ERNA 10-K & 10-Q changes, risk factors and insider trading

Our business, financial condition and operating results can be affected by many factors, whether currently known or unknown, many of which are not exclusively within our control, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our financial condition and operating results to differ materially from historical or anticipated future financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price. We urge investors to carefully consider the risk factors described below in evaluating our stock and the information in this 2025 Annual Report on Form 10-K,Report, including the consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We rely on patents, know-how and proprietary technology licensed from Factor Limited under the Factor L&C Agreement. 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. For example, we are obligated to paypaid Factor Limited $0.2 million per month for the first twelve months,months and $0.1 million per month for the first nine months toward patent costs,costs. We are also obligated to pay certain milestone payments, royalty payments on net sales of commercialized products and sublicensing fee payments. 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.

Our ability to compete in the highly competitive life science industry depends in large part upon the ability to attract highly qualified personnel. In order to induce valuable employees to remain with us, we intend to provide employees with stock options and/or restricted stock units that vest over time. The value to employees of stock options that vest over time will be significantly affected by movements in the price of the common stockstock, thatwhich itwe willcannot not be able to controlcontrol, and may at any time be insufficient to counteract more lucrative offers from other companies.

Competition for skilled personnel in our industry is intenseintense, and competition for experienced scientists may limit our ability to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, our employees may terminate their employment with us on short notice.

Risks Related to New, Cutting EdgeCutting-Edge Technologies

Cell reprogramming technology and related cell therapy products using iPSC lines represent novel therapeutic approaches, and to our knowledgeknowledge, no iPSC-derived cell products are currently approved for commercial sale anywhere in the world. 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. 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 successfulsuccessfully commercialization ofcommercializing future 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- based therapies are relatively new, regulatory agencies may lack experience in evaluating product candidates using our synthetic iMSC technology platform. This novelty may lengthen the regulatory review process, including the time it takes for the FDA to review IND applications if and when such applications are submitted, increase development costs, and delay or prevent commercialization of future products, if such products are approved for marketing.

Due to the rapid advancements in cellular technologies, regulatory processes and requirements in the United StatesU.S. and in other jurisdictions governing governing cellular therapy products are evolving and the FDA or other regulatory bodies may change the requirements, or identify different regulatory regulatory pathways, for the clinical testing and approval of these product candidates. For example, in recent years the FDA has issued several several new guidance documents related to developing and manufacturing cellular therapy products. In addition, adverse developments in clinical 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. For example, in November 2023, 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. Future adverse events or safety issues could lead to more significant regulatory action applicable to either a specific product or a broader product class, based on case-by-case science-based benefit-risk assessments. 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. These regulatory agencies and committees and any new regulations, requirements or guidelines they promulgate may lengthen the regulatory review process, which may reduce the anticipated benefits of our co-development strategic partnerships or adversely affect the commercialization of any future therapeutic products we may develop.

The clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the product candidate. 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. It is difficult to determine howthe long it will taketime or howcost much it will costrequired to obtain regulatory approvals for product candidates using this technology in either the United StatesU.S. or the E.U.E.U., or how long it will take to commercialize any product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product candidate to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects may be harmed.

We are in an industry with intense competition and rapid technological changechange, and our competitors may develop therapies that are more advanced, safer, or more effective than any therapy we develop in the future, which may adversely affect our financial condition.

We have competitors both in the United StatesU.S. and internationally, including major multinational pharmaceutical companies, biotechnology companies, companies, universities, and other research institutions. Many of our competitors have substantially greater financial, technical, research and and human resources than we do, and may also have strategic partnerships and collaborative arrangements with leading companies and research institutions .institutions. Our competitors may succeed in developing, acquiring, or licensing on an exclusive basis, products that are more effective, safer, or less costly than any products that we may develop in the future, or achieve patent protection, marketing approval, product commercialization, and market penetration earlier than us. Additionally, technologies developed by our competitors may render any product candidates we are seeking to develop uneconomical or obsolete. For additional information regarding our competition, see “Part I, Item 1. Business—Competition”.

The manufacture of biotechnology products, including cellular and gene therapy products, is complex and requires significant expertise and capital investment. Manufacturers for any product candidates developed using our synthetic iMSC technology platform will be required to comply with cGMP regulations and guidelines for clinical trial product manufacture and subsequently for commercial product manufacture. Manufacturers of biotechnology products often encounter difficulties in production, particularly in scaling up, addressing product quality, product comparability, validating production processes and mitigating potential sources of contamination. These problems include difficulties with raw material procurement, production costs and yields, quality control, product quality, including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Any delay or interruption in the supply of preclinical study supplies (or clinical trial supplies in the future) could delay the completion of such studies, increase the costs associated with the affected development programs and,and depending upon the the period of delay, require new studies to be commenced at additional expense or terminated completely.

In addition, under the terms of thean asset purchase agreement pursuant to which we acquired assets from Exacis,a company (the “Seller”) in April 2023, we agreed to issue to Exacis the Seller shares of our common stock as contingent consideration. 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. In addition, if our market capitalization equals or exceeds $200 million during the same three-year period, we agreed to issue to Exacisthe Seller additional shares of our common stock determined by a formula specified in the asset purchase agreement. SeeThe Notecontingent 4consideration toperiod theexpires on accompanyingApril consolidated26, financial statements for additional information.2026.

Our common stock is listed on The Nasdaq Capital Market. The Nasdaq Capital Market requires that listed companies satisfy certain continued listing requirements. Listing Rule 5505550(a)(2) requires that listed companies maintain a minimum bidcompliance pricewith of their common stock of at least $1 per share (the “Bid Price Rule”).Rule. Listing Rule 5550(b) requires that listed companies havemaintain compliance with : (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’sNet mostIncome recently completed fiscal year or in two of the three most recently completed fiscal years.Rule.

Risks Related to our Financial Position and Capital Requirements We may acquire businesses, assets or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.

Product candidates employing medical technology are subject to extensive and rigorous domestic government regulation including regulation by the FDA, other divisions of the United StatesU.S. Department of Health and Human Services, the United StatesU.S. Department of Justice, state and local governments, and their respective foreign equivalents. If products employing our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not they have obtained FDA approval for one or more uses. Such foreign regulation may be equally or more demanding than corresponding United StatesU.S. regulation.

We maintain quantities of various flammable and toxic chemicals in our facilities in Massachusetts that are used for our research and development activities. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. We believe our procedures for storing, handling and disposing these hazardous materials in our laboratory facilities comply with the relevant guidelines of the relevant local, state, and the Occupational Safety and Health Administration of the U.S. Department of Labor. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards mandated by applicable regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of animals and biohazardous materials. Any insurance coverage we have may not be sufficient to cover these liabilities. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate,violate any of these laws or regulations which would adversely affect our business.

Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United StatesU.S. and certain foreign jurisdictions, there have been, and likely will continue to be, legislative and and regulatory proposals at the foreign, federal, and state levels directed at containing or lowering the cost of healthcare. We cannot predict predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations, organizations, and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

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. U.S. It also included the provisions that created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. The ACA continues to significantly impact the United States’sU.S.’s pharmaceutical industry.

Moreover, there has been heightened governmental scrutiny over the manner in which prescription drug and biological product manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. In August 2022, President Biden signed into the law the Inflation Reduction Act of 2022 (“IRA”), which includes (among other things) multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States.U.S.. A manufacturer of drug products products covered by Medicare Parts B or D must pay a rebate to the federal government if their drug product’s price increases faster than than the rate of inflation. The IRA is in the process of being implemented by CMS and its impact on the pharmaceutical industry in the U.S. United States remains uncertain at this time, in part because multiple large pharmaceutical companies and other stakeholders (e.g., the U.S. Chamber of Commerce) have initiated federal lawsuits against CMS arguing a separate price negotiation program is unconstitutional for a variety of reasons, among other complaints. Those lawsuits are currently ongoing.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United StatesU.S. or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, our therapeutic candidates may lose any marketing approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.

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. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.U.S. 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 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. No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United StatesU.S. or in many foreign jurisdictions. The standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. In addition, the determination of patent rights with respect to pharmaceutical compounds commonly involves complex legal and factual questions, which which has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value value of our patent rights are highly uncertain. 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 ABLAsaBLAs to the FDA in which they claim that the patents related to our in-licensed technology are invalid, unenforceable or not infringed. 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. Thus, we cannot offer any assurances aboutregarding which, if any, patents will issue, the breadthscope of any such issued patents, whether any issuedsuch patents will be found invalid and unenforceableunenforceable, orwhether they will may be threatenedchallenged by third parties or whether any issued patentsthey will effectively prevent others from commercializing competing technologies and and drug candidates.

In addition to patent protection, we expect to rely heavily on trade secrets, know-how and other unpatented technology, which are difficult to protect. Although we seek such protection in part by entering into confidentiality agreements with our vendors, employees, consultants and others who may have access to proprietary information, we cannot be certain that these agreements will not be breached, adequate remedies for any breach would be available, or our trade secrets, know-how and other unpatented proprietary technology will not otherwise become known to or be independently developed by our competitors. If we are unsuccessful in protecting our intellectual property rights, sales of our products may suffersuffer, and our ability to generate revenue could be severely impacted.

If the licensor of our in-licensed technology does not obtain patent term extension for future products that we orwe, our strategic partners or collaborators may successfully develop, our business may be materially harmed.

Patents have a limited lifespan. In the United States,U.S., 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. Even if patents covering future products and product candidates that we or our strategic partners or collaborators may develop are obtained, once the patent life has expired for a particular product, we or our strategic partners or collaborators may be open to competition from competitive products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are approved and commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

In the future, if we obtain an issued patent covering one of the product candidates that we or our strategic partners or collaborators may develop, depending upon the timing, duration and specifics of any FDA marketing approval of such product candidates, such patent may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process for drugs and biologics. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval,approval. onlyOnly one patent may be extendedextended, and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. A patent may only be extended once and only based on a single approved product. 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. A patent licensed to us by a third party may not be available for patent term extension. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.

Changes in patent law in the United StatesU.S. and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect future products and product candidates that we or our strategic partners or collaborators may develop.

Changes in either the patent laws or the interpretation of the patent laws in the United StatesU.S. or other jurisdictions could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. When implemented, the Leahy-Smith Act included several significant changes to U.S. patent law that impacted how patent rights could be prosecuted, enforced and defended. In particular, the Leahy-Smith Act also included provisions that switched the United StatesU.S. from a “first-to-invent” system to a “first-to-file” system, allowed third- party submission of prior art to the USPTO during patent prosecution and set forth additional procedures to attack the validity of a patent by the USPTO administered post grant proceedings. Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The USPTO developed new regulations and procedures governing the administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first first to file provisions, only became effective on March 16, 2013. 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.

Filing, prosecuting, maintaining, defending and enforcing patents on products and product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United StatesU.S. could be less extensive than those in the United States.U.S.. The requirements for patentability may differ in certain countries, particularly in developing countries; thus, even in countries where we do pursue patent protection, there can be no assurance that any patents will issue with claims that cover our products. There can be no assurance that we will obtain or maintain patent rights in or outside the United StatesU.S. under any future license agreements. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.U.S. Consequently, we may not be able to prevent third parties from utilizing our inventions in all countries outside the United States, U.S., even in jurisdictions where we pursue patent protection, or from selling or importing products made using our inventions in and into the United StatesU.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States.U.S. These products may compete with future products and product candidates that we or our strategic partners or collaborators may develop and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing with us.

Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, laws of some countries outside of the United StatesU.S. and Europe do not afford intellectual property protection to to the same extent as the laws of the United StatesU.S. and Europe. Many companies have encountered significant problems in protecting and defending defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries countries including India and China, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly 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. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in certain countries outside the United StatesU.S. and Europe. In addition, many countries limit the enforceability of patents against government authorities or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.

Proceedings to enforce our patent rights, even if obtained, in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business,business. They could also put our patents at risk of being invalidated or interpreted narrowlynarrowly, and put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that that we initiateinitiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. While we intend to protect our intellectual intellectual property rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to 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.

We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United StatesU.S. and abroad that is relevant to or necessary for the commercialization of our drug candidates candidates in any jurisdiction.

The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect. For example, we may incorrectly determine that our products are not covered by a third-party patent or may incorrectly predict whether a third-party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the UnitedU.S. States or abroad that we consider relevant may be incorrect. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products.

Many of our current and former employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including some which may be competitors or potential competitors. Some of these employees may be subject to proprietary rights, non-disclosure and non-non competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Moreover, any proprietary name we have proposed to use with our drug candidates in the United StatesU.S. must be approved by the FDA, regardless of whether whether we have registered it, or applied to register it, as a trademark. Similar requirements exist in Europe. The FDA typically conducts a a review of proposed proprietary product names, including an evaluation of potential for confusion with other product names. If the FDA (or an equivalent administrative body in a foreign jurisdiction) objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties, and be acceptable to the FDA. Furthermore, in many countries, owning and maintaining a trademark registration may not provide an adequate defense against a subsequent infringement claim asserted by the owner of a senior trademark. At times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. If we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

2025 Private Placement of Equity

InRevenue Februaryis 2023,related we entered intoto an exclusive option and license agreement (thewe “Lineage Agreement”)had with Lineagea Cell Therapeutics, Inc. (“Lineage”),customer, under which we granted Lineagethe customer an option to obtain an exclusive sublicense to certain of our technology for preclinical, clinical and commercial purposes in exchange for a non-refundable up-front payment to us of $0.3 million. InWe August 2023,also Lineage requested that we beginbegan developing certain induced pluripotent stem cell lines in exchange for a cell line customization customization fee. LineageThe customer paid us $0.4 million towards the customization fee, which we were recognizing ratably over the customization period period.for the year ended December 31, 2024. The Company did not recognize any revenue during the year ended December 31, 2025.

OnIn September 24, 2024, we entered into an agreement with Factor Limited (and together with Factor Bioscience Inc. and its other affiliates, “Factor Bioscience”) whereby we assigned the Lineagecustomer Agreementcontract to Factor Bioscience (the “Lineage Assignment Agreement”). The Lineage Assignment Agreement with Factor Bioscience.Bioscience assignsassigned all our rights and obligations under that the Lineagecustomer Agreementcontract to Factor Bioscience. Payments to us related to the Lineagecustomer Agreementcontract 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 the customer in the event that Lineagethe customer obtains a sublicense from Factor Bioscience. Upon receipt of future payments for the customization activities set forth in the Lineagecustomer Agreement,contract, Factor Bioscience will pay us twenty percent (20%) of all amounts Factor Bioscience receives from Lineage. Because we have no further obligations under the agreementcustomer. with Lineage, we have fully recognized as revenue amounts previously recorded in deferred revenue of approximately $0.5 million forFor the year ended December 31, 2024.2025, Forwe received additionalapproximately information,$0.5 seemillion Note 5from toFactor Bioscience under the accompanyingAssignment consolidatedAgreement, financialwhich statements.is Werecognized have noas other revenueincome generatingin contractsthe consolidated atstatements of operations, as this time.income did not qualify as revenue.

We recognize direct labor and supplies associated with generating our revenue as cost of revenues. As provided for in the A&R Factor License Agreement discussed in Note 11 to the accompanying consolidated financial statements, weWe were also obligated to pay Factor Bioscience Limited 20% of any amounts we receivereceived from athe customer thatcontract wasdiscussed related to the licensed technologyabove under thea A&Rprevious license agreement we had with Factor LicenseBioscience, Agreement, which wehas since been terminated, and such costs were also recognizerecognized as a cost of revenue.revenues.

We have contracted with third parties to perform various studies.services. 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. If the actual timing of the performance of the services or the level of effort varies from the estimate, the accrual is adjusted accordingly. The expenses for some third-party services may be recognized on a straight-line basis if the expected costs are expected to be incurred ratably during the period. Payments under the contracts depend on factors such as the achievement of certain events or milestones, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the preclinical study or similar conditions.

During the yearsyear ended December 31, 2024 and 2023,2024, we recognized revenue related to the cell line customization activities we performed for a customer, Lineage. The increase in revenue is due to acceleratingincluding the recognitionacceleration of recognizing approximately $0.5 million of deferred revenue related to nonrefundable payments we received from Lineagethe customer due to the Lineage Assignment Agreement we entered into on September 24, 2024 with Factor Bioscience Limited discussed earlier. As of December 31, 2024, weWe did not have any deferred revenue balancesrecognizing oncontracts ourduring consolidatedthe balanceyear sheet.ended December 31, 2025.

During the yearsyear ended December 31, 2024 and 2023,2024, our cost of revenues included direct labor and materials to perform the customization cell line activities for Lineage.a Thecustomer. decreaseWe indid not have any cost of revenue was primarily related to a 20% license fee paid to Factor Biosciencerevenues during the year ended December 31, 2023 related to the Lineage Agreement, which was not repeated in 2024.2025.

Total research and development expenses decreased by approximately $1.3$0.5 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, primarily due to decreased professional fees due to a reduction in consultant services, MSA/license fees as a result of the new Factor L&C Agreement,Agreement and payroll-related expensesexpenses, offset andby stock-basedincreased compensationprofessional fromfees adue reductionto an increase in headcount,consulting services, third party study fees related to our development programs, and other expenses incurred duringfor 2023the relatedyear ended December 31, 2025 compared to closingthe down a clinical trial weyear ended inDecember 2022.31, 2024.

Our general and administrative expenses decreased by approximately $1.5$8.0 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to decreases in occupancy expense as a result of terminating our Somerville sublease effective August 31, 2024, professional fees related to a reduction in legal services for litigation matters and consultants, insurance expense due to lower premiums and payroll-related expenses resulting from less severance expense during the year ended December 31, 20242025 compared to the year ended December 31, 2023. These decreases were offset by increased occupancy expense related to our Somerville sublease that we began to incur expense for in July 2023 and was terminated effective August 31, 2024, as well as increased stock-based compensation due to stock option awards granted to the chief executive officer during the year ended December 31, 2024.

OnIn August 9, 2024, we and the sublessor of our Somerville sublease entered into a sublease termination agreement effective August 31, 2024. Pursuant to thethis sublease termination agreement, we agreed to surrender and vacate the premises, all of our right, title and interest in all furniture, fixtures and laboratory equipment at the premises will become the property of the sublessor, and both parties will be released of their obligations under the sublease. As a result of the sublease termination, we recognized a gain on lease termination of approximately $1.6 million for the year ended December 31, 2024. There was no similar transaction during the year ended December 31, 2023.2025.

Gain (Loss ) on Extinguishment of Debt

WeDuring the year ended December 31, 2024, we recognized a $22.4 million loss on extinguishment of debt related to (i) agreements to exchange certain convertible notes and warrants into shares of our common stock (the “Exchange Agreements”) and (ii) a securities purchase agreement for the yearsale endedof December 31, 2024 related to the exchange transaction and common stock private(the placement“2024 Private Placement”), both of which were entered into on September 24, 2024. There was no similar transaction during the year ended December 31, 2023. See Note 615 to the accompanying consolidated financial statements for more information on thethese exchange transaction and common stock private placement.transactions.

Because the modification of our convertible notes was accounted for as an extinguishment of debt and marked to fair value as of September 24, 2024 upon modification,entering into the Exchange Agreements, we recognized income of approximately $1.0 million during the year ended December 31, 2024 related to the change in fair value of the convertible notes. This was due to such convertible notes being marked to fair value as of October 29, 2024 when when such convertible notes were converted to shares of common stock. There was no similar transaction during the year ended December 31, 2023. 2025.

We recognized expense of $1.6 million related to the initial measurement at September 24, 2024 of the incremental fair value of the bridge notes derivative liability over the carrying value due to bifurcation of the conversion feature (recognized as a derivative liability) from the bridge notes. This was offset by $0.1 million in income recognized for the change in fair value of the bridge notes derivative liability due to remeasuring the liability during the year ended December 31, 2024.2024 related to the initial measurement of the incremental fair value of a derivative liability for convertible bridge notes we entered into (the “Bridge Notes”) over the carrying value of the Bridge Notes due to bifurcation of an embedded conversion feature. This expense was offset by a $0.2 million credit for the change in fair value of the Bridge Notes derivative liability due to remeasuring the liability at each reporting period or immediately prior to converting the Bridge Notes into shares of our common stock. There was no similar transaction during the year ended December 31, 2023. 2025. See Note 611 to the accompanying consolidated financial statements for more information on the bridgeBridge notes.Notes.

WeThe recognized income of $0.4 million and $0.2 million for the years ended December 31, 2024 and 2023, respectively, for the change in the fair value of our warrant liabilities. The change in fair value ofthe warrant liabilities for the year ended December 31, 2025 was de minimis. We recognized income of $0.4 million for the year ended December 31, 2024 for the change in the fair value of our warrant liabilities, which includes certain certainwarrants warrantsunder the Exchange Agreements 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.2024. See Note 615 to the accompanying consolidated financial statements for more information on the exchanged warrants.

We recognized ana increasedecrease in interest income of approximately $0.2 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 due to having ourlower cash intobalances interestin bearinginterest-bearing accounts for the full year of 2024 compared to 2023.accounts.

We recognized ana increasedecrease in interest expense for the year ended December 31, 20242025 of approximately $6.1$6.7 million compared to the year ended December 31, 20232024 primarily due to interestno expenselonger andhaving amortizationconvertible ofnotes debtoutstanding issuance costs associated withduring the 2023year convertibleended noteDecember 31, 2025 as a result financings andof the 2024Exchange bridgeAgreements notes.entered into during the year ended December 31, 2024.

Other Income (Expense),Income, Net

We are subject to General Instruction I.B.6 of Form S-3 (the “baby shelf” rules), which limits the aggregate market value of securities we may sell under the Universal Shelf to no more than one-third of our public float in any 12-month period while our public float remains below $75.0 million. As of the filing of the Universal Shelf, one-third of our public float was approximately $9.2 million, representing the maximum amount to be sold under the ATM. AsTo of March 31, 2026,date, we have not sold anyapproximately securities463,000 shares of common stock for net proceeds of approximately $3.7 million under the ATM.

On May 5, 2026, the Panel granted our request for continued listing on Nasdaq, subject to the following conditions: (i) on or before May 15, 2026, we shall demonstrate compliance with the Bid Price Rule; (ii) from the date of the Panel decision until September 14, 2026 (the end of the Panel’s jurisdiction in this matter), we shall maintain compliance with all Nasdaq Listing Rules; and (iii) we will be subject to a mandatory panel monitor for a period of one year from the date of this determination pursuant to Rule 5815(d)(4)(B). If we do not maintain compliance with all Nasdaq Listing Rules through September 14, 2026, the Panel will immediately delist our securities from Nasdaq. Additionally, should we become deficient again with the Bid Price Rule during the one-year period ending May 5, 2027, Nasdaq will immediately issue us a delisting determination On May 4, 2026, we effected the Reverse Stock Split and our stock price has since been closing above the minimum bid price of $1.00 per share. To regain compliance with the Bid Price Rule, we must achieve a closing bid price of at least $1.00 for a minimum of 10 consecutive business days, or through May 15, 2026, and we expect to regain compliance with the Bid Price Rule as of such date.determination.

Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

We had no revenues or cost of revenues for the three and six months ended MarchJune 31,30, 2026 or 2025.

Total research and development expenses increased for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, 2025, primarily due to increased study fees related to ERNA-101 as well as increased payroll due to an increase in our research and development development headcount and increased other expenses, which includes travel, supplies and allocated rent. These increases were offset by a reduction in expenses related to our Master Service Agreement (“MSA”) and the license and collaboration agreement (“the Factor L&C Agreement”) with Factor Bioscience Limited (“Factor Limited”). Pursuant to the Factor L&C Agreement, we paid Factor Bioscience approximately $0.2 million per month from September 2024 through August 2025, and we paid approximately $0.1 million per month from September 2024 through May 2025. The Company will also pay certain milestone payments, royalty payments on net sales of commercialized products and sublicensing fee payments, when applicable.

OurFor the six months ended June 30, 2026 compared to the six months ended June 30, 2025, our general and administrative expenses for the three months ended March 31, 2026 increased by approximately $0.2$0.1 million primarily due to increases in payroll related to certain accrued bonuses and in professional fees related to certain legal matters, offset by a reduction in stock based compensation due to a reduction in the fair values of the equity awards that are amortizing during the threesix months ended March 31,June 30, 2026 compared to the threesix months ended MarchJune 31,30, 2025, as well as decreased other expenses for occupancy costs, depreciation and amortization, and reduced insurance premiums.

During the threesix months ended MarchJune 31,30, 2026, we recognized a $2.0 million impairment charge of the goodwill we had on our balance sheet from a a 2018 acquisition because we concluded that the fair value of the reporting unit was less than the carrying value as of March 31, 2026, and the goodwill was considered fully impaired. As of MarchJune 31,30, 2026, there was no remaining goodwill balance. We did not recognize a similar expense during the threesix months ended MarchJune 31,30, 2025.

During the three months ended MarchJune 31,30, 2025, we recognized expense of $5.3$0.5 million related to a forward sales contract because the fair value value of the shares that were expected to be issued under a securities purchase agreement entered into on March 31, 2025 (the “2025 SPA”) exceeded the expected proceeds. There was no similar transaction for the three months ended MarchJune 31, 30, 2026.

The change in the fair value of the warrant liabilities for the three and six months ended MarchJune 31,30, 2025 was de minimis. There was no change in the fair value of the warrant liabilities recognized for the three and six months ended MarchJune 31,30, 2026.

For the three months ended MarchJune 31,30, 2026, we recognized approximately $39,000$55,000 more in interest income due to an increase of cash in interest-bearing accounts compared to the three months ended MarchJune 31,30, 2025.

During the three monthsand six ended MarchJune 31,30, 2025, we recognized approximately $0.1 million and $0.3 million of expenses related to the 2025 SPA transaction entered into on March 31, 2025. There was no comparable expense for the three and six months ended March 31,June 30, 2026.

As of MarchJune 31,30, 2026, we had cash of approximately $9.2$5.0 million, and we had an accumulated deficit of approximately $251.1$255.2 million. We have to date incurred operating losses, and we expect these losses to continue in the future. For the three and six months ended MarchJune 31, 30, 2026, we incurred a net loss of $5.5$4.0 million and $9.5 million, respectively, which includes the $2.0 million non-cash goodwill impairment charge. charge,For the six months ended June 30, 2026, and we used $2.3$6.4 million of cash in operating activities.

On February 10, 2026, we received approximately $9.5 million in net proceeds from the Public Offering. On March 13, 2026, we filed the Universal Shelf, which included a prospectus for a $9.2 million ATM. The Universal Shelf is subject to the baby shelf rules, and as of the filing of the Universal Shelf, one-third of our public float was approximately $9.2 million, representing the maximum amount to be sold under the ATM. As of MarchJune 31,30, 2026, we havereceived notapproximately sold$6,000 anyin securitiesnet proceeds from the sale of common stock under the ATM. To date, we have sold approximately 463,000 shares of common stock for net proceeds of approximately $3.7 million under the ATM, and we have approximately $5.4 million of shares remaining to sell under this facility.

In connection with preparing the financial statement as of and for the three and six months ended MarchJune 31,30, 2026, we evaluated whether there are are conditions and events, considered in the aggregate, that are known and reasonably knowable that would raise substantial doubt about our our ability to continue as a going concern within one year after the date that the financial statements are issued.

As of AprilAugust 30,4, 2026, we had approximately $8.3$7.4 million in cash, which is less than that needed to effectaffect our current operating plan and forecasted cash requirements for the next twelve months. However, we expect that our ability to access additional capital under our ATM will cover shortfalls in our cash resources over the next twelve months from the issuance date of these financial statements. Subsequent to the balance sheet date of June 30, 2026, the Company sold an additional 461,851 shares for net proceeds of $3.7 million in cash under the ATM.

There was an increase of approximately $0.2$1.8 millionmillion, respectively, in cash used in operating activities for the threesix months ended MarchJune 31,30, 2026 compared compared to the threesix months ended MarchJune 31,30, 2025. This change was due to a $0.8$2.3 million increase in net loss, after giving effect to adjustments made for non-cash transactions, offset by aan decreaseincrease of $0.6$0.5 million in cash used in operating assets and liabilities for the threesix months ended MarchJune 31,30, 2026 when compared to the threesix months ended MarchJune 31,30, 2025.

We used approximately $2,000$5,000 in cash for the purchases of property and equipment during the threesix months ended MarchJune 31,30, 2026, and we made no purchases of property and equipment during the threesix months ended MarchJune 31,30, 2025.

Net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2026 includes net proceeds of $9.5 million received from the Public Offering, including proceeds from the exercise of prefunded warrants issued in the Public Offering. Net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2025 includes $2.3 million of gross proceeds received from the issuance of two promissory notes asand well$4.9 asmillion anof immaterial amountproceeds received from the exerciseFirst ofClosing prefundedand warrants.Second Closing under the SPA.

There were no significant changes in our critical accounting estimates during the three and six months ended MarchJune 31,30, 2026 from those described in in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2025 10-K.