Ernexa Therapeutics' $5.6M cash below 12-month needs
ERNA's $5.6 million cash balance at September 30, 2026 was below forecast needs, while management expects ATM access to cover a significant share.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Filing Summary
Ernexa Therapeutics Inc. reported a $12.5 million net loss and $9.6 million of operating cash use for the nine months ended September 30, 2026. Its September 30 cash balance was $5.6 million, below the amount needed for its current operating plan and forecast cash needs for the next 12 months; management expects ATM access to cover a significant portion of the shortfall and is pursuing financing. For the same nine-month period, research and development expense was $6.578 million, versus $3.480 million a year earlier, primarily reflecting ERNA-101 study and manufacturing costs.
An independent preclinical ovarian-cancer mouse study found complete tumor clearance and long-term survival in 10 of 15 models (67%) treated with ERNA-101 plus PD-1 blockade; neither treatment alone produced complete clearance or durable survival. Ernexa is prioritizing ERNA-101 and has deprioritized ERNA-201 for near-term resources.
ATM sales generated approximately $3.7 million net as of September 30, 2026; on October 6, 2026, an additional 43,700 shares generated $0.1 million net. Nasdaq restored bid-price compliance on May 29, 2026. A mandatory panel monitor continues through May 5, 2027, and a bid-price deficiency during monitoring would trigger a delisting determination.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- None.
Negative
- Major pointCash of $5.6 million was below 12-month forecast needs.
- Moderate pointNine-month operating cash use rose to $9.6 million from $5.9 million.
Filing Explained
This 10-Q reports
Key Figures
Key Terms
iMSCs technical
At-the-Market financial
Milestone Warrants financial
IND enabling studies regulatory
baby shelf rules regulatory
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much cash did ERNA have, and how much operating cash did it use?
What did ERNA's ERNA-101 combination study show?
How much did ERNA receive from ATM sales?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| 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:
(Exact name of registrant as specified in its charter)
| (State of incorporation) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(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 | ||
| The
| ||||
| The
|
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.
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).
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 | ☐ |
| ☒ | 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 6, 2026, the registrant had outstanding shares of common stock, $ 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 | 28 |
| Signatures | 29 |
| i |
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.
| ii |
PART I. Financial Information
Item 1. Financial Statements
ERNEXA THERAPEUTICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
(unaudited)
| September 30, 2026 | December 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Other receivables | ||||||||
| Due from related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets - operating leases, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Income taxes payable | ||||||||
| Operating lease liabilities, current | ||||||||
| Due to related party | ||||||||
| Contingent consideration liability | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value, shares authorized, designated and outstanding of Series A convertible preferred stock at September 30, 2026 and December 31, 2025, $ | ||||||||
| Common stock, $ par value, shares authorized at September 30, 2026 and December 31, 2025, and issued and outstanding at September 30, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 1 |
ERNEXA THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Impairment of goodwill | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense), net: | ||||||||||||||||
| Forward sales contract expense | ( | ) | ||||||||||||||
| Change in fair value of warrant liabilities | ||||||||||||||||
| Interest income (expense), net | ||||||||||||||||
| Gain on extinguishment of contingent liability | ||||||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Total other income (expense), net | ( | ) | ||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Benefit (provision) for income taxes | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Series A preferred stock dividend | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 2 |
ERNEXA THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the three and nine months ended September 30, 2026 and 2025 (unaudited)
(In thousands)
| Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances at July 1, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock under ATM, net | - | |||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances at September 30, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances at January 1, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock, prefunded warrants and warrants in connection with public offering, net | - | |||||||||||||||||||||||||||
| Issuance of common stock from the exercise of prefunded warrants, net | - | |||||||||||||||||||||||||||
| Issuance of common stock to consultant for services | - | |||||||||||||||||||||||||||
| Issuance of common stock to Series A preferred stockholders in lieu of cash dividends | - | ( | ) | |||||||||||||||||||||||||
| Issuance of common stock under ATM, net | - | |||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances at September 30, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances at July 1, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock in connection with exercise of prefunded warrants | - | |||||||||||||||||||||||||||
| Issuance of common stock to consultant for services | - | |||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances at September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Series A Preferred Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balances at January 1, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock to Series A preferred stockholders in lieu of cash dividends | - | ( | ) | |||||||||||||||||||||||||
| Issuance of common stock in connection with exercise of prefunded warrants | - | |||||||||||||||||||||||||||
| Issuance of common stock to consultant for services | - | |||||||||||||||||||||||||||
| Issuance of common stock in connection with settlement | - | |||||||||||||||||||||||||||
| Issuance of common stock and prefunded warrants in connection with private placement | - | |||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances at September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
ERNEXA THERAPEUTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
| For the nine months ended September 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Amortization of right-of-use asset | ||||||||
| Impairment of goodwill | ||||||||
| Issuance of common stock to consultant for services | ||||||||
| Accrued interest expense | ||||||||
| Forward sales contract expense | ||||||||
| Issuance of common stock in connection with settlement | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Gain on extinguishment of contingent liability | ( | ) | ||||||
| Loss on disposal of fixed assets | ||||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other receivables | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other non-current assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Due from related party | ||||||||
| Due to related party | ( | ) | ||||||
| Other liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Gross proceeds received from the sale of common stock, prefunded warrants and Milestone Warrants in public offering | ||||||||
| Proceeds received from the issuance of common stock and prefunded warrants | ||||||||
| Fees related to public offering | ( | ) | ||||||
| Proceeds received from notes payable | ||||||||
| Gross proceeds received from the exercise of prefunded warrants | ||||||||
| Fee related to the exercise of prefunded warrants from public offering | ( | ) | ||||||
| Dividends paid to Series A preferred stockholders | ||||||||
| Issuance of common stock net under ATM | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ||||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Reclassification of forward sales contract to equity upon issuance of common stock | $ | $ | ||||||
| Issuance of common stock to Series A preferred stockholders in lieu of cash dividends | $ | $ | ||||||
| Remeasurement of ROU asset and lease liability | $ | $ | ||||||
| Leasehold improvements funded by tenant improvement allowance | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
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 stromal 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 bring new treatment possibilities to people facing difficult to treat cancers.
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 nine months ended September 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
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 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 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.
| 5 |
| 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 September 30, 2026, the Company had a cash balance of approximately
$
On
February 10, 2026, the Company received approximately $
On
March 13, 2026, the Company filed a Registration Statement on Form S-3 with the SEC to offer and sell up to $
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 $
In connection with preparing the financial statements as of and for the three and nine months ended September 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 September 30, 2026, the Company had approximately $
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.
| 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.
| 6 |
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 due to their short maturities.
The Company issued 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 $
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 September 30, 2026 or December 31, 2025.
The following table summarizes the liabilities that are measured at fair value as of September 30, 2026 and December 31, 2025 (in thousands):
| Description | Level | September 30, 2026 | December 31, 2025 | |||||||||
| Liabilities: | ||||||||||||
| Contingent consideration | 3 | $ | $ | | ||||||||
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 September 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 $
| 7 |
| 4. | Goodwill |
The
Company recorded goodwill in the amount of $
| 5. | Accrued Expenses |
September 30, 2026 | December 31, 2025 | |||||||
| Study Fees | $ | $ | ||||||
| Accrued compensation | ||||||||
| Professional fees | ||||||||
| Other | ||||||||
| Total accrued expenses | $ | $ | ||||||
| 6. | Operating Leases |
As of September 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 $
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 $
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
$
| 8 |
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||||||
| Sublease income | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain on sublease termination | ( | ) | ||||||||||||||
| Variable lease expense | ||||||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||||
| Operating Lease ROU Assets | ||||
| Operating lease ROU assets at January 1, 2026 | $ | |||
| Remeasurement of ROU asset | ( | ) | ||
| Amortization of operating lease ROU assets | ( | ) | ||
| Operating lease ROU assets at September 30, 2026 | $ | |||
| Operating Lease Liabilities | ||||
| Operating lease liabilities at January 1, 2026 | $ | |||
| Remeasurement of lease liability | ( | ) | ||
| Principal payments on operating lease liabilities | ( | ) | ||
| Operating lease liabilities at September 30, 2026 | ||||
| Less non-current portion | ( | ) | ||
| Current portion at September 30, 2026 | $ | |||
As
of September 30, 2026, the Company’s operating lease had a remaining life of
| As of September 30, 2026 | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total payments | ||||
| Less imputed interest | ( | ) | ||
| Total operating lease liabilities | $ | |||
| 7. | Stock-Based Compensation |
Stock Options
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Stock options granted | ||||||||||||||||
| 9 |
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-line basis.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Weighted average risk-free rate | % | % | % | % | ||||||||||||
| Weighted average volatility | % | % | % | % | ||||||||||||
| Dividend yield | % | % | % | % | ||||||||||||
| Expected term | years | years | years | years | ||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Weighted average grant date fair value | $ | $ | $ | $ | ||||||||||||
Vesting of all stock options is subject to continuous service with the Company through the applicable vesting date. As of September 30, 2026, there were approximately 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. RSUs vested during the three and nine months ended September 30, 2026 and 2025. The Company did t grant RSUs during the three and nine months ended September 30, 2026 and 2025, and as of September 30, 2026, there were RSUs outstanding.
| 10 |
Stock-Based Compensation Expense
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 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 Public Offering, which included the public offering of (i) million shares of the Company’s common stock (or pre-funded warrants in lieu of common stock) and accompanying Milestone Warrants to purchase million shares of common stock, at a combined offering price of $ per share of common stock and accompanying Milestone Warrant (or $ 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 $
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 $
Pursuant
to the Placement Agency Agreement, the Company paid the Placement Agent an aggregate cash fee of approximately $
The
Public Offering closed on February 10, 2026, for aggregate gross proceeds of approximately $
The Placement Agency Agreement and the Purchase Agreements contain customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company, the Placement Agent, or the investors, as the case may be, and other obligations of the parties.
| 11 |
Pursuant to the terms of the Purchase Agreements and the Placement Agency Agreement, the Company has agreed that for a period of ninety (90) days from the closing of the Public Offering, that neither the Company nor any subsidiary may (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or common stock equivalents or (ii) file any registration statement or prospectus, or any amendment or supplement thereto, in each case, subject to certain exceptions, unless waived by the Placement Agent. The Company has also agreed not to effect or enter into an agreement to effect any issuance of common stock or common stock equivalents involving a Variable Rate Transaction, as defined in the Purchase Agreements, for a period of ninety (90) days following the closing of the Public Offering, subject to certain exceptions, unless waived by the Placement Agent. In addition, as part of the Purchase Agreement, subject to certain exceptions, the Company’s officers and directors entered into lock-up agreements, pursuant to which they agreed not to sell or otherwise dispose of any of the Common Stock for a period of ninety (90) days following the date of closing of the Public Offering.
Universal Shelf and ATM
On
March 13, 2026, the Company filed the Universal Shelf to offer and sell up to $
The
Company is subject to 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 $
2025 Private Placement
On
March 31, 2025, the Company entered into a securities purchase agreement (the “2025 SPA”) with certain accredited investors
to sell in a private placement an aggregate of approximately shares of common stock at a purchase price of $ per share,
or pre-funded warrants in lieu of common stock at a purchase price of $ per pre-funded warrant (the “2025 Private Placement”).
The pre-funded warrants will be exercisable until exercised in full at a nominal exercise price of $
The
2025 SPA represented a forward sale contract obligating the Company to sell a fixed number of shares of its common stock at a fixed price
per share and contained an adjustment to the settlement amount based on shareholder approval, which is not an input into the pricing
of a fixed-for-fixed forward on equity shares. The Company measured the fair value of the forward sale contract as the difference between
(i) the fair value of the expected shares to be purchased by the investors as of the date the Company entered into the 2025 SPA and (ii)
the discounted purchase price of the shares and recorded a liability of approximately $ million at the contract inception date. The
Company also recognized a corresponding $
| Date | Common Stock | Pre-funded Warrants | Gross Proceeds | |||||||||
| April 2, 2025 | $ | |||||||||||
| June 9, 2025 | ||||||||||||
| June 27, 2025 | ||||||||||||
| $ | ||||||||||||
| 12 |
Warrants
As of September 30, 2026, the Company had the following warrants outstanding:
Warrants Outstanding | Exercise Price | Expiration Date | Classification | |||||||||
| Q1-22 Warrants | $ | |||||||||||
| December 2022 Warrants | $ | |||||||||||
| Milestone Warrants | $ | * | ||||||||||
| Prefunded warrants | $ | None | ||||||||||
| * |
As
of September 30, 2026, the weighted average remaining contractual life of expiring warrants outstanding was
The following table shows the warrant activity from January 1, 2026 through September 30, 2026:
| Outstanding January 1, 2026 | Granted | Exercised | Outstanding September 30, 2026 | |||||||||||||
| Q1-22 Warrants | ||||||||||||||||
| December 2022 Warrants | ||||||||||||||||
| Milestone Warrants | ||||||||||||||||
| Prefunded warrants | ( | ) | ||||||||||||||
| Total | ( | ) | ||||||||||||||
On
February 11, 2026 and February 18, 2026, the Company issued approximately and shares of common stock, respectively, in
connection with the exercise of the pre-funded warrants from the Public Offering, for a total exercise price of approximately $
Stock Repurchase Program
In
November 2024, the Company’s Board of Directors authorized a stock repurchase program (the “Repurchase Program”) of
up to $
| 9. | Net Loss Per Share |
The Company calculates basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, including the weighted average effect of prefunded warrants, and without consideration for potentially dilutive securities.
Diluted net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding, including the weighted average effect of the prefunded warrants, plus dilutive securities. Shares of common stock issuable upon exercise, conversion or vesting of stock options, restricted stock units, warrants and the outstanding Series A convertible preferred stock are considered potential shares of common stock and are included in the calculation of diluted net loss per share using the treasury method when their effect is dilutive. Diluted net loss per share is the same as basic net loss per share for periods in which the effect of potentially dilutive shares of common stock is antidilutive.
| 13 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Stock options | ||||||||||||||||
| Warrants | ||||||||||||||||
| Preferred stock converted into common stock | ||||||||||||||||
| Total potential common shares excluded from computation | ||||||||||||||||
| 10. | Commitments and Contingencies |
Litigation Matters
The Company is involved in litigation and arbitrations from time to time in the ordinary course of business. Legal fees and other costs associated with such actions are expensed as incurred. In addition, the Company assesses the need to record a liability for litigation and contingencies. The Company reserves for costs relating to these matters when a loss is probable, and the amount can be reasonably estimated. The Company is not currently party to any material legal proceedings.
Licensing Agreements
The Company has an exclusive license and collaboration agreement (“the Factor L&C Agreement”) with Factor Bioscience Limited (“Factor Limited”), which was effective September 24, 2024 (the “Effective Date”). Under the Factor L&C Agreement, the Company has obtained exclusive licenses in the fields of cancer, autoimmune disorders, and rare diseases with respect to certain licensed technology and has the right to develop the licensed technology directly or enter into co-development agreements with partners who can help bring such technology to market. The Factor L&C Agreement also provides for certain services and materials to be provided by Factor Bioscience to facilitate the development of the licensed technology and to enable the Company to scale up production at third party facilities.
The
initial term of the Factor L&C Agreement was one year after the Effective Date, and it automatically renews yearly thereafter. The
Company may terminate the Factor L&C Agreement for any reason upon
Pursuant
to the Factor L&C Agreement, the Company paid Factor Bioscience approximately $
Contingent Consideration
The
Company previously recorded a three-year contingent consideration liability related to an asset acquisition in April 2023.
| 14 |
Retirement Savings Plan
The
Company offers to its eligible employees a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, through
its co-employment arrangement with its professional employer organization (“PEO”). Under this arrangement, the PEO serves
as the plan sponsor and administrator. Eligible employees may defer up to
| 11. | Related Party Transactions |
Recent Financings
Investors
who participated in the Public Offering and the 2025 Private Placement included Charles Cherington. Mr. Cherington participated in the
applicable financing under the same terms and subject to the same conditions as all the other investors. Mr.
Cherington served on the Company’s board of directors from March 2021 to July 6, 2023. As of September 30, 2026, Mr. Cherington
owned approximately
March 2025 Promissory Notes
On
March 11, 2025, the Company received $
As
a result of completing the 2025 Private Placement, the Company repaid the outstanding principal plus accrued interest on the notes in
full in the aggregate amount of $
On
October 20, 2025, Dennis J. Donoghue, a security owner of the Company, initiated a lawsuit against the Company as a nominal defendant,
and Charles Cherington as defendant, in the Southern District of New York (Case No. 25-cv-8653) alleging a violation of Section 16(b)
of the Securities Exchange Act of 1934, 15 U.S.C. Section 78p(b) and seeking recovery of alleged short swing profits by Mr. Cherington.
On December 19, 2025, Mr. Donoghue, the Company and Mr. Cherington entered into a settlement agreement to resolve the matter. Pursuant
to the settlement agreement, the Company agreed to pay Mr. Cherington an aggregate amount of $
| 12. | Segment Reporting |
The Company operates within a single reportable operating segment, the research and development of cellular therapies. The Company has identified its president and chief executive officer as its chief operating decision maker (“CODM”), who regularly reviews the Company’s performance and allocates resources based on information reported at the consolidated entity level.
The CODM uses consolidated net loss as a measure of profit and loss and assesses Company performance through the achievement of its business strategy goals. The CODM is regularly provided with forecasted expense information that is used to determine the Company’s liquidity needs and cash allocation to execute its business strategy, and he uses cash as a measure of segment assets in managing the Company. The Company operates in the United States, and all of its assets are located in the United States.
The table below provides a breakdown of the Company’s significant operating expenses for the three and nine months ended September 30, 2026 and 2025, with a reconciliation to net loss for each of those periods.
| 15 |
The
Company had
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development by significant expense: | ||||||||||||||||
| Study fees | $ | $ | $ | $ | ||||||||||||
| Payroll and related | ||||||||||||||||
| Professional fees | ||||||||||||||||
| MSA/license fees | ||||||||||||||||
| Other1 | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative by significant expense: | ||||||||||||||||
| Payroll and related | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| Other2 | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Impairment of goodwill | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Forward sales contract expense | ( | ) | ||||||||||||||
| Change in fair value of warrant liabilities | ||||||||||||||||
| Interest income (expense), net | ||||||||||||||||
| Gain on extinguishment of contingent liability | ||||||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Total other income (expense), net | ( | ) | ||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Benefit (provision) for income taxes | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 1 |
| 2 |
| 13. | Recent Accounting Pronouncements |
No new Accounting Standards Updates have been issued by the Financial Accounting Standards Board since January 1, 2026 that would apply to the Company and were not disclosed in the 2025 10-K.
| 14. | Subsequent Events |
On
October 6, 2026, the Company sold shares of common stock for proceeds of $
Management has evaluated subsequent events through the date these financial statements were issued and concluded that no other recognized or non-recognized subsequent events occurred that require adjustment to or disclosure in the financial statements.
| 16 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read this discussion together with the unaudited interim condensed consolidated financial statements, related notes, and other financial information included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) together with our audited consolidated financial statements, related notes, and other information contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on March 13, 2026 (the “2025 10-K”). The following discussion contains or is based on assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors,” in this report and in Part I, Item 1A of the 2025 10-K and as described from time to time in our other filings with the SEC. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements.
Overview
We are a pre-clinical-stage synthetic allogeneic iMSC therapy company. iMSCs are induced pluripotent stem cell-derived mesenchymal stromal cells. We envision a future where cell therapies powered by synthetic iMSCs can offer new options for patients with limited treatment paths, and our mission is to bring new treatment possibilities to people facing difficult-to-treat cancers.
Objectives and Business Strategy
Our lead product candidate ERNA-101 is allogeneic pro-inflammatory cytokines IL-7 and IL-15-secreting iMSCs. ERNA-101 capitalizes on the intrinsic tumor-homing ability of MSCs to slip through the tumor’s defenses and to deliver potent pro-inflammatory factors directly to the tumor microenvironment (“TME”), limiting systemic exposure and potential toxicity while potentially unleashing potent anti-cancer immune responses including enhancement of T-cell anti-tumor activity. Our initial focus is to develop ERNA-101 in platinum-resistant ovarian cancer. We collaborated with the University of Texas MD Anderson Cancer Center (“MDACC”) to investigate the ability of ERNA-101 to induce and modulate antitumor immunity in an ovarian cancer model. In preclinical study, ERNA-101 exhibited reduction of tumor growth and a statistically significant survival advantage in the ovarian cancer model as compared to the control group, and as announced in May 2026, preclinical data demonstrates that when ERNA-101 is used in combination with PD-1 blockade, it drives complete tumor clearance and 100% long-term survival in syngeneic ovarian cancer models. We have filed Patent Application No. 63/991,024 related to the use of ERNA-101 in combination with PD-1 blockade, which remains pending. It is possible that the pending application, and any that may be filed in the future, will not lead to an issued patent. Additionally, MDACC has filed a patent application based on research conducted under our collaboration agreement (the “MDACC Application”), and we were informed that none of our employees were identified as inventors on the MDACC Application. We have not yet received the MDACC Application and have not evaluated inventorship, ownership or assignment rights as of the filing of this Quarterly Report.
Beyond oncology, we continue to advance our synthetic iMSC platform through ERNA-201, an allogeneic iMSC therapy engineered to express anti-inflammatory factors for the treatment of autoimmune diseases. In preclinical studies, ERNA-201 demonstrated disease-modifying activity in the collagen-induced arthritis model, providing proof-of-concept for the application of our engineered iMSC platform in inflammatory disease and further support the versatility of our synthetic iMSC technology across multiple therapeutic areas. Although we are prioritizing near-term resources toward the development of ERNA-101 and our oncology programs, ERNA-201 remains an important platform asset with demonstrated preclinical validation and potential future development opportunities
During the fourth quarter of 2025, we had a successful pre-Investigational New Drug (“IND”) meeting with the Food and Drug Administration (“FDA”), which resulted in regulatory alignment with our development approach. We expect to complete the Investigational New Drug (“IND”) enabling studies and IND submission in 2026 and to subsequently enter a Phase I investigator sponsored clinical trial in the first half of 2027.
We have also been accepted as one of only ten global companies for the Japan External Trade Organization acceleration program, which will allow us to receive expert-led mentoring and market-entry guidance focused on Japan’s regulatory, clinical and commercial landscape. The program also provides direct engagement opportunities with leading Japanese research and development organizations to explore potential collaborations across development, manufacturing and clinical execution.
Additionally, to expand our developmental opportunities and raise non-dilutive capital, we are actively seeking strategic partnerships to co-develop or out-license therapeutic assets and engage with potential collaborators, and we are currently applying for research grants (e.g. Small Business Innovation Research (SBIR) funding).
| 17 |
Recent Developments
Disclosed Independently Validated Combination Data of ERNA-101 (July 2026):
ERNA-101 in combination with PD-1 checkpoint inhibitor exhibited complete tumor clearance and long-term survival in 10 out of 15 (67%) immunocompetent ID8luc-ova syngeneic ovarian cancer mice models. No complete tumor clearance or durable survival was observed in animals treated with anti-PD-1 or ERNA-101 alone. This study was conducted by an independent contract research organization successfully reproduced earlier findings generated at MD Anderson Cancer Center, demonstrating complete tumor clearance and durable long-term survival in a substantially larger study. The results further strengthen confidence in ERNA-101’s mechanism of action and provide important third-party validation as the Company advances toward its planned Investigational New Drug (IND) submission in the third quarter of 2026 and anticipated first-in-human Phase 1 clinical trial in the fourth quarter.
Appointed David Polinsky to Board of Directors (August 2026)
Disclosed Efficacy of ERNA-201 (September 2026):
ERNA-201 monotherapy exhibited improvement in clinical arthritis score and disease severity in collagen-induced rheumatoid arthritis (CIA) model
Deprioritized of ERNA-201 Program & Preserve the Program for Future (September 2026):
Objective is to concentrate near-term capital and operational resources to develop ERNA-101 (nearest value creating milestone) and expand oncology pipeline
Appointed Robert J. Spiegel, M.D., FACP to Board of Directors (September 2026)
Disclosed IND-Enabling Preclinical Data of ERNA-101 (September 2026):
Repeat-dose safety: No ERNA-101-related adverse findings were observed at any dose level tested in a 50-day GLP toxicology study in tumor-bearing mice with an intact immune system.
Tumorigenicity: No teratoma formation was observed in ERNA-101-treated animals through the six-month tumorigenicity in-life phase, addressing an important safety consideration for an iPSC-derived therapy.
Biodistribution: No significant ERNA-101 signal was detected in tumor-free animals or non-tumor tissues, supporting ERNA-101’s design to home to tumors without taking up residence elsewhere in the body.
Reverse Stock Split
As approved on March 27, 2026 by written consent from approximately 53.34% of our stockholders (the “Consenting Stockholders), on May 4, 2026, we effected a reverse stock split of our common stock at a ratio of 1-for-25, as determined by our 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. We 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.
2026 Public Offering
On February 6, 2026, we 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 we engaged the Placement Agent for the public offering of 0.8 million shares of our common stock (or pre-funded warrants in lieu of common stock) and accompanying warrants to purchase 0.8 million shares of common stock (the “Milestone Warrants”), at a combined offering price of $12.50 per share of common stock and accompanying Milestone Warrant (or a combined offering price of $12.25 per share of pre-funded warrant and accompanying Milestone Warrants) (the “Public Offering”). In connection with the Public Offering, we also entered into a securities purchase agreement (each, a “Purchase Agreement”) with certain investors who purchased shares of 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, we issued 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 180th calendar day following our public release of clinical trial data from the first cohort of the Phase 1 study of ERNA-101.
Pursuant to the Placement Agency Agreement, we 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). We will also pay the Placement Agent a cash fee as compensation for gross proceeds we receive 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. We also issued approximately 9,000 shares of common stock to the Placement Agent, which was equal to 1.5% of the aggregate number of shares of common stock and pre-funded warrants sold in the Public Offering (or 0.5% with respect to sales to certain existing investors). In addition, we reimbursed the Placement Agent for its accountable offering-related legal expenses in an amount of $125,000.
| 18 |
The Public Offering closed on February 10, 2026, for aggregate gross proceeds of approximately $10.5 million before deducting Placement Agent fees and other offering expenses payable by us. We are using the net proceeds from the Public Offering to support the advancement of our development programs and for working capital and general corporate purposes.
The Placement Agency Agreement and the Purchase Agreements contain customary representations, warranties and agreements by us, customary conditions to closing, indemnification obligations of us, the Placement Agent, or the investors, as the case may be, and other obligations of the parties.
Pursuant to the terms of the Purchase Agreements and the Placement Agency Agreement, we have agreed that for a period of ninety (90) days from the closing of the Public Offering, that neither we nor any subsidiary may (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or common stock equivalents or (ii) file any registration statement or prospectus, or any amendment or supplement thereto, in each case, subject to certain exceptions, unless waived by the Placement Agent. We have also agreed not to effect or enter into an agreement to effect any issuance of common stock or common stock equivalents involving a Variable Rate Transaction, as defined in the Purchase Agreements, for a period of ninety (90) days following the closing of the Public Offering, subject to certain exceptions, unless waived by the Placement Agent. In addition, as part of the Purchase Agreement, subject to certain exceptions, our officers and directors entered into lock-up agreements, pursuant to which they agreed not to sell or otherwise dispose of any of the common stock for a period of ninety (90) days following the date of closing of the Public Offering.
Universal Shelf and ATM
On March 13, 2026, we filed a Registration Statement on Form S-3 with the SEC to offer and sell up to $50.0 million of our 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 under a sales agent agreement we entered into with Brookline.
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. To date, we have sold approximately 520,000 shares of common stock for net proceeds of approximately $3.9 million under the ATM.
Nasdaq Compliance
Our common stock is listed on The Nasdaq Capital Market (“Nasdaq”). Nasdaq requires that listed companies satisfy certain continued listing requirements, including Listing Rule 5550(a)(2), which requires that listed companies maintain a minimum bid price of their common stock of at least $1.00 per share (the “Bid Price Rule”).
On March 18, 2026, we received written notice from Nasdaq indicating that our common stock failed to maintain the Bid Price Rule for 30 consecutive business days. While companies are typically afforded a 180-calendar day compliance period, as specified under Nasdaq Listing Rule 5810(c)(3)(A), to comply with the Bid Price Rule, Nasdaq concluded that we are not eligible for the compliance period pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv) due to the fact that we effected a reverse stock split over the prior one-year period. Accordingly, we requested a hearing before the Nasdaq Hearing Panel (the “Panel”), which automatically stayed any suspension or delisting action pending the hearing and the expiration of any additional extension period granted by the Panel following the hearing. Our hearing was held on April 28, 2026, during which we requested an extension for continued listing on Nasdaq through May 15, 2026, the date we expected to demonstrate compliance with the Bid Price Rule (as discussed further below).
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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) The Company satisfied the applicable conditions and maintained compliance with all Nasdaq Listing Rules through September 14, 2026. Accordingly, the Panel’s jurisdiction over this matter ended on September 14, 2026. The Company remains subject to the mandatory Panel monitor through May 5, 2027. During this one-year monitoring period, should the Company become deficient with respect to the Bid Price Rule, Nasdaq will immediately issue a delisting determination.
On May 4, 2026, we effected the Reverse Stock Split and on May 29, 2026, we received notice from Nasdaq that we have regained compliance with the Bid Price Rule. The Company must continue to remain compliant with the Bid Price Rule through May 5, 2027 to avoid delisting.
Basis of Presentation
Revenues and Cost of Revenues
We are a pre-clinical stage company and do not currently have any revenues from product sales or cost of revenues. We will not have revenues from product sales or cost of revenues until such time as we receive regulatory approval of our product candidates and successfully commercialize our products.
Research and Development Expenses
We expense our research and development costs as incurred. Research and development expenses consist of costs incurred for company-sponsored research and development activities. Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to have any alternative future uses other than the specific research and development project for which it was intended.
The major components of research and development costs include preclinical study costs, salaries and employee benefits, stock-based compensation expense, supplies and materials, expensed licensed technology, consulting, scientific advisors and other third-party costs, as well as allocations of various overhead costs related to our product development efforts.
We have contracted with third parties to perform various studies. 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.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries, benefits and other costs, including stock-based compensation, for our executive and administrative personnel, legal and other professional fees, travel, insurance, and other corporate costs.
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Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2026 and 2025
Three months ended September 30, | ||||||||||||
| (In thousands) | 2026 | 2025 | Change | |||||||||
| Operating expenses: | ||||||||||||
| Research and development | $ | 1,871 | $ | 1,035 | $ | 836 | ||||||
| General and administrative | 1,119 | 958 | 161 | |||||||||
| Total operating expenses | 2,990 | 1,993 | 997 | |||||||||
| Loss from operations | (2,990 | ) | (1,993 | ) | (997 | ) | ||||||
| Other income (expense), net: | ||||||||||||
| Forward sales contract expense | - | - | - | |||||||||
| Interest income, net | 49 | 31 | 18 | |||||||||
| Gain on extinguishment of contingent liability and debt | - | 734 | (734 | ) | ||||||||
| Other expense, net | - | (6 | ) | 6 | ||||||||
| Total other income (expense), net | 49 | 759 | (710 | ) | ||||||||
| Loss before income taxes | (2,941 | ) | (1,234 | ) | (1,707 | ) | ||||||
| Benefit (provision) for income taxes | - | (6 | ) | 6 | ||||||||
| Net loss | $ | (2,941 | ) | $ | (1,240 | ) | $ | (1,701 | ) | |||
Nine months ended September 30, |
||||||||||||
| (In thousands) | 2026 | 2025 | Change | |||||||||
| Operating expenses: | ||||||||||||
| Research and development | $ | 6,578 | $ | 3,480 | $ | 3,098 | ||||||
| General and administrative | 4,132 | 3,745 | 387 | |||||||||
| Impairment of goodwill | 2,044 | - | 2,044 | |||||||||
| Total operating expenses | 12,754 | 7,225 | 5,529 | |||||||||
| Loss from operations | (12,754) | (7,225 | ) | (5,529 | ) | |||||||
| Other income (expense), net: | ||||||||||||
| Forward sales contract expense | - | (5,847 | ) | 5,847 | ||||||||
| Change in fair value of warrant liabilities | - | 1 | (1 | ) | ||||||||
| Interest income, net | 148 | 36 | 112 | |||||||||
| Gain on extinguishment of contingent liability and debt | 41 | 734 | (693) | |||||||||
| Other expense, net | 69 | (264 | ) | 333 | ||||||||
| Total other income (expense), net | 258 | (5,340 | ) | 5,598 | ||||||||
| Loss before income taxes | (12,496) | (12,565 | ) | 69 | ||||||||
| Benefit (provision) for income taxes | 40 | (17 | ) | 57 | ||||||||
| Net loss | $ | (12,456) | $ | (12,582 | ) | $ | 126 | |||||
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Revenues and Cost of Revenues
We had no revenues or cost of revenues for the three and nine months ended September 30, 2026 or 2025.
Research and Development Expenses
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | 2026 | 2025 | Change | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Study fees | $ | 1,047 | $ | 60 | $ | 987 | $ | 4,322 | $ | 472 | $ | 3,850 | ||||||||||||
| Payroll and related | 399 | 123 | 276 | 994 | 365 | 629 | ||||||||||||||||||
| Professional fees | 192 | 233 | (41 | ) | 529 | 591 | (62 | ) | ||||||||||||||||
| MSA/license fees | 120 | 510 | (390 | ) | 320 | 1,810 | (1,490 | ) | ||||||||||||||||
| Other | 113 | 109 | 4 | 413 | 242 | 171 | ||||||||||||||||||
| Total research and development expenses | $ | 1,871 | $ | 1,035 | $ | 836 | $ | 6,578 | $ | 3,480 | $ | 3,098 | ||||||||||||
Total research and development expenses increased for the three months ended September 30, 2026 compared to the three months ended September 30, 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 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.
For the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, our research and development expenses increased by approximately $3.1 million primarily due to fees recognized for services under Statement of Work 1 with Cellipont (now Kincellis) for development and manufacturing services, increased study fees related to ERNA-101 as well as increased payroll due to an increase in research and development headcount. These increases were partially offset by a decrease in MSA/License fees due to the amendment of Work Order No. 2 with Factor Bioscience Inc. starting during March 2026 and a reduction in expenses under professional fees.
General and Administrative Expenses
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | 2026 | 2025 | Change | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Payroll and related | $ | 278 | $ | 313 | $ | (35 | ) | $ | 1,501 | $ | 1,134 | $ | 367 | |||||||||||
| Professional fees | 322 | 215 | 107 | 1,160 | 1,041 | 119 | ||||||||||||||||||
| Stock-based compensation | 348 | 284 | 64 | 942 | 1,123 | (181 | ) | |||||||||||||||||
| Other | 171 | 146 | 25 | 529 | 447 | 82 | ||||||||||||||||||
| Total general and administrative expenses | $ | 1,119 | $ | 958 | $ | 161 | $ | 4,132 | $ | 3,745 | $ | 387 | ||||||||||||
Our general and administrative expenses for the three months ended September 30, 2026 increased by approximately $0.2 million primarily due to an increase in professional fees driven by greater reliance on third party accounting firms and investor relations firms, and an increase in stock based compensation partially offset by payroll fees.
For the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, our general and administrative expenses increased by approximately $0.4 million primarily due to increases in payroll related to certain accrued bonuses and in professional fees related to certain legal matters as well as increased other expenses for occupancy costs, depreciation, and amortization, offset by reduced insurance premiums and a reduction in stock based compensation due to a reduction in the fair values of the equity awards that are amortizing during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025.
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Impairment of Goodwill
During the nine months ended September 30, 2026, we recognized a $2.0 million impairment charge of the goodwill we had on our balance sheet from 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 September 30, 2026, there was no remaining goodwill balance. We did not recognize a similar expense during the nine months ended September 30, 2025.
Forward sales contract expense
There was no forward sales contract expense during the three months ended September 30, 2026 or 2025.
During the nine months ended September 30, 2025, we recognized expense of $5.8 million related to a forward sales contract because the fair 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 nine months ended September 30, 2026.
Change in Fair Value of Warrant Liabilities
The change in the fair value of the warrant liabilities for the three and nine months ended September 30, 2025 was de minimis. There was no change in the fair value of the warrant liabilities recognized for the three and nine months ended September 30, 2026.
Interest Income (Expense), net
For the three months ended September 30, 2026, we recognized approximately $18,000 more in interest income due to an increase of cash in interest-bearing accounts compared to the three months ended September 30, 2025.
For the nine months ended September 30, 2026, we recognized approximately $112,000 more in interest income due to an increase of cash in interest-bearing accounts compared to the nine months ended September 30, 2025.
Gain on extinguishment of contingent liability
For the nine months ended September 30, 2026, we recognized approximately $41,000 due to the extinguishment of the contingent consideration liability during the nine months ended September 30, 2026 .
During the three and nine months ended September 30, 2025, we recognized a gain on extinguishment of debt of approximately $0.7 million related to accounts payable and accrued expenses that were deemed to be time-barred from collection under the respective state laws. There was no similar gain during the three and nine months ended September 30, 2026.
Other Income (expense), net
During the nine months ended September 30, 2025, we recognized approximately $0.3 million of expenses related to the 2025 SPA transaction entered into on March 31, 2025, and other expense, net, for the three months ended September 30, 2025 was de minimis.. During the nine months ended September 30, 2026, we recognized approximately $0.1 million of other income, primarily attributable to sublease income.
Benefit (provision) for Income Taxes
During 2026, we expect to incur state income tax liabilities related to our operations. We have established a full valuation allowance for all deferred tax assets, including our net operating loss carryforwards, since we could not conclude that we were more likely than not able to generate future taxable income to realize these assets. The effective tax rate differs from the statutory tax rate due primarily to our full valuation allowance.
Liquidity and Capital Resources
As of September 30, 2026, we had cash of approximately $5.6 million, and we had an accumulated deficit of approximately $258.1 million. We have to date incurred operating losses, and we expect these losses to continue in the future. For the three and nine months ended September 30, 2026, we incurred a net loss of $2.9 million and $12.5 million, respectively, which includes the $2.0 million non-cash goodwill impairment charge. For the nine months ended September 30, 2026, we used $9.6 million of cash in operating activities.
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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 September 30, 2026, we received approximately $3.7 million in net proceeds from the sale of common stock under the ATM. To date, we have sold approximately 520,000 shares of common stock for net proceeds of approximately $3.9 million under the ATM, and we have approximately $5.3 million of shares remaining to sell under this facility.
In connection with preparing the financial statement as of and for the three and nine months ended September 30, 2026, we evaluated whether there are conditions and events, considered in the aggregate, that are known and reasonably knowable that would raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued.
As of September 30, 2026, we had approximately $5.6 million in cash, which is less than that needed to effect 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 facility will cover a significant portion of the shortfall in our cash resources over the twelve months from the issuance date of these financial statements. Management is also actively pursuing other additional financing opportunities to raise capital. Subsequent to the balance sheet date of September 30, 2026, the Company sold an additional 43,700 shares for net proceeds of $0.1 million in cash under the ATM.
If our cash is not sufficient to meet future cash requirements, we may be required to reduce planned capital expenses, reduce operational cash uses or raise capital on terms that are not as favorable to us as they otherwise might be. Any actions we may undertake to reduce planned capital purchases or reduce expenses may be insufficient to cover shortfalls in available funds. If we require additional capital, we may be unable to secure additional financing on terms that are acceptable to us, or at all.
Cash Flows
Cash flows from operating, investing and financing activities, as reflected in the accompanying condensed consolidated statements of cash flows, are summarized as follows:
| (in thousands) | 2026 | 2025 | Change | |||||||||
| Cash (used in) provided by: | ||||||||||||
| Operating activities | $ | (9,586 | ) | $ | (5,869 | ) | $ | (3,717 | ) | |||
| Investing activities | (5 | ) | (22 | ) | 17 | |||||||
| Financing activities | 13,282 | 7,209 | 6,073 | |||||||||
| Net increase in cash | $ | 3,691 | $ | 1,318 | $ | 2,373 | ||||||
Net Cash Used in Operating Activities
There was $9.6 million in cash used in operating activities for the nine months ended September 30, 2026 compared to $5.9 million for the nine months ended September 30, 2025. This change was due to $3.3 million increase in adjustments made for non-cash transactions, with an additional increase of $0.4 million in cash used in operating assets and liabilities for the nine months ended September 30, 2026 when compared to the nine months ended September 30, 2025.
Net Cash Used in Investing Activities
We used approximately $5,000 in cash for the purchases of property and equipment during the nine months ended September 30, 2026, compared to approximately $22,000 during the nine months ended September 30, 2025.
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Net Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2026 includes gross proceeds of $10.5 million received from the Public Offering, including proceeds from the exercise of prefunded warrants issued in the Public Offering and $3.7 million in net proceeds from the sale of common stock under the ATM. Net cash provided by financing activities for the nine months ended September 30, 2025 includes $2.3 million of gross proceeds received from the issuance of two promissory notes and $4.9 million of proceeds received from 3 separate closings under the SPA. (See Note 8)
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.
Critical Accounting Estimates
There were no significant changes in our critical accounting estimates during the three and nine months ended September 30, 2026 from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2025 10-K.
Recent Accounting Pronouncements
See Note 13 to the accompanying condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Under the rules and regulations of the SEC, as a smaller reporting company we are not required to provide the information otherwise required by this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we were required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period covered by this Quarterly Report under the supervision, and with the participation, of our management, including our President and Chief Executive Officer and our Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report in providing reasonable assurance of achieving the desired control objectives.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth under “Note 10—Commitments and Contingencies—Litigation Matters” to the accompanying condensed consolidated financial statements included in this Quarterly Report is incorporated in this Item 1 by reference.
From time to time, we may become involved in legal proceedings arising in the ordinary course of business. We are not currently party to any material legal proceedings.
Item 1A. Risk Factors.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described under Part I, Item 1A, “Risk Factors,” in our 2025 10-K, in addition to other information in this report, when evaluating our business and before deciding whether to purchase, hold or sell shares of our common stock. Each of these risks and uncertainties, as well as additional risks and uncertainties not presently known to us or that we currently consider immaterial, could harm our business, financial condition, results of operations and/or growth prospects, as well as adversely affect the market price of our common stock, in which case you may lose all or part of your investment. Except as set forth below, there have been no material changes to the risk factors described in the 2025 10-K.
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock.
Our common stock is listed on The Nasdaq Capital Market. Nasdaq requires that listed companies satisfy certain continued listing requirements. Listing Rule 5550(a)(2) requires that listed companies maintain a minimum compliance with the Bid Price Rule. Listing Rule 5550(b) requires that listed companies maintain compliance with: (1) the Stockholders’ Equity Rule; (2) the MVLS Rule; or (3) the Net Income Rule.
On March 18, 2026, we received written notice from Nasdaq that our common stock had failed to maintain compliance with the Bid Price Rule for 30 consecutive business days. Because we had effected a reverse stock split within the prior one-year period, Nasdaq determined that we were not eligible for the standard 180-calendar-day compliance period ordinarily available under Nasdaq Listing Rule 5810(c)(3)(A). Accordingly, we requested a hearing before a Nasdaq Hearings Panel (the “Panel”), which automatically stayed any suspension or delisting action pending the hearing and any additional extension period granted by the Panel. 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) The Company satisfied the applicable conditions and maintained compliance with all Nasdaq Listing Rules through September 14, 2026. Accordingly, the Panel’s jurisdiction over this matter ended on September 14, 2026. The Company remains subject to the mandatory Panel monitor through May 5, 2027. During this one-year monitoring period, should the Company become deficient with respect to the Bid Price Rule, Nasdaq will immediately issue a delisting determination
On May 4, 2026, we effected a 1-for-25 reverse stock split of our common stock. On May 29, 2026, we received notice from Nasdaq that we had regained compliance with the Bid Price Rule. Notwithstanding this notice, the Panel continues to retain jurisdiction over us, and we must remain in compliance with the Bid Price Rule through May 5, 2027. As of September 30th 2026, the Company has maintained compliance with all applicable Nasdaq listing requirements.
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If our common stock is ultimately delisted by Nasdaq, and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, then we could face significant material adverse consequences, including: a material reduction in the liquidity of our common stock and a corresponding material reduction in the trading price of our common stock; a more limited market quotations for our securities; a determination that our common stock is a “penny stock” that requires brokers to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our securities; more limited research coverage by stock analysts; loss of reputation; more difficult and more expensive equity financings in the future; the potential loss of confidence by investors; and fewer business development opportunities.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If our common stock remains listed on Nasdaq, our common stock will be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. If our securities were no longer listed on Nasdaq and therefore not “covered securities,” we would be subject to regulation in each state in which we offer our securities.
We are dependent on a limited management team and key employees to manage expenses, and the loss of whom could harm our business.
Our business is dependent on a limited number of management personnel, consisting of Sanjeev Luther, our President and chief executive officer, and Mark J. Keeley, our fractional chief financial officer, as well as our key employees, including our Chief Medical Officer, Chief Scientific Officer, Head of Chemistry, Manufacturing and Controls (CMC), and other key personnel. Mr. Keeley renders services to us on a part-time consulting basis (approximately 10 hours per week). While we do not believe this arrangement materially impacts our business operations, particularly given that we have a full-time Controller, Mr. Keeley’s limited availability could affect our ability to address financial reporting, accounting, and other financial matters in a timely manner, which could adversely affect our business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
| Exhibit | Description | Incorporated By Reference | ||
| 31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||
| 32.1 | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished herewith | ||
| 32.2 | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Furnished herewith | ||
| 99.1 | 2026 Ernexa Therapeutics Inc. Omnibus Equity Incentive Plan | Exhibit 10.1 to Form 8-K filed on July 2, 2026 | ||
| 101 | Inline XBRL Document Set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q. | Filed herewith | ||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ERNEXA THERAPEUTICS INC. | ||
| Date: November 6, 2026 | By: | /s/ Sanjeev Luther |
| Sanjeev Luther | ||
| President and Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 6, 2026 | By: | /s/ Mark J. Keeley |
| Mark J. Keeley | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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