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What changed in Ernexa Therapeutics Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Ernexa Therapeutics Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+261 added−313 removedSource: 10-K (2025-03-12) vs 10-K (2024-03-14)

Top changes in Ernexa Therapeutics Inc.'s 2024 10-K

261 paragraphs added · 313 removed · 173 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

112 edited+49 added−104 removed270 unchanged
Biggest changePatent protection for the mRNA technology platform includes: Family Number and Title United States or Foreign Jurisdiction Earliest Effective Date of Patent Application FAB-001: “Methods and Products for Transfecting Cells” Granted : US (Nos. 9,422,577, 9,605,277, 9,605,278, 10,472,611, 10,662,410, 10,829,738, 10,982,229, ,11,466,293, 11,692,203 and 11,708,586), EP (CH, DE, FR, GB, IE), EP (BE, CH, DE, DK, FR, GB, IE, NL), AU (6X), CA, CN (4X), HK (5X), JP (2X), KR (2X), MX(2X), RU Nationalized PCT : (1X) Pending : US (4X), AU, BR (4X), CA, CN, EP, HK (2X), KR, MX (3X), RU 12/05/2011 FAB-003: “Methods and Products for Transfection” Granted : US (Nos. 8,497,124, 9,127,248, 9,399,761, 9,562,218, 9,695,401, 9,879,228, 9,969,983, 10,131,882, 10,301,599, 10,443,045, 11,492,600) Pending : US 5/07/2012 FAB-005: “Methods and Products for Expressing Proteins in Cells” Granted : US (Nos. 9,447,395, 9,376,669, 9,464,285, 9,487,768, 9,657,282, 9,758,797, 10,415,060, 10,590,437, 11,339,409, 10,752,917, 11,339,410 ,10,724,053, 11,332,758, 10,767,195, 11,332,759, 10,752,918 and 10,752,919 ), EP (CH, DE, FR, GB, IE), AU (2X), BR (3X), CA, HK, JP (3X), KR (3X), MX, RU Nationalized PCT : (1X) Allowed: BR, JP, MX and US Pending : AU, CA, CN, EU, HK, KR and US 11/01/2012 3 Table of Contents FAB-008: “Methods and Products for Nucleic Acid Production and Delivery” Granted : US (Nos. 9,770,489 and 10,124,042), EP (DE, FR, GB, CH, ES, IE), EP (BE; DK; FI; FR; DE; IE; NL; NO; ES; SE; CH; GB), AU, HK, JP, KR, MX, RU Nationalized PCT : (1X) Pending : AU, BR, CA, CN, EP, JP, KR, MX and US (2X) 08/18/2014 FAB-009: “Nucleic Acid Products and Methods of Administration Thereof” Granted : US (No. 11,241,505), AU, JP Nationalized PCT : (1X) Pending : AU, CA, CN, EP, HK (2X), JP, NZ and US 02/16/2016 FAB-010: “Nucleic Acid Products and Methods of Administration Thereof” Granted : US (Nos. 10,576,167, 10,137,206, 10,350,304, 10,363,321, 10,369,233, 10,888,627, and 10,894,092), AU, CN Nationalized PCT : (1X) Issue Fees Paid: US Pending : US (3X), AU, CN, EP, HK, IL (2X), JP (2X), NZ (2X) 08/17/2017 FAB-011: “Nucleic Acid-Based Therapeutics” Nationalized PCT: (1X) Pending: US, AU, CA, EP and HK 03/27/2019 FAB-012: “Cationic Lipids and Transfection Methods” Granted : US (Nos. 10,501,404, 10,556,855, 10,611,722, 10,752,576, 11,242,311 and 11,814,333) Nationalized PCT: (1X) Pending : US (2X), AU, CA, CN, EP, HK, JP, KR, MX, NZ US: 07/30/2019 Foreign: 07/03/2019 4 Table of Contents FAB-013: “Engineered Gene-Editing Proteins” Pending : US, EP Nationalized PCT: (1X) 05/12/2021 FAB-016: “Mesenchymal Stem Cell Therapies” Nationalized PCT: (1X) Pending : US, AU, CN, EP, HK and JP 04/28/2021 FAB-017: “Engineered Immune Cell Therapies” Nationalized PCT: (1X) Pending: US, AU, CA, CN, EP and JP 03/04/2022 FAB-018: “Circular RNA” Nationalized PCT: (1X) Pending: US, AU, CA, CN, EP and JP 04/27/2022 FAB-019: “Methods for reprogramming and gene editing cells” Pre-nationalization PCT: (1X) 01/05/2022 US – United States of America EP – European Patent Convention PCT – Patent Cooperation Treaty AU – Australia BE – Belgium BR – Brazil CA – Canada CH – Switzerland CN – Peoples’ Republic of China DE – Germany DK – Denmark ES – Spain FI – Finland FR – France GB – Great Britain HK – Hong Kong IE – Ireland IL – Israel IN – India JP – Japan KR – Republic of Korea (South Korea) MX – Mexico NL – Netherlands NO – Norway NZ – New Zealand RU – Russian Federation SE – Sweden 5 Table of Contents Patent Families Descriptions of our patent families are as follows: • FAB-001: “Methods and Products for Transfecting Cells” - The present invention relates in part to nucleic acids encoding proteins, nucleic acids containing non-canonical nucleotides, therapeutics comprising nucleic acids, methods, kits, and devices for inducing cells to express proteins, methods, kits, and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, and therapeutics produced using these methods, kits, and devices.
Biggest changePatent protection for the iMSC technology platform includes: Family Number and Title United States or Foreign Jurisdiction Earliest Effective Date of Patent Application FAB-001: “Methods and Products for Transfecting Cells” Granted : US (Nos. 10829738, 10982229, 11692203, 10472611, 11466293, 10662410, 12227757); EP (No. 2788033 (CH; DE; FR; GB; IE)); EP (No. 3260140 (BE; CH; DE; DK; FR; GB; IE; NL); CA (No. 2,858,148); JP (Nos. 6073916, 6294944); KR (No. 10-2196339) Pending : US (4X), EP, CA 12/05/2011 FAB-003: “Methods and Products for Transfection” Granted : US (Nos. 8497124, 9127248, 11492600, 9399761, 9562218, 9695401, 9879228, 9969983, 10131882, 10301599, 10443045, 12227768) Pending : US (3X) 5/07/2012 FAB-005: “Methods and Products for Expressing Proteins in Cells” Granted : : JP (Nos. 6510416, 6890565, 6793146, 7436406); KR (No. 10-2121086); CA (No. 2890110) Pending : JP, US 11/01/2012 FAB-009: “Nucleic Acid Products and Methods of Administration Thereof” Granted : JP (Nos. 7199809, Not Assigned Yet) Pending : CA, JP 02/16/2016 2 Family Number and Title United States or Foreign Jurisdiction Earliest Effective Date of Patent Application FAB-010: “Nucleic Acid Products and Methods of Administration Thereof” Pending : US, CA, EP 08/17/2017 FAB-011: “Nucleic Acid-Based Therapeutics” Pending: US (2X), EP 03/27/2019 FAB-013: “Engineered Gene-Editing Proteins” Pending : US, EP 05/12/2021 FAB-016: “Mesenchymal Stem Cell Therapies” Pending : US, EP, JP 04/28/2021 FAB-017: “Engineered Immune Cell Therapies” Pending: US, CA, EP and JP 03/04/2022 FAB-018: “Circular RNA” Pending: US, CA, EP and JP 04/27/2022 FAB-019: “Methods for reprogramming and gene editing cells” Pre-nationalization PCT: (1X) 01/05/2022 FAB-021: ““Methods for reprogramming and gene editing cells” Pre-nationalization PCT: (1X) 05/01/2024 FAB-023: “Methods for reprogramming and gene editing cells” Pre-nationalization PCT: (1X) Pending : US 09/20/2024 04/19/2024 US – United States of America EP – European Patent Convention PCT – Patent Cooperation Treaty BE – Belgium CA – Canada CH – Switzerland DE – Germany DK – Denmark FR – France GB – Great Britain IE – Ireland JP – Japan KR – Republic of Korea (South Korea) NL – Netherlands Patent Families Descriptions of our patent families are as follows: ● FAB-001: “Methods and Products for Transfecting Cells” - The present invention relates in part to nucleic acids encoding proteins, nucleic acids containing non-canonical nucleotides, therapeutics comprising nucleic acids, methods, kits, and devices for inducing cells to express proteins, methods, kits, and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, and therapeutics produced using these methods, kits, and devices.
We urge investors to carefully consider the risk factors described below in evaluating our stock and the information in this Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Risks Related to our Business and Industry We will require substantial additional capital to fund our operations and execute our business strategy, and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all.
We urge investors to carefully consider the risk factors described below in evaluating our stock and the information in this Annual Report on Form 10-K, including the consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 12 Risks Related to our Business and Industry We will require substantial additional capital to fund our operations and execute our business strategy, and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all.
The legal systems of certain countries, particularly certain developing countries including India and China, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology and pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.
The legal systems of certain countries, particularly certain developing countries including India and China, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology and pharmaceutical products, which could make it difficult for us to stop the infringement of our in-licensed patents or marketing of competing products in violation of our proprietary rights generally.
There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. Risks Related to Regulatory Requirements We are subject to extensive and costly government regulation.
There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. 21 Risks Related to Regulatory Requirements We are subject to extensive and costly government regulation.
In addition, if our market capitalization equals or exceeds $200.0 million during the same three-year period, we agreed to issue to Exacis additional shares of our common stock determined by a formula specified in the asset purchase agreement. See Note 4 to the accompanying consolidated financial statements for additional information.
In addition, if our market capitalization equals or exceeds $200 million during the same three-year period, we agreed to issue to Exacis additional shares of our common stock determined by a formula specified in the asset purchase agreement. See Note 4 to the accompanying consolidated financial statements for additional information.
The completion or commencement of clinical studies can be delayed or prevented for a number of reasons, including, among others: • the FDA or comparable foreign regulatory authorities may not authorize us or our future clinical investigators to commence planned clinical studies, or require that we suspend ongoing clinical studies through imposition of clinical holds; 25 Table of Contents • negative results from our ongoing studies or other industry studies involving engineered or gene-edited cell therapy product candidates; • delays in reaching or failing to reach agreement on acceptable terms with prospective clinical research organizations (“CROs”) and clinical study sites, the terms of which can be subject to considerable negotiation and may vary significantly among different CROs and study sites; • inadequate quantity or quality of a product candidate or other materials necessary to conduct clinical studies, for example delays in the manufacturing of sufficient supply of finished drug product; • difficulties obtaining ethics committee or IRB, approval to conduct a clinical study at a prospective site or sites; • challenges in recruiting and enrolling subjects to participate in clinical studies, the proximity of subjects to study sites, eligibility criteria for the clinical study, the nature of the clinical study protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical study programs for similar indications; • severe or unexpected drug-related side effects experienced by subjects in a clinical study, such as severe neurotoxicity and cytokine release syndrome; • the FDA or comparable foreign regulatory authorities may disagree with a proposed clinical study design, implementation of clinical trials or our interpretation of data from clinical studies, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical studies; • reports from non-clinical or clinical testing of other competing candidates that raise safety or efficacy concerns; and • difficulties retaining subjects who have enrolled in a clinical study but may be prone to withdraw due to rigors of the clinical studies, lack of efficacy, side effects, personal issues, or loss of interest.
The completion or commencement of clinical studies can be delayed or prevented for a number of reasons, including, among others: ● the FDA or comparable foreign regulatory authorities may not authorize us or our future clinical investigators to commence planned clinical studies, or require that we suspend ongoing clinical studies through imposition of clinical holds; ● negative results from our ongoing studies or other industry studies involving engineered or gene-edited cell therapy product candidates; ● delays in reaching or failing to reach agreement on acceptable terms with prospective clinical research organizations (“CROs”) and clinical study sites, the terms of which can be subject to considerable negotiation and may vary significantly among different CROs and study sites; ● inadequate quantity or quality of a product candidate or other materials necessary to conduct clinical studies, for example delays in the manufacturing of sufficient supply of finished drug product; ● difficulties obtaining ethics committee or IRB, approval to conduct a clinical study at a prospective site or sites; ● challenges in recruiting and enrolling subjects to participate in clinical studies, the proximity of subjects to study sites, eligibility criteria for the clinical study, the nature of the clinical study protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical study programs for similar indications; 22 ● severe or unexpected drug-related side effects experienced by subjects in a clinical study, such as severe neurotoxicity and cytokine release syndrome; ● the FDA or comparable foreign regulatory authorities may disagree with a proposed clinical study design, implementation of clinical trials or our interpretation of data from clinical studies, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical studies; ● reports from non-clinical or clinical testing of other competing candidates that raise safety or efficacy concerns; and ● difficulties retaining subjects who have enrolled in a clinical study but may be prone to withdraw due to rigors of the clinical studies, lack of efficacy, side effects, personal issues, or loss of interest.
If our market capitalization equals or exceeds $100.0 million during the three-year period commencing on April 26, 2023 and ending on the three-year anniversary thereof, the number of shares of common stock we would issue is determined by a formula specified in the asset purchase agreement.
If our market capitalization equals or exceeds $100 million during the three-year period commencing on April 26, 2023 and ending on the three-year anniversary thereof, the number of shares of common stock we would issue is determined by a formula specified in the asset purchase agreement.
Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations. If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.
Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations. 23 If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.
Therapeutics comprising cells produced using these methods are also disclosed. • FAB-005: “Methods and Products for Expressing Proteins in Cells” - The present invention relates in part to nucleic acids encoding proteins, therapeutics comprising nucleic acids encoding proteins, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, and therapeutics produced using these methods, kits, and devices.
Therapeutics comprising cells produced using these methods are also disclosed. 3 ● FAB-005: “Methods and Products for Expressing Proteins in Cells” - The present invention relates in part to nucleic acids encoding proteins, therapeutics comprising nucleic acids encoding proteins, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, and therapeutics produced using these methods, kits, and devices.
Even if they are unchallenged, our patents and patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our patent claims by developing similar or alternative technologies or therapeutics in a non-infringing manner.
Even if they are unchallenged, our in-licensed patents and patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our patent claims by developing similar or alternative technologies or therapeutics in a non-infringing manner.
The FDA has issued various guidance documents regarding gene therapies, which outline additional factors the FDA will consider at each of the above stages of development and relate to, among other things: the proper preclinical assessment of gene therapies; the CMC information that should be included in an IND application; the proper design of tests to measure product potency in support of an IND or BLA application; and measures to observe delayed adverse effects in subjects who have been exposed to investigational gene therapies when the risk of such effects is high.
The FDA has issued various guidance documents regarding cell therapies, which outline additional factors the FDA will consider at each of the above stages of development and relate to, among other things: the proper preclinical assessment of cell therapies; the CMC information that should be included in an IND application; the proper design of tests to measure product potency in support of an IND or BLA application; and measures to observe delayed adverse effects in subjects who have been exposed to investigational cell therapies when the risk of such effects is high.
In some embodiments, the nucleic acid comprises the structure: 5'-X-Y-A-IRES-B-CDS-C-Y'-Z-3', wherein X, Y, Y' and Z each independently comprise one or more nucleotides; Y and Y' are substantially complementary; X and Z are not substantially complementary; IRES comprises an internal ribosome entry site; CDS comprises a coding sequence; and A, B, and C are each independently a spacer comprising one or more nucleotides or null. • FAB-019: “Methods for reprogramming and gene editing cells” The present disclosure provides improved methods for reprogramming and gene editing cells, including manufacturing a population of cells comprising cells of the lymphoid lineage and/or cells of the myeloid lineage.
In some embodiments, the nucleic acid comprises the structure: 5’-X-Y-A-IRES-B-CDS-C-Y’-Z-3’, wherein X, Y, Y’ and Z each independently comprise one or more nucleotides; Y and Y’ are substantially complementary; X and Z are not substantially complementary; IRES comprises an internal ribosome entry site; CDS comprises a coding sequence; and A, B, and C are each independently a spacer comprising one or more nucleotides or null. ● FAB-019: “Methods for reprogramming and gene editing cells” The present disclosure provides improved methods for reprogramming and gene editing cells, including manufacturing a population of cells comprising cells of the lymphoid lineage and/or cells of the myeloid lineage. 4 ● FAB-021: “Methods for reprogramming and gene editing cells” The present disclosure provides improved methods for reprogramming and gene editing cells.
As a result, any patents we may obtain in the future may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to future products and product candidates that we or our strategic partners or collaborators may develop. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain.
As a result, any patents we may in-license in the future may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar to future products and product candidates that we or our strategic partners or collaborators may develop. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain.
However, we may not be granted an extension because of, for example, failure to obtain a granted patent before approval of a product candidate, failure to exercise due diligence during the testing phase or regulatory review process, failure to apply within applicable deadlines, failure to apply prior to expiration of relevant patents or otherwise our failure to satisfy applicable requirements.
However, the patent owner may not be granted an extension because of, for example, failure to obtain a granted patent before approval of a product candidate, failure to exercise due diligence during the testing phase or regulatory review process, failure to apply within applicable deadlines, failure to apply prior to expiration of relevant patents or otherwise our failure to satisfy applicable requirements.
For example, in recent years the FDA has issued several new guidance documents related to developing and manufacturing cellular and gene therapy products.
For example, in recent years the FDA has issued several new guidance documents related to developing and manufacturing cellular therapy products.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or discovering, developing and commercializing technology that is competitive with or superior to our mRNA technology platform.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or discovering, developing and commercializing technology that is competitive with or superior to our technology.
Government regulation and product approval Drugs and biologics must be approved by the FDA through the New Drug Application (“NDA”) process or the Biologic License Application (“BLA”) process before they may be legally marketed in the United States. We use the terms “marketing application” or “MA” to apply to both.
Regulatory Matters Government regulation and product approval Drugs and biologics must be approved by the FDA through the New Drug Application (“NDA”) process or the Biologic License Application (“BLA”) process before they may be legally marketed in the United States. We use the terms “marketing application” or “MA” to apply to both.
Furthermore, we, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities to seek additional patent protection.
Furthermore, we, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities for the licensor to seek additional patent protection.
In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner.
In these circumstances, we may need to defend or assert these patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find the in-licensed patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner.
We were unable to timely file our Quarterly Report on Form 10-Q for the three months ended March 31, 2022 with the SEC due to identifying errors in our financial statements reported in the 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.
We were unable to timely file our Quarterly Report on Form 10-Q for the three months ended March 31, 2022 due to identifying errors in our financial statements reported in the 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.
Due to the rapid advancements in cellular and genetic technologies, regulatory processes and requirements in the United States and in other jurisdictions governing cellular and gene therapy products are evolving and the FDA or other regulatory bodies may change the requirements, or identify different regulatory pathways, for the clinical testing and approval of these product candidates.
Due to the rapid advancements in cellular technologies, regulatory processes and requirements in the United States and in other jurisdictions governing cellular therapy products are evolving and the FDA or other regulatory bodies may change the requirements, or identify different regulatory pathways, for the clinical testing and approval of these product candidates.
Through December 31, 2023, we have issued and sold approximately 214,000 shares of our common stock to Lincoln Park for approximately $0.3 million in gross proceeds under the SEPA, leaving an approximately $9.7 million balance of the $10.0 million total commitment.
Through December 31, 2024, we have issued and sold approximately 214,000 shares of our common stock to Lincoln Park for approximately $0.3 million in gross proceeds under the SEPA, leaving an approximately $9.7 million balance of the $10.0 million total commitment.
If disputes over intellectual property that we have licensed, or license in the future, prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully enter into strategic partnerships.
If disputes over intellectual property that we have licensed, or license in the future, prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully enter into co-development strategic partnerships.
Due to the novelty and complexity of gene-edited cellular products, the regulatory approval process for such product candidates is uncertain and may be more expensive and take longer than the approval process for product candidates based on other, better known or more extensively studied technologies.
Due to the novelty and complexity of cellular products, the regulatory approval process for such product candidates is uncertain and may be more expensive and take longer than the approval process for product candidates based on other, better known or more extensively studied technologies.
Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-approval testing and other requirements. 28 Table of Contents In addition, in April 2023 the European Commission issued a proposal that will revise and replace the existing general pharmaceutical legislation governing drug and biological products intended for the EU market.
Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-approval testing and other requirements. In addition, in April 2023 the European Commission issued a proposal that will revise and replace the existing general pharmaceutical legislation governing drug and biological products intended for the EU market.
For example, in November 2023, the FDA announced that it was investigating reports of T-cell malignancy in patients following their treatment with BCMA-directed or CD19-directed autologous chimeric antigen receptor (CAR) T-cell immunotherapies, although more recent public statements by agency leadership indicate that the benefits of such treatments are expected to still outweigh those risks.
For example, in November 2023, the FDA announced that it was investigating reports of T-cell malignancy in patients following their treatment with B cell maturation antigen-directed or CD19-directed autologous chimeric antigen receptor (CAR) T-cell immunotherapies, although more recent public statements by agency leadership indicate that the benefits of such treatments are expected to still outweigh those risks.
Even with the availability of such studies, products may be considered less safe, less effective or less cost-effective than alternative products, and third-party payors may not provide coverage and reimbursement for any product, in whole or in part. 12 Table of Contents Political, economic and regulatory influences are subjecting the health care industry in the United States to fundamental changes.
Even with the availability of such studies, products may be considered less safe, less effective or less cost-effective than alternative products, and third-party payors may not provide coverage and reimbursement for any product , in whole or in part. Political, economic and regulatory influences are subjecting the health care industry in the United States to fundamental changes.
Moreover, the patent application and approval processes are expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
Moreover, the patent application and approval processes are expensive and time-consuming. The licensor may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
Although these license agreements may provide guidelines for how our trademarks and trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names. 35 Table of Contents Moreover, any proprietary name we have proposed to use with our drug candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark.
Although these license agreements may provide guidelines for how our trademarks and trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names. 30 Moreover, any proprietary name we have proposed to use with our drug candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark.
In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited.
Similarly, the EMA oversees the development of cellular and gene therapies in the EU and may issue new guidelines concerning the development and marketing authorization for cellular or gene therapy products and require that we comply with these new guidelines.
Similarly, the EMA oversees the development of cellular therapies in the EU and may issue new guidelines concerning the development and marketing authorization for cellular therapy products and require that we comply with these new guidelines.
It is possible that the licensors’ infringement proceedings or defense activities may be less vigorous than had we conducted them ourselves. 16 Table of Contents If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or drug candidate and our business, financial condition, results of operations and prospects could suffer.
It is possible that the licensors’ infringement proceedings or defense activities may be less vigorous than had we conducted them ourselves. 14 If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or drug candidate and our business, financial condition, results of operations and prospects could suffer.
We have identified a material weakness in our internal control over financial reporting.
We have previously identified a material weakness in our internal control over financial reporting.
Our competitors may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved products by submitting ANDAs or ABLAs to the FDA in which they claim that our patents are invalid, unenforceable or not infringed.
Our competitors may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved products by submitting ANDAs or ABLAs to the FDA in which they claim that the patents related to our in-licensed technology are invalid, unenforceable or not infringed.
Additional Regulation for Gene Therapy Clinical Trials In addition to the regulations discussed elsewhere in this section, there are a number of additional standards that apply to clinical trials involving the use of gene therapy.
Additional Regulation for Cell Therapy Clinical Trials In addition to the regulations discussed elsewhere in this section, there are a number of additional standards that apply to clinical trials involving the use of cell therapy.
In addition, adverse developments in clinical trials of cellular gene therapy products conducted by others, or in treated patients after such products are commercialized, may cause the FDA or other oversight bodies to change the requirements for approval of any of our strategic partners’ product candidates.
In addition, adverse developments in clinical trials of cellular therapy products conducted by others, or in treated patients after such products are commercialized, may cause the FDA or other oversight bodies to change the requirements for approval of any of our product candidates.
Further, the processes and requirements imposed by the FDA or other applicable regulatory authorities may cause delays and additional costs in obtaining approvals for marketing authorization for any future product candidates. Because our platform is novel, and cell- and gene-based therapies are relatively new, regulatory agencies may lack experience in evaluating product candidates using our mRNA technology platform.
Further, the processes and requirements imposed by the FDA or other applicable regulatory authorities may cause delays and additional costs in obtaining approvals for marketing authorization for any future product candidates. Because our platform is novel, and cell- based therapies are relatively new, regulatory agencies may lack experience in evaluating product candidates using our synthetic iMSC technology platform.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop. 33 Table of Contents We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect our ability to develop and market our products.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop. 28 We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect our ability to develop and market our products.
Before approving an MA, the FDA will inspect the facility or facilities where the product is manufactured to determine whether its manufacturing is cGMP–compliant to assure and preserve the product’s identity, potency, quality, purity and stability. 10 Table of Contents If the FDA’s evaluation of the marketing submission or manufacturing facilities is not favorable, the FDA will issue a complete response letter.
Before approving an MA, the FDA will inspect the facility or facilities where the product is manufactured to determine whether its manufacturing is cGMP–compliant to assure and preserve the product’s identity, potency, quality, purity and stability. 8 If the FDA’s evaluation of the marketing submission or manufacturing facilities is not favorable, the FDA will issue a complete response letter.
The remediation actions implemented to date include: enhancing the business process controls related to reviews over technical, complex, and non-recurring transactions; providing additional training to accounting personnel and using an external accounting advisor to review management’s conclusions on certain technical, complex and non-recurring matters.
The remediation actions implemented to date include: enhancing the business process controls related to reviews over technical, complex, and non-recurring transactions; providing additional training to accounting personnel and using external accounting advisors to review management’s conclusions on certain technical, complex and non-recurring matters.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. 34 Table of Contents We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time-consuming and unsuccessful. Competitors may infringe our patents, trademarks, copyrights or other intellectual property.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. 29 We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive, time-consuming and unsuccessful. Competitors may infringe our patents, trademarks, copyrights or other intellectual property.
Some of the Company’s patents and patent applications have effective dates later than March 16, 2013 and thus will be subject to the provisions of the Leahy-Smith Act. 32 Table of Contents In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent rulings from the U.S.
Some of the Company’s patents and patent applications have effective dates later than March 16, 2013 and thus will be subject to the provisions of the Leahy-Smith Act. 27 In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent rulings from the U.S.
Many of our competitors have significantly greater financial, marketing, technical and human resources than we do, and may also have strategic partnerships and collaborative arrangements with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate discovery and development of technology that could make our mRNA technology platform or obsolete.
Many of our competitors have significantly greater financial, marketing, technical, research and human resources than we do, and may also have strategic partnerships and collaborative arrangements with leading companies and research institutions. Established pharmaceutical companies may also invest heavily to accelerate the discovery and development of technology that could make our technology obsolete.
Such licenses impose obligations on our business, and if we fail to comply with those obligations, we could lose license rights, which would substantially harm our business. We rely on patents, know-how and proprietary technology licensed from Factor Limited under the A&R Factor License Agreement.
Such licenses impose obligations on our business, and if we fail to comply with those obligations, we could lose license rights, which would substantially harm our business. We rely on patents, know-how and proprietary technology licensed from Factor Limited under the Factor L&C Agreement.
We and our strategic partners thus face uncertainties associated with the preclinical and clinical development, manufacture, and regulatory compliance for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of future product candidates.
We thus face uncertainties associated with the preclinical and clinical development, manufacture, and regulatory compliance for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of future product candidates.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following: ● completion of preclinical laboratory tests, animal studies and formulation studies according to the FDA’s good laboratory practice, or GLP, regulations; ● submission of an investigational new drug application (“IND”), which must become effective before human clinical trials may begin and which must include approval by an institutional review board (“IRB”) at each clinical site before the trials are initiated; ● performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use conducted in compliance with federal regulations and good clinical practice (“GCP”), an international standard meant to protect the rights and health of human clinical trial subjects and to define the roles of clinical trial sponsors, administrators, and monitors; ● submission to, and acceptance by, the FDA of a MA; ● satisfactory completion of an FDA inspection of our manufacturing facility or other facilities at which the drug or biologic is produced to assess compliance with current good manufacturing practice (“cGMP”), regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; ● potential FDA audit of the non-clinical and clinical trial sites that generated the data in support of the MA: and ● FDA review and approval of the MA. 8 Table of Contents The testing and approval process require substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain.
The process required by the FDA before a drug or biologic may be marketed in the United States generally involves the following: ● completion of preclinical laboratory tests, animal studies and formulation studies according to the FDA’s good laboratory practice, or GLP, regulations; ● submission of an investigational new drug application (“IND”), which must become effective before human clinical trials may begin and which must include approval by an institutional review board (“IRB”) at each clinical site before the trials are initiated; ● performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use conducted in compliance with federal regulations and good clinical practice (“GCP”), an international standard meant to protect the rights and health of human clinical trial subjects and to define the roles of clinical trial sponsors, administrators, and monitors; ● submission to, and acceptance by, the FDA of a MA; ● satisfactory completion of an FDA inspection of our manufacturing facility or other facilities at which the drug or biologic is produced to assess compliance with current good manufacturing practice (“cGMP”), regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; ● potential FDA audit of the non-clinical and clinical trial sites that generated the data in support of the MA: and ● FDA review and approval of the MA.
Although, to our knowledge, such stockholders are not a “group” or “acting in concert,” they have and are expected to continue to have, individually and/or collectively, the ability to influence the election of our board of directors and the outcome of other matters submitted to our stockholders.
Although, to our knowledge, such stockholders are not a “group” or “acting in concert,” they have and we expect them to continue to have, individually and/or collectively, the ability to influence the election of our board of directors and the outcome of other matters submitted to our stockholders.
In addition, attempting to secure additional capital may divert the time and attention of our management from day-to-day activities and harm its ability to execute on our business strategy. 15 Table of Contents We have a limited operating history, have incurred significant losses since our inception and expect to continue to incur losses for the foreseeable future, which, together with our limited financial resources and substantial capital requirements, make it difficult to assess our prospects.
In addition, attempting to secure additional capital may divert the time and attention of our management from day-to-day activities and harm its ability to execute on our business strategy. 13 We have incurred significant losses since our inception and expect to continue to incur losses for the foreseeable future, which, together with our limited financial resources and substantial capital requirements, make it difficult to assess our prospects.
The requirement for a REMS can materially affect the potential market and profitability of the drug or biologic. 11 Table of Contents Drugs and biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.
The requirement for a REMS can materially affect the potential market and profitability of the drug or biologic. 9 Drugs and biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.
Therapeutics comprising nucleic acids encoding gene-editing proteins are also described. • FAB-009: “Nucleic Acid Products and Methods of Administration Thereof” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. • FAB-010: “Nucleic Acid Products and Methods of Administration Thereof” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. • FAB-011: “Nucleic Acid-Based Therapeutics” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. • FAB-012: “Cationic Lipids and Transfection Methods” - The present invention relates in part to novel cationic lipids and their use, e.g., in delivering nucleic acids to cells. • FAB-013: “Engineered Gene-Editing Proteins” - The present invention relates in part to nucleic acids encoding gene editing proteins, including novel engineered variants. 6 Table of Contents • FAB-016: “Mesenchymal Stem Cell Therapies” - Cell-based therapies based on mesenchymal stem cells (MSCs) are described. • FAB-017: “Engineered Immune Cell Therapies” - The present disclosure relates in part to engineered immune cells that are, inter alia, silenced from a host immune response. • FAB-018: “Circular RNA” - Nucleic acid structures that promote formation of circular RNAs (circRNAs), which may comprise hybridization of substantially complimentary regions within the nucleic acid and contact with an RNA ligase.
Therapeutics comprising nucleic acids encoding gene-editing proteins are also described. ● FAB-009: “Nucleic Acid Products and Methods of Administration Thereof” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. ● FAB-010: “Nucleic Acid Products and Methods of Administration Thereof” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. ● FAB-011: “Nucleic Acid-Based Therapeutics” - The present invention relates in part to nucleic acids, including nucleic acids encoding proteins, therapeutics and cosmetics comprising nucleic acids, methods for delivering nucleic acids to cells, tissues, organs, and patients, methods for inducing cells to express proteins using nucleic acids, methods, kits and devices for transfecting, gene editing, and reprogramming cells, and cells, organisms, therapeutics, and cosmetics produced using these methods, kits, and devices. ● FAB-013: “Engineered Gene-Editing Proteins” - The present invention relates in part to nucleic acids encoding gene editing proteins, including novel engineered variants. ● FAB-016: “Mesenchymal Stem Cell Therapies” - Cell-based therapies based on MSCs are described. ● FAB-017: “Engineered Immune Cell Therapies” - The present disclosure relates in part to engineered immune cells that are, inter alia, silenced from a host immune response. ● FAB-018: “Circular RNA” - Nucleic acid structures that promote formation of circular RNAs (circRNAs), which may comprise hybridization of substantially complimentary regions within the nucleic acid and contact with an RNA ligase.
We may in the future become party to additional license agreements pursuant to which we in-license key intellectual property. The A&R Factor License Agreement imposes various sublicense fees and other obligations on us.
We may in the future become party to additional license agreements pursuant to which we in-license key intellectual property. The Factor L&C Agreement imposes various sublicense fees and other obligations on us.
As such, it is difficult to accurately predict the type and scope of challenges that potential strategic partners may confront in developing and advancing a pipeline of iPSC-derived therapeutic products.
As such, it is difficult to accurately predict the type and scope of challenges that we may confront in developing and advancing a pipeline of iPSC-derived therapeutic products.
If we or our licensors fail to adequately protect the intellectual property underlying our mRNA technology platform and any other in-licensed intellectual property, our ability to enter into strategic partnerships could materially suffer. Our intellectual property rights may not adequately protect our business.
If we or our licensors fail to adequately protect the intellectual property underlying our synthetic iMSC technology platform and any other in-licensed intellectual property, our ability to enter into co-development strategic partnerships could materially suffer. Our intellectual property rights may not adequately protect our business .
Changes in regulatory authorities and advisory groups, or any new regulations, requirements or guidelines they promulgate, may lengthen the regulatory review process, require additional studies, increase development and manufacturing costs, lead to changes in regulatory pathways, positions and interpretations, delay or prevent approval and commercialization of product candidates developed through our strategic partners or lead to significant post-approval limitations or restrictions that may reduce the anticipated benefits of our strategic partnerships.
Changes in regulatory authorities and advisory groups, or any new regulations, requirements or guidelines we promulgate, may lengthen the regulatory review process, require additional studies, increase development and manufacturing costs, lead to changes in regulatory pathways, positions and interpretations, delay or prevent approval and commercialization of product candidates we develop or lead to significant post-approval limitations or restrictions that may reduce the our anticipated benefits.
Risks Relating to Eterna’s Intellectual Property If we are unable to obtain and maintain patent and other intellectual property protection, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to those derived from our intellectual property, and our ability to achieve profitability may be adversely affected.
Risks Relating to Our Intellectual Property If the licensors of our in-licensed technology are unable to obtain and maintain patent and other intellectual property protection, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to those derived from such intellectual property, and our ability to achieve profitability may be adversely affected.
Servicing the interest and principal repayment obligations under our outstanding convertible notes and under any other debt we incur will divert funds that might otherwise be available to support our operations. In addition, debt financing involves covenants that restrict our ability to operate our business.
Servicing the interest and principal repayment obligations under any debt we incur will divert funds that might otherwise be available to support our operations. In addition, debt financing may involve covenants that restrict our ability to operate our business.
If our potential strategic partners are ultimately unable to obtain regulatory approval for their product candidates, we may be unable to product revenue and our business will be substantially harmed. We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate.
If we are ultimately unable to obtain regulatory approval for our product candidates, we may be unable to produce revenue and our business will be substantially harmed. A product cannot be commercialized until the appropriate regulatory authorities have reviewed and approved the product candidate.
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock. Our common stock is listed on The Nasdaq Capital Market.
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock. Our common stock is listed on The Nasdaq Capital Market. The Nasdaq Capital Market requires that listed companies satisfy certain continued listing requirements.
We or our licensors may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property that we own or license now or in the future. 17 Table of Contents We or our licensors may be subject to claims that former employees, collaborators or other third parties have an ownership interest in the patents and intellectual property that we in-license or that we may own or in-license in the future.
We or our licensors may be subject to claims that former employees, collaborators or other third parties have an ownership interest in the patents and intellectual property that we in-license or that we may own or in-license in the future.
Factor Limited has customary termination rights under the A&R Factor License Agreement, including in connection with certain uncured material breaches of the A&R Factor License Agreement and specified bankruptcy events. Any termination of our existing or future licenses could result in the loss of significant rights and would harm our business significantly.
The parties have customary termination rights under the Factor L&C Agreement, including in connection with certain uncured material breaches of the Factor L&C Agreement and specified bankruptcy events. Any termination of our existing or future licenses could result in the loss of significant rights and would harm our business significantly.
Disruptions at the FDA and other government agencies caused by funding shortages or other events or conditions outside of their control could negatively impact our business. 26 Table of Contents The ability of the FDA to review and approve INDs, proposed clinical trial protocols, or new product candidates can be affected by a variety of factors, including, but not limited to, government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, statutory, regulatory, and policy changes, and other events that may otherwise affect the FDA’s ability to perform routine functions.
The ability of the FDA to review and approve INDs, proposed clinical trial protocols, or new product candidates can be affected by a variety of factors, including, but not limited to, government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, statutory, regulatory, and policy changes, and other events that may otherwise affect the FDA’s ability to perform routine functions.
In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with Nasdaq continued listing requirements would be successful.
If we fail to satisfy any of the Nasdaq continued listing requirements, Nasdaq may take steps to delist our common stock. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with Nasdaq continued listing requirements would be successful.
United States drug development process Once a pharmaceutical candidate is identified for development it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies.
The testing and approval process require substantial time, effort and financial resources, and the receipt and timing of any approval is uncertain. 6 United States drug development process Once a pharmaceutical candidate is identified for development it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies.
The continuing efforts of the government, insurance companies, managed care organizations, and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect: • the demand for our therapeutic candidates, if we obtain marketing approval; • our ability to receive or set a price that we believe is fair for our future products; • our ability to generate revenue and achieve or maintain profitability; • the level of taxes that we are required to pay; and • the availability of capital. 27 Table of Contents The Affordable Care Act of 2010 (“ACA”) includes measures that have significantly changed the way healthcare is financed by both governmental and private insurers in the United States.
The continuing efforts of the government, insurance companies, managed care organizations, and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect: ● the demand for our therapeutic candidates, if we obtain marketing approval; ● our ability to receive or set a price that we believe is fair for our future products; ● our ability to generate revenue and achieve or maintain profitability; ● the level of taxes that we are required to pay; and ● the availability of capital.
As disclosed in Part II, Item 9A to this Annual Report on Form 10-K, our Chief Executive Officer and Senior Vice President of Finance concluded that, as of December 31, 2023, our disclosure controls and procedures were not effective and did not provide reasonable assurance of achieving the desired control objectives.
As a result of the above remediation measures, and as disclosed in Part II, Item 9A to this Annual Report on Form 10-K, our Chief Executive Officer and Senior Vice President of Finance concluded that the prior material weakness was remediated as of December 31, 2024, and our disclosure controls and procedures were effective and provided reasonable assurance of achieving the desired control objectives.
If the plan is not accepted or if we are unable to regain compliance within any extension period granted by Nasdaq, Nasdaq would be required to issue a delisting determination, which we expect we would be entitled to request a hearing before a Nasdaq Hearings Panel to present a plan to regain compliance and to request a further extension period to regain compliance. 23 Table of Contents If we fail to satisfy any of the Nasdaq continued listing requirements, Nasdaq may take steps to delist our common stock.
If the plan is not accepted or if we are unable to regain compliance within any extension period granted by Nasdaq, Nasdaq would be required to issue a delisting determination, which we expect we would be entitled to request a hearing before a Nasdaq Hearings Panel to present a plan to regain compliance and to request a further extension period to regain compliance.
Our ability to compete effectively will depend, in part, on our ability to maintain the proprietary nature of our technology and manufacturing processes. We rely on research, manufacturing and other know-how, patents, trade secrets, license agreements and contractual provisions to establish our intellectual property rights. These legal means, however, afford only limited protection and may not adequately protect our rights.
Our ability to compete effectively will depend, in part, on maintaining the proprietary nature of our in-licensed technology and manufacturing processes. We rely on research, manufacturing and other know-how, patents, trade secrets, license agreements and contractual provisions to establish our intellectual property rights.
If this were to occur, then we could face significant material adverse consequences, including: a material reduction in the liquidity of our common stock and a corresponding material reduction in the trading price of our common stock; a more limited market quotations for our securities; a determination that our common stock is a “penny stock” that requires brokers to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our securities; more limited research coverage by stock analysts; loss of reputation; more difficult and more expensive equity financings in the future; the potential loss of confidence by investors; and fewer business development opportunities.
If this were to occur, then we could face significant material adverse consequences, including: a material reduction in the liquidity of our common stock and a corresponding material reduction in the trading price of our common stock; a more limited market quotations for our securities; a determination that our common stock is a “penny stock” that requires brokers to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our securities; more limited research coverage by stock analysts; loss of reputation; more difficult and more expensive equity financings in the future; the potential loss of confidence by investors; and fewer business development opportunities. 20 The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If our common stock remains listed on Nasdaq, our common stock will be covered securities.
Cybersecurity for more information on information regarding our cybersecurity risk management, strategy, and governance. If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. Our ability to compete in the highly competitive life science industry depends in large part upon the ability to attract highly qualified personnel.
Cybersecurity for more information on information regarding our cybersecurity risk management, strategy, and governance. 16 If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
If we fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If there are material defects in the form, preparation, prosecution or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents.
If there are material defects in the form, preparation, prosecution or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects. We rely heavily on in-licensed intellectual property from Factor Limited.
Further, if the A&R Factor License Agreement is terminated, there is no guarantee that we will be able to enter into a new license agreement that aligns with our business strategy on the same or similar terms, if at all, and our competitors could in-license the technology, which would result in a significant market disadvantage to us.
If the Factor L&C Agreement is terminated, there is no guarantee that we will be able to enter into a new license agreement that aligns with our business strategy on the same or similar terms, if at all, and our competitors could in-license the technology, which would result in a significant market disadvantage to us. 15 We or our licensors may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property that we own or license now or in the future.
The Nasdaq Capital Market requires that listed companies satisfy continued listing requirements, one of which that listed companies have: (x) stockholders' equity of at least $2.5 million; (y) a market value of listed securities of at least $35 million; or (z) net income from continuing operations of $500,000 in the company’s most recently completed fiscal year or in two of the three most recently completed fiscal years.
Listing Rule 5550(b) requires that listed companies have: (1) stockholders’ equity of at least $2.5 million (the “Stockholders’ Equity Rule”; (2) a market value of listed securities (the “MVLS Rule”) of at least $35 million; or (3) net income from continuing operations of $500,000 in the company’s most recently completed fiscal year or in two of the three most recently completed fiscal years.
If the patent protection provided by the patents and patent applications we hold or pursue with respect to such product candidates is not sufficiently broad to impede such competition, the successful commercialization of such product candidates could be negatively affected. 29 Table of Contents Other parties, many of whom have substantially greater resources and have made significant investments in competing technologies, have developed or may develop technologies that may be related or competitive with our approach, and may have filed or may file patent applications and may have been issued or may be issued patents with claims that overlap or conflict with our patent applications, either by claiming the same compositions, formulations or methods or by claiming subject matter that could dominate our patent position.
Other parties, many of whom have substantially greater resources and have made significant investments in competing technologies, have developed or may develop technologies that may be related or competitive with our approach, and may have filed or may file patent applications and may have been issued or may be issued patents with claims that overlap or conflict with our patent applications, either by claiming the same compositions, formulations or methods or by claiming subject matter that could dominate our patent position.
(“Factor Bioscience”), the parent company of Factor Limited, Factor Bioscience has agreed to provide us with certain mRNA cell engineering research support services, including (i) access to Factor Bioscience’s research laboratory facilities located in Cambridge, Massachusetts, (ii) access to Factor Bioscience’s scientific equipment, (iii) training of our research staff in certain mRNA, iPSC, and gene editing technologies, (iv) copies of protocols, formulations, and sequences that may be useful for the development of mRNA cell engineering products and (v) in vitro transcription templates, mRNA constructs, and iPS cells that may be useful for the development of mRNA cell engineering products.
Pursuant to the Factor L&C Agreement Factor Limited has agreed to provide us with certain synthetic iMSC cell engineering research support services, including (i) reasonable access to Factor Bioscience’s research laboratory facilities located in Cambridge, Massachusetts, (ii) training of our research staff in certain mRNA, iPSC, gene editing technologies and process of converting iPSC to iMSC, (iii) copies of protocol binders, formulations, Licensor Know-How (as defined in the Factor L&C Agreement) and sequences that may be useful for the development of synthetic iMSC products and (iv) in vitro transcription templates, mRNA constructs, and iPS and iMS cells that may be useful for the development of synthetic iMSC products.
Management has implemented measures designed to ensure that the deficiencies contributing to the ineffectiveness of our internal control over financial reporting are remediated, such that the internal controls are designed, implemented and operating effectively.
Management concluded that the errors were the result of accounting personnel’s lack of technical proficiency in the accounting for complex matters. Management has implemented measures designed to ensure that the deficiencies contributing to the ineffectiveness of our internal control over financial reporting are remediated, such that the internal controls are designed, implemented and operating effectively.
Many of our competitors have substantially greater financial, technical, research and human resources than we do, and may also have strategic partnerships and collaborative arrangements with leading companies and research institutions.
We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies, universities, and other research institutions. Many of our competitors have substantially greater financial, technical, research and human resources than we do, and may also have strategic partnerships and collaborative arrangements with leading companies and research institutions .
There have been, and we expect there will continue to be, legislative and regulatory proposals to change the healthcare system in ways that could significantly affect the development and commercialization of products, including the Patient Protection and Affordable Care Act of 2010 (the “Affordable Care Act”).
There have been, and we expect there will continue to be, legislative and regulatory proposals to change the healthcare system in ways that could significantly affect the development and commercialization of products, including the Patient Protection and Affordable Care Act of 2010 (the “Affordable Care Act”). 10 In the United States, Congress, state legislatures, and private sector entities are expected to continue to consider and may adopt healthcare policies intended to curb rising healthcare costs.
If we are unable to continue to attract and retain high-quality personnel, our business, results of operations and financial condition may be materially adversely affected.
If we are unable to continue to attract and retain high-quality personnel, our business, results of operations and financial condition may be materially adversely affected. Risks Related to New, Cutting Edge Technologies Our product development relies on novel, inherently risky technologies.
As of December 31, 2023, we had an accumulated deficit of approximately $187.0 million. Since inception, we have primarily financed our operations by raising capital through the sale of shares of our common stock, warrants to purchase shares of our common stock and convertible notes. We have not been profitable since we commenced operations and may never achieve profitability.
We have incurred significant net losses since inception. As of December 31, 2024, we had an accumulated deficit of approximately $231.5 million. Since inception, we have primarily financed our operations by raising capital through the sale of shares of our common stock, warrants to purchase shares of our common stock and convertible notes.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Chief Executive Officer and Senior Vice President of Finance are primarily responsible for assessing and managing our material risks from cybersecurity threats. In this regard, our Chief Executive Officer and Senior Vice President of Finance have assistance from consultants.
Biggest changeOur board of directors administers its cybersecurity risk oversight function through its audit committee, which provides oversight of our cybersecurity program as part of its periodic review of enterprise risk management. Our President and Chief Executive Officer and Senior Vice President of Finance are primarily responsible for assessing and managing our material risks from cybersecurity threats.
As of December 31, 2023 and through the date of the filing of this report, we are not aware of any cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
As of December 31, 2024 and through the date of the filing of this report, we are not aware of any cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Under such policies and processes, our Chief Executive Officer and Senior Vice President are responsible for reporting to our audit committee regarding any cybersecurity incidents. 36 Table of Contents The audit committee, in turn, provides periodic reports to our board of directors regarding our cybersecurity processes, including the results of cybersecurity risk assessments.
Under such policies and processes, our President and Chief Executive Officer and Senior Vice President are responsible for reporting to our audit committee regarding any cybersecurity incidents. The audit committee, in turn, provides periodic reports to our board of directors regarding our cybersecurity processes, including the results of cybersecurity risk assessments.
Our Chief Executive Officer and Senior Vice President of Finance oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
In this regard, our President and Chief Executive Officer and Senior Vice President of Finance have assistance from consultants. Our President and Chief Executive Officer and Senior Vice President of Finance oversee our cybersecurity policies and processes, including those described in “Risk Management and Strategy” above.
Our board of directors is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible for the day-to-day management of the material risks we face. Our board of directors administers its cybersecurity risk oversight function through its audit committee, which provides oversight of our cybersecurity program as part of its periodic review of enterprise risk management.
Our board of directors is responsible for monitoring and assessing strategic risk exposure, and our executive officers are responsible for the day-to-day management of the material risks we face .

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. Properties We currently lease approximately 49,000 square feet of office and laboratory space in the aggregate in New York and Massachusetts, of which, approximately 45,000 square feet is new office and laboratory space in Somerville, Massachusetts that we subleased in October 2022. The terms of our leases expire from December 2026 through approximately November 2033.
Biggest changeITEM 2. Properties We currently lease approximately 4,000 square feet of office and laboratory space in the aggregate in New York and Massachusetts. We sublease the New York office space to a sublessee. The terms of our leases expire from December 2026 through June 2028.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRecent Sales of Unregistered Securities We did not sell any unregistered securities during the period covered by this report that were not previously reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K. Issuer Purchases of Equity Securities None.
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this report. 32 Recent Sales of Unregistered Securities We did not sell any unregistered securities during the period covered by this report that were not previously reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on The Nasdaq Capital Market under the symbol “ERNA.” Holders of Common Stock As of March 12, 2024, there were approximately 155 stockholders of record.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on The Nasdaq Capital Market under the symbol “ERNA.” Holders of Common Stock As of March 10, 2025, there were approximately 146 stockholders of record of our common stock.
In 2023, we paid approximately $16,000 in cash dividends to the holders of our Series A Preferred Stock. We expect to pay the dividends on our Series A Preferred Stock in accordance with its terms. Dividend Policy We have not declared or paid any cash dividends on our common stock.
In 2024, we paid approximately $8,000 in cash and issued approximately 11,000 shares of common stock as payment of the dividends to the holders of our Series A Preferred Stock. We expect to pay the dividends on our Series A Preferred Stock in accordance with its terms.
We currently do not anticipate paying any cash dividends in the foreseeable future.
Dividend Policy We have not declared or paid any cash dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future.
Removed
Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this report.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOn December 14, 2023, we 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 our common stock (the “December 2023 warrants” and together with the July 2023 warrants, the “note warrants”).
Biggest changeSeptember 2024 Transactions Exchange Transactions Pursuant to exchange agreements we entered into on September 24, 2024 with the holders of certain of our warrants and convertible notes, on October 29, 2024, we issued an aggregate of 38.3 million shares of our common stock in exchange for: (i) warrants to purchase an aggregate of approximately 4.4 million shares of our common stock that we issued in December 2022 with an exercise price of $1.43 per share; (ii) $8.7 million in the aggregate principal amount of convertible notes that we issued in July 2023 and warrants to purchase an aggregate of approximately 6.1 million shares of our common stock that we issued in July 2023 with an exercise price of $1.43 per share; (iii) $9.2 million in the aggregate principal amount of convertible notes that we issued in December 2023 and warrants to purchase an aggregate of approximately 9.6 million shares of our common stock that we issued in December 2023 with an exercise price of $1.43 per share (the “exchange transactions”).
See the risk factor in Item 1A of Part II of this report titled, “We will require substantial additional capital to fund our operations, and if we fail to obtain the necessary financing, we may not be able to pursue our business strategy.” Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of shares of our common stock and of convertible notes.
See the risk factor in Item 1A of Part II of this report titled, “We will require substantial additional capital to fund our operations, and if we fail to obtain the necessary financing, we may not be able to pursue our business strategy.” Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of shares of our common stock and convertible notes.
If we raise capital through collaborative arrangements, we may be required to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us. We prepared the accompanying consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business.
If we raise capital through collaborative arrangements, we may be required to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us. We prepared the accompanying condensed consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business.
Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules. Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules. 40 Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
As discussed above, there is substantial doubt about our ability to continue as a going concern because we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over at least the next 12 months from the date of issuance of the accompanying consolidated financial statements.
As discussed above, there is substantial doubt about our ability to continue as a going concern because we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements.
ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years with early adoption permitted.
ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance was effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years with early adoption permitted.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in Part II, Item 8 of this report. The following discussion contains forward-looking statements. See “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS” in Part I of this report.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in Part II, Item 8 of this report. The following discussion contains forward-looking statements. See “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ” in Part I of this report .
Recent Accounting Pronouncements In June 2022, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”).
Recent Accounting Pronouncements Recently Adopted Accounting Standards In June 2022, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”).
ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. Early adoption is permitted. We do not expect the amendments in this ASU to have a material impact on our consolidated financial statements.
ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024 and allows for adoption on a prospective basis, with a retrospective option. Early adoption is permitted. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.
ASU No. 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. Early adoption is permitted, and the amendments should be applied retrospectively.
ASU No. 2023-07 was effective for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. Early adoption was permitted, and the amendments should be applied retrospectively.
Upfront payments and milestone payments we make for the in-licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended.
Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended.
If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then this ASU will not become effective. Early adoption is prohibited. We do not expect the amendments in this ASU to have a material impact on our consolidated financial statements.
If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then this ASU will not become effective. Early adoption is prohibited. The Company does not expect the amendments in this ASU to have a material impact on its consolidated financial statements.
Change in Fair Value of Contingent Consideration On the closing date of our acquisition of the intellectual property assets of Exacis, we recognized a contingent consideration liability of $0.2 million for future payments that may be payable to Exacis, which was included as part of the $0.5 million fair value of the Purchased License and expensed as IPR&D for the year ended December 31, 2023.
Change in Fair Value of Contingent Consideration On the closing date of the acquisition of assets from Exacis in April 2023, we recognized a contingent consideration liability of $0.2 million for future payments that may be payable to Exacis, which was included as part of the $0.5 million fair value of the Purchased License asset and expensed as IPR&D during the year ended December 31, 2023.
Payments under the contracts depend on factors such as the achievement of certain events or milestones, the successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions.
Payments under the contracts depend on factors such as the achievement of certain events or milestones, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the preclinical study or similar conditions.
The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, supplies and materials, preclinical study costs, expensed licensed technology, consulting, scientific advisors and other third-party costs, and allocations of various overhead costs related to our product development efforts.
The major components of research and development costs include salaries and employee benefits, stock-based compensation expense, supplies and materials, preclinical study costs, expensed licensed technology, consulting, scientific advisors and other third-party costs, as well as allocations of various overhead costs related to our product development efforts. We have contracted with third parties to perform various studies.
Forward-looking statements are not guarantees of future activities or results. Many factors could cause our actual activities or results to differ materially from those anticipated in forward-looking statements, including those discussed in “Item 1A. Risk Factors” of Part I of this report.
Forward-looking statements are not guarantees of future activities or results. Many factors could cause our actual activities or results to differ materially from those anticipated in forward-looking statements, including those discussed in “Item 1A. Risk Factors” of Part I of this report. Overview We are a preclinical-stage synthetic allogeneic iMSC therapy company.
The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain a going concern.
The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain a going concern. 39 In addition, while we are not presently pursuing product development, we may do so in the future.
In February 2023, we entered into an exclusive option and license agreement with a third party, under which we granted such third party an option to obtain an exclusive sublicense to certain of our technology for preclinical, clinical and commercial purposes in exchange for a non-refundable up-front payment to us of $0.3 million.
Basis of Presentation Revenue In February 2023, we entered into an exclusive option and license agreement (the “Lineage Agreement”) with Lineage Cell Therapeutics, Inc. (“Lineage”), under which we granted Lineage an option to obtain an exclusive sublicense to certain of our technology for preclinical, clinical and commercial purposes in exchange for a non-refundable up-front payment to us of $0.3 million.
In addition, while we are not presently pursuing product development, we may do so in the future. Developing product candidates, conducting clinical trials and commercializing products requires substantial capital, and we would need to raise substantial additional funds if we were to pursue the development of one or more product candidates.
Developing product candidates, conducting clinical trials and commercializing products requires substantial capital, and we would need to raise substantial additional funds if we were to pursue the development of one or more product candidates.
In August 2023, that third party requested that we begin developing certain induced pluripotent stem cell lines in exchange for a cell line customization fee. The third party paid us $0.4 million towards the customization fee, which we are recognizing ratably over the customization period, which is expected to be approximately 20 to 25 months.
In August 2023, Lineage requested that we begin developing certain induced pluripotent stem cell lines in exchange for a cell line customization fee. Lineage paid us $0.4 million towards the customization fee, which we were recognizing ratably over the customization period.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures , which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others.
The adoption of this ASU did not have a material impact to our consolidated financial statements. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures , which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others.
Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research.
Research and Development Expenses We expense our research and development costs as incurred. Research and development expenses consist of costs incurred for company-sponsored research and development activities.
(“Exacis”) substantially all of its intellectual property assets, including all of its right, title and interest in and to an exclusive license agreement by and between Exacis and Factor Limited (the “Purchased License”).
Acquisition of Exacis In-Process Research and Development In April 2023, we acquired from Exacis substantially all of its intellectual property assets, including all of its right, title and interest in an exclusive license agreement between Exacis and Factor Limited (the “Purchased License”).
Provision for Income Taxes During 2023, we expect to incur state income tax liabilities related to our operations. We have established a full valuation allowance for all deferred tax assets, including our net operating loss carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets.
We have established a full valuation allowance for all deferred tax assets, including our net operating loss carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets. The effective tax rate differs from the statutory tax rate due primarily to our full valuation allowance.
We do not expect the amendments in this ASU to have a material impact on our consolidated financial statements. 46 Table of Contents In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures , which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures , which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures.
Interest Expense We recognized an increase in interest expense for the year ended December 31, 2023 primarily due to interest related to the convertible notes of approximately $0.3 million as well as the amortization of the debt discount and debt issuance costs associated with the convertible note financings. There were no convertible notes for the same period in 2022.
Interest Expense We recognized an increase in interest expense for the year ended December 31, 2024 of approximately $6.1 million compared to the year ended December 31, 2023 primarily due to interest expense and amortization of debt issuance costs associated with the 2023 convertible note financings and the 2024 bridge notes.
The expenses for some third-party services may be recognized on a straight-line basis if the expected costs are expected to be incurred ratably during the period.
If the actual timing of the performance of the services or the level of effort varies from the estimate, the accrual is adjusted accordingly. The expenses for some third-party services may be recognized on a straight-line basis if the expected costs are expected to be incurred ratably during the period.
Cash Flows Cash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are summarized as follows: For the years ended December 31, (in thousands) 2023 2022 Change Cash (used in) provided by: Operating activities $ (20,408 ) $ (20,976 ) $ 568 Investing activities (19 ) (47 ) 28 Financing activities 16,556 19,579 (3,023 ) Net decrease in cash and cash equivalents $ (3,871 ) $ (1,444 ) $ (2,427 ) Net Cash Used in Operating Activities There was an increase of approximately $0.6 million in cash used in operating activities for the year ended December, 2023, as compared to year ended December 31, 2022.
Cash Flows Cash flows from operating, investing and financing activities, as reflected in the accompanying condensed consolidated statements of cash flows, are summarized as follows: For the years ended December 31, (in thousands) 2024 2023 Change Cash (used in) provided by: Operating activities $ (15,836 ) $ (20,408 ) $ 4,572 Investing activities (365 ) (19 ) (346 ) Financing activities 6,260 16,556 (10,296 ) Net decrease in cash and cash equivalents $ (9,941 ) $ (3,871 ) $ (6,070 ) Net Cash Used in Operating Activities There was a decrease of approximately $4.6 million in cash used in operating activities for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Net Cash Provided by Financing Activities Net cash provided by financing activities for the year ended December 31, 2023 includes approximately $16.3 million in net proceeds received from convertible note financings and approximately $0.3 million in net proceeds received under the SEPA.
Net cash provided by financing activities for the year ended December 31, 2023 includes approximately $16.5 million of gross proceeds from convertible note financings and $0.3 million of proceeds received from selling approximately 214,000 shares to Lincoln Park under the SEPA. The Company did not sell any shares under the SEPA during the year ended December 31, 2024.
The Purchased License was determined to be an IPR&D asset that has no alternative future use and no separate economic value from its original intended purpose, which is expensed in the period the cost is incurred. As a result, we expensed the fair value of the Purchased License of approximately $0.5 million during the year ended December 31, 2023.
The Purchased License was determined to be an in-process research and development (“IPR&D”) asset that has no alternative future use and no separate economic value from its original intended purpose, which is therefore expensed in the period the cost is incurred.
We do not expect a material impact on our consolidated financial statements as a result of adopting this ASU. In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements – Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative.
The adoption of this ASU did not have an impact to our consolidated financial statements, but did result in additional disclosures made in the notes to the consolidated financial statements. 41 Recently Issued Accounting Standards to be Adopted In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements – Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative.
General and Administrative Expenses Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs. 40 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 Years ended December 31, (in thousands) 2023 2022 Change Revenue $ 68 $ - $ 68 Cost of revenues 236 - 236 Gross loss (168 ) - (168 ) Operating expenses: Research and development 5,920 10,392 (4,472 ) General and administrative 14,587 16,835 (2,248 ) Acquisition of Exacis IPR&D 460 - 460 Impairment of IRX-2 IPR&D - 5,990 (5,990 ) Total operating expenses 20,967 33,217 (12,250 ) Loss from operations (21,135 ) (33,217 ) 12,082 Other expense, net: Change in fair value of warrant liabilities 215 10,795 (10,580 ) Change in fair value of contingent consideration 118 - 118 Loss on non-controlling investment (59 ) (941 ) 882 Interest income 138 - 138 Interest expense (614 ) (30 ) (584 ) Other expense, net (334 ) (1,141 ) 807 Total other (expense) income, net (536 ) 8,683 (9,219 ) Loss before income taxes (21,671 ) (24,534 ) 2,863 Benefit (provision) for income taxes 3 (45 ) 48 Net loss $ (21,668 ) $ (24,579 ) $ 2,911 Revenue During the year ended December 31, 2023, we recognized revenue related to the cell line customization activities we performed for a third party.
General and Administrative Expenses Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs. 35 Comparison of the Years Ended December 31, 2024 and 2023 Year ended December 31, (in thousands) 2024 2023 Change Revenue $ 582 $ 68 $ 514 Cost of revenues 96 236 (140 ) Gross income (loss) 486 (168 ) 654 Operating expenses: Research and development 4,604 5,920 (1,316 ) General and administrative 13,132 14,587 (1,455 ) Gain on lease termination (1,576 ) - (1,576 ) Acquisition of Exacis IPR&D - 460 (460 ) Total operating expenses 16,160 20,967 (4,807 ) Loss from operations (15,674 ) (21,135 ) 5,461 Other (expense) income, net: Loss on extinguishment of debt (22,440 ) - (22,440 ) Change in fair value of convertible notes 1,017 - 1,017 Change in fair value of bridge notes derivative liability (1,459 ) - (1,459 ) Change in fair value of warrant liabilities 414 215 199 Change in fair value of contingent consideration 66 118 (52 ) Loss on non-controlling investment - (59 ) 59 Interest income 249 138 111 Interest expense (6,752 ) (614 ) (6,138 ) Other income (expense), net 70 (334 ) 404 Total other expense, net (28,835 ) (536 ) (28,299 ) Loss before income taxes (44,509 ) (21,671 ) (22,838 ) (Provision) benefit for income taxes (30 ) 3 (33 ) Net loss $ (44,539 ) $ (21,668 ) $ (22,871 ) Revenue During the years ended December 31, 2024 and 2023, we recognized revenue related to the cell line customization activities we performed for Lineage.
Interest Income We recognized interest income for the year ended December 31, 2023 due to depositing our cash into interest bearing accounts compared to the same period in 2022.
We recognized a loss of approximately $0.1 million for the year ended December 31, 2023. Interest Income We recognized an increase in interest income for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to having our cash into interest bearing accounts for the full year of 2024 compared to 2023.
This change was due to an increase in cash used in operating assets and liabilities of $5.5 million, primarily related to MSA fees, insurance premiums and accrued severance payments, offset by a $6.1 million decrease in net loss, after giving effect to adjustments made for non-cash transactions, for the year ended December 31, 2023 when compared to the year ended December 31, 2022. 44 Table of Contents Net Cash Used in Investing Activities Total cash used in investing activities remained relatively flat for the year ended December 31, 2023 compared to 2022.
This change was due a $4.5 million decrease in net loss, after giving effect to adjustments made for non-cash transactions, primarily due to an increase in recognition of revenue as well as a reduction in professional and consulting expenses, offset by a slight increase of $0.1 million in cash used in operating assets and liabilities for the year ended December 31, 2024 compared to the year ended December 31, 2023.
We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. 45 Table of Contents Goodwill Impairment Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in the acquisition of IRX Therapeutics, Inc. in November 2018, which was accounted for as a business combination.
Actual results may differ from these estimates. We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Goodwill Impairment Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and the liabilities assumed.
We remeasured the fair value of the contingent consideration liability at the end of each quarterly period enduring the year, and for the year ended December 31, 2023, the change in fair value was approximately $0.1 million, which is recognized in the consolidated statement of operations.
This contingent consideration liability is remeasured at each period end, and any change in the fair value of the contingent liability is recognized in the statement of operations.
To date, we have issued and sold approximately 214,000 shares of our common stock to Lincoln Park, including the 74,000 commitment shares, and have received approximately $0.3 million in gross proceeds from such sales. 43 Table of Contents Based on our current financial condition and forecasts of available cash, we will not have sufficient capital to fund our operations for the 12 months following the issuance date of the accompanying consolidated financial statements.
We sold no shares under the SEPA during the year ended December 31, 2024. Based on our current financial condition and forecasts of available cash, we will not have sufficient capital to fund our operations for the 12 months following the issuance date of the accompanying consolidated financial statements.
Currently, our sole source of liquidity is through sales of our common stock under the standby equity purchase agreement (the “SEPA”) we entered into with Lincoln Park Capital Fund, LLC (“Lincoln Park”) in April 2023, pursuant to which Lincoln Park committed to purchase up to $10.0 million of our common stock.
Other than the proceeds raised under the bridge notes and the common stock private placement, our sole source of liquidity is through sales of our common stock under the SEPA, pursuant to which Lincoln Park committed to purchase up to $10.0 million of our common stock.
Other (Expense) Income, Net Years ended December 31, 2023 2022 Change (in thousands) SEPA fees $ (280 ) $ - $ (280 ) Q1-22 PIPE transaction fees - (1,007 ) 1,007 Liquidated damages - (240 ) 240 Other (expense) income, net (54 ) 106 (160 ) Total other expense, net $ (334 ) $ (1,141 ) $ 807 For the year ended December 31, 2023, we recognized (a) commitment fees and other fees related to the SEPA we entered into with Lincoln Park in April 2023 and (b) other miscellaneous expense.
For the year ended December 31, 2023, we recognized (a) commitment fees and other fees related to the SEPA we entered into with Lincoln Park in April 2023 and (b) other miscellaneous expense. 38 Provision for Income Taxes During 2024, we expect to incur state income tax liabilities related to our operations.
We accrue for third party expenses based on estimates of the services received and efforts expended during the reporting period. If the actual timing of the performance of the services or the level of effort varies from the estimate, the accrual is adjusted accordingly.
The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. We accrue for third party expenses based on estimates of the services received and efforts expended during the reporting period.
We have to date incurred operating losses, and we expect these losses to continue in the future. For the year ended December 31, 2023, we incurred a net loss of $21.7 million, and we used $20.4 million in operating activities.
Liquidity and Capital Resources As of December 31, 2024, we had cash of approximately $1.7 million, and we had an accumulated deficit of approximately $231.5 million. We have to date incurred operating losses, and we expect these losses to continue in the future.
Cost of Revenue During the year ended December 31, 2023, our cost of revenues includes direct labor and materials to perform the customization cell line activities for a third party, as well as royalty expense owed to Factor Limited in accordance with our exclusive license agreement with Factor Limited.
As of December 31, 2024, we did not have any deferred revenue balances on our consolidated balance sheet. Cost of Revenue During the years ended December 31, 2024 and 2023, our cost of revenues included direct labor and materials to perform the customization cell line activities for Lineage.
On December 8, 2023, we received $1.5 million in exchange for a 6% promissory note with an aggregate principal amount of $1.5 million we issued to Charles Cherington. The promissory note was to mature on January 8, 2024, and interest accrued at a rate of 6.0% per annum, payable at maturity.
For the year ended December 31, 2024, we incurred a net loss of $44.5 million, and we used $15.8 million of cash in operating activities. On March 11, 2025, we received $1.5 million in exchange for the issuance of a promissory note with an aggregate principal amount of $1.5 million to an investor.
There were no contingent consideration liabilities during the same period in 2022. 42 Table of Contents Loss on Non-Controlling Investment We account for our 25% non-controlling investment in NoveCite, Inc. (“NoveCite”) under the equity method. We have not guaranteed any obligations of NoveCite, nor are we otherwise committed to providing further financial support for NoveCite.
(“NoveCite”) under the equity method. We have not guaranteed any obligations of NoveCite, nor are we otherwise committed to providing further financial support for NoveCite. Therefore, we only record 25% of NoveCite’s losses up to our investment carrying amount. As a result, we did not recognize additional losses related to NoveCite for the year ended December 31, 2024.
For additional information, see Note 4 to the accompanying consolidated financial statements included in this report. Impairment of In-Process Research and Development During the year ended December 31, 2022, we received the results from the INSPIRE phase 2 trial of IRX-2.
As a result, we expensed the fair value of the Purchased License of approximately $0.5 million during the year ended December 31, 2023. For additional information, see Note 4 to the accompanying financial statements included in this report. There was no similar transaction during the year ended December 31, 2024.
Net cash provided by financing activities for the year ended December 31, 2022 includes approximately $19.6 million in net proceeds received from capital raising transactions. Material Cash Requirements Somerville Sublease In October 2022, we entered into a sublease for approximately 45,500 square feet of office and laboratory space in Somerville, Massachusetts.
Net Cash Provided by Financing Activities Net cash provided by financing activities for the year ended December 31, 2024 includes approximately $6.4 million of gross proceeds received from the convertible note financing, the bridge note financing and the common stock private placement that occurred in January 2024, September 2024 and October 2024, respectively.
Therefore, we only record 25% of NoveCite’s losses up to our investment carrying amount of $1.0 million. For the years ended December 31, 2023 and 2022, we recognized losses of approximately $0.1 million and $0.9 million, and as of December 31, 2023, the carrying value of our initial investment is zero.
As of December 31, 2024 and 2023, we remeasured the contingent liability and recognized income of $0.1 million for each of the years ended December 31, 2024 and 2023 due to the decrease in the fair value of the contingent consideration liability. Loss on Non-Controlling Investment We account for our 25% non-controlling investment in NoveCite, Inc.
Sales under the SEPA may occur from time to time, at our sole discretion, through April 2025.
Sales under the SEPA may occur from time to time, at our sole discretion, through April 2025. To date, we have issued and sold approximately 214,000 shares of our common stock to Lincoln Park, including approximately 74,000 commitment shares, and have received approximately $0.3 million in gross proceeds from such sales.
Change in Fair Value of Warrant Liabilities For the year ended December 31, 2023 and 2022, we recognized credits to expense related to the change in the fair value of warrant liabilities due to a decrease in the market price of our common stock.
The change in fair value of warrant liabilities for the year ended December 31, 2024 includes certain warrants that were reclassified to a liability in September 2024 and then exchanged for shares of common stock in October 2024 as part of the September 2024 Transactions described above.
As part of the sublease, we delivered a security deposit in the form of a letter of credit in the amount of $4.1 million, which will be reduced on an incremental basis throughout the term of the sublease.
Termination of Sublease In October 2022, we entered into a sublease for office and laboratory space in Somerville, Massachusetts. In connection with entering into the sublease, we delivered a security deposit in the form of a letter of credit in the amount of $4.1 million.
Purchases of property and equipment decreased by $0.3 million for the year ended December 31, 2023 compared to 2022, which was offset by a decrease in proceeds received from the sale of fixed assets of $0.3 million for the year ended December 31, 2022 compared to 2022.
Net Cash Used in Investing Activities We used approximately $0.4 million to pay for the purchases of property and equipment during the year ended December 31, 2024. There was an immaterial amount of investing activities during the year ended December 31, 2023.
Removed
Overview We are a life science company committed to realizing the potential of mRNA cell engineering to provide patients with transformational new medicines.
Added
Our vision is to improve the lives of patients with difficult-to-treat diseases through innovative, effective, and safe, but accessible cellular therapies, and our mission is to develop allogenic off-the-shelf cellular therapies, leveraging induced pluripotent stem cell (“iPSC”)-derived mesenchymal stem cells (“iMSCs”) to target solid tumors and autoimmune diseases.
Removed
We have in-licensed a portfolio of over 100 patents covering key mRNA cell engineering technologies, including technologies for mRNA cell reprogramming, mRNA gene editing, the NoveSlice TM and UltraSlice TM gene-editing proteins, and the ToRNAdo TM mRNA delivery system, which we collectively refer to as our “mRNA technology platform.” We refer to aspects of our mRNA technology platform as “mRNA delivery,” “mRNA gene editing” and “mRNA cell reprogramming.” We license our mRNA technology platform from Factor Bioscience Limited (“Factor Limited”) under an exclusive license agreement. 38 Table of Contents Our near-term focus is on entering into strategic partnerships to deploy our mRNA technology platform.
Added
The holders of the warrants described in the paragraph above exchanged all their warrants for shares of our common stock at an exchange ratio of 0.5 of a share of common stock for every one share of common stock issuable upon exercise of the applicable warrant (rounded up to the nearest whole number), and the holders of the convertible notes described in the paragraph above exchanged all their convertible notes for shares of our common stock at an exchange ratio equal to (A) the sum expressed in U.S. dollars of (1) the principal amount of the applicable convertible note, plus (2) all accrued and unpaid interest thereon through the date the applicable convertible note is exchanged plus (3) all interest that would have accrued through, but not including, the maturity date of applicable convertible note if it was outstanding from the date such convertible note is exchanged through its maturity date, divided by (B) $1.00 (rounded up to the nearest whole number).
Removed
We expect that potential strategic partners will use our mRNA technology platform for preclinical and eventual clinical development of product candidates for a variety of clinical indications. Following receipt of the results from the INSPIRE phase 2 trial of IRX-2, our only product candidate, in June 2022, we determined to cease the development of IRX-2.
Added
Conversion of Bridge Notes On September 24, 2024, we closed a private placement in which we sold an aggregate principal amount of approximately $3.9 million of 12.0% senior convertible notes (the “bridge notes”).
Removed
We do not currently plan to develop any product candidates. In the future we may develop and advance product candidates, either internally and/or through strategic partnerships.
Added
On October 29, 2024, in accordance with the terms of the bridge notes, approximately $3.0 million of the principal amount of the bridge notes plus all accrued and unpaid interest thereon, plus such amount of interest that would have accrued on the principal amount through December 24, 2024, was automatically converted at a conversion price of $0.50 into 6.2 million shares of our common stock, and approximately $0.9 million of the principal amount of the bridge notes plus all accrued and unpaid interest thereon, plus such amount of interest that would have accrued on the principal amount through December 24, 2024, was automatically converted at a conversion price of $0.50 into pre-funded warrants to purchase 1.8 million shares of our common stock. 33 Private Placement Pursuant to a securities purchase agreement we entered into with certain investors on September 24, 2024, on October 29, 2024, we closed a private placement (the “common stock private placement” and together with the bridge notes and the exchange transactions, the “September 2024 Transactions”) in which we sold an aggregate of 1.4 million shares of our common stock and pre-funded warrants to purchase 0.1 million shares of our common stock at a purchase price of $0.75 per share of common stock and $0.745 per pre-funded warrant.
Removed
Recent Financings In July 2023, we received $8.7 million from a private placement in which we 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 our common stock (the “July 2023 warrants”).
Added
We received approximately $1.1 million in gross proceeds from the issuance of such securities. For additional information regarding this private placement, see Note 6 to the accompanying consolidated financial statements. For additional information regarding the September 2024 Transactions, see Note 6 to the accompanying consolidated financial statements.
Removed
On December 14, 2023, we 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.
Added
In total, the Company issued approximately 45.9 million shares of common stock and 1.9 million pre-funded warrants on October 29, 2024 pursuant to the private placement, the exchange transactions and the conversion of the bridge notes discussed above and had 51.4 million shares of common stock issued and outstanding after the closing of the September 2024 Transactions.
Removed
There were two closings under this purchase agreement: on December 15, 2023, we received $7.8 million and issued $7.8 million in December 2023 convertible notes and December 2023 warrants to purchase approximately 8.1 million shares of our common stock, and on January 11, 2024, we received the remaining $1.4 million and issued an aggregate of $1.4 million in December 2023 convertible notes and December 2023 warrants to purchase approximately 1.5 million shares of our common stock.
Added
The letter of credit was collateralized with $4.1 million of cash deposited in a restricted account. 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 for February 2024 through August 2024, plus interest and penalties.
Removed
The July 2023 convertible notes bear interest at 6% per annum, and the December 2023 convertible notes bear interest at 12% per annum, both of which are payable quarterly in arrears. At our election, we may pay interest either in cash or in-kind by increasing the outstanding principal amount of the applicable notes.
Added
On August 9, 2024, we and the sublessor entered into a sublease termination agreement pursuant to which the parties agreed to terminate the sublease effective August 31, 2024.
Removed
The July 2023 convertible notes mature on July 14, 2028, and the December 2023 convertible notes mature on December 15, 2028 and January 11, 2029, depending on the issuance date of such notes, unless earlier converted or repurchased. We may not redeem any of the convertible notes prior to maturity.
Added
Pursuant to the sublease termination agreement, we agreed to surrender and vacate the premises, all of our right, title and interest in all furniture, fixtures and laboratory equipment at the premises will become the property of the sublessor, and both parties will be released of their obligations under the sublease.
Removed
At the option of the holder, the July 2023 convertible notes and the December 2023 convertible notes may be converted from time-to-time in whole or in part into shares of our common stock at a conversion rate of $2.86 per share and $1.9194 per share, respectively, subject to customary adjustments for stock splits, stock dividends, recapitalization and the like.
Added
As a result of the sublease termination, we recognized a gain on lease termination of approximately $1.6 million for the year ended December 31, 2024, and we expect to save approximately $72 million in base rental payments, parking, operating expenses, taxes and utilities that we would have paid over the remaining lease term.
Removed
The convertible notes contain conversion limitations such that no conversion may be made if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99%, 9.99% or 19.99% immediately after conversion thereof, subject to certain increases not in excess of either 9.99% or 19.99% at the option of the holder.
Added
On September 24, 2024, we entered into an agreement with Factor Bioscience whereby we assigned the Lineage Agreement to Factor Bioscience (the “Lineage Assignment Agreement”). The Lineage Assignment Agreement with Factor Bioscience. assigns all our rights and obligations under that the Lineage Agreement to Factor Bioscience.
Removed
The convertible notes provide for customary events of default (subject in certain cases to customary grace and cure periods), which include, among others: nonpayment of principal or interest; breach of covenants or other agreements in the convertible notes; the occurrence of a material adverse effect event and certain events of bankruptcy.
Added
Payments to us related to the Lineage Agreement will now be subject to the Lineage Assignment Agreement, which provides for Factor Bioscience paying us thirty percent (30%) of all amounts it receives from Lineage in the event that Lineage obtains a sublicense from Factor Bioscience.
Removed
Generally, if an event of default occurs and is continuing under the convertible notes, the holder thereof may require us to repurchase some or all of their convertible notes at a repurchase price equal to 100% of the principal amount of the convertible notes being repurchased, plus accrued and unpaid interest thereon.
Added
Upon receipt of future payments for the customization activities set forth in the Lineage Agreement, Factor Bioscience will pay us twenty percent (20%) of all amounts Factor Bioscience receives from Lineage.
Removed
In connection with the issuance of the December 2023 convertible notes, we agreed to reduce the exercise price of the warrants we issued in a private placement in December 2022 to purchase an aggregate of approximately 4.4 million shares of our common stock from $3.28 to $1.43 per share and of the July 2023 warrants from $2.61 to $1.43 per share. 39 Table of Contents Basis of Presentation Revenue Our near-term focus is on deploying our mRNA technology platform through strategic partnerships.
Added
Because we have no further obligations under the agreement with Lineage, we have fully recognized as revenue amounts previously recorded in deferred revenue of approximately $0.5 million for the year ended December 31, 2024. For additional information, see Note 5 to the accompanying consolidated financial statements.
Removed
We are not currently developing any product candidates. Our future revenue, if any, is primarily expected to come from out-licensing our mRNA technology platform and/or aspects thereof.

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