities

Net increase (decrease) in cash

Cash at beginning of period

Cash at end of period

Supplemental disclosures of cash flow information:

Cash paid during the period

Cash paid during the period for:

Supplemental disclosure of non-cash investing

and financing activities:

of warrants for common stock

of convertible notes for common stock

of bridge notes for common stock

Reclassification

of warrants to liabilities

warrants issued

fees incurred in connection with the convertible note financings

in-kind interest added to convertible notes principal

of warrants in connection with the December 2023 financing

to lease liability and ROU asset due to remeasurement

issued to Series A preferred stockholders in lieu of cash dividend

measurement of ROU assets

measurement of lease liability

for purchase of property and equipment

consideration for Exacis asset acquisition

of common stock for Exacis asset acquisition

Reconciliation of cash, cash equivalents and

restricted cash at end of period:

Cash and cash equivalents

Total cash, cash equivalents

and restricted cash at end of period

Offset of related party notes payable

principal with related party receivable related to issuance of common stock and prefunded warrants

Reclassification of forward sales contract to equity upon issuance of

Issuance of common stock to Series A preferred stockholders in lieu

of cash dividends

Adjustment to lease liability and ROU asset

due to remeasurement

Leasehold improvements funded by tenant improvement

Note warrants issued

Unpaid fees incurred in connection with the

convertible note financing

Paid in-kind interest added to convertible

notes principal

Reclassification of warrants to liability

Exchange of warrants for common stock

Exchange of convertible notes for common stock

Conversion of bridge notes for common stock

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

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the Years Ended December 31, 2025 and 2024

1) Organization and Description of Business Operations

and Description of Business Operations

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.

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

iMSCs are induced pluripotent

stem cell (“iPSC”)-derived mesenchymal stem cells.

The Company envisions a future where cell therapies powered by synthetic

iMSCs can offer new options for patients with limited treatment paths and its mission is to transform the treatment of cancer and autoimmune

disease by developing scalable, affordable, off-the-shelf cell therapies that restore hope.

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

TX2, Inc., Novellus, Inc., Novellus Therapeutics Limited and Eterna Therapeutics LLC) unless otherwise stated or the context otherwise

In April 2025, the Company dissolved Eterna Therapeutics LLC, which was a single-member limited liability company and had no

and Capital Resources

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

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As of December 31, 2025, the Company had a cash balance of approximately

$ 1.7 million

and an accumulated deficit of approximately $ 231.5

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.

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.

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

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

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

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.

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.

6 for additional information regarding these financings.

$ 1.9 million and an accumulated deficit of approximately $ 245.6 million.

For the year ended December 31, 2025, the Company incurred a

net loss of $ 14.1 million, which includes a non-cash charge of $ 5.8 million related to a forward sales contract the Company entered into

on March 31, 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.

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.

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.

3) Basis of Accounting Presentation and Summary of Significant Accounting Policies

of Accounting Presentation

During the year ended December 31, 2025, the Company used cash of $ 7.0 million in operating activities.

September 24, 2024, the Company entered into certain financing agreements for the September 2024 Transactions (as discussed more fully

in Note 15), which included (in) the private placement of $ 3.9 million of convertible Bridge Notes (as defined in Note 11), (ii) the

Common Stock Private Placement of $ 1.1 million in shares of the Company’s common stock or pre-funded warrants, as well as (iii)

the Exchange Transaction, which provided for the exchange of convertible notes and warrants into shares of the Company’s common

The September 2024 Transactions were subject to shareholder approval, and on October 29, 2024, the shareholders approved the issuance

of common stock under the September 2024 Transactions.

Following the conversions of the convertible notes, the Company had no convertible

notes outstanding.

March 11, 2025 and March 20, 2025, the Company received $ 1.5 million and $ 0.8 million, respectively, in exchange for the issuance of

two promissory notes with aggregate principal amounts of $ 2.3 million to an investor.

During the year ended December 31, 2025, the Company

repaid the notes in full for $ 2.3 million, including accrued interest.

See Note 11 for more information on the promissory notes.

May 1, 2025, the $ 10.0 million Standby equity purchase agreement (“SEPA”) the Company entered into with Lincoln Park Capital

Fund, LLC (“Lincoln Park”) expired.

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

The Company does not have a new SEPA in place at this time.

the year ended December 31, 2025, the Company raised $ 7.2 million in gross proceeds from the sale of shares of the Company’s common

stock and prefunded warrants (the “2025 Private Placement”).

See Note 15 for additional information regarding this financing.

February 10, 2026, the Company received approximately $ 9.6 million in net proceeds from a public offering (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”).

See Note 18 for more information regarding

the 2026 Offering.

connection with preparing the accompanying consolidated financial statements as of and for the year ended, 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 public or private

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

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.

of Accounting Presentation and Summary of Significant Accounting Policies

Basis of Accounting Presentation

consolidated financial statements have been prepared in conformity with U.S.

4 unchanged sentences

intercompany balances and transactions have been eliminated in consolidation.

of Significant Accounting Policies

Reverse Stock Split

approved by the Company’s stockholders at the Company’s Annual Meeting of Stockholders held on June 2, 2025 (the “2025

Annual Meeting”), the Company effected a reverse stock split of its common stock at a ratio of 1-for-15 , as determined by the Company’s

Board of Directors within the parameters approved by the Company’s stockholders (the “Reverse Stock Split”).

Stock Split became effective under Delaware law at 12:01 a.m.

Eastern time on June 12, 2025.

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, after giving effect to the increase in the authorized shares

of the Company’s common stock from 100,000,000 to 150,000,000 shares, which occurred on June 2, 2025 following stockholder approval

at the 2025 Annual Meeting.

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.

The Company issued an aggregate

of 153 shares for rounding up fractional shares to whole shares.

share and per share data in this Annual Report on Form 10-K have been adjusted for all periods presented to reflect the Reverse Stock

Summary of Significant Accounting Policies

preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect:

9 unchanged sentences

valuation assumptions of warrants

and liabilities associated with the September 2024 Transactions;

and liabilities associated with the 2025 Private Placement and 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 Equivalents and Restricted Cash

Company classifies highly liquid investments with a remaining contractual maturity at date of purchase of three months or less as cash

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.

and Cash Equivalents

Company classifies highly liquid investments with a remaining contractual maturity at the date of purchase of three months or less as

cash equivalents.

The Company had no cash equivalents as of December 31, 2025 or 2024.

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.

and Equipment

29 unchanged sentences

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.

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.

assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is in

an amount equal to the excess fair value..

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

general, the Company applies the following steps when recognizing revenue from contracts with customers:

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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.

Company had one revenue generating contract relating to an option and license agreement as well as certain development activities.

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.

Company had one

revenue-generating contract during the year ended December 31, 2024, relating to an option and license agreement as well as certain development

This contract was assigned to a third party in September 2024, and the Company had no further performance obligations under

the contract.

See Note 4 for more information.

The Company did not have any revenue generating contracts during the year ended December

contract asset is an entity’s right to payment for goods and services already transferred to a customer if that right to payment

5 unchanged sentences

satisfaction of the contract obligations.

The Company had no contract assets as of December 31, 2024 or 2023.

Liabilities :

The Company had no contract assets as of December 31, 2024.

There were no revenue generating

contracts during the year ended December 31, 2025.

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.

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.

The Company recognized

$ 0.6 million of revenue during the year ended December 31, 2024 from contract liabilities that arose in a prior year.

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.

There were no revenue generating contracts during the year ended December 31, 2025.

and Development

37 unchanged sentences

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.

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.

with the 2025 Private Placement and September 2024 Transactions (see Note 15), and without consideration for potentially dilutive securities.

The Company determined that the exercise of prefunded warrants requires nominal consideration for the delivery of shares of common stock,

and as a result, has considered the shares underlying prefunded warrants to be outstanding effective on the issuance date of the prefunded

warrants for purposes of calculated basic net loss per share.

net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of

4 unchanged sentences

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.

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.

The Company did not have any convertible notes outstanding as of December 31, 2025

or 2024, therefore, there were no potential shares of common stock related to convertible notes included in the calculation of diluted

net loss per share.

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.

Company operates within a single 1 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

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.

Company maintains its cash balances in financial institutions located in the United States (the “U.S.”).

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.

the Company’s business, vendor concentrations could be indicative of vulnerabilities in the Company’s supply chain, which

2 unchanged sentences

31, 2025 and 2024, there was no vendor concentration related to the Company’s research and development activities.

of Financial Instruments

Value of Financial Instruments

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

4 unchanged sentences

is as follows:

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

has the ability to access at the measurement date.

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

liability, either directly or indirectly.

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

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

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

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

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

develop its own assumptions.

carrying amounts reported on the 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.

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.

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.

3 Inputs – Valued based on inputs for which there is little or no market value, which

require the reporting entity to develop its own assumptions.

carrying amounts reported on the consolidated balance sheet for 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.

Company accounts for its leases under ASC Topic 842, Leases.

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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.

In this case, the lease modification 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

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.

and Contingencies

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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.

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.

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’

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.

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.

Company accounts for its convertible notes as a 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.

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.

from the sale of convertible notes with stock purchase warrants are allocated to the two elements based on their relative fair values.

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of operations.

Recent Accounting

Accounting Standards

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 the Company’s 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 the Company’s consolidated financial

statements, but it 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.

The Company adopted this ASU on a prospective basis, and it 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.

Issued Accounting Standards to be Adopted

11 unchanged sentences

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.

The Company does not expect the adoption of this ASU to

have a material impact on its consolidated financial statements.

November 2024, the FASB issued ASU No.

19 unchanged sentences

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

2 unchanged sentences

impact on its consolidated financial statements.

Asset Acquisition

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

known as Exacis Biotherapeutics Inc.

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

therein, Factor Limited.

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

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

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

The Company assumed none of Exacis’

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

The transactions contemplated

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

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

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

The shares were issued to Exacis at a price

based on the Company having an assumed equity valuation 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:

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;

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

the Company’s market capitalization equals or exceeds $ 200.0 million for at least ten consecutive trading days, then the Company

will issue to Exacis a number of additional shares of common stock equal to (x) $ 2.0 million divided by (y) the quotient of $ 200.00

million divided by the number of the Company’s then issued and outstanding shares of common stock (collectively with (i) above,

the “Market Cap Contingent Consideration”);

the five-year period commencing on the closing date and ending on the five-year anniversary of the closing date, the Company will

pay or deliver to Exacis 20 % of all cash or other consideration (collectively, “License Contingent Consideration”) actually

received by the Company during 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.

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.

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

Risk-free rate

Dividend yield

Warrants, Measurement Input

Expected term

Note 9 for more information on the fair value measurement of the Market Cap Contingent Consideration as of December 31, 2024 and 2023..

License Contingent Consideration is to be settled in cash and is generally recognized when the liability is probable and estimable.

of the acquisition date, the Company concluded that paying the License Contingent Consideration was not probable or estimable.

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.

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

Consideration

Shares issued

Contingent consideration

Total fair value

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.

a result, the Company expensed the fair value of the Purchased License during the year ended December 31, 2023.

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

with Factor Bioscience Limited (“Factor Limited”), the Purchased License was assigned back to Factor Limited.

for more information on the Factor L&C Agreement.

Contract with Customer

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

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

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

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

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

September 24, 2024, the Company and Factor Bioscience (as defined in Note 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.

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

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

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

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

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.

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.

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

The Company would only earn

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

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

it placed a constraint on the remaining contractual customization fee.

The $ 0.4 million was being recognized equally over the development

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

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

$ 0.3 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.

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.

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

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.

The Company does not expect

the amendments in this ASU to have a material impact on its 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.

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

The Company does not expect the amendments in this ASU to have a material impact on its consolidated financial statements.

with Customer

the year ended December 31, 2024, the Company had one contract with a customer that was accounted for under ASC 606 related to an exclusive

option and license agreement it entered into in February 2023, and amended in August 2023, with a customer, which provided the customer

with the option (the “Option Right”) to obtain an exclusive sublicense of intellectual property from the Company and to request

to have the Company develop a customized cell line.

The customer 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.

September 2024, the Company assigned this customer contract to Factor Bioscience Limited (“Factor Limited”) whereby all the

Company’s rights and obligations under the customer contract are now Factor Limited’s.

Factor Limited will pay the Company

thirty percent ( 30 %) of all amounts it receives from the customer under the contract in the event that the customer exercises its Option

Right, and Factor Limited will pay the Company twenty percent ( 20 %) of all amounts it receives from the customer for the customization

activities set forth in the contract.

During the year ended December 31, 2025, Factor Limited paid the Company approximately $ 0.5 million,

which was 20 % of what Factor Limited received from the customer customization activities.

Factor Limited did not pay the Company anything

during the year ended December 31, 2024.

Debt and Equity Financings

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.

Notes Financings

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.

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”).

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.

Note 16 for more information on the Note Warrants.

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.

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):

of Interest Expense

Debt issuance costs

Total interest expense

$ 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.

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.

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.

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

of Proceeds and Costs:

July 2023 Convertible Notes

$ ( 80 ) ( 766 )

July 2023 Warrants

of Proceeds and Costs:

Allocation of

December 2023 Convertible Notes

December 2023 Warrants

of Proceeds and Costs:

December 2023 Convertible Notes

December 2023 Warrants

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

July 2023 Convertible Notes

December 2023 Convertible Notes

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

as of each of July 14, 2023, December 15, 2023 and January 11, 2024 using the following assumptions:

July 2023 warrants

December 2023 warrants

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.

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

to assigning the contract to Factor Limited, the Company recognized the $ 0.4 million received from the customer equally over the development

However, as a result of assigning the customer contract to Factor Limited, and there being no further obligations the Company

needed to fulfill for the customization activities, the Company accelerated the recognition of the remaining $ 0.2 million in deferred

revenue during the year ended December 31, 2024.

Likewise, there being no further obligations regarding the non-refundable payment related

to the Option Right, the Company also recognized the $ 0.3 million Option Right payment in full as revenue during the year ended December

During the year ended December 31, 2024, the Company recognized approximately $ 0.6 million in revenue related to this customer

contract for the customization activities and Option Right, including the accelerations of revenue recognition discussed above.

was no such revenue recognized during the year ended December 31, 2025.

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

The Company was also obligated to pay Factor Limited 20 % of any amounts the Company received

from a customer that was related to the licensed technology under a previous license agreement the Company had with Factor Limited ,

which has since been terminated.

During the year ended December 31, 2024, the Company recognized approximately $ 0.1 million in fees to

Factor Limited , which was recorded as a cost of revenue.

There were no direct labor, supplies

or license fee recognized during the year ended December 31, 2025.

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 U.S., and all of its assets are located in the U.S.

table below provides a breakdown of the Company’s significant operating expenses for the years ended December 31, 2025 and 2024

with a reconciliation to net loss for each of those years.

Company’s revenue, the total of which was generated in the U.S., and its cost of revenues for the year ended December 31, 2024

relate to a customer contract that was assigned to Factor Limited in September 2024.

The Company did not have any revenue generating

contracts during the year ended December 31, 2025.

The Company’s purchases of property and equipment were less than $0.1

million for the year ended December 31, 2025 and approximately $0.4 million for the year ended December 31, 2024.

Depreciation and

amortization expense was $ 0.1

million for each of the years ended December 31, 2025 and 2024.

During the year ended December 31, 2025, the Company recognized

million in other expense for the 2025 Private Placement and $ 0.8

million in other income for time-barred liabilities.

During the year ended December 31, 2024, the Company recognized $ 22.6

million in other expense, net, related to the September 2024 Transactions.

The Company recognized $ 0.1

million and $ 0.2

million in interest income for the years ended December 31 2025 and 2024, respectively, and it recognized interest expense of less

million and approximately $ 6.8

million during the years ended December 31, 2025 and 2024, respectively.

of Breakdown of Significant Operating Expenses

ended December 31,

Cost of revenues

Operating expenses:

Research and development by significant expense:

MSA/license fees

Professional fees

Payroll and related

Research and development

General and administrative by significant expense:

Stock-based compensation

Payroll and related

Professional fees

Occupancy expense

General and administrative

Gain on lease termination

Total operating expenses

Loss from operations

Other expense, net:

Forward sales contract expense

Gain (loss) on extinguishment of debt

Change in fair value of convertible notes

Change in fair value to bridge notes derivative

Change in fair value of warrant liabilities

Change in fair value of contingent consideration

Interest income

Interest expense

Other income, net

Total other expense, net

Loss before income taxes

Benefit (provision) for income taxes

At December 31,

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.

and Diluted Net Loss per Common Share

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):

of Computation of Net Loss Per Share Basic and Diluted

ended December 31,

Net loss attributable to common

Weighted average shares outstanding - basic and diluted

Net loss per common share - basic and diluted

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.

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, 2025 and 2024, as their effect was anti-dilutive (in thousands):

of Securities Excluded from the Computation of Diluted Net Loss per Common Stock

ended December 31,

Stock options

Preferred stock converted into common stock

Total potential common shares excluded from

and Equipment

and equipment consist of the following (in thousands):

of Property and Equipment

of December 31,

Laboratory and manufacturing equipment

Furniture and fixtures

Leasehold improvements

Computer equipment and programs

Property and equipment, gross

Less accumulated depreciation and amortization

Property and equipment, net

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 12 for more details on the sublease

termination agreement).

During the year ended December 31, 2025, the Company recognized a de minimis loss on disposal of fixed assets.

expense was approximately $ 0.1 million for each of the years ended December 31, 2025 and 2024.

No depreciation expense is recorded on

fixed assets in process until such time as the assets are completed and are placed into service.

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 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.

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, 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.

Value of Financial Instruments

connection with the Bridge Notes (as defined in Note 11) on September 24, 2024, the Company recorded a derivative liability of approximately

$ 5.5 million, 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.

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.

The Company remeasured the fair value of the Bridge Notes at each reporting period or immediately prior to converting

the Bridge Notes to shares of common stock and recorded changes in fair value of approximately $ 0.2 million.

Pursuant to the approval

of the September 2024 Transactions by the Company’s stockholders at the 2024 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 of approximately $ 5.3 million, were reclassified to equity.

As of December 31, 2024, there was no derivative liability balance.

connection with the Exchanged Warrants (as defined in Note 15), the Company reclassified the fair value of the Exchanged Warrants of

approximately $ 11.2 million from equity to a liability.

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 $ 16.95 and reclassified approximately $ 11.2 million from equity

to warrant liabilities.

The Company remeasured the fair value of the Exchanged Warrants at each

reporting period or immediately prior to exchanging the Exchanged Warrants to shares of common stock and recorded a change in fair value

of approximately $ 0.3 million.

Upon approval of the September 2024 Transactions at the 2024 Annual Meeting, the Company exchanged

the Exchanged Warrants for shares of common stock and reclassified the $ 10.4 million fair value of the Exchanged Warrants from liabilities

There was no remaining Exchanged Warrants liability as of December 31, 2024.

Company issued approximately 23,000 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 has also recorded a three-year contingent consideration

liability related to an asset acquisition in April 2023, which is recorded in current liabilities at December 31, 2025 due to the Company’s

obligation for this liability terminating in April 2026.

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 liability ,

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

The Company remeasures these liabilities at each reporting period and

recognizes changes in their respective fair value in the accompanying consolidated statements of operations.

connection with the 2025 Private Placement, the Company recorded a forward sales contract liability at fair value and recognized $ 5.3

million of expense b ecause the fair value of the expected

shares to be purchased by the investors exceeded the proceeds under the 2025 Private Placement .

The Company determined the expense related to the forward sales contract by taking the difference between (I) the fair value of

the expected shares to be purchased by the investors as of the March 31, 2025 date the Company entered into the 2025 Private Placement

and (ii) the discounted purchase price of the shares .

The Company remeasured the fair value of

the forward sales contract liability at each reporting period or immediately prior to the settlement of the shares purchased under the

2025 Private Placement and recognized approximately $ 0.2 million for the changes in the fair value in the accompanying consolidated statement

of operations.

During the year ended December 31, 2025, the Company completed the sale of the shares under the 2025 Private Placement,

and as a result, the forward sales contract liability was reclassified to equity.

There was no remaining forward sales contract liability

balance as of December 31, 2025.

following table summarizes the liabilities that are measured at fair value as of December 31, 2025 and 2024 (in thousands):

Schedule of Liabilities Measured at Fair Value

Warrant liabilities - Q1-22 warrants

Contingent consideration

Liability fair value disclosure

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

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 consolidated statements of operations.

following table presents the changes in the liabilities measured at fair value from January 1, 2025 through December 31, 2025 (in thousands):

Schedule of Changes in Warrant Liabilities

Consideration

Fair value at January 1, 2025

Initial measurement

Change in fair value

Reclassification of forward

sales contract liability to equity

Fair value at December 31, 2025

Company remeasured the fair value of the Q1-22 warrants at December 31, 2025, and the result of the remeasurement was de minimis.

The Company assessed the fair value of the contingent consideration liability at each reporting period through December 31, 2025 and

determined that there were no material changes to the inputs used in the December 31, 2024 remeasurement that would have resulted in

a material change to the liability at December 31, 2025.

Therefore, the Company did not recognize a change in fair value of the contingent

consideration liability for the year ended December 31, 2025.

Payable and Accrued Expenses

the year ended December 31, 2025, the Company requested its legal counsel to provide guidance with respect to vendor collectability of

various accounts payable and accrued expenses carried on its balance sheet from 2020 and prior.

Based on the review of the statute of

limitations for the various jurisdictions by which the liabilities were governed, legal counsel provided a conclusion as to whether such

statute of limitation had expired in the respective jurisdiction.

The statute of limitations is an affirmative defense in which the defendant

introduces evidence, which, if found to be credible, will negate criminal or civil liability, even if it is proven the defendant committed

the alleged acts.

The party raising the affirmative defense has the burden of proof on establishing that it applies.

In a civil action

in which a creditor demands payment on a written instrument evidencing a debt, the successful assertion of the statute of limitations

defense will bar collection of the debt.

In order to assert the statute of limitations as a defense, a defendant must specifically assert

the defense is the answer.

If a defendant fails to specifically plead the defense, it will be deemed to be waived.

Since no action to

enforce such liabilities was brought before December 31, 2025, it is our legal counsel’s opinion that the liabilities are time-barred

from collection under the respective state laws and should be removed from the Company’s balance sheet.

Therefore, the Company

wrote off approximately $ 0.6 million of accounts payable and approximately $ 0.2 million of accrued expenses, which resulted in a gain

on extinguishment of debt of $ 0.8 million report in the accompanying consolidated statement of operations for the year ended December

The Company did not write off any time-barred liabilities for the year ended December 31, 2024.

expenses at December 31, 2025 and 2024 consisted of the following (in thousands):

of Accrued Expenses

Professional fees

Legal matters

Accrued compensation

Total accrued expenses

Notes and Bridge Notes

March 11, 2025, the Company received $ 1.5 million for the issuance of a promissory note in the principal amount of $ 1.5 million to Charles

Cherington, and on March 21, 2025 the Company received $ 0.8 million for the issuance of a second promissory note in the principal amount

of $ 0.8 million to Mr.

The promissory notes had a maturity date of the earlier of (i) June 15, 2025 or (ii) upon the Company

receiving $ 5.0 million in gross proceeds from a subsequent capital raise.

Each of the promissory notes accrued interest at a rate of

5.0 % per annum, payable at maturity.

a result of completing the 2025 Private Placement discussed in Note 15, the Company offset the outstanding principal plus accrued interest

on the notes in full in the aggregate amount of $ 2.3 million with the receivable due to the Company from Mr.

Cherington for his purchase

of shares in the 2025 Private Placement, and as of December 31, 2025, there were no outstanding balances on the notes.

Notes Financing

8 unchanged sentences

on September 24, 2024.

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.

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

29, 2024 (the “2024 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 $ 7.50 .

Otherwise, the Bridge Notes could only be paid

in cash upon maturity.

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

5 unchanged sentences

as a component of interest expense.

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.

October 29, 2024, all of the Bridge Notes were converted to common stock as part of the September 2024 Transactions (as defined below)

the year ended December 31, 2024, the Company remeasured the fair value of the Bridge Notes derivative liability and recorded a reduction

in the liability of $ 0.2 million.

The corresponding credit of $ 0.2 million was recorded as a component of the fair value adjustments

to Bridge Notes derivative liability on the accompanying consolidated statement of operations for the year ended December 31, 2024, which

also includes the $ 1.6 million incremental expense noted above.

See Note 9 for more information on the fair value of the Bridge Notes.

October 29, 2024, all of the Bridge Notes were converted to common stock as part of the September 2024 Transactions (as defined in Note

15) that the Company’s stockholders approved at the 2024 Annual Meeting.

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

Debt issuance costs

Total interest expense

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.

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.

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”).

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.

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

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.

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.

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

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

pre-funded warrants to purchase one share of our common stock) for a purchase price of $ 0.75 per share of common stock and $ 0.745 per

pre-funded warrant (the “Common Stock Private Placement” and together with the Bridge Notes and the Exchange Transactions,

the “September 2024 Transactions”).

The closing of the Common Stock Private Placement was conditioned upon receiving stockholder

approval at the Annual Meeting.

SPA 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

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.

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

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

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

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

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

The pre-funded

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

not expire until exercised in full.

the Bridge Notes, approximately $ 3.0 million of the principal amount of the Bridge Notes

plus all accrued and unpaid interest thereon, plus such amount of interest that would have

accrued on the principal amount through December 24, 2024, was automatically converted at

a conversion price of $ 0.50 into approximately 6,244,000 shares of the Company’s common

stock and approximately $ 0.9 million of the principal amount of the Bridge Notes plus all

accrued and unpaid interest thereon, plus such amount of interest that would have accrued

on the principal amount through December 24, 2024, was automatically converted at a conversion

price of $ 0.50 into pre-funded warrants to purchase 1,764,000 shares of common stock.

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

and will not expire until exercised in full.

As of October 29, 2024, there were no Bridge

Notes outstanding.

the Exchange Transactions, (i) the holders of the 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

Property and Equipment

and equipment consist of the following (in thousands):

of Property and Equipment

of December 31,

Laboratory and

manufacturing equipment

Furniture and fixtures

Leasehold improvements

equipment and programs

Property and equipment, gross

accumulated depreciation and amortization

and equipment, net

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.

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.

Company currently has operating leases for office in the borough of Manhattan in New York,

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

addition, in October 2022, the Company entered into a sublease with a subsidiary of Bristol-Myers Squibb Company, as sublessor (“Sublessor”),

for office, laboratory and research and development space of approximately 45,500 square feet in Somerville, Massachusetts.

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

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

The Company paid the Sublessor a security

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

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.

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.

Company recorded an initial lease liability of $ 34.1 million and a corresponding ROU asset of $ 34.4 million during the year ended December

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.

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.

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

in past due rent.

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

$ 4.0 million of past due rent payments, plus interest and penalties.

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

The sublease was

originally scheduled to expire in 2033.

Pursuant to the sublease termination agreement, the Company agreed to the following:

and vacate the premises;

that the Company’s right, title and interest in all furniture, fixtures and laboratory equipment at the

premises will become the property of the sublessor;

As of December 31, 2025 and 2024, there were no liabilities

remaining on the Bridge Notes.

of December 31, 2025, the Company had operating leases for offices in the Borough of Manhattan

in New York, New York (the “Manhattan Lease”), and Cambridge, Massachusetts (the “Cambridge

Lease”), which expire in 2027 and 2028, respectively.

the year ended December 31, 2024, the Company entered into a sublease termination agreement with a sublessor related to a sublease of

office, laboratory, and research and development space in Somerville, Massachusetts (the “Somerville Sublease Termination Agreement”),

which was effective on August 31, 2024.

Prior to the Somerville Sublease Termination Agreement, the Company was paying approximately

$ 0.6 million per month in base rent, parking, common area maintenance costs and taxes under the Somerville Sublease, which was originally

scheduled to expire in 2033.

to the Somerville Sublease Termination Agreement, the Company agreed to the following:

to surrender and vacate the premises;

Company’s right, title and interest in all furniture, fixtures and laboratory equipment at the premises will become the property

of the sublessor;

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

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

December 31, 2024, which includes a loss on disposal of fixed assets of approximately $ 0.5 million.

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.

the years ended December 31, 2025 and 2024, the net operating lease expenses were as follows (in thousands):

4 unchanged sentences

Variable lease expense

lease expense

Total lease expense

tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2025 and the ending balances

1 unchanged sentence

Lease Right-of-use Assets and Liabilities

lease ROU assets at January 1, 2024

to ROU asset for remeasurement of

Sublease liability

of Somerville Sublease ROU asset

of operating lease ROU assets

lease ROU assets at December 31, 2024

lease liabilities at January 1, 2024

to lease liability due to remeasurement

Somerville Sublease

of interest for Somerville Sublease

of Somerville Sublease liability

payments on operating lease liabilities

lease liabilities at December 31, 2024

non-current portion

portion at December 31, 2024

Operating lease ROU assets at January

Amortization of operating lease ROU assets

Remeasurment of ROU asset

Impairment of ROU asset

Operating lease ROU assets at December 31,

Operating lease liabilities at

January 1, 2025

Principal payments on operating lease liabilities

Remeasurment of lease liability

Operating lease liabilities at December 31,

Less non-current portion

Current portion at December 31, 2025

Cambridge Lease, which commenced in June 2021, included a tenant improvement allowance of up to $ 50,000 (the “TI Allowance”),

which was not paid or payable at lease commencement, and the amount of payment from the lessor was contingent on future events (e.g.,

the timing and the amount of qualified costs the Company incurs to construct leasehold improvements).

Therefore, the TI Allowance was

not previously included in the consideration of the contract when the Company measured the lease liability and ROU asset.

the year ended December 31 2025, the Company made some leasehold improvements to the Cambridge office space of approximately $ 0.1 million,

of which $ 50,000 qualified to be reimbursed under the TI Allowance.

As a result, the contingent aspects of the TI Allowance were resolved

and became fixed, which resulted in the Company remeasuring the lease liability.

The TI Allowance of $ 50,000 was deducted from the ROU

asset balance immediately prior to the re-measurement.

The remaining unpaid lease payments, including the reimbursement of the TI Allowance,

which is considered a reduction in the consideration of the contract, were then remeasured using the current index and interest rate

and resulted in an approximately $ 14,000 increase to the lease liability, with a corresponding adjustment to the ROU asset.

million of leasehold improvements was recorded as a fixed asset and is being depreciated over the remaining lease term.

the year ended December 31, 2025, the Company tested the Manhattan Lease ROU asset for recoverability and determined that the carrying

value of the ROU asset was more than its fair value.

As a result, the Company recognized an impairment loss of approximately $ 33,000

during the year ended December 31, 2025, which was recorded in general and administrative expense in the accompanying

consolidated statement of operations.

There were no impairment losses recognized for the year ended December 31, 2024.

of December 31, 2025, the Company’s operating leases had a weighted-average remaining life of 2.2 years with a weighted-average

1 unchanged sentence

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

of Maturities

of Operating Lease Liabilities

Maturities of Operating Lease Liabilities

December 31, 2025

1 unchanged sentence

Less imputed interest

Total operating lease

Total operating lease liabilities

February 2026, the Company entered into a lease termination agreement related to the Manhattan Lease.

See Note 18 for more information

on this agreement.

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.

agreed to sublease the space rented by the Company under the Manhattan Lease.

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.

Company received sublease payments of approximately $ 0.1 million for each of the years ended December 31, 2025 and 2024, respectively.

4 unchanged sentences

the criteria of a sale-type or direct financing lease.

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

December 31, 2024

Total payments

Fair Value of Financial

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.

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.

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

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

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

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

the conversion feature and without the conversion feature.

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.

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.

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.

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

Warrant liabilities - Q1-22 warrants

Market Cap Contingent Consideration

Liability fair value disclosure

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

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.

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

Consideration

Fair value at January 1, 2024

Reclassification of Exchanged Warrants from

equity to liability

Initial measurement of Bridge Notes derivative

Change in fair value

Reclassification of Exchanged Warrants and

derivative liability to

Reclassification of Exchanged Warrants and

Bridge Notes derivative liability to

Fair value at December 31, 2024

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.

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.

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.

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

Convertible Notes

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.

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.

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.

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.

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

Related Party Transactions

with Factor Bioscience Inc.

and Affiliates

of December 31, 2024, the Company had entered into the agreements described below with Factor Bioscience Inc.

Matthew Angel.

These agreements have been deemed related party transactions because the Company’s former chief executive officer, Dr.

the chairman and chief executive

officer of Factor Bioscience Inc.

and a director of its subsidiary, Factor Bioscience Limited (“Factor Limited” and together

with Factor Bioscience Inc.

and its other affiliates, “Factor Bioscience”).

Angel resigned as the Company’s chief

executive officer effective December 31, 2023.

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.

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.

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.

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

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).

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

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.

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

Factor L&C Agreement terminated the A&R Factor License Agreement as well as the Purchased License that Exacis entered into with

Factor Bioscience on November 4, 2020, which the Company acquired pursuant to the Exacis Purchase Agreement with Exacis and certain stockholders

of Exacis on April 26, 2023.

the Factor L&C Agreement, the Company has obtained exclusive licenses in the fields of cancer, autoimmune disorders, and rare diseases

with respect to certain licensed technology and has the right to develop the licensed technology directly or enter into co-development

agreements with partners who can help bring such technology to market.

The Factor L&C Agreement also provides for certain services

and materials to be provided by Factor Bioscience to facilitate the development of the licensed technology and to enable the Company

to scale up production at third party facilities.

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

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

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

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

approximately $ 0.1 million per month for the first nine months toward patent costs, certain milestone payments, royalty payments on net

sales of commercialized products and sublicensing fee payments.

Asset Acquisition

April 26, 2023, the Company closed the Exacis Acquisition.

See Note 4 for additional information.

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.

Agreement with Former Director

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.

Fiore served on the Company’s

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

2023, December 2023 and September 2024 Financings

in the July 2023 Convertible Note financing included Brant Binder, Richard Wagner, Charles Cherington and Nicholas Singer, and investors

in the December 2023 Convertible Note financing and the September 2024 financing included Messrs.

Cherington and Singer.

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

Note 6 for additional information regarding the financings.

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.

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.

Accrued Expenses

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

of Accrued Expenses

Professional fees

Accrued compensation

Convertible notes interest

Somerville facility

accrued expenses

Commitments and Contingencies

February 2026, the Company entered into a sublease termination agreement with the Subtenant.

See Note 18 for more information on this

and Contingencies

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

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The Company reserves for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated.

Cherington and Ernexa

Donoghue, a security owner of the Company, initiated a lawsuit against the Company as a nominal defendant, and Charles Cherington

as defendant, on October 20, 2025 in the Southern District of New York (Case No.

25-cv-8653) alleging a violation of Section 16(b) of

the Securities Exchange Act of 1934, 15 U.S.C.

Section 78p(b) and seeking recovery of alleged short swing profits by Mr.

Cherington (the

“Donoghue Matter”).

December 19, 2025, Mr.

Donoghue, the Company and Mr.

Cherington entered into a settlement agreement.

Sowyrda et al., C.A.

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prior to our acquisition of Novellus, Inc.), alleging breach of fiduciary duty, breach of contract and civil conspiracy.

Eterna acquired

Novellus, Inc.

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

Christopher Rohde, Dr.

Matthew Angel, Leonard Mazur and Factor Bioscience, Inc.

captioned Zelickson et al., v.

Angel et al.,

2021-1014-JRS and by Westman against Novellus LLC captioned Westman v.

Novellus LLC , C.A.

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.

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.

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.

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.

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

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

The Company has accrued approximately $ 0.2

million for this matter in the year ended December 31, 2024.

Immunotherapies NV and eTheRNA Inc.

Eterna Therapeutics Inc.

July 31, 2023, eTheRNA Immunotherapies NV and eTheRNA Inc.

filed a complaint against the Company alleging the following claims:

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.

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.

October 6, 2024, the parties entered into an addendum to the settlement agreement extending the deadline for phasing out the Company’s

use of the ETERNA trademark until March 31, 2025.

If the Company continues to use the Eterna Therapeutics name as of April 1, 2025, it

will be obligated to pay € 667 per day that it continues to do so.

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

See Note 11 for details of this agreement.

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.

Basic and Diluted Net

Loss per Common Share

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):

of Computation of Net Loss Per Share Basic and Diluted

ended December 31,

attributable to common stockholders

Weighted average shares outstanding -

basic and diluted

Net loss per common

share - basic and diluted

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.

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):

of Securities Excluded from the Computation of Diluted Net Loss per Common Stock

Stock options

Preferred stock converted into common stock

Convertible Notes converted into common stock

Total potential common

shares excluded from computation

Stock-Based Compensation

amended the complaint to withdraw all claims against all defendants

except Paul Sowyrda and John Westman.

Since 2022, the parties have engaged in legal proceedings relating to alleged conduct that took

place before the Company acquired Novellus, Inc., including certain counterclaims against Novellus LLC, Novellus Inc., Factor Bioscience

Inc., Christopher Rohde, Matthew Angel and the Company (the “Counterclaim Defendants”).

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.

On April 22, 2025, Counterclaim Defendants and Westman reached a confidential settlement with an effective

date of April 30, 2025.

Such settlement included the issuance of 20,000 shares of the Company’s common stock and a cash payment

of less than $0.1 million.

On May 27, 2025, Counterclaim Defendants and Westman filed stipulation of dismissal with prejudice with the

September 24, 2024, the Company entered into the Exclusive License and Collaboration Agreement (“the Factor L&C Agreement”)

with Factor Limited.

The Factor L&C Agreement terminated a previous license agreement, as well as a license that the Company acquired

from a third party pursuant to an asset purchase agreement in April 2023.

the Factor L&C Agreement, the Company has obtained exclusive licenses in the fields of cancer, autoimmune disorders, and rare diseases

with respect to certain licensed technology and has the right to develop the licensed technology directly or enter into co-development

agreements with partners who can help bring such technology to market.

The Factor L&C Agreement also provides for certain services

and materials to be provided by Factor Limited to facilitate the development of the licensed technology and to enable the Company to

scale up production at third party facilities.

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

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

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

to the Factor L&C Agreement, the Company will pay Factor Limited 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.

Consideration

Company has recorded a three-year contingent consideration liability related to an asset acquisition in April 2023.

If during the three-year

period since April 26, 2023, the Company’s market cap equals or exceeds $100 million for at least ten consecutive trading days,

then the Company will issue to the seller shares of the Company’s common stock equal to (a) $2.0 million divided by (b) the quotient

of $100 million divided by the number of the Company’s then issued and outstanding shares of common stock.

If during that three-year

period, the Company’s market cap equals or exceeds $200 million for at least ten consecutive trading days, then the Company will

issue to the seller additional shares of the Company’s common stock equal to (a) $2.0 million divided by (b) the quotient of $200

million dividend by the number of the Company’s then issued and outstanding shares of common stock.

As discussed in Note 9, the

Company records the contingent consideration liability at its fair value, and as of December 31, 2025 the fair value of the liability

was approximately $ 41,000 .

The contingent consideration obligation will expire on April 26,2026 .

Company offers to its eligible employees a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, through

its co-employment arrangement with its professional employer organization (“PEO”).

Under this arrangement, the PEO serves

as the plan sponsor and administrator.

Eligible employees may defer up to 100 % of their annual compensation or a specific amount imposed

by the Internal Revenue Service, whichever is less.

The Company matches 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, 2025

Incentive Plans

25 unchanged sentences

As of December 31, 2025, there were approximately 5,000 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.

As of December 31, 2025, there were no stock options outstanding and or RSUs outstanding under the 2021 Inducement Plan.

following weighted-average assumptions were used for stock options granted during the years ended December 31, 2025 and 2024:

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Expected term

risk-free rate is based on the observed interest rates appropriate for the expected life.

The expected life (estimated period of time

risk-free rate is based on the observed interest rates appropriate for the expected term.

The expected term (estimated period of time

outstanding) of the stock options granted is estimated using the “simplified” method as permitted by the SEC’s Staff

2 unchanged sentences

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.

over the expected term of the stock option granted, and the Company assumes no dividends.

Forfeitures are recognized as incurred.

2 unchanged sentences

Schedule of Stock Option Activity

Average Exercise

Price per Share

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he was granted a non-qualified stock option to purchase approximately 112,000 shares of the Company’s common 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

has an exercise price of $ 27 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).

Luther’s employment agreement and

as a material inducement to his joining the Company in accordance with Nasdaq Listing Rule 5635(c)(4).

April 26, 2024, the vesting terms of Mr.

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during the year ended December 31, 2024 as a result of the modification.

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

Value per Share

January 1, 2023

December 31, 2023

There was no modification expense recorded during the year ended

December 31, 2025.

Balance expected to

vest at December 31, 2024

following table summarizes RSU activity for the years ended December 31, 2025 and 2024 :

Schedule of RSU Activity

Restricted Stock Units

Average Fair Value per Share

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

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of withholding taxes payable.

During the years ended December 31, 2024 and 2023, less than 1,000 RSUs vested in each year.

During the years ended December 31, 2025 and 2024, less than 1,000 RSUs vested in each year, and as of

December 31, 2025, there are no RSUs outstanding.

Compensation Expense

3 unchanged sentences

General and administrative

Stockholders’ Equity

the year ended December 31, 2024, the Company had the following warrant activity (in thousands):

Stockholders’

Equity and Warrants

Private Placement

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

to sell 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 the Company’s outstanding common stock.

2025 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 and contained an adjustment to the settlement amount based on shareholder approval, which is not an input into the pricing

of a fixed-for-fixed forward on equity shares.

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

(i) the fair value of the expected shares to be purchased by the investors as of the date the Company entered into the 2025 SPA and (ii)

the discounted purchase price of the shares and recorded a liability of approximately $ 5.3 million at the contract inception date.

Company also recognized a corresponding $ 5.3 million charge to expense on the contract inception date because the fair value of the expected

shares to be purchased by the investors exceeded the expected proceeds under the 2025 SPA.

the year ended December 31, 2025, the Company sold the following shares of common stock and pre-funded warrants under the 2025 SPA (in

of Common Stock and Pre-funded Warrants

April 2, 2025

June 27, 2025

shares sold on April 2, 2025 (the “First Closing”) represented 19.99 % of the Company’s outstanding shares of common

stock as of March 31, 2025.

The shares sold in June 2025 (the “Second Closing”) were subject to satisfaction or waiver of

certain conditions, including without limitation, receipt of stockholder approval for such issuance as required under applicable Nasdaq

listing rules, which the Company received at the 2025 Annual Meeting.

before each settlement date, the Company remeasured the fair value of the respective forward sales contract liability and recognized

changes in fair value of approximately $ 0.5 million in the accompanying consolidated statement of operations.

Upon settlement, the Company

then reclassified the respective forward sales contract liability to equity.

For the year ended December 31, 2025, the Company recognized

$ 5.8 million of forward sales contract expense.

During the year ended December 31, 2025, the Company reclassified the $ 5.8 million forward

sales contract liability to equity, and at December 31, 2025, there was no forward sales contract liability balance.

2024 Transactions

Exchange Transaction

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

convertible notes issued in convertible note financings during 2023 (the “2023 Convertible Notes), (ii) all holders of warrants

issued in connection with the 2023 Convertible Notes and (iii) substantially all of the holders of warrants issued in December 2022 (the

“December 2022 Warrants”).

One holder of a December 2022 Warrants to purchase approximately 9,000 shares of our common stock

did not enter into the Exchange Agreement.

to approval by the Company’s stockholders at the 2024 Annual Meeting, under the Exchange Agreements (i) the holders of the warrants

agreed to exchange all their warrants for shares of the Company’s common stock at an exchange ratio of 0.50 shares 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) $ 15.00

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

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

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

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

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

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

the 2023 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.

Upon entering into the Exchange Agreements, the fair value of the 2023 Convertible Notes

was $ 32.0 million and was determined by multiplying approximately 1,890,000 shares the Company would be issuing on October 29, 2024 by

the closing stock price of $ 16.95 per share on September 24, 2024.

difference between the reacquisition price and the net carrying amount of the 2023 Convertible Notes being extinguished was approximately

$ 21.9 million.

Accordingly, the Company increased the carrying value of the 2023 Convertible Notes to $ 32.0 million and recognized a

loss on extinguishment of debt of approximately $ 21.9 million during the year ended December 31, 2024.

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.

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 $ 16.95 and reclassified approximately $ 11.2 million from equity to warrant liabilities.

Company remeasured the fair value of the Exchanged Warrants at each reporting period or immediately prior to exchanging the Exchanged

Warrants to shares of common stock and recorded a change in fair value of approximately $ 0.3 million.

A corresponding credit of

$ 0.3 million was recognized as a change in fair value of warrant liabilities for the year ended December 31, 2024 on the accompanying

consolidated statement of operations.

Private Placement

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

to sell in a private placement an aggregate of approximately 101,000 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 $ 11.25 per share of common stock and $ 11.175 per

pre-funded warrant (the “2024 Private Placement” and together with the Bridge Notes and the Exchange Transactions, the “September

2024 Transactions”).

The closing of the 2024 Private Placement was conditioned upon receiving stockholder approval at the 2024

Annual Meeting.

2024 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 2024 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 2024 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 2024 SPA and the Exchange Agreements, and because the investors in the

2024 SPA were 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 in the accompanying consolidated statement

of operations.

of Shares Issued in the September 2024 Transactions

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

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

the 2024 Private Placement, the Company issued approximately 93,000 shares of common stock

and pre-funded warrants to purchase approximately 8,000 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 $ 0.075 per share, are exercisable at any time and will

not expire until exercised in full.

the Bridge Notes, approximately $ 3.0 million of the principal amount of the Bridge Notes

plus all accrued and unpaid interest thereon, plus such amount of interest that would have

accrued on the principal amount through December 24, 2024, was automatically converted at

a conversion price of $ 7.50 into approximately 416,000 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 $ 7.50 into pre-funded warrants to purchase approximately 118,000 shares of common

The pre-funded warrants have an exercise price of $ 0.075 per share, are exercisable

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

As of October 29, 2024, there were

no Bridge Notes outstanding.

the Exchange Transactions, (i) the holders of the Exchanged Warrants exchanged approximately

1,327,000 warrants for approximately 663,000 shares of the Company’s common stock,

and (ii) the holders of the Convertible Notes exchanged all their Convertible Notes for approximately

1,890,000 shares of our common stock for a total of 2,553,000 shares of our common stock

under the Exchange Transactions.

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

of December 31, 2025, the Company had the following common warrants outstanding:

of Warrants Outstanding

(in thousands)

Classification

Q1-22 Warrants

December 2022 Warrants

Prefunded warrants

of December 31, 2025, the weighted average remaining contractual life of expiring warrants outstanding was 1.90 years and the weighted

average exercise price for the expiring warrants was $ 411.74 .

The prefunded warrants do not expire and have a weighted average exercise

price of $ 0.075 .

following table shows the warrant activity for the years ended December 31, 2025 and 2024 (in thousands):

of Warrants Activity

January 1, 2024

December 31, 2024

December 31, 2025

Q1-22 Warrants

December 2022 Warrants

July 2023 Warrants

December 2023 Warrants

Exchanged Warrants

Prefunded warrants

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.

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 .

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.

Repurchase Program

November 2024, the Company’s Board of Directors 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 years ended

December 31, 2025 or 2024.

Convertible Preferred Stock

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Dividends may be paid in cash or with shares of common stock.

The Company issued approximately 7,000 shares of common stock

for the payment of dividends during the year ended December 31, 2025.

The Company paid approximately $ 8,000 in cash and issued approximately

1,000 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.

Series A Preferred Stock has no voting rights and has a $ 1.00 per share liquidation preference over the Company’s common stock.

10 unchanged sentences

the following circumstances:

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.

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.

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.

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

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.

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.

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.

2024 Transactions

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.

Repurchase Program

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.

timing and amount of repurchases will be determined by the Company, taking into consideration market conditions, stock price, and other

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.

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.

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.

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.

May 1, 2025, the Company’s $ 10.0 million SEPA with Lincoln Park expired in accordance with its terms.

The Company did not sell

any shares under the SEPA during the years ended December 31, 2025 or 2024.

before income taxes consist of the following (in thousands):

2 unchanged sentences

(in thousands)

Total loss before income

Total loss before income taxes

each of the years ended December 31, 2025 and 2024, current tax provisions and current deferred tax provisions were recorded as follows

6 unchanged sentences

Deferred tax provision

Total tax provision

(benefit) for income taxes

Total tax provision (benefit) for income taxes

income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting

7 unchanged sentences

of Deferred Tax Assets and Liabilities

of December 31,

As of December

Deferred Tax Assets:

Net operating

Net operating losses

Foreign net operating losses

Stock compensation

In-process research and

Capitalized research and

development expenses

In-process research and development

Capitalized research and development expenses

Accrued expenses

5 unchanged sentences

Deferred Tax Liabilities:

Convertible debt

Intangibles - goodwill

Total deferred tax liabilities

1 unchanged sentence

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:

of Reconciliation of Computed Expected Income Taxes to Effective Income Taxes

of 21 % for the years ended December 31, 2025 and 2024 is as follows (in thousands, except for percentages):

Schedule of Reconciliation of Computed Expected Income Taxes to Effective Income Taxes

of December 31,

Tax at federal income tax rate

State income tax, net of federal tax

Current tax at federal statutory

State income tax, net of federal tax (a)

Foreign tax differential

Non-deductible expenses/excludable items

Financing costs

Convertible debt

Change in valuation allowance

(Provision) benefit

for income taxes

net increase in the total valuation allowance for the year ended December 31, 2024 was an increase of approximately $ 7.7 million.

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.

(Provision) benefit for income taxes

the years ended December 31, 2025, state taxes in Massachusetts made up the majority (greater

than 50%) of the tax effect in this category.

net change in the total valuation allowance for the year ended December 31, 2025 was an increase of approximately $ 0.1 million.

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.

deferred tax liability represents an indefinite life intangible liability related to tax deductible goodwill, partially offset by an

indefinite life deferred tax asset.

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 net deferred tax liability represents

an indefinite life intangible liability related to tax deductible goodwill, partially offset by an indefinite life deferred tax asset.

December 31, 2025 and 2024, the Company has available net operating loss (“NOL”) carryforwards of approximately $ 71.5 million

and $ 62.1 million for federal income tax purposes, respectively, of which approximately $ 70.8 million can be carried forward indefinitely.

Federal NOL carryforwards generated after tax year 2021 are subject to an 80% limitation on taxable income, do not expire and will carryforward

indefinitely.

The Company has available $ 55.2 million and $ 52.6 million state NOLs for the years ended December 31, 2025 and 2024, 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, 2025 and 2024, which carry forward indefinitely .

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.

Company has federal and state income tax credit carryforwards of approximately $ 0.4 million at both December 31, 2025 and 2024.

credits begin to expire in 2041 .

begin to expire in 2041.

accordance with authoritative guidance, the impact of an uncertain income tax position on the income tax return must be recognized at

8 unchanged sentences

tax positions

Additions based on current year’s tax

Additions based on current year’s tax positions

Net changes based on prior

10 unchanged sentences

31, 2025 or December 31, 2024.

Company is also subject to certain non-income taxes such as value added taxes, sales taxes and property taxes.

The Company has taken

certain positions that management feels, although not free from doubt, should not result in a successful challenge by certain tax authorities.

Company is subject to U.S.

6 unchanged sentences

jurisdictions.

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.

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.

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.

Company’s revenue and its cost of revenues for the years ended Decembe4 2024 and 2023 relate to the Lineage Agreement.

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.

of Breakdown of Significant Operating Expenses

Year ended December 31,

Cost of revenues

Gross profit (loss)

Operating expenses:

Research and development by significant expense:

MSA/license fees

Professional fees

Payroll and related

Research and development

General and administrative by significant expense:

Occupancy expense

Professional fees

Payroll and related

Stock-based compensation

General and administrative

Gain on lease termination

Acquisition of Exacis in-process research and development

Total operating expenses

Loss from operations

Other expense, net

Loss before income taxes

(Provision) benefit for income taxes

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.

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

the years ended December 31, 2025, the components of total income taxes paid, net of refunds, by jurisdiction were as follows (in thousands):

Summary of Income Tax Examinations

Massachusetts

Total cash paid for

income taxes (net of refunds)

table above excludes jurisdictions that do not meet the 5% of total taxes paid reporting threshold for the respective periods.

July 4, 2025, the One Big Beautiful Bill (“OBBBA”) was enacted, introducing significant and wide-ranging changes to the U.S.

federal tax system.

Significant components include restoration of 100% accelerated tax depreciation on qualifying property including

expansion to cover qualified production property.

Another major aspect includes the return to immediate expensing of domestic research

and experimental expenditures (“R&E”), which in some cases may include retroactive application back to 2021 for businesses

with gross receipts of less than $ 31 million or accelerated tax deductions of R&E that was previously capitalized for larger businesses.

The legislation also reinstates EBITDA-based interest deductions for tax purposes and makes several business tax incentives permanent.

Less favorable business provisions include limitations on tax deductions for charitable contributions.

OBBBA modified the U.S.

International Tax provisions for Global Intangible Low-Taxed Income (“GILTI”), Foreign-Derived Intangible

Income (“FDII”), and the Base-erosion Anti-abuse Tax (“BEAT”) effective for tax years starting after December

The tax rate on GILTI, now renamed to Net CFC Tested Income (“NCTI”), is now 12.6 %.

The FDII rules, now renamed

to Foreign Derived Deduction Eligible Income (“FDDEI”), now carry a 14 % tax rate on FDDEI eligible income.

The OBBB Act increases

the BEAT rate from 10 % to 10.5 %.

Party Transactions

who participated in the September 2024 Transactions and the 2025 Private Placement that are discussed in Note 15 and in the 2026 Offering

discussed in Note 18 included Charles Cherington.

Cherington participated in the applicable financing under the same terms and subject

to the same conditions as all the other investors.

Cherington served on the Company’s board of directors from March 2021 to July 6, 2023.

As of December 31, 2025, Mr.

owned approximately 35 % of the Company’s outstanding common stock, and after the 2026 Offering and exercise of the related prefunded

warrants, he owned approximately 23 %.

2025 Promissory Notes

March 11, 2025, the Company received $ 1.5 million for the issuance of a promissory note in the principal amount of $ 1.5 million to Mr.

Cherington, and on March 21, 2025 the Company received $ 0.8 million for the issuance of a second promissory note in the principal amount

of $ 0.8 million to Mr.

The promissory notes had a maturity date of the earlier of (i) June 15, 2025 or (ii) upon us receiving

$ 5 million in gross proceeds from a subsequent capital raise.

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

Each of the promissory notes accrued interest at a rate of 5.0 % per annum,

payable at maturity.

Upon issuance of the notes, Mr.

Cherington owned approximately 32 % of our outstanding common stock and currently

owns approximately 25 % of our outstanding common stock.

a result of completing the 2025 Private Placement discussed in Note 15, the Company repaid the outstanding principal plus accrued interest

on the notes in full in the aggregate amount of $ 2.3

million, and as of September 30, 2025, there were no outstanding

balances on the notes.

February 6, 2026, the Company 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 the Company engaged the

Placement Agent for the 2026 Offering, which included the public offering of (i) 19.0 million shares (the “Shares”) of the

Company’s common stock, par value $ 0.005 per share (“Common Stock”) and accompanying Milestone Warrants to purchase

19.0 million shares of Common Stock, 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.

In connection with the 2026 Offering, the Company 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 a total 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 the Company of clinical trial data from the first cohort of the Phase 1 study of ERNA-101.

to the Placement Agency Agreement, the Company 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).

The Company will also pay the Placement Agent a cash fee as compensation for gross proceeds the Company receives 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.

The Company also issued approximately 0.2 million shares of Common Stock to the Placement

Agent (the “Agent’s Shares”), 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, the Company 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 the Company.

The Company intends to use the net proceeds from the 2026 Offering to support

the advancement of its development programs, working capital and general corporate purposes.

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

conditions to closing, indemnification obligations of the Company, 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, the Company has agreed that for a period of ninety (90) days

from the closing of the 2026 Offering, that neither the Company 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.

The Company has 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, the

Company’s 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, the Company also entered into a Warrant Agent Agreement (the “Warrant Agent Agreement”) with it transfer

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

and Sublease Termination Agreements

February 16, 2026, the Company entered into a sublease termination agreement with the Subtenant of the Manhattan Lease (the “Manhattan

Sublease Termination Agreement”) effective March 13, 2026.

Pursuant to the Manhattan Sublease Termination Agreement, the Subtenant

agreed to surrender and vacate the premises in exchange for a sublease termination payment of approximately $ 0.1 million to the Company.

February 18, 2026, the Company entered into a lease termination agreement with the lessor of the Manhattan Lease (the “Manhattan

Lease Termination Agreement”) effective March 13, 2026.

Pursuant to the Manhattan Lease Termination Agreement, the Company agreed

to surrender and vacate the premises in exchange for a lease termination payment of approximately $ 0.1 million to the lessor.

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 9A. Controls and Procedures