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 September 30, 2024

☐	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

Eterna 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)

(212) 582-1199

(Registrant’s telephone number, including area code)

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

Title of each class		Trading symbol		Name of each exchange on which registered
Common stock, $0.005 par value per share		ERNA		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 November 8, 2024, the registrant had outstanding 51,374,713 shares of common stock, $0.005 par value per share.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023	2
	Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the three and nine months ended September 30, 2024 and 2023	3
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36

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, 2023 filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2024, 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 “Eterna” refer to Eterna Therapeutics Inc., references to “Eterna LLC” refer to Eterna Therapeutics LLC, a wholly owned subsidiary of Eterna, and references to the “Company,” “we,” “us” or “our” refer to Eterna and its subsidiaries, including Eterna LLC, Novellus, Inc. and Novellus Therapeutics Limited.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ETERNA THERAPEUTICS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)

(unaudited)

	September 30, 2024			December 31, 2023
ASSETS
Current assets:
Cash	$	4,264		$	7,575
Other receivables		187			425
Prepaid expenses and other current assets		279			1,599
Total current assets		4,730			9,599
Restricted cash		-			4,095
Property and equipment, net		105			493
Right-of-use assets - operating leases		719			32,781
Goodwill		2,044			2,044
Other assets		120			120
Total assets	$	7,718		$	49,132

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	2,193		$	1,067
Accrued expenses		1,166			1,893
Income taxes payable		18			2
Bridge notes, net of debt discount		776			-
Bridge notes derivative liability		4,926			-
Operating lease liabilities, current		201			2,216
Due to related party, current		559			1,205
Deferred revenue, current		-			190
Other current liabilities		113			-
Total current liabilities		9,952			6,573
Convertible notes, net		32,037			6,773
Warrant liabilities		10,463			116
Operating lease liabilities, non-current		534			32,854
Deferred revenue, non-current		-			392
Contingent consideration liability		41			107
Other liabilities		84			84
Total liabilities		53,111			46,899

Stockholders’ (deficit) equity:
Preferred stock, $0.005 par value, 1,000 shares authorized, 156 designated and outstanding of Series A convertible preferred stock at September 30, 2024 and December 31, 2023, $156 liquidation preference		1			1
Common stock, $0.005 par value, 100,000 shares authorized at September 30, 2024 and December 31, 2023; 5,411 and 5,410 issued and outstanding at September 30, 2024 and December 31, 2023, respectively		27			27
Additional paid-in capital		180,348			189,186
Accumulated deficit		(225,769	)		(186,981	)
Total stockholders’ (deficit) equity		(45,393	)		2,233

Total liabilities and stockholders’ (deficit) equity	$	7,718		$	49,132

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

ETERNA THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

	2024			2023			2024			2023
	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Revenue	$	487		$	51		$	581		$	51
Cost of revenues		(60	)		120			96			170
Gross income (loss)		547			(69	)		485			(119	)

Operating expenses:
Research and development		1,001			1,387			3,446			4,560
General and administrative		3,381			4,049			11,592			10,231
Gain on lease termination		(1,576	)		-			(1,576	)		-
Acquisition of Exacis in-process research and development		-			-			-			460
Total operating expenses		2,806			5,436			13,462			15,251

Loss from operations		(2,259	)		(5,505	)		(12,977	)		(15,370	)

Other expense, net:
Loss on extinguishment of debt		(22,440	)		-			(22,440	)		-
Fair value adjustments to bridge notes derivative liability		(1,038	)		-			(1,038	)		-
Change in fair value of warrant liabilities		831			20			897			166
Change in fair value of contingent consideration		-			-			66			118
Loss on non-controlling investment		-			-			-			(59	)
Interest expense, net		(1,686	)		(113	)		(3,269	)		(88	)
Other expense, net		-			(1	)		-			(281	)
Total other expense, net		(24,333	)		(94	)		(25,784	)		(144	)

Loss before income taxes		(26,592	)		(5,599	)		(38,761	)		(15,514	)
(Provision) benefit for income taxes		(12	)		8			(19	)		(1	)

Net loss		(26,604	)		(5,591	)		(38,780	)		(15,515	)

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

Net loss attributable to common stockholders	$	(26,604	)	$	(5,591	)	$	(38,788	)	$	(15,523	)

Net loss per common share - basic and diluted	$	(4.92	)	$	(1.03	)	$	(7.17	)	$	(2.94	)

Weighted average shares outstanding - basic and diluted		5,410			5,410			5,410			5,281

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

ETERNA THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

For the three and nine months ended September 30, 2024 and 2023 (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 July 1, 2024		156	$	1		5,411	$	27	$	190,611		$	(199,165	)	$	(8,526	)
Fair value of forward sale contract pursuant to common stock offering		-		-		-		-		576			-			576
Reclassification of warrants to liability		-		-		-		-		(11,244	)		-			(11,244	)
Stock-based compensation		-		-		-		-		405			-			405
Net loss		-		-		-		-		-			(26,604	)		(26,604	)
Balances at September 30, 2024		156	$	1		5,411	$	27	$	180,348		$	(225,769	)	$	(45,393	)

Balances at January 1, 2024		156	$	1		5,410	$	27	$	189,186		$	(186,981	)	$	2,233
Fair value of forward sale contract pursuant to common stock offering		-		-		-		-		576			-			576
Reclassification of warrants to liability		-		-		-		-		(11,244	)		-			(11,244	)
Issuance of note warrants		-		-		-		-		720			-			720
Stock-based compensation		-		-		-		-		1,110			-			1,110
Issuance of common stock from vested restricted units		-		-		1		-		-			-			-
Cash dividends to Series A preferred stockholders		-		-		-		-		-			(8	)		(8	)
Net loss		-		-		-		-		-			(38,780	)		(38,780	)
Balances at September 30, 2024		156	$	1		5,411	$	27	$	180,348		$	(225,769	)	$	(45,393	)

Balances at July 1, 2023		156	$	1		5,410	$	27	$	179,067		$	(175,229	)	$	3,866
Issuance of warrants in connection with convertible notes financing		-		-		-		-		5,113			-			5,113
Stock-based compensation		-		-		-		-		174			-			174
Net loss		-		-		-		-		-			(5,591	)		(5,591	)
Balances at September 30, 2023		156	$	1		5,410	$	27	$	184,354		$	(180,820	)	$	3,562

Balances at January 1, 2023		156	$	1		5,127	$	26	$	177,377		$	(165,297	)	$	12,107
Issuance of common stock in connection with Exacis asset acquisition		-		-		69		-		208			-			208
Issuance of common stock related to stock purchase agreement with Lincoln Park Capital Fund, LLC, net		-		-		214		1		579			-			580
Issuance of warrants in connection with convertible notes financing		-		-		-		-		5,113			-			5,113
Cash dividends to Series A preferred stockholders		-		-		-		-		-			(8	)		(8	)
Stock-based compensation		-		-		-		-		1,077			-			1,077
Net loss		-		-		-		-		-			(15,515	)		(15,515	)
Balances at September 30, 2023		156	$	1		5,410	$	27	$	184,354		$	(180,820	)	$	3,562

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

ETERNA THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	2024			2023
	For the nine months ended September 30,
	2024			2023
Cash flows from operating activities:
Net loss	$	(38,780	)	$	(15,515	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		120			62
Stock-based compensation		1,110			1,077
Amortization of right-of-use asset		1,450			580
Gain on lease termination		(1,576	)		-
Accrued interest expense		441			113
Paid-in-kind interest expense		829			-
Amortization of debt discount and debt issuance costs		2,148			52
Loss on extinguishment of debt		22,440			-
Fair value adjustments to bridge notes derivative liability		1,038
Change in fair value of warrant liabilities		(897	)		(166	)
Change in fair value of contingent consideration liability		(66	)		(118	)
Commitment shares issued to Lincoln Park Capital, LLC		-			249
Loss on shares sold to Lincoln Park Capital, LLC		-			11
Non-cash component of acquisition of Exacis in-process research and development		-			433
Gain on disposal of fixed assets		-			1
Loss on non-controlling investment		-			59
Changes in operating assets and liabilities:
Other receivables		238			(825	)
Prepaid expenses and other current assets		1,225			340
Other non-current assets		1			(2,911	)
Accounts payable and accrued expenses		758			1,099
Operating lease liability		(1,656	)		795
Due to related party		(646	)		(1,313	)
Deferred revenue		(582	)		599
Other liabilities		113			(369	)
Net cash used in operating activities		(12,291	)		(15,747	)
Cash flows from investing activities:
Purchase of property and equipment		(369	)		-
Proceeds received from the sale of fixed assets		4			-
Net cash used in investing activities		(365	)		-
Cash flows from financing activities:
Proceeds received from convertible note financings		1,405			8,715
Fees paid related to convertible note financings		(34	)		(175	)
Proceeds received from bridge notes financings		3,887			-
Proceeds from sale of common stock pursuant to stock purchase agreement with Lincoln Park Capital Fund, LLC		-			320
Dividends paid to Series A preferred stockholders		(8	)		(8	)
Net cash provided by financing activities		5,250			8,852
Net decrease in cash and cash equivalents		(7,406	)		(6,895	)
Cash, cash equivalents and restricted cash at beginning of period		11,670			15,541
Cash, cash equivalents and restricted cash at end of period	$	4,264		$	8,646

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	46		$	13
Income taxes	$	2		$	4

Supplemental disclosure of non-cash investing and financing activities:
Note warrants issued	$	755		$	-
Unpaid fees incurred in connection with the December 2023 financing	$	32		$	-
Paid in-kind interest added to convertible notes principal	$	1,006		$	-
Adjustment to lease liability and ROU asset due to remeasurement	$	4,245		$	-
Reclassification of warrants to liability	$	11,244		$	-
Warrants issued in connection with July 2023 Financing	$	-		$	5,234
Unpaid fees incurred in connection with the July 2023 Financing	$	-		$	27
Initial measurement of ROU assets	$	-		$	34,410
Initial measurement of lease liability	$	-		$	34,170
Contingent consideration for Exacis asset acquisition	$	-		$	225
Issuance of common stock for Exacis asset acquisition	$	-		$	208

Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	4,264		$	4,551
Restricted cash		-			4,095
Total cash, cash equivalents and restricted cash at end of period	$	4,264		$	8,646

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

SEC Form 10-Q filed by Eterna Therapeutics Inc.