UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _____________

Commission file number: 001-11460

Ernexa Therapeutics Inc.

(Exact name of registrant as specified in its charter)

Delaware		31-1103425
(State of incorporation)		(I.R.S. Employer Identification No.)

1035 Cambridge Street, Suite 18A

Cambridge, Massachusetts

02141

(Address of principal executive offices)

(Zip Code)

(617) 798-6700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange

on Which Registered

Common Stock, $0.005 par value

ERNA

The Nasdaq Stock Market LLC

Common Stock Purchase Warrants

ERNAW

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 6, 2026, the registrant had outstanding [1,632,411] shares of common stock, $0.005 par value per share.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations	2
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)	3
Condensed Consolidated Statements of Cash Flows	4
Notes to Condensed Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	25
Item 4. Controls and Procedures.	25
PART II — OTHER INFORMATION	26
Item 1. Legal Proceedings.	26
Item 1A. Risk Factors.	26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	27
Item 3. Defaults Upon Senior Securities.	27
Item 4. Mine Safety Disclosures.	27
Item 5. Other Information.	27
Item 6. Exhibits	29
Signatures	30

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements related to future events, results, performance, prospects and opportunities, including statements related to our strategic plans, capital needs, and our financial position. Forward-looking statements are based on information currently available to us, on our current expectations, estimates, forecasts, and projections about the industries in which we operate and on the beliefs and assumptions of management. Forward looking statements often contain words such as “expects,” “anticipates,” “could,” “targets,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “would,” and similar expressions. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, and other characterizations of future events or circumstances, are forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, subject to risks and uncertainties that could cause actual results to differ materially and adversely from those expressed in any forward-looking statements. For us, particular factors that might cause or contribute to such differences include those risks and uncertainties described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on March 13, 2026, in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, and in other documents we file from time to time with the SEC.

Readers are urged not to place undue reliance on the forward-looking statements in this Quarterly Report on Form 10-Q, which speak only as of the date of this Quarterly Report on Form 10-Q. We are including this cautionary note to make applicable, and take advantage of, the safe harbor provisions of the PSLRA. Except as required by law, we do not undertake, and expressly disclaim any obligation, to disseminate, after the date hereof, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based.

We believe that the expectations reflected in forward-looking statements in this Quarterly Report on Form 10-Q are based upon reasonable assumptions at the time made. However, given the risks and uncertainties, you should not rely on any forward-looking statements as a prediction of actual results, developments or other outcomes. You should read these forward-looking statements with the understanding that we may be unable to achieve projected results, developments or other outcomes and that actual results, developments or other outcomes may be materially different from what we expect.

Unless stated otherwise or the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “Ernexa” refer to Ernexa Therapeutics Inc., and references to the “Company,” “we,” “us” or “our” refer to Ernexa and its subsidiaries, including Ernexa TX2 Inc. and Novellus, Inc.

PART I. Financial Information

Item 1. Financial Statements

ERNEXA THERAPEUTICS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(unaudited)

	June 30, 2026			December 31, 2025
ASSETS
Current assets:
Cash	$	5,028		$	1,884
Other receivables		83			95
Due from related party		-			750
Prepaid expenses and other current assets		783			404
Total current assets		5,894			3,133
Property and equipment, net		82			94
Right-of-use assets - operating leases, net		314			453
Goodwill		-			2,044
Other assets		25			110
Total assets	$	6,315		$	5,834

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,375		$	1,125
Accrued expenses		1,016			898
Income taxes payable		-			3
Operating lease liabilities, current		167			213
Due to related party		250			750
Contingent consideration liability		-			41
Other current liabilities		124			83
Total current liabilities		2,932			3,113
Operating lease liabilities, non-current		182			277
Other liabilities		1			43
Total liabilities		3,115			3,433

Stockholders’ equity:
Preferred stock, $0.005 par value, 1,000 shares authorized, 156 designated and outstanding of Series A convertible preferred stock at June 30, 2026 and December 31, 2025, $156 liquidation preference		1			1
Common stock, $0.005 par value, 150,000 shares authorized at June 30, 2026 and December 31, 2025, 1,170 and 314 issued and outstanding at June 30, 2026 and December 31, 2025, respectively		6			2
Additional paid-in capital		258,352			248,034
Accumulated deficit		(255,159	)		(245,636	)
Total stockholders’ equity		3,200			2,401
Total liabilities and stockholders’ equity	$	6,315		$	5,834

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

ERNEXA THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

	2026			2025			2026			2025
	Three months ended June 30,						Six months ended June 30,
	2026			2025			2026			2025
Operating expenses:
Research and development	$	2,792		$	1,136		$	4,707		$	2,445
General and administrative		1,312			1,365			2,943			2,786
Impairment of goodwill		-			-			2,044			-
Total operating expenses		4,104			2,501			9,694			5,231

Loss from operations		(4,104	)		(2,501	)		(9,694	)		(5,231	)

Other income (expense), net:
Forward sales contract expense		-			(512	)		-			(5,847	)
Change in fair value of warrant liabilities		-			-			-			1
Interest income (expense), net		55			-			99			5
Gain on extinguishment of contingent liability		41			-			41			-
Other expense, net		(1	)		(123	)		(1	)		(258	)
Total other income (expense), net		95			(635	)		139			(6,099	)

Loss before income taxes		(4,009	)		(3,136	)		(9,555	)		(11,330	)
Benefit (provision) for income taxes		-			(3	)		40			(11	)

Net loss		(4,009	)		(3,139	)		(9,515	)		(11,341	)

Series A preferred stock dividend		(8	)		(8	)		(8	)		(8	)

Net loss attributable to common stockholders	$	(4,017	)	$	(3,147	)	$	(9,523	)	$	(11,349	)

Net loss per common share - basic and diluted	$	(3.40	)	$	(15.19	)	$	(9.63	)	$	(65.22	)

Weighted average shares outstanding - basic and diluted		1,183			207			989			174

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

ERNEXA THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the three and six months ended June 30, 2026 and 2025 (unaudited)

(In thousands)

	Shares		Amount		Shares		Amount		Capital		Deficit			Total
	Series A Preferred Stock				Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total

Balances at April 1, 2026		156	$	1		1,166	$	6	$	257,994	$	(251,142	)	$	6,859
Issuance of common stock to consultant for services		-		-		2		-		24		-			24
Issuance of common stock to Series A preferred stockholders in lieu of cash dividends		-		-		1		-		8		(8	)		-
Issuance of common stock under ATM, net		-		-		1		-		6		-			6
Stock-based compensation		-		-		-		-		320		-			320
Net loss		-		-		-		-		-		(4,009	)		(4,009	)
Balances at June 30, 2026		156	$	1		1,170	$	6	$	258,352	$	(255,159	)	$	3,200

	Series A Preferred Stock				Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total

Balances at January 1, 2026		156	$	1		314	$	2	$	248,034	$	(245,636	)	$	2,401
Issuance of common stock, prefunded warrants and warrants in connection with public offering, net		-		-		769		4		9,537		-			9,541
Issuance of common stock from the exercise of prefunded warrants, net		-		-		80		-		18		-			18
Issuance of common stock to consultant for services		-		-		5		-		120		-			120
Issuance of common stock to Series A preferred stockholders in lieu of cash dividends		-		-		1		-		8		(8	)		-
Issuance of common stock under ATM, net		-		-		1		-		6		-			6
Stock-based compensation		-		-		-		-		629		-			629
Net loss		-		-		-		-		-		(9,515	)		(9,515	)
Balances at June 30, 2026		156	$	1		1,170	$	6	$	258,352	$	(255,159	)	$	3,200

	Series A Preferred Stock				Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balances at April 1, 2025		156	$	1		139	$	1	$	233,786	$	(239,738	)	$	(5,950	)
Issuance of common stock to Series A preferred stockholders in lieu of cash dividends		-		-		-		-		8		(8	)		-
Issuance of common stock to consultant for services		-		-		1		-		47		-			47
Issuance of common stock in connection with settlement		-		-		1		-		69		-			69
Issuance of common stock and prefunded warrants in connection with private placement		-		-		159		1		13,047		-			13,048
Stock-based compensation		-		-		-		-		369		-			369
Net loss		-		-		-		-		-		(3,139	)		(3,139	)
Balances at June 30, 2025		156	$	1		300	$	2	$	247,326	$	(242,885	)	$	4,444

	Series A Preferred Stock				Common Stock				Additional Paid-in		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balances at January 1, 2025		156	$	1		137	$	1	$	233,235	$	(231,536	)	$	1,701
Balance		156	$	1		137	$	1	$	233,235	$	(231,536	)	$	1,701
Issuance of common stock to Series A preferred stockholders in lieu of cash dividends		-		-		-		-		8		(8	)		-
Issuance of common stock in connection with exercise of prefunded warrants		-		-		2		-		4		-			4
Issuance of common stock to consultant for services		-		-		1		-		93		-			93
Issuance of common stock in connection with settlement		-		-		1		-		69		-			69
Issuance of common stock and prefunded warrants in connection with private placement		-		-		159		1		13,047		-			13,048
Stock-based compensation		-		-		-		-		870		-			870
Net loss		-		-		-		-		-		(11,341	)		(11,341	)
Balances at June 30, 2025		156	$	1		300	$	2	$	247,326	$	(242,885	)	$	4,444
Balance		156	$	1		300	$	2	$	247,326	$	(242,885	)	$	4,444

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

ERNEXA THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	2026			2025
	For the six months ended June 30,
	2026			2025
Cash flows from operating activities:
Net loss	$	(9,515	)	$	(11,341	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		17			35
Stock-based compensation		629			870
Amortization of right-of-use asset		113			89
Impairment of goodwill		2,044			-
Issuance of common stock to consultant for services		120			93
Accrued interest expense		-			22
Forward sales contract expense		-			5,847
Issuance of common stock in connection with settlement		-			69
Change in fair value of warrant liabilities		-			(1	)
Gain on extinguishment of contingent liability		(41	)		-
Changes in operating assets and liabilities:
Other receivables		12			283
Prepaid expenses and other current assets		(379	)		(137	)
Other non-current assets		85			1
Accounts payable and accrued expenses		365			(463	)
Operating lease liability		(115	)		(91	)
Due from related party		750			-
Due to related party		(500	)		-
Other liabilities		(1	)		127
Net cash used in operating activities		(6,416	)		(4,597	)
Cash flows from investing activities:
Purchase of property and equipment		(5	)		-
Cash used in investing activities		(5	)		-
Cash flows from financing activities:
Gross proceeds received from the sale of common stock, prefunded warrants and Milestone Warrants in public offering		10,480			-
Proceeds received from the issuance of common stock and prefunded warrants		-			4,929
Fees related to public offering		(939	)		-
Proceeds received from notes payable		-			2,250
Gross proceeds received from the exercise of prefunded warrants		20			4
Fee related to the exercise of prefunded warrants from public offering		(2	)		-
Issuance of common stock under ATM		6			-
Net cash provided by financing activities		9,565			7,183
Net increase in cash		3,144			2,586
Cash at beginning of period		1,884			1,729
Cash at end of period	$	5,028		$	4,315

Cash paid during the period for:
Interest	$	-		$	4
Income taxes	$	-		$	3

Supplemental disclosure of non-cash investing and financing activities:
Offset of related party notes payable principal with related party receivable related to issuance of common stock and prefunded warrants	$	-		$	2,250
Reclassification of forward sales contract to equity upon issuance of common stock	$	-		$	5,847
Issuance of common stock to Series A preferred stockholders in lieu of cash dividends	$	8		$	8
Remeasurement of ROU asset and lease liability	$	26		$	-

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

ERNEXA THERAPEUTICS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Description of Business and Basis of Presentation

Description of Business

Ernexa Therapeutics Inc. (the “Company”) is a preclinical-stage synthetic allogeneic iMSC therapy company. iMSCs are induced pluripotent stem cell (“iPSC”)-derived mesenchymal stem cells. The Company envisions a future where cell therapies powered by synthetic iMSCs can offer new options for patients with limited treatment paths and its mission is to transform the treatment of cancer and autoimmune disease by developing scalable, affordable, off-the-shelf cell therapies that restore hope.

As used herein, the “Company” or “Ernexa” refers collectively to Ernexa and its consolidated subsidiaries (Ernexa TX2 Inc. and Novellus, Inc.) unless otherwise stated or the context otherwise requires. In March 2026, the Company dissolved Novellus Therapeutics Limited, which had no operations.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited financial statements include all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented.

These condensed consolidated financial statements should be read together with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on March 13, 2026. The accompanying condensed consolidated balance sheet as of December 31, 2025 has been derived from the audited financial statements contained in the 2025 10-K but does not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2026, or any other period.

Reverse Stock Split

As approved on March 27, 2026 by written consent from approximately 53.34% of Company’s stockholders (the “Consenting Stockholders), on May 4, 2026, the Company effected a reverse stock split of its common stock at a ratio of 1-for-25, as determined by the Company’s Board of Directors within the parameters approved by the Consenting Stockholders (the “Reverse Stock Split”).

Upon the effectiveness of the Reverse Stock Split, every twenty-five shares of the issued and outstanding common stock were automatically combined and reclassified into one issued and outstanding share of common stock. The Reverse Stock Split did not alter the par value of the common stock, and the number of authorized shares of common stock remains unchanged at 150,000,000 shares. No fractional shares were issued in connection with the Reverse Stock Split, and no cash or other consideration was paid in connection with any fractional shares. Stockholders who otherwise would have held a fractional share after giving effect to the Reverse Stock Split instead owned one whole share of the post-reverse stock split common stock. The Company issued an aggregate of 203 shares for rounding up fractional shares to whole shares.

All share and per share data in this Quarterly Report on Form 10-Q have been adjusted for all periods presented to reflect the Reverse Stock Split.

2.	Liquidity and Capital Resources

The Company has incurred significant operating losses and has an accumulated deficit as a result of its efforts to develop product candidates and provide general and administrative support for operations. As of June 30, 2026, the Company had a cash balance of approximately $5.0 million and an accumulated deficit of approximately $255.2 million. For the three and six months ended June 30, 2026, the Company incurred a net loss of $4.0 million and $9.5 million, respectively, which includes a non-cash charge of $2.0 million for the impairment of goodwill during the six months ended June 30, 2026, and it used cash of $6.4 million in operating activities for the six months ended June 30, 2026.

On February 10, 2026, the Company received approximately $9.5 million in net proceeds from a public offering (the “Public Offering”) of (i) 0.8 million shares of the Company’s common stock or pre-funded warrants and (ii) accompanying warrants to purchase 0.8 million shares of the Company’s common stock (the “Milestone Warrants”). See Note 8 for more information regarding the Public Offering.

On March 13, 2026, the Company filed a Registration Statement on Form S-3 with the SEC to offer and sell up to $50.0 million of its common stock from time to time in one or more offerings (the “Universal Shelf”), which became effective on March 30, 2026. The Universal Shelf includes a prospectus supplement providing for sales of up to $9.2 million of common stock pursuant to an At-the-Market (“ATM”) program.

The Company is subject to General Instruction I.B.6 of Form S-3 (the “baby shelf” rules), which limits the aggregate market value of securities the Company may sell under the Universal Shelf to no more than one-third of its public float in any 12-month period while its public float remains below $75.0 million. As of the filing of the Universal Shelf, one-third of the Company’s public float was approximately $9.2 million, representing the maximum amount to be sold under the ATM. As of June 30, 2026, the Company has sold securities worth approximately $5,900 under the ATM, net of commissions.

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

As of June 30, 2026, the Company had approximately $5.0 million in cash, which is less than that needed to effect its current operating plan and forecasted cash requirements for the next twelve months. However, management expects that its ability to access capital under its ATM will cover shortfalls in its 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.

If the Company’s cash is not sufficient to meet future cash requirements, the Company may be required to reduce planned capital expenses, reduce operational cash uses or raise capital on terms that are not as favorable to the Company as they otherwise might be. Any actions the Company may undertake to reduce planned capital purchases or reduce expenses may be insufficient to cover shortfalls in available funds. If the Company requires additional capital, it may be unable to secure additional financing on terms that are acceptable to the Company, or at all.

3.	Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between willing market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

● Level 1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

● Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

● Level 3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to develop its own assumptions.

The carrying amounts reported on the balance sheet for cash, other receivables, prepaid expenses and other current assets, accounts payable and accrued expenses, other current liabilities and other liabilities approximate fair value based due to their short maturities.

The Company issued 914 warrants in connection with a private placement during the first quarter of 2022 (the “Q1-22 warrants”), which were determined to be classified as a liability. The Company has also recorded a three-year contingent consideration liability related to an asset acquisition in April 2023, the obligation of which terminated in April 2026.

The Company used a Black-Scholes option pricing model to estimate the fair value of the Q1-22 warrant liabilities and a Monte Carlo simulation model to estimate the fair value of the contingent consideration liability, both of which are considered a Level 3 fair value measurement. The Company remeasures these liabilities at each reporting period and recognizes changes in their respective fair value in the accompanying condensed consolidated statement of operations.

In connection with the 2025 SPA (as defined in Note 8) that the Company entered into on March 31, 2025, the Company recorded a forward sales contract liability at fair value and recognized $5.3 million of expense during the three months ended March 31, 2025 because the fair value of the expected shares to be purchased by the investors exceeded the proceeds under the 2025 SPA.

The Company determined the expense related to the forward sales contract as of March 31, 2025 by taking the difference between (i) the fair value of the expected shares to be purchased by the investors as of the March 31, 2025 date the Company entered into the 2025 SPA and (ii) the discounted purchase price of the shares. The forward sales contract liability was remeasured at fair value at each reporting date or immediately prior to settlement, with changes in fair value recognized in the condensed consolidated statements of operations. Upon settlement, the liability was reclassified as a component of stockholders’ equity. The 2025 SPA closed during the second quarter of 2025, and as a result, there was no SPA liability remaining as of June 30, 2026 or December 31, 2025.

The following table summarizes the liabilities that are measured at fair value as of June 30, 2026 and December 31, 2025 (in thousands):

Description	Level		June 30, 2026		December 31, 2025
Liabilities:
Contingent consideration		3	$	-	$	41
Liability fair value disclosure		3	$	-	$	41

Certain inputs used in Black-Scholes and Monte Carlo models may fluctuate in future periods based upon factors that are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of the Company’s warrant liabilities or contingent consideration liabilities, which could also result in material non-cash gains or losses being reported in the Company’s condensed consolidated statement of operations.

The Company remeasured the fair value of the Q1-22 warrants at June 30, 2026, and the result of the remeasurement was de minimis. The Company assessed the fair value of the contingent consideration liability at each reporting period through March 31, 2026 and determined that there were no material changes to the remeasurement that would have resulted in a material change to the liability. The obligation under the contingent consideration liability terminated in April 2026. Therefore, the Company reversed the liability and recognized a gain in the statement of operations of $41,000 during the three and six months ended June 30, 2026.

4.	Goodwill

The Company recorded goodwill in the amount of $2.0 million related to a 2018 acquisition that was accounted for as a business combination. Goodwill is not amortized but is tested for impairment annually, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the entity is less than its carrying value. The Company performed an assessment as of March 31, 2026, and based on that assessment, the Company was unable to conclude that it was more likely than not that the fair value of the entity exceeded its carrying value as of such date. As a result, the Company performed a step-one quantitative assessment and concluded that the fair value of the reporting unit was less than the carrying value as of March 31, 2026, and the goodwill was considered fully impaired. Therefore, the Company recognized an impairment charge for $2.0 million in the accompanying condensed consolidated statement of operations during the six months ended June 30, 2026. There was no impairment charge for the three months ended June 30, 2026. As of June 30, 2026, there was no goodwill balance.

5.	Accrued Expenses

Accrued expenses at June 30, 2026 and December 31, 2025 consisted of the following (in thousands):

Schedule of Accrued Expenses

	June 30, 2026		December 31, 2025
Study Fees	$	527	$	156
Accrued compensation		12		12
Professional fees		117		150
Other		360		580
Total accrued expenses	$	1,016	$	898

6.	Operating Leases

As of June 30, 2026, the Company had an operating lease for an office in Cambridge, Massachusetts (the “Cambridge Lease”), which expires in 2028.

The Company also leased an office in the Borough of Manhattan in New York, New York (the “Manhattan Office”), which was to expire in January 2027, and was subleasing the Manhattan Office to a sublessee. The sublease was to expire in October 2026. On February 16, 2026, the Company entered into a sublease termination agreement with the sublessee of the Manhattan Office effective March 13, 2026. Pursuant to the sublease termination agreement, the sublessee agreed to surrender and vacate the premises in exchange for a termination payment of approximately $60,000, which represented the remaining sublease payments through October 2026. As a result, the Company recognized a gain for the sublease termination of approximately $56,000, which is included in general and administrative expense in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2026.

On February 18, 2026, the Company entered into a lease termination agreement with the lessor of the Manhattan Office effective March 13, 2026. Pursuant to the lease termination agreement, the Company agreed to surrender and vacate the premises in exchange for a termination payment of approximately $72,000 to the lessor.

The lease termination agreement was accounted for as a modification to the Manhattan Office lease rather than as a lease termination because the Company did not contemporaneously terminate the Manhattan Office lease upon the February 18, 2026 modification date and had a continued right-of-use of the facility through March 13, 2026. As a result, the Company remeasured the remaining lease payments, including the $72,000 termination fee, and reduced the lease liability the Company had on its balance sheet at the time of the modification by approximately $26,000 to the present value of the remeasured lease liability of approximately $79,000. For a lease modification that is not accounted for as a separate contract, a lessee recognizes the amount of the remeasured lease liability as an adjustment to the corresponding right-of-use (“ROU”) asset without affecting profit or loss. As a result, the Company reduced the ROU asset by approximately $26,000 to approximately $31,000, which was amortized through March 13, 2026. As of June 30, 2026, there was no lease liability or ROU asset for the Manhattan Office remaining.

For the three and six months ended June 30, 2026 and 2025, the net operating lease expenses were as follows (in thousands):

Schedule of Net Operating Lease Expense

	2026		2025			2026			2025
	Three months ended June 30,					Six months ended June 30,
	2026		2025			2026			2025
Operating lease expense	$	43	$	68		$	132		$	135
Sublease income		-		(21	)		(14	)		(42	)
Gain on sublease termination		-		-			(56	)		-
Variable lease expense		1		7			1			13
Total lease expense	$	44	$	54		$	63		$	106

The tables below show the beginning balances of the operating ROU assets and lease liabilities as of January 1, 2026 and the ending balances as of June 30, 2026, including the changes during the period (in thousands).

	Operating Lease ROU Assets

Operating lease ROU assets at January 1, 2026	$	453
Remeasurement of ROU asset		(26	)
Amortization of operating lease ROU assets		(113	)
Operating lease ROU assets at June 30, 2026	$	314

	Operating Lease Liabilities
Operating lease liabilities at January 1, 2026	$	490
Remeasurement of lease liability		(26	)
Principal payments on operating lease liabilities		(115	)
Operating lease liabilities at June 30, 2026		349
Less non-current portion		(182	)
Current portion at June 30, 2026	$	167

As of June 30, 2026, the Company’s operating lease had a remaining life of 2.0 years with a discount rate of 9.08%. The maturities of the operating lease liability are as follows (in thousands):

	As of June 30, 2026
2026	$	95
2027		190
2028		95
Total payments		380
Less imputed interest		(31	)
Total operating lease liabilities	$	349

7.	Stock-Based Compensation

Stock Options

During the three and six months ended June 30, 2026 and 2025, the Company granted options to purchase the number of shares of the Company’s common stock set forth in the table below (in thousands):

Schedule of Stock Option Granted

	2026		2025
	Three months ended June 30,
	2026		2025
Stock options granted		5		0

	2026		2025
	Six months ended June 30,
	2026		2025
Stock options granted		13		5

The Company recognizes stock-based compensation expense for stock options granted to employees, directors and certain consultants. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period on a straight-lined basis.

The following weighted-average assumptions were used for stock options granted during the three and six months ended June 30, 2026 and 2025:

	2026			2025			2026			2025
	Three months ended June 30,						Six months ended June 30,
	2026			2025			2026			2025
Weighted average risk-free rate		4.44	%		3.91	%		4.15	%		4.40	%
Weighted average volatility		130.33	%		109.87	%		125.98	%		116.43	%
Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%
Expected term		9.90 years			10.0 years			9.24 years			6.36 years

The per-share weighted average grant-date fair value of stock options granted during the three and six months ended June 30, 2026 and 2025 were as follows:

	2026		2025		2026		2025
	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Weighted average grant date fair value	$	10.14	$	5.08	$	9.94	$	7.12

Vesting of all stock options is subject to continuous service with the Company through the applicable vesting date. As of June 30, 2026, there were approximately 27,000 shares of the Company’s common stock subject to outstanding stock options.

Restricted Stock Units

The Company recognizes the fair value of RSUs as expense on a straight-line basis over the requisite service period. For performance-based RSUs, the Company begins recognizing the expense once the achievement of the related performance goal is determined to be probable.

Outstanding RSUs are settled in an equal number of shares of common stock on the vesting date of the award. An RSU award is settled only to the extent vested. Vesting generally requires continued employment or service by the award recipient through the applicable vesting date. Because RSUs are settled in an equal number of shares of common stock without any offsetting payment by the recipient, the measurement of cost is based on the quoted market price of the stock at the measurement date, which is the grant date.

In lieu of paying cash to satisfy withholding taxes due upon the settlement of vested RSUs, at the Company’s discretion, an employee may elect to have shares of common stock withheld that would otherwise be issued at settlement, the value of which is equal to the amount of withholding taxes payable. No RSUs vested during the three and six months ended June 30, 2026 and 2025. The Company did not grant RSUs during the three and six months ended June 30, 2026 and 2025, and as of June 30, 2026, there were no RSUs outstanding.

Stock-Based Compensation Expense

For the three and six months ended June 30, 2026 and 2025, the Company recognized stock-based compensation expense as follows (in thousands):

	2026		2025		2026		2025
	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Research and development	$	20	$	15	$	33	$	31
General and administrative		300		353		596		839
Total	$	320	$	368	$	629	$	870

8.	Equity Transactions

2026 Public Offering

On February 6, 2026, the Company entered into a placement agency agreement (the “Placement Agency Agreement”) with Brookline Capital Markets, a division of Arcadia Securities, LLC (“Brookline” or the “Placement Agent”), pursuant to which the Company engaged the Placement Agent for the 2026 Offering, which included the public offering of (i) 0.8 million shares of the Company’s common stock (or pre-funded warrants in lieu of common stock) and accompanying Milestone Warrants to purchase 0.8 million shares of common stock, at a combined offering price of $12.50 per share of common stock and accompanying Milestone Warrant (or $12.25 per pre-funded warrant and accompanying Milestone Warrant). In connection with the Public Offering, the Company also entered into a securities purchase agreement (each, a “Purchase Agreement”) with certain investors who purchased common stock and Milestone Warrants in the Public Offering.

The pre-funded warrants were immediately exercisable (subject to certain ownership limitations) had an exercise price of $0.25 per share and did not expire until exercised in full. On February 11, 2026 and February 18, 2026, the Company issued approximately 53,000 and 27,000 shares of common stock, respectively, in connection with the exercise of the pre-funded warrants, for a total exercise price of approximately $20,000. There are no remaining pre-funded warrants outstanding related to the Public Offering.

The Milestone Warrants are tradeable on The Nasdaq Capital Market under the symbol “ERNAW.” The Milestone Warrants are immediately exercisable (subject to certain ownership limitations), have an exercise price of $17.00 per share, and expire on the earlier of (i) the five-year anniversary of the original issuance date or (ii) the 180^th calendar day following the public release by the Company of clinical trial data from the first cohort of the Phase 1 study of ERNA-101.

Pursuant to the Placement Agency Agreement, the Company paid the Placement Agent an aggregate cash fee of approximately $0.5 million, which was equal to 6.5% of the aggregate purchase price paid by investors in the Offering (or 1.5% with respect to certain existing investors). The Company will also pay the Placement Agent a cash fee as compensation for gross proceeds the Company receives from any exercise of any Milestone Warrants sold in connection with the Public Offering, payable quarterly on each January 1, April 1, July 1 and October 1 following the closing of the Public Offering (or the following business day if such day is not a business day), at the same percentage and as calculated in the manner as set forth above. The Company also issued approximately 9,000 shares of Common Stock to the Placement Agent (the “Agent’s Shares”), which was equal to 1.5% of the aggregate number of Shares and pre-funded warrants sold in the Public Offering (or 0.5% with respect to sales to certain existing investors). In addition, the Company reimbursed the Placement Agent for its accountable offering-related legal expenses in an amount of $