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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material under 240.14a-12 |
Eterna Therapeutics Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
| ☒ | No fee required |
| ☐ | Fee paid previously with preliminary materials |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
Eterna Therapeutics Inc.
1035 Cambridge Street, Suite 18A Cambridge, Massachusetts 02141
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2024 annual meeting of stockholders of Eterna Therapeutics Inc., a Delaware corporation, is scheduled to be held on October 29, 2024, at 9:00 a.m. Eastern Time for the following purposes, which are more fully described in the accompanying proxy statement:
1. To elect five nominees to the companys board of directors.
2. To ratify the appointment of Grant Thornton LLP as the companys independent registered public accounting firm for the 2024 fiscal year.
3. To approve, for the purpose of complying with the applicable Nasdaq listing rules, the issuance of shares of the companys common stock (a) pursuant to a securities purchase agreement dated September 24, 2024, (b) in exchange for outstanding convertible notes, (c) in exchange for outstanding warrants to purchase shares of common stock, and (d) upon conversion of 12% senior convertible notes, as further described in the accompanying proxy statement; and
4. To consider any other business that is properly presented at the meeting and any adjournment or postponement thereof.
The record date for the meeting is October 1, 2024. Stockholders owning the companys common stock at the close of business on the record date, or their legal proxy holders, are entitled to vote at the meeting.
The meeting will be a completely virtual meeting conducted via live audio webcast. You will be able to attend the meeting by visiting virtualshareholdermeeting.com/ERNA2024.
Your vote is very important. Please vote your shares promptly to ensure the presence of a quorum at the meeting. You may vote your shares over the Internet, via a toll-free telephone number, or by completing, signing, dating and returning the proxy or voting instruction card you received. Additional instructions on how to vote your shares are in the accompanying proxy statement. Whether or not you expect to attend the meeting, please vote at your earliest convenience.
| By order of our board of directors, | |
| Cambridge, Massachusetts | /s/ Sanjeev Luther |
| October 7, 2024 |
Sanjeev Luther President and Chief Executive Officer |
TABLE OF CONTENTS
| i |
ETERNA THERAPEUTICS INC.
PROXY STATEMENT
2024 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On October 29, 2024
You are receiving this proxy statement because you owned shares of common stock of Eterna Therapeutics Inc., a Delaware corporation (we, us, our or the Company), as of October 1, 2024, which entitles you to vote those shares at the 2024 annual meeting of stockholders to be held on October 29, 2024, at 9:00 a.m. Eastern Time. In this proxy statement, we refer to the 2024 annual meeting of stockholders and any adjournments of or postponements thereof as the meeting or annual meeting.
Our proxy materials will be first sent or given to stockholders on or about October 7, 2024. We are soliciting proxies pursuant to this proxy statement for use at the annual meeting.
Our Internet website and the information contained therein or linked thereto are not incorporated by reference or otherwise made a part of this proxy statement.
When and where is the annual meeting?
The annual meeting will be held on October 29, 2024, at 9:00 a.m. Eastern Time. The annual meeting will be a completely virtual meeting conducted via live audio webcast. You will be able to attend the annual meeting by visiting virtualshareholdermeeting.com/ERNA2024 . There will still not be a physical location for the annual meeting.
To participate in the annual meeting, you will need the 16-digit control number included on your proxy card or voting instruction form. The annual meeting will begin promptly at 9:00 a.m. Eastern Time on October 29, 2024. We encourage you to access the virtual meeting website prior to the start time. Online check-in will begin at 10:45 a.m. Eastern Time, and you should allow ample time to ensure your ability to access the meeting.
Technicians will be available to assist you if you experience technical difficulties accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual shareholder meeting log-in page.
The chairman of the meeting has broad authority to conduct the annual meeting in an orderly manner, including establishing rules of conduct.
Who may attend the annual meeting?
Stockholders of record as of October 1, 2024 (which we refer to as the record date), or their duly appointed proxies, and our invited guests are permitted to attend the annual meeting.
What is the purpose of the annual meeting?
Our stockholders will be asked to vote on the proposals listed below at the annual meeting. Each share of our common stock has one vote on each matter.
| Proposal 1: | To elect the five nominees for directors named in this proxy statement to hold office until our 2025 annual meeting of stockholders (the Election of Directors Proposal). |
| Proposal 2: | To ratify of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024 (the Auditor Ratification Proposal); |
| Proposal 3: | To approve, for the purpose of complying with the applicable Nasdaq Listing Rules, the issuance of shares of our common stock (a) pursuant to a securities purchase agreement dated September 24, 2024, (b) in exchange for outstanding convertible notes, (c) in exchange for outstanding warrants to purchase shares of common stock, and (d) upon conversion of 12% senior convertible notes, as further described in this proxy statement (the Stock Issuance Proposal). |
What are the voting recommendations of our board of directors?
Our board of directors recommends that you vote FOR the election of each of the director nominees named in this proxy statement and FOR each of the Ratification of Auditors Proposal and the Stock Issuance Proposal.
| - 1 - |
How can I vote at the annual meeting?
You may vote your shares electronically at the annual meeting by using the control number on your proxy card or voting instruction form and following the instructions at www.proxyvote.com. If you have already voted previously by telephone or Internet, there is no need to vote again at the annual meeting unless you wish to revoke and change your vote.
Can I vote by telephone or Internet?
For beneficial stockholders with shares registered in the name of a brokerage firm or bank, a number of brokerage firms and banks are participating in a program that offers telephone and Internet voting options. Stockholders should refer to the voting instruction form provided by their brokerage firm or bank for instructions on the voting methods they offer. Registered stockholders with shares registered directly in their names with our transfer agent, Computershare Trust Company, N.A (Computershare), will also be able to vote by telephone and Internet. The accompanying proxy card provides instructions on how to vote via the Internet or by telephone. Submitting a telephonic or Internet vote will not affect your right to vote at the annual meeting should you decide to attend the annual meeting. The telephone and Internet voting procedures are designed to authenticate stockholders identities, to allow stockholders to give their voting instructions, and to confirm that stockholders instructions have been recorded properly.
Who may vote?
The record date for the annual meeting is October 1, 2024. Holders of shares of our common stock issued and outstanding at the close of business on the record date are entitled to vote such shares at the annual meeting. There were 5,410,588 shares of our common stock issued and outstanding as of the record date, all of which are entitled to be voted at the annual meeting. Holders of our common stock are entitled to one vote per share on each matter that will be submitted to stockholders for approval at the annual meeting.
Our Series A convertible preferred stock does not have voting rights. No shares of Series A convertible preferred stock are entitled to be voted at the annual meeting.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
If, as of the record date, your shares were registered directly in your name with our transfer agent, then you are considered a stockholder of record.
If, as of the record date, your shares were held in a stock brokerage account and/or registered in the name of a broker, bank or other organization, then those shares are considered to be held in street name and you are considered the beneficial owner of those shares. As the beneficial owner, you may direct the broker, bank or other organization holding your shares how to vote the shares you beneficially own. You should have received a notice with voting instructions from the broker, bank or other organization that holds those shares. Follow the instructions provided by that broker, bank or other organization to ensure that your vote is counted.
How can I access the proxy materials over the Internet?
The proxy card or voting instruction form included with the proxy materials will contain instructions on how to view the proxy materials on the Internet. Electronic copies of this proxy statement and the 2023 Annual Report are available at www.proxyvote.com.
How can I sign up for the electronic proxy delivery service?
The proxy card or voting instruction form included with the proxy materials will contain instructions on how to request electronic delivery of future proxy materials. Choosing to receive your future proxy materials by email, when we are permitted to provide proxy materials by email under applicable SEC rules, will eliminate the cost of printing and mailing documents and will reduce the associated environmental impact. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
How do I revoke my proxy and change my vote?
You may change your vote or revoke your proxy at any time before the vote at the annual meeting. You may change your vote prior to the annual meeting by executing a valid proxy card bearing a later date and delivering it to us prior to the annual meeting at Eterna Therapeutics Inc., 1035 Cambridge Street, Suite 18A, Cambridge, MA 02141. Only your latest dated proxy we receive at or prior to the annual meeting will be counted. You may also revoke your proxy and change your vote at any time before the final vote at the annual meeting by voting again via the Internet or by telephone. Attendance at the virtual meeting will not by itself revoke a previously granted proxy. If you hold shares in street name and wish to change your vote, you must follow the directions provided by the broker, bank or other organization that holds your shares.
What if I return a proxy card but do not make specific choices?
When you properly submit your proxy, the shares it represents will be voted at the annual meeting in accordance with your directions. If the meeting is adjourned, the proxy holders can vote your shares at the adjourned meeting as well, unless you have revoked your proxy directions. If you submit your executed proxy but do not fill out the voting instructions on the proxy card, the shares represented by your proxy will be voted FOR the election of each of the director nominees named in this proxy statement and FOR each of the Ratification of Auditors Proposal and the Stock Issuance Proposal.
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If any other business is properly presented at the annual meeting for which we did not have notice before the close of business on October 5, 2024, the proxy confers discretionary voting authority to the proxy holders with respect to such business.
What are broker non-votes?
If you hold your shares in street name (i.e., you are a beneficial owner of shares), the broker, bank or other organization that holds your shares may vote your shares only on certain of proposals without receiving voting instructions from you. If you hold your shares in street name and you do not submit voting instructions to the broker, bank or other organization that holds your shares, whether that broker, bank or other organization may exercise its discretion to vote your shares typically depends on whether a particular proposal is considered a routine or non-routine matter under the rules of the New York Stock Exchange applicable to securities intermediaries (even though we are a Nasdaq-listed company).
If you do not provide voting instructions to the broker, bank or other organization that holds your shares, we do not expect that those shares will be voted on any proposal considered a non-routine matter because such broker, bank or other organization typically lacks discretionary authority to vote uninstructed shares on non-routine matters.
On the other hand, we expect the broker, bank or other organization that holds your shares will have discretionary voting authority to vote your shares on proposals considered to be routine matters even if that broker, bank or other organization does not receive voting instructions from you. However, certain brokers, banks or other organizations may elect not to vote shares without an instruction from the beneficial owner even if they have discretionary authority to do so.
Brokers, banks and other organizations may reach conclusions regarding their ability to vote your shares on a particular proposal that differ from our expectations expressed in this proxy statement. Accordingly, we urge you to direct the broker, bank or other organization that holds your shares how to vote your shares on all proposals to ensure that your vote is counted. We expect that brokers, banks and other organizations will vote shares as you have instructed.
A broker non-vote will occur if the broker, bank or other organization that holds your shares cannot vote your shares on a particular matter because it has not received instructions from you and it does not have discretionary voting authority on that matter or because the organization that holds your shares chooses not to vote on a matter for which it does have discretionary voting authority.
What proposals are expected to be considered routine or non-routine matters?
We expect the Election of Directors Proposal and the Stock Issuance Proposal to be considered non-routine matters. We expect the Ratification of Auditors Proposal to be considered a routine matter.
What constitutes a quorum?
The presence at the meeting, virtually or by proxy, of the holders of a majority of the shares of common stock entitled to vote at the meeting will constitute a quorum, permitting the conduct of business at the annual meeting. If less than a majority of such shares of common stock is represented at the annual meeting, the chairman of the meeting may adjourn the annual meeting to another date, time or place. Notice need not be given of the new date, time or place if announced at the annual meeting before an adjournment is taken, unless (i) the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally noticed or (ii) our board of directors fixes a new record date for the annual meeting, in which cases notice of the place, if any, date, and time of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting, shall be given in conformity with our bylaws.
Abstentions and broker non-votes are counted as shares present at the meeting for purposes of determining the presence of a quorum.
We entered into support agreements on September 25, 2024. As of the record date for the meeting, we believe that the stockholder parties thereto owned approximately 48% of the outstanding shares of our common stock. For more information, see Proposal No. 3Stock Issuance ProposalBackgroundSupport Agreements, below.
How many votes are required to approve each proposal and what is the effect of abstentions and broker-non votes?
Election of Directors Proposal
If a quorum is present, the director nominees will be elected by a plurality of the votes cast. Accordingly, the five nominees who receive the most FOR votes will be elected. The holders of our common stock may vote FOR or WITHHOLD authority to vote for any or all of the director nominees. If you WITHHOLD authority to vote with respect to one or more director nominees, your vote will have no effect on the election of such nominees. Broker non-votes will have no effect on the election of directors.
Other Proposals
With respect to the Ratification of Auditors Proposal, if a quorum is present, the proposal will be approved by our stockholders if a majority of the votes cast on such proposal are cast FOR the proposal.
With respect to the Stock Issuance Proposal, if a quorum is present, the proposal will be approved by our stockholders if a majority of the votes cast on such proposal are cast FOR the proposal.
| - 3 - |
Stockholders may vote FOR, AGAINST or ABSTAIN from voting on each of Ratification of Auditors Proposal and the Stock Issuance Proposal. Neither abstentions nor broker non-votes will be treated as votes cast on either of these proposals and therefore will have no effect on the outcome of these proposals. We expect the Ratification of Auditors Proposal to be considered a routine matter, and because brokers, banks and other organizations typically may vote in their discretion on routine matters, we do not expect broker non-votes on the Ratification of Auditors Proposal.
What does it mean if I receive more than one Notice of Internet Availability?
If you receive more than one Notice of Internet Availability, your shares may be registered in more than one name or held in different registered accounts. Please follow the voting instructions on each Notice of Internet Availability to ensure that all of your shares are voted.
Am I entitled to dissenters rights or appraisal rights?
No. Our stockholders are not entitled to dissenters rights or appraisal rights on any of the matters being submitted to stockholders at the annual meeting.
How can I find out the voting results?
Preliminary voting results will be announced at the meeting. Final voting results will be published in a current report on Form 8-K that we expect to file with the SEC within four business days after the meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.
Who tabulates the votes?
We will select an inspector of election for the meeting. Such inspector will determine the number of shares of common stock represented at the meeting, the existence of a quorum and the validity and effect of proxies, and will receive, count and tabulate ballots and votes and determine the results thereof.
Who pays the cost of this proxy solicitation?
The Company is making this solicitation. We pay the cost of soliciting your proxy, and we reimburse brokerage firms and others for forwarding proxy materials to you. Our directors, officers and employees may participate in the solicitation of proxies without additional consideration. We may engage the services of a professional proxy solicitation firm to aid in the solicitation of proxies from certain brokers, bank nominees, and other institutional owners. Our costs for such services, if retained, will not be significant.
Will a list of stockholders entitled to vote at the meeting be available?
A list of stockholders entitled to vote at the annual meeting will be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least 10 days before the meeting during ordinary business hours at our principal place of business.
When are stockholder proposals and director nominations due for next years annual meeting?
Under our bylaws, a stockholder must follow certain procedures to bring an item of business before an annual meeting of stockholders or to nominate persons for election as directors. For business to be properly brought before next years annual meeting by a stockholder or for a stockholder to properly nominate a person for election to our board of directors at next years annual meeting, the stockholder must have given timely notice thereof in writing to our corporate secretary and comply with the requirements relating to stockholder proposals and director nominations in our bylaws. To be timely, a stockholders notice must be delivered to or mailed and received at our principal executive offices no later than June 9, 2025. Any stockholder notice received after June 9, 2025 will be considered untimely. However, if the date of next years annual meeting is advanced more than 30 days before or delayed by more than 30 days after the anniversary of this years annual meeting, then notice by the stockholder to be timely must be so delivered not later than the close of business on the later of the 90th day before next years annual meeting or the 10th day following the day on which we first make a public announcement of the date of next years meeting. Stockholders are advised to review our bylaws, which contain additional requirements relating to stockholder proposals and director nominations, including who may submit them and what information must be included.
In addition to satisfying the requirements of our bylaws, for stockholder nominees for directors to be considered timely for inclusion on a universal proxy card pursuant to Rule 14a-19 under the Exchange Act, stockholders must provide notice to us no later than June 9, 2025, containing the information required by, and otherwise comply with the requirements of, Rule 14a-19 under the Exchange Act. However, if the date of next years annual meeting is changed by more than 30 days from the anniversary of this years annual meeting, then notice by the stockholder to be timely must be so delivered not later than the close of business on the later of the 90th day before next years annual meeting or the 10th day following the day on which we first make a public announcement of the date of next years meeting.
In order for a stockholder proposal to be included in our proxy materials for consideration at next years annual meeting under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the Exchange Act), the stockholder seeking to include such proposal must comply with the applicable provisions in our bylaws and SEC rules and regulations, each as then in effect, and such proposal must be received at our principal executive offices no later than June 9, 2025 (which is 120 calendar days before the first anniversary of the date our proxy statement was released to stockholders in connection with this years annual meeting). If we change the date of next years annual meeting of stockholders by more than 30 days from the one-year anniversary of the date of this years annual meeting, then the deadline will be reasonable time before we begin to print and send our proxy materials for next years annual meeting.
Our principal executive offices are currently located at 1035 Cambridge Street, Suite 18A, Cambridge, MA 02141.
What is householding and how does it work?
We use an SEC-approved procedure called householding. This procedure potentially means extra convenience for stockholders and cost savings for companies. Under this procedure, only one copy of the Notice of Internet Availability, and if applicable, Notice of Annual Meeting of Stockholders, Proxy Statement and Annual Report, is sent to stockholders of record who share an address, unless we have received contrary instructions from one of those stockholders. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of the Notice of Internet availability, and if applicable, Notice of Annual Meeting of Stockholders, Proxy Statement and Annual Report, from the other stockholder(s) sharing your address, please direct your written request to Eterna Therapeutics Inc., Attention: Secretary, Eterna Therapeutics Inc., 1035 Cambridge Street, Suite 18A, Cambridge, Massachusetts 02141 or contact us by phone at (212) 582-1199. We undertake to deliver promptly, upon any such oral or written request, a separate copy of the Notice of Internet Availability, and if applicable, Notice of Annual Meeting of Stockholders, Proxy Statement and Annual Report, to a stockholder at a shared address to which a single copy of these documents was delivered. Similarly, if stockholders sharing the same address are receiving multiple copies of the Notice of Internet Availability, or if applicable, Notice of Annual Meeting of Stockholders, Proxy Statement and Annual Report, and such stockholders would like a single copy to be delivered to them in the future, such stockholders may make such a request by contacting us by the means described above.
If you wish to update your participation in householding and you are a beneficial owner who holds shares in street name with a broker, bank or other nominee, you may contact your broker, bank, or other nominee or our mailing agent, Broadridge Investor Communications Solutions, at 1-866-540-7095.
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Directors Executive Officers
The names of our current directors, each of whom is also a nominee for election to our board of directors, and executive officers and their respective ages (as of October 1, 2024), positions, biographies and, in the case of directors, their qualifications to serve as directors, are set forth in the table below and the paragraphs below the table.
| Name | Age | Position | ||
| Sanjeev Luther | 63 | President and Chief Executive Officer and Director | ||
| Dorothy Clarke | 60 | General Counsel and Director | ||
| Sandra Gurrola | 57 | Senior Vice President, Finance | ||
| James Bristol | 78 | Chairman of the Board | ||
| Peter Cicala | 63 | Director | ||
| William Wexler | 65 | Director |
Sanjeev Luther has served as President, Chief Executive Officer and as a member of our board of directors since January 1, 2024. Prior to that, Mr. Luther served as President, Chief Executive Officer and a board member of Cornerstone Pharmaceuticals from November 2017 to December 2023 and as its Chief Operations Officer and Chief Business Officer from December 2014 to November 2017. Prior to that, Mr. Luther served in various leadership roles at Bristol-Myers Squibb, Novartis, Bausch and Lomb and GE Healthcare. Mr. Luther holds an MBA in Marketing and a B.S. in Marketing and Business Administration from the State University of New York at Buffalo.
Mr. Luthers qualifications to serve on our board of directors include his expertise in the healthcare industry, his business training and education, and his extensive experience managing life science companies.
Dorothy Clarke has served as our General Counsel since January 1, 2024 and as a member of our board of directors since August 28, 2023. From April 2002 until November 2022, Ms. Clarke worked at Johnson Johnson (JJ), serving in various roles, including in the law department as a regulatory attorney for pharmaceutical, medical device and consumer businesses, a vice president of law and vice president of regulatory affairs in the medical devices sector, the chief privacy officer of JJ, and a vice president of health care compliance for medical devices and for research and development functions. From November 2023 until February 2024, Ms. Clarke also served as a board member of Comera Life Sciences. Ms. Clarke received a B.A. in history from Wesleyan University and a J.D. from the New York University School of Law.
Ms. Clarkes qualifications to serve on our board of directors include her expertise in the healthcare industry, risk management, regulatory affairs and compliance.
Sandra Gurrola has served as our Senior Vice President of Finance since May 2023 and as our Vice President of Finance from June 2021 until May 2023. Prior to that, she served as the Senior Vice President of eGames.com Holdings, LLC from March 2021 to June 2021 and as a consultant to us. Ms. Gurrola served as Senior Vice President of Finance to NTN Buzztime, Inc. from September 2019 to March 2021 and its Vice President of Finance from 2014 until 2019. From 2009 to 2014, Ms. Gurrola served NTN Buzztime, Inc. in various leadership accounting roles, including Controller, Director of Accounting, and Director of Financial Reporting and Compliance. Previously, she was a senior manager of financial reporting for Metabasis Therapeutics, Inc., a biotechnology company. Ms. Gurrola received a B.A. in English from San Diego State University.
James Bristol has served as a member of our board of directors since October 2023. Dr. Bristol worked for 32 years in drug discovery, research and preclinical development at Schering - Plough Corporation, Parke - Davis, and Pfizer Inc. (Pfizer), serving in various senior research and development roles. From 2003 until his retirement in 2007, Dr. Bristol served as Senior Vice President of Worldwide Drug Discovery Research at Pfizer Global Research Development, where he oversaw 3,000 scientists at seven Pfizer sites as they produced an industry leading number of drug development candidates in 11 therapeutic areas. In 2009, Dr. Bristol joined Frazier Healthcare Partners as a Senior Advisor. Since August 2007, Dr. Bristol has served as a member of the board of directors of Deciphera Pharmaceuticals, and since 2018 he has served as a member of the board of directors of Erasca, Inc., both of which are publicly traded life science companies. Dr. Bristol also served on the board of directors of Ignyta from 2014 until its acquisition by Roche in 2018, and served on the board of directors of SUDO Biosciences, Inc. from June 2021 until December 2023, and of Cadent Therapeutics, Inc. from 2011 until 2020. Dr. Bristol is the author of over 100 publications, abstracts and patents, and he conducted postdoctoral research at the University of Michigan (NIH Postdoctoral Fellow) and at The Squibb Institute for Medical Research. Dr. Bristol holds a Ph.D. in organic chemistry from the University of New Hampshire and a B.S. in Chemistry from Bates College.
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Dr. Bristols qualifications to serve on our board of directors include his vast experience in the biopharmaceutical industry, including in management and as a director, as well as his expertise in drug discovery and development.
Peter Cicala has served as a member of our board of directors since February 2024. Mr. Cicala currently serves as General Counsel for a private biotechnology company, where he has been since March of 2021. In November of 2019, he co-founded Pretzel Therapeutics, Inc., a biotechnology company, and still serves as an executive advisor. From March 2020 until March 2021, Mr. Cicala served as Chief Intellectual Property Counsel for Intercept Pharmaceuticals, Inc. and from March 2014 until November 2019, he served as Chief Patent Counsel for Celgene Corporation, both publicly traded biopharmaceutical companies. Mr. Cicala has practiced law for over 25 years, and also has over 10 years of experience as a medicinal chemist. He received his B.S. in chemistry from Fairleigh Dickinson University and a J.D. from Seton Hall University School of Law.
Mr. Cicalas qualifications to serve on our board of directors include his expertise in pharmaceutical and biotechnology intellectual property law and in strategic management of proprietary technology and products.
William Wexler has served as a member of our board of directors since June 2022. Prior to joining our board of directors, Mr. Wexler worked on over 150 individual projects, serving in various capacities including as Chairman, Chief Executive Officer, Chief Restructuring Officer and other designated roles of senior responsibility. Mr. Wexler has served as the Managing Member of WEXLER Consulting LLC, a management consulting firm, since 2012. From 2012 to 2019, he served in various roles, including as Chairman of the Board, interim Chief Executive Officer, Chief Executive Officer and sole director and stockholder representative of Upstate New York Power Products, Inc., a holding company that owned and operated power plants throughout upstate New York. From 2012 to 2013, Mr. Wexler served as Chief Restructuring Officer of VMR Electronics, LLC, a manufacturer of cable assembly products for the electronics interconnect industry. Prior to that, he served as a Managing Director and national finance practice lead at BBK, Ltd., a turn-around advisory firm, from 2006 to 2011. Mr. Wexler served as group Managing Director of corporate restructuring at Huron Consulting Group, LLC from 2002 to 2005. Previously, he was a Managing Director at Berenson Minella Co., a boutique investment-banking firm, from 2000 to 2002. Between 1986 and 2000 he served as a Senior Director at BNP Paribas, where he established and led Paribas Properties, Inc., a real estate investment arm of the bank, and also where he was a lead officer of the then newly created U.S. asset workout group. Mr. Wexler started his professional career in 1981 in commercial lease brokerage, asset management and investment sales at Jones Lang Wootton (now Jones Lang LaSalle) where he worked until 1986. He earned a B.A. in Political Science from Johns Hopkins University.
Mr. Wexlers qualifications to serve on our board of directors include his experience in investment and senior management roles, as well as his business training and education.
Family Relationships
There are no family relationships between any of our officers or directors.
Involvement in Certain Legal Proceedings
None of our directors or executive officers is involved in any legal proceeding that requires disclosure under Item 401(f) of Regulation S-K.
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Overall Role of the Board. Our common stock is listed on the Nasdaq Capital Market under the symbol ERNA. In accordance with our bylaws and the Delaware General Corporation Law, our business and affairs are managed under the direction of our board of directors. Directors are kept informed of the Companys business through discussions with management, by reviewing materials provided to them and by participating in meetings of our board of directors and its committees.
Our board of directors has adopted Corporate Governance Guidelines that contain general principles regarding the responsibilities and function of our board of directors and of its committees. See Corporate Governance Guidelines, below.
Board Leadership Structure. Our board of directors believes it is appropriate to separate the roles of the chairman of our board of directors and the chief executive officer. The chairman of our board of directors is charged with acting as a liaison between our board of directors and our management team, including oversight of managements implementation of the strategies and directives of our board of directors. Our chief executive officer is responsible for providing general supervision of our affairs and general control of all of our business subject to the ultimate authority of our board of directors.
Risk Oversight . One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure, and our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures. The audit committee also has the responsibility to review with management the process by which risk assessment and management is undertaken, monitor compliance with legal and regulatory requirements, and review the adequacy and effectiveness of our internal controls over financial reporting. Our nominating and corporate governance committee is responsible for periodically evaluating our companys corporate governance policies and systems.
Diversity and Inclusion . Although we do not have a formal diversity policy, our nominating and corporate governance committee, in accordance with its policies and procedures for director candidates, seeks to identify candidates who will enhance the overall diversity of our board of directors.
Board Diversity Matrix as of October 1, 2024
| Total number of directors | 5 | |||||||||||||||
| Female | Male |
Non- Binary |
Did Not Disclose Gender |
|||||||||||||
| Part I: Gender Identity | ||||||||||||||||
| Directors | 1 | 4 | ||||||||||||||
| Part II: Demographic Background | ||||||||||||||||
| African-American or Black | ||||||||||||||||
| Alaskan Native or Native American | ||||||||||||||||
| Asian | 1 | |||||||||||||||
| Hispanic | ||||||||||||||||
| Native Hawaiian or Pacific Islander | ||||||||||||||||
| White | 1 | 3 | ||||||||||||||
| Two or more races or ethnicities | ||||||||||||||||
| LGBTQ+ | ||||||||||||||||
| Did not disclose demographic background | ||||||||||||||||
Corporate Governance Guidelines . Our board of directors strongly supports effective corporate governance and has developed and followed a program of strong corporate governance. Our nominating and corporate governance committee is responsible for overseeing our governance guidelines and reporting and making recommendations to our board of directors concerning corporate governance matters. A copy of our corporate governance guidelines is available under the Governance tab of the Investor Relations section of our website located at www.eternatx.com. The information on our website is not intended to form a part of or be incorporated by reference into this proxy statement.
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Director Independence . Our board of directors undertook a review of the independence of each director. Based on information provided by each director concerning his background, employment, and affiliations, our board of directors determined that our board of directors meets independence standards under the applicable rules and regulations of the SEC and the listing standards of Nasdaq. Our board of directors has affirmatively determined that all of our current directors are independent as defined in the listing standards of Nasdaq, other than Mr. Luther and Ms. Clark, each of whom also an employee. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our Company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director, and the transactions involving them described in the section titled Corporate GovernanceCertain Relationships and Related Party Transactions of this proxy statement.
Code of Ethics . Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. A copy of our Code of Business Conduct and Ethics is available under the Governance tab of the Investor Relations section of our website located at www.eternatx.com. We intend to disclose any changes in our Code of Business Conduct and Ethics or waivers from it that apply to our principal executive officer, principal financial officer, or principal accounting officer by posting such information on the same website or by filing with the SEC a Current Report on Form 8-K, in each case if such disclosure is required by SEC or Nasdaq rules. The information on our website is not intended to form a part of or be incorporated by reference into this Proxy Statement.
Board Committees . Our board of directors has three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance committee. Each committee reports to our board of directors as it deems appropriate and as our board may request. The composition, duties and responsibilities of these committees are set forth below. In the future, our board of directors may establish other committees, as it deems appropriate, to assist it with its responsibilities.
The table below provides current members of each of the standing committees of our board of directors.
| Name |
Audit Committee |
Compensation Committee |
Nominating and Corporate Governance Committee |
|||
| James Bristol | M | M | C | |||
| Peter Cicala | M | M | M | |||
| Willaim Wexler | C | C | M | |||
| C=Chair; M=Member |
Each member of our audit committee meets the requirements for independence of audit committee members under applicable Nasdaq and SEC rules, including Rule 10A-3 promulgated under the Exchange Act, and meets the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. Mr. Wexler qualifies as an audit committee financial expert, as such term is defined in Item 407 of Regulation S-K.
Each member of our compensation committee is independent, as defined under the Nasdaq listing rules, including Nasdaqs additional independence standards for compensation committee members. Each member of our compensation committee is a non-employee director (within the meaning of Rule 16b-3 under the Exchange Act).
Each member of our nominating and corporate governance committee is independent as defined under the Nasdaq listing rules.
Audit Committee. We have a standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Our audit committee is responsible for, among other things:
| ● | appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm; | |
| ● | discussing with our independent registered public accounting firm their independence from management; | |
| ● | reviewing, with our independent registered public accounting firm, the scope and results of their audit; | |
| ● | approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm; | |
| ● | overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the quarterly and annual financial statements that we file with the SEC; | |
| ● | overseeing our financial and accounting controls and compliance with legal and regulatory requirements; | |
| ● | reviewing our policies on risk assessment and risk management; | |
| ● | reviewing related person transactions; and | |
| ● | establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters. |
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Compensation Committee. Our compensation committee is responsible for, among other things:
| ● | reviewing and approving the corporate goals and objectives, evaluating the performance and reviewing and approving the compensation of our executive officers; | |
| ● | reviewing and approving or making recommendations to our board of directors regarding our incentive compensation and equity-based plans, policies and programs; | |
| ● | reviewing and approving all employment agreement and severance arrangements for our executive officers; | |
| ● | making recommendations to our board of directors regarding the compensation of our directors; and | |
| ● | retaining and overseeing any compensation consultants. |
Our compensation committee may establish and delegate authority to one or more subcommittees consisting of one or more of its members, when our compensation committee deems it appropriate to do so in order to carry out its responsibilities. In carrying out its responsibilities, our compensation committee is entitled to rely upon the advice and information that it receives in its discussions and communications with management and such experts, advisors and professionals with whom our compensation committee may consult.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee is responsible for, among other things:
| ● | identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors; | |
| ● | overseeing succession planning for our executive officers; | |
| ● | periodically reviewing our board of directors leadership structure and recommending any proposed changes to our board of directors; | |
| ● | overseeing periodic evaluations of the effectiveness of our board of directors and its committees; and | |
| ● | developing and recommending to our board of directors a set of corporate governance guidelines. |
Committee Charters. Our board of directors has adopted a written committee charter for each of its standing committees. Our board of directors has also adopted written corporate governance guidelines. The charters of each standing committee of our board of directors and the corporate governance guidelines are available under the Governance tab of the Investor Relations section of our website located at www.eternatx.com. The information on our website is not intended to form a part of or be incorporated by reference into this proxy statement.
Board and Committee Meetings; Meeting Attendance . Our board of directors and its committees meet regularly during the year, and they hold special meetings and act by unanimous written consent as circumstances require. Independent directors meet at regularly scheduled executive sessions without management present. During 2023, our board of directors held 17 meetings, our audit committee held five meetings; our compensation committee held three meetings; and our nominating and corporate governance committee did not hold any meetings but took action by written consent three times. During 2023, each director attended at least 75% of the aggregate of the total number of board meetings and the total number of meetings held by all committees of our board of directors on which he or she served.
Although we do not have a formal policy with respect to the attendance of directors at our annual stockholder meetings, we encourage all of our directors to attend our annual stockholder meetings.
Director Nominations . Our nominating and corporate governance committee may solicit recommendations for director nominees from any or all of the following sources: non-management directors, our chief executive officer, other executive officers, third-party search firms, or any other source it deems appropriate, including stockholders. Our nominating and corporate governance committee will evaluate all such proposed director candidates in the same manner, with no regard to the source of the initial recommendation of such proposed director candidate. In identifying and evaluating proposed director candidates, our nominating and corporate governance committee considers, in addition to the minimum qualifications and other criteria for board membership, all facts and circumstances that it deems appropriate or advisable, including, among other things:
| ● | the skills of the proposed director candidate; | |
| ● | his or her depth and breadth of business experience; | |
| ● | whether the nominee would help achieve a mix that represents a diversity of background and experience, inclusive of gender, race, ethnicity, age, gender identity, gender expression and sexual orientation or other background characteristics; | |
| ● | his or her independence; and | |
| ● | the needs of our board of directors. |
Our nominating and corporate governance committee will consider candidates recommended by our stockholders holding at least three percent of our common stock continuously for at least 24 months prior to the date of the submission of the recommendation in the same manner as candidates recommended from other sources.
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Although we have not adopted a formal policy regarding the consideration of director nominees recommended by our stockholders, our board of directors believes that the procedures set forth in our bylaws are currently sufficient and that the establishment of a formal policy is not necessary. Without limiting the requirements contained in our bylaws, the recommendation must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class and number of shares of our capital stock that are owned beneficially or of record by the person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) and (E) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice (A) the name and record address of such stockholder as they appear on our books, (B) the class and number of shares of our capital stock that are owned beneficially and of record by such stockholder and the beneficial owner, if any, on whose behalf the nomination is made and (C) any material interest of the stockholder in such nomination. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.
While we do not have a formal diversity policy with respect to the composition of our board of directors, our board believes it is important for our board to have diversity of knowledge base, professional experience and skills, and our corporate governance and nominating committee takes these qualities into account when considering director nominees for recommendation to our board. We believe diversity of perspectives and experience enhances our effectiveness. Given our commitment to diversity and related considerations in our appointment, hiring, and promotion practices, we have not adopted a formal diversity policy or specific diversity targets for determining board membership or executive appointments. However, our board remains committed to monitoring best practices and corporate governance developments in this area.
Management Succession . As reflected in the charter of our nominating and corporate governance committee, one of primary responsibilities of our board of directors includes planning for CEO succession and monitoring and advising on managements succession planning for our other key officers, with the goal of establishing an effective succession plan. Our nominating and corporate governance committee and board of directors have not yet established a formal succession plan for our CEO, but our board routinely discusses management succession during the course of its meetings, including during sessions held by our non-management directors, and our nominating and corporate governance committee has identified individuals who would be able to undertake the CEOs duties on an interim basis if necessary.
Communicating with us and our board of directors . All interested parties, including stockholders, may communicate with us or our board of directors by writing to Eterna Therapeutics Inc., Attention: Secretary, 1035 Cambridge Street, Suite 18A, Cambridge, Massachusetts 02141, or by e-mail to Sandra.Gurrola@eternatx.com. Interested parties may also communicate with our board of directors by calling (212) 582-1199. This centralized process assists our board of directors in reviewing and responding to communications in an appropriate manner. If an interested party would like the letter to be forwarded directly to the chairman of our board, the members of the standing committees of our board, they should so indicate. If no specific direction is indicated, our corporate secretary will review the written communication and forward it to the appropriate board member(s).
Hedging Policy . Under our insider trading policy, none of our or our subsidiaries directors, officers, employees, family members of such persons, or trusts, corporations or other entities controlled by such persons may engage in any hedging transactions (including variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of our equity securities. For purposes of our insider trading policy, the term family members includes, with respect to our directors, officers and employees, their spouses, their minor children, adult family members who reside with them (including adult children away at school), anyone else who shares the same household with them and any immediate family members and family members who do not share the same household with them but whose transactions in our securities are directed by them or are subject to their influence or control.
Certain Relationships and Related Party Transactions
Except as set forth below and as described in the Stock Issuance Proposal, since January 1, 2022, there has not been nor are there currently proposed any transactions or series of similar transactions to which we were or are to be a party in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any director, executive officer, holder of more than 5% of the common stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
Agreements with Factor Bioscience Inc. and Affiliates
The Company has or had the agreements described below with Factor Bioscience Inc. and/or Dr. Matthew Angel. These agreements have been deemed related party transactions because the Companys former chief executive officer, Dr. Angel, is the chairman and chief executive officer of Factor Bioscience Inc. and a director of its subsidiary, Factor Bioscience Limited (Factor Limited and together with Factor Bioscience Inc. and its other affiliates, Factor Bioscience). Dr. Angel resigned as the Companys chief executive officer effective December 31, 2023.
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In September 2022, the Company entered into a Master Services Agreement (the MSA) with Factor Bioscience, pursuant to which Factor Bioscience agreed to provide services to the Company as agreed between the Company and Factor Bioscience and as set forth in one or more work orders under the MSA, including the first work order included in the MSA (WO1). The MSA contains customary confidentiality provisions and representations and warranties of the parties, and the MSA may be terminated by either party upon 30 days prior notice, subject to any superseding termination provisions contained in a particular work order.
Under WO1, Factor Bioscience agreed to provide the Company with mRNA cell engineering research support services, including access to certain facilities, equipment, materials and training, and the Company agreed to pay Factor Bioscience an initial fee of $5.0 million, payable in 12 equal monthly installments of approximately $0.4 million. Of the $5.0 million, the Company allocated $3.5 million to the License Fee Obligation (as defined below). Following the initial 12-month period, the Company agreed to continue paying Factor Bioscience the monthly fee of $0.4 million until such time as WO1 is terminated. Upon entering into the MSA, the Company paid a deposit of $0.4 million, which will be applied to the last month of WO1. Under the terms of an amendment to WO1, the Company may terminate WO1 on or after the second anniversary of the date of the MSA, subject to providing Factor Bioscience with 75 days prior notice if such notice is provided no later than June 30, 2024. On June 26, 2024, the Company provided Factor Bioscience with its notice to terminate WO1, which will be effective on September 9, 2024.
In connection with entering into the MSA, Factor Limited entered into a waiver agreement with Eterna LLC, pursuant to which Factor Limited agreed to waive payment of $3.5 million otherwise payable to it (the License Fee Obligation) in October 2022 by Eterna LLC under the exclusive license agreement entered into in April 2021 by and among Eterna LLC, Novellus Limited and Factor Limited (the Original Factor License Agreement). Under the terms of the waiver agreement, the License Fee Obligation is waived conditionally on the Company paying Factor Bioscience a minimum of $3.5 million due under the MSA.
Because the License Fee Obligation was conditionally waived until the Company paid Factor Bioscience a minimum of $3.5 million under the MSA, the Company recorded a liability of $3.5 million. As of December 31, 2023, there was approximately $1.2 million of the unamortized License Fee Obligation remaining, which is recorded on the accompanying consolidated balance sheet in the due to related party, current line item.
In September 2022, Novellus Inc. (Novellus) and the Company entered into a Second Amendment to the Limited Waiver and Assignment Agreement (the Waiver and Assignment Agreement) with Drs. Matthew Angel and Christopher Rohde (the Founders) whereby the Company agreed to be responsible for all future, reasonable and substantiated legal fees, costs, settlements and judgments incurred by the Founders, the Company or Novellus. for certain claims and actions and any pending or future litigation brought against the Founders, Novellus and/or the Company by or on behalf of the Westman and Sowyrda legal matters described in Note 13 (the Covered Claims). The Founders will continue to be solely responsible for any payments made to satisfy a judgement or settlement of any pending or future wage act claims. Under the Waiver and Assignment Agreement, the Founders agreed that they are not entitled to, and waived any right to, indemnification or advancement of past, present or future legal fees, costs, judgments, settlement or other liabilities they may have been entitled to receive from the Company or Novellus in respect of the Covered Claims. The Company and the Founders will share in any recoveries up to the point at which the parties have been fully compensated for legal fees, costs and expenses incurred, with the Company retaining any excess recoveries. The Company has the sole authority to direct and control the prosecution, defense and settlement of the Covered Claims.
In November 2022, following the expiration of one of the milestone deadlines for certain regulatory filings required under the Third Amended and Restated Exclusive License Agreement between Novellus Limited and Factor Limited entered into in November 2020 (the Novellus-Factor License Agreement), which permitted Factor Limited to terminate the license granted to Novellus Limited thereunder, the Company entered into the first amendment to the Original Factor License Agreement (as amended, the 2021 Factor License Agreement), pursuant to which, among other things, Factor Limited granted to Eterna LLC an exclusive, sublicensable license under certain patents owned by Factor Limited (the Factor Patents) for the purpose of identifying and pursuing certain opportunities to grant to third parties sublicenses to the Factor Patents. The Original Factor License Agreement also (i) terminated the Novellus-Factor License Agreement, (ii) confirmed Factor Limiteds grant to Eterna LLC of the rights and licenses Novellus Limited previously granted to Eterna LLC under the Novellus-Factor License Agreement on the same terms and conditions as granted by Novellus Limited to Eterna LLC under such agreement, (iii) confirmed that the sublicense granted by Novellus Limited in accordance with the Novellus-Factor License Agreement to NoveCite, Inc., a company which the Company has a 25% non-controlling interest (NoveCite), survived termination of the Novellus-Factor License Agreement; and (iv) removed Novellus Limited from the Original Factor License Agreement and the license agreement entered into on October 6, 2020 between Novellus Limited and NoveCite, Inc, as amended, and replaced Novellus Limited with Factor Limited as the direct licensor to Eterna LLC and NoveCite under such agreements, respectively.
On February 20, 2023, the Company, entered into an exclusive license agreement (the Feb 2023 Factor Exclusive License Agreement) with Factor Limited, pursuant to which Factor Limited granted to the Company an exclusive, sublicensable, worldwide license under certain patents owned by Factor Limited for the purpose of, among other things, identifying and pursuing certain opportunities to develop products in respect of such patents and to otherwise grant to third parties sublicenses to such patents. The Feb 2023 Factor Exclusive License Agreement, which terminated and superseded the Amended Factor License Agreement, was subsequently terminated and superseded by the AR Factor License Agreement (as defined below).
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On November 14, 2023, the Company entered into an amended and restated exclusive license agreement (the AR Factor License Agreement) with Factor Limited to replace in its entirety the exclusive license agreement between the parties dated February 20, 2023 and the amendment thereto. Under the terms of the AR Factor License Agreement, Factor Limited granted to the Company an exclusive, sublicensable license under certain patents owned by Factor Limited (the Factor Patents). The AR Factor License Agreement also provides for, among other things, the expansion of the Companys license rights to include (i) the field of use of the Factor Patents to include veterinary uses (ii) know-how that is necessary or reasonably useful to practice to the licensed patents, (iii) the ability to sublicense through multiple tiers (as opposed to only permitting a direct sublicense) and (iv) the transfer of technology to the Company, subject to the use restrictions in the AR Factor License Agreement. The term of the AR Factor License Agreement expires on November 22, 2027, but will be automatically extended for an additional five years (such period, the Renewal Term) if the Company pays at least $6.0 million to Factor Limited from fees from sublicenses to the Factor Patents (Sublicense Fees), other cash on hand or a combination of both sources of funds. The Company will pay to Factor Limited 20% of any Sublicense Fee received by the Company during the term of the AR Factor License Agreement. Beginning in September 2024, the Company will also begin paying Factor Limited a monthly maintenance fee of approximately $0.4 million until the expiration of the AR Factor License Agreement, including any Renewal Term. The Company may terminate the AR Factor License Agreement upon 120 days written notice to Factor Limited, and both parties have additional customary termination rights. Under the AR Factor License Agreement, the Company is obligated to pay the expenses incurred by Factor Limited in preparing, filing, prosecuting and maintaining the Factor Patents and the Company agreed to bear all costs and expenses associated with enforcing and defending the Factor Patents in any action or proceeding arising from pursuit of sublicensing opportunities under the license granted under the AR Factor License Agreement.
On September 24, 2024, the Company entered into an Exclusive License and Collaboration Agreement (the LC Agreement) effective as of September 9, 2024, with Factor Limited, which terminated and superseded the AR Factor License Agreement in its entirety. Under the LC Agreement, the Company has obtained an exclusive license 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 LC Agreement also provides for certain services and materials to be provided by Factor 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 LC Agreement is one year after the effective date, and it automatically renews yearly thereafter. The Company may terminate the LC Agreement for any reason upon 90 days written notice to Factor Limited, and the parties otherwise have customary termination rights, including in connection with certain uncured material breaches and specified bankruptcy events.
Pursuant to the LC Agreement, the Company will pay Factor Limited approximately $0.2 million per month for the first twelve months, $50,000 per month for the first nine months toward patent costs, certain milestone payments, royalty payments on net sales of commercialized products and sublicensing fee payments.
Exacis Asset Acquisition
On April 26, 2023, the Company entered into an asset purchase agreement (the Exacis Purchase Agreement), with Dilos Bio (fka Exacis Biotherapeutics Inc. (Exacis)), the stockholders party thereto and, with respect to specified provisions therein, Factor Limited (the Exacis Acquisition). Pursuant to the Exacis Purchase Agreement, the Company acquired from Exacis substantially all of Exacis intellectual property assets (the Exacis Assets), including all of Exacis right, title and interest in and to an exclusive license agreement by and between Exacis and Factor Limited (the Purchased License). The Company assumed none of Exacis liabilities, other than liabilities under the Purchased License that accrue subsequent to the closing date. As a result of the LC Agreement with Factor Limited, effective September 9, 2023, the Purchased License was terminated.
The Exacis Acquisition was deemed a related party transaction because Dr. Gregory Fiore, who was the chief executive officer of Exacis at the time of the Exacis Acquisition, was also a member of the Companys board of directors at the time of the Exacis Acquisition. Additionally, Dr. Angel, who was the Companys chief executive officer at the time of the Exacis Acquisition, was chairman of Exacis scientific advisory board, and an affiliate of Factor Bioscience was the majority stockholder of Exacis at the time of the Exacis Acquisition.
In October 2022, the Company entered into an Option Agreement on October 8, 2022 with Exacis (the Exacis Option Agreement), pursuant to which Exacis granted the Company the option to negotiate and enter into an exclusive worldwide license to certain of the technology licensed by Exacis for the treatment of cancer in humans. The Exacis Option Agreement provided for the Company paying Exacis a fee of $250,000 for the option, which would be creditable against the fees or purchase price payable under any such license if entered into by the Company in accordance with Exacis Option Agreement. The Company did not exercise the option, and the Exacis Option Agreement terminated on December 31, 2022.
Consulting Agreement with Former Director
In May 2023, the Company entered into a consulting agreement with Dr. Fiore, whereby Dr. Fiore agreed to provide business development consulting services to the Company for a monthly retainer of $20,000. The consulting agreement was terminable for any reason by either party upon 15 days written notice. The Company terminated the consulting agreement, effective July 31, 2023. Dr. Fiore served on the Companys board of directors from June 2022 to October 4, 2023.
July 2023 and December 2023 Financings
Investors in the July 2023 convertible note financing included Brant Binder, Richard Wagner, Charles Cherington and Nicholas Singer, and investors in the December 2023 convertible note financing included Messrs. Cherington and Singer. Each of them participated in the applicable financing under the same terms and subject to the same conditions as all the other investors. See Note 6 for additional information regarding the financings. Mr. Binder served on the Companys board of directors from July 6, 2023 to August 8, 2023, Mr. Wagner served on the Companys board of directors from July 6, 2023 to August 8, 2023, Mr. Cherington served on the Companys board of directors from March 2021 to July 6, 2023, and Mr. Singer served on our board of directors from March 25, 2021 to April 16, 2021 and from June 2022 to July 6, 2023.
Q4 2022 PIPE
In November 2022, the Company entered into a securities purchase agreement with certain investors providing for the issuance of approximately of 2,185,000 units, each unit consisting of (i) one share of the Companys common stock and (ii) two warrants to purchase shares of the Companys common stock, at a purchase price of $3.53 per unit. The financing closed in December 2022. Messrs. Cherington and Singer invested in the financing on the same terms and subject to the same conditions as all other investors in the financing. Mr. Cherington served on the Companys board of directors from March 2021 to July 6, 2023, and Mr. Singer served on our board of directors from March 25, 2021 to April 16, 2021 and from June 2022 to July 6, 2023.
Related Party Transaction Policy
Our audit committee is responsible for the review, approval, or ratification of any potential conflict of interest transaction involving any of our directors or executive officers, director nominees, any person known by us to be the beneficial owner of more than 5% of our outstanding capital stock, or any family member of or related party to such persons, including any transaction required to be reported under Item 404(a) of Regulation S-K promulgated by the SEC.
In reviewing any such proposed transaction, our audit committee is tasked with considering all relevant facts and circumstances, including the commercial reasonableness of the terms, the benefit or perceived benefit, or lack thereof, to us, opportunity costs of alternate transactions, the materiality and character of the related persons direct or indirect interest and the actual or apparent conflict of interest of the related person.
Under our policy, employees are required to report any material transaction or relationship that could result in a conflict of interest to our compliance officer.
All transactions disclosed above were approved by our audit committee in accordance with our related party transaction policy.
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The following report of the audit committee does not constitute soliciting material and should not be deemed filed with the SEC nor shall this information be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a filing.
Our audit committee consists of Chair, William Wexler, and members, James Bristol and Peter Cicala. Our board of directors has determined that each audit committee member is independent, as independence for audit committee members is defined in the applicable Nasdaq listing standards and rules of the SEC. Our board also determined that all members of the audit committee are financially literate, and Mr. Wexler has been designated as an audit committee financial expert, as such term is defined in Item 407 of Regulation S-K. Although designated as audit committee financial expert, the audit committee chair and members are not accountants for the Company nor, under SEC rules, an expert for purposes of the liability provisions of the Securities Act or for any other purpose.
The role of the audit committee is to (a) oversee the accounting and financial reporting processes of the Company and the audits of the Companys financial statements; (b) oversee the Companys compliance with legal and regulatory requirements; (c) oversee the performance of the Companys internal audit function; (d) take, or recommend that our board take, appropriate action to oversee the qualifications, independence and performance of the Companys independent registered public accounting firm; and (e) prepare the report required by the rules of the SEC to be included in the Companys annual proxy statement.
Our audit committee influences the overall tone for quality financial reporting, sound internal controls, and ethical behavior. Management is responsible for the preparation, presentation and integrity of the Companys financial statements, for the appropriateness of the accounting and reporting policies that are used by the Company, and for the establishment and effectiveness of internal controls and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing the Companys consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), expressing an opinion as to the conformity of such financial statements with generally accepted accounting principles, and for reviewing the Companys interim consolidated financial statements.
The independent registered public accounting firm reports directly to our audit committee. Our audit committee has the sole authority and responsibility to recommend to our board the nomination of the independent registered public accounting firm for approval by the stockholders on an annual basis. Our audit committee is directly responsible for the appointment, retention, termination, compensation, retention, evaluation and oversight of the work of the independent registered public accounting firm for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company.
In 2023, our audit committee met and held discussions with management and Grant Thornton, the Companys independent registered public accounting firm. Our audit committee discussed with management and Grant Thornton the Companys audited consolidated financial statements and policies and procedures designed to reduce the likelihood of events of non-compliance with rules and regulations, including discussions of the quality, not just the acceptability, of accounting policies and principles, significant judgments and estimates, system of internal control over financial reporting, and clarity of disclosures, including items reported as Critical Auditing Matters in the report of the independent registered public accounting firm. Our audit committee reviewed the annual plan and scope of work to be performed by Grant Thornton, and met outside of the presence of management with Grant Thornton to discuss their respective audit results, any material weakness or significant deficiencies noted as a result of the audit, and the overall quality of the Companys financial reporting. Consistent with the requirements of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder, our audit committee discussed with Grant Thornton those matters required to be discussed pursuant to PCAOB Auditing Standard 1301, Communications with Audit Committees, and the rules of the SEC, and reviewed a letter from Grant Thornton disclosing such matters.
Our audit committee also discussed with Grant Thornton the firms independence from the Company and its management team and reviewed the written disclosures and letter from Grant Thornton pursuant to applicable requirements of the PCAOB regarding the independent registered public accounting firms communications with our audit committee concerning independence, and considered the compatibility of non-audit services, if any, with Grant Thorntons independence.
Based upon the reports and discussions described above, our audit committee, in accordance with its responsibilities, recommended to our board that the audited consolidated financial statements be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2023.
AUDIT COMMITTEE
William Wexler (Chair)
James Bristol
Peter Cicala
| - 13 - |
The following table sets forth information known to us regarding beneficial ownership of common stock as of October 1, 2024 (the Measurement Date) by:
| ● | each person known by us to be the beneficial owner of more than 5% of outstanding common stock; | |
| ● | each of our named executive officers and directors; and | |
| ● | all of our executive officers and directors as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days after the Measurement Date. In computing the number of shares beneficially owned by a person or entity and the percentage ownership of that person or entity in the table below, all shares subject to options, warrants and restricted stock units held by such person or entity were deemed outstanding if such securities are currently exercisable, or exercisable or would vest based on service-based vesting conditions within 60 days of the Measurement Date, assuming that the liquidity event vesting conditions had been satisfied as of such date. These shares were not deemed outstanding, however, for the purpose of computing the percentage ownership of any other person or entity.
The beneficial ownership of our common stock is based on 5,410,588 shares of our common stock outstanding as of the Measurement Date.
Unless otherwise indicated, we believe that each person named in the table below has sole voting and investment power with respect to all shares of common stock beneficially owned by him.
Unless otherwise noted, the business address of each of these stockholders is c/o Eterna Therapeutics, Inc., 1035 Cambridge Street, Suite 18A, Cambridge, MA 02141.
| Name and Address of Beneficial Owner |
Common Shares Beneficially Owned |
Percentage of Common Shares Beneficially Owned |
Series A Convertible Preferred Stock Beneficially Owned |
Percentage of Series A Convertible Preferred Stock Beneficially Owned |
Percentage of Total Voting Power |
|||||||||||||||
| Greater than 5% Stockholders: | ||||||||||||||||||||
| Charles Cherington (1)^ | 1,212,752 | 19.99 | % | 71,306 | 45.7 | % | 19.99 | % | ||||||||||||
| George Denny Estate (2)^ | 1,237,529 | 19.99 | % | 71,306 | 45.7 | % | 19.99 | % | ||||||||||||
| Freebird Partners LP (3)^ | 1,283,683 | 19.99 | % | 19.99 | % | |||||||||||||||
| Nicholas J. Singer (4)^ | 600,480 | 9.99 | % | 9.99 | % | |||||||||||||||
| IAF, LLC (5)^ | 576,899 | 9.99 | % | 9.99 | % | |||||||||||||||
| John Halpern (6)^ | 550,282 | 9.99 | % | 9.99 | % | |||||||||||||||
| Named Executive Officers and Directors: | ||||||||||||||||||||
| Matthew Angel | 174,482 | 3.22 | % | 3.22 | % | |||||||||||||||
| Sandra Gurrola (7) | 6,273 | * | * | |||||||||||||||||
| Andrew Jackson | ||||||||||||||||||||
| James Bristol | ||||||||||||||||||||
| Dorothy Clarke (8) | 46,812 | * | * | |||||||||||||||||
| Peter Cicala | ||||||||||||||||||||
| Sanjeev Luther | ||||||||||||||||||||
| William Wexler (8) | 15,895 | * | * | |||||||||||||||||
| AlAll current directors and executive officers as a group (6 persons) (9) | 68,980 | 4.49 | % | 4.49 | % | |||||||||||||||
| * | Less than 1% |
| - 14 - |
| ^ | The securities beneficially owned by this stockholder include warrants and convertible notes that include a 9.99% or 19.99% blocker. The number of common shares beneficially owned, the percentage of common shares beneficially owned and the percentage of total voting power shown in the table gives effect to such blocker. Pursuant to the terms of the warrants and convertible notes, the number of shares of common stock that may be acquired by the holder thereof upon exercise of the warrants and/or conversion of the convertible notes is limited, to the extent necessary, to ensure that following such exercise and/or conversion, the number of shares of common stock then beneficially owned by the holder and any other persons or entities whose beneficial ownership of common stock would be attributed to the holder for purposes of Section 13(d) of the Exchange Act does not exceed 9.99% or 19.99%, as the case may be, of the total number of shares of our common stock then outstanding. Upon delivery of a written notice to us, the holder may from time to time increase (with such increase not effective until the 61st day after delivery of such notice) or decrease the blocker to any other percentage not in excess of 9.99%. |
| (1) | The number of common shares beneficially owned consists of (i) 556,465 shares of common stock, (ii) 8,587 shares of common stock issuable upon the conversion of shares of Series A convertible preferred stock (assuming a conversion rate of 8.3038 per share) and (iii) 647,700 shares of common stock issuable upon exercise of warrants and/or the conversion of convertible notes. Mr. Cheringtons address is c/o Ara Partners, LLC, 200 Berkeley Street, 26 th Floor, Boston, MA, 02116. |
| (2) |
Denny Family Partners II, LLC owns 50,453 shares of common stock and the George Denny III Trust dated 6/11/1981 (the Denny Trust) owns 406,785 shares of common stock. Amos Denny is the managing partner of Denny Family Partners II, LLC and in such capacity has the sole voting and dispositive power over the shares owned by such entity. Amos Denny disclaims beneficial ownership of the shares held by Denny Family Partners II, LLC except to the extent of his pecuniary interest therein. The Denny Trust has four trustees who share voting and dispositive power over the shares owned by the Denny Trust. Each of the trustees disclaims beneficial ownership of the shares held by the Denny Trust except to the extent of their respective pecuniary interest therein, if any. The address for each of the Denny Family Partners II, LLC and Denny Trust is PO Box 423, Poland, ME 04274.
The number of common shares beneficially owned consists of (i) 457,442 shares of common stock, (ii) 8,587 shares of common stock issuable upon the conversion of shares of Series A convertible preferred stock (assuming a conversion rate of 8.3038 per share) and (iii) 771,500 shares of common stock issuable upon exercise of warrants and/or the conversion of convertible notes. |
| (3) | The number of common shares beneficially owned consists of (i) 272,583 shares of common stock and (ii) 1,011,100 shares of common stock issuable upon exercise of warrants and/or the conversion of convertible notes. Freebird Investments LLC serves as the general partner of Freebird Partners LP. Mr. Curtis Huff is the sole member and 100% owner of Freebird Investments LLC, the President of Freebird Partners LP and the Managing Member of Freebird Investments LLC. By virtue of these relationships, each of Freebird Investments LLC and Mr.Huff may be deemed to share beneficial ownership of the securities held of record by Freebird Partners LP. The principal business address of Freebird Partners LP is 2800 Post Oak Blvd, Suite 2000, Houston, Texas 77056. |
| (4) | The number of common shares beneficially owned consists of shares of common stock issuable upon exercise of warrants and/or the conversion of convertible notes held by Purchase Capital LLC, of which Mr. Singer is the controlling person, or by Pacific Premier Trust as custodian for the benefit of Mr. Singers individual retirement account. The foregoing information has been included in reliance upon, and without independent investigation of, the disclosures contained in the Schedule 13G/A filed by Mr. Singer with the SEC on January 19, 2024. Mr. Singers address is 1395 Brickell Avenue, Suite 800, Miami, FL 33131. |
| (5) | The number of common shares beneficially owned consists of (i) 212,464 shares of common stock and (ii) 364,435 shares of common stock issuable upon exercise of warrants and/or the conversion of convertible notes. IAF, LLC has sole voting and dispositive powers. IAF LLCs address is 115 Church Street, Charleston, SC 29401. |
| (6) | The number of common shares beneficially owned consists of (i) 452,284 shares of common stock held by the John D. Halpern Revocable Trust, of which, Mr. Halpern and Katherine H. Halpern are trustees and (ii) 97,998 shares of common stock issuable upon exercise of warrants and/or the conversion of convertible notes. Mr. Halpern and Ms. Halpern share voting and dispositive powers. Mr. Halperns address is PO Box 540 Portsmouth, New Hampshire 03802. |
| (7) | Includes 5,088 shares of common stock issuable upon exercise of options. |
| (8) | Represents shares of common stock issuable upon exercise of options. |
| (9) | Includes 62,954 shares of common stock issuable upon exercise of options. |
| - 15 - |
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table contains information as of December 31, 2023 with respect to compensation plans under which our equity securities are authorized for issuance.
| Equity Compensation Plan Information | ||||||||||||
| Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted- average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by securityholders (1) | 296,116 | $ | 9.79 | 684,023 | ||||||||
| Equity compensation plans not approved by securityholders (2) | 93,545 | $ | 158.80 | 67,863 | ||||||||
| Total | 389,661 | $ | 45.00 | 751,886 | ||||||||
| (1) | At our 2021 annual meeting of stockholders, our stockholders approved a restatement of the Eterna Therapeutics Inc. Restated 2020 Stock Incentive Plan (the Restated 2020 Plan). The Restated 2020 Plan is a broad-based incentive plan, which allows for the grant of stock options, restricted stock, restricted stock units, performance awards, unrestricted stock awards and similar kinds of equity-based compensation to employees, directors, consultants and prospective employees. |
| (2) | In May 2021, our board of directors adopted our 2021 Inducement Stock Incentive Plan (the 2021 Inducement Plan). The 2021 Inducement Plan was adopted without stockholder approval pursuant to Section 711 of the Company Guide of the NYSE American LLC, the stock exchange on which our common stock was listed at the time the 2021 Inducement Plan was adopted by our board of directors. The 2021 Inducement Plan provides for the grant of equity-based awards, including non-qualified stock options, performance shares, performance units, restricted stock, restricted stock units, and stock appreciation rights. The awards available for grant under the 2021 Inducement Plan are available only to new employees and incentive stock options may not be issued under the 2021 Inducement Plan. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC reports of ownership of, and transactions in, our equity securities. To our knowledge, based solely on a review of copies of such reports that we received, our records and written representations received from our directors, executive officers and certain of those persons who own greater than 10% of any class of our equity securities, for the year ended December 31, 2023, all applicable Section 16(a) filing requirements were complied with on a timely basis, with the exception of Dr. Bristols inadvertent late filing of a Form 3 filed on November 13, 2023 (which reported no transactions or holdings), and which was due on November 9, 2023.
| - 16 - |
Introduction
Overview
When determining executive officer compensation, and the various components that comprise it, our compensation committee evaluates and considers publicly available executive officer compensation survey data to present a competitive compensation package to attract and retain top talent, including an appropriate level of salary, performance-based bonus and equity incentives. Typically, our compensation committee evaluates competitive market benchmark data for a given executive role. Additionally, our compensation committee is authorized to engage outside advisors and experts to assist and advise our compensation committee on matters relating to executive compensation. In 2023, our compensation committee retained the services of Pearl Meyer, an independent compensation consultant, to review the cash and equity compensation package to be offered to Mr. Luther prior to his appointment as our Chief Executive Officer.
Our Chief Executive Officer presents compensation recommendations to our compensation committee with respect to the executive officers other than himself. Our compensation committee considers such recommendations, in conjunction with possible input from our compensation committees independent compensation consultant, in making compensation decisions or recommendations to the full Board. The full Board participates in evaluating the performance of our executive officers, except that our Chief Executive Officer does not participate when our board of directors evaluates his or her performance and is not present during voting or deliberations regarding his or her performance or compensation matters.
Compensation-Related Risk Assessment
Our compensation committee assesses and monitors whether any of our compensation policies and programs are reasonably likely to have a material adverse effect on our Company. Our compensation committee and management do not believe that the Company presently maintains compensation policies or practices that are reasonably likely to have a material adverse effect on the Companys risk management or create incentives that could lead to excessive or inappropriate risk taking by employees. In reaching this conclusion, our compensation committee considered all components of our compensation program and assessed any associated risks. Our compensation committee also considered the various strategies and measures employed by the company that mitigate such risk, including: (i) the overall balance achieved through our use of a mix of cash and equity, annual and long-term incentives and time-and performance-based compensation; (ii) our use of multi-year vesting periods for equity grants; and (ii) the oversight exercised by our compensation committee over performance metrics, if any, established for performance-based bonuses and its administration of our equity incentive plans.
Compensation Recoupment (Clawback) Policy
In 2023, we adopted a clawback policy providing for the recovery of erroneously-awarded incentive-based compensation related to the three fiscal years preceding the date on which the company is required to prepare an accounting restatement. The clawback policy complies with the requirements of Nasdaqs listing rules.
Named Executive Officers
Under applicable SEC rules and regulations, our named executive officers are all individuals who served as our principal executive officer during 2023, our two most highly compensated executive officers (other than our principal executive officer) who were serving as executive officers at December 31, 2023, and up to two additional individuals who would have been one of our top two most highly compensated executive officer had they been serving as an executive officer at the end of 2023. Our 2023 named executive officers are identified in the table below:
| Name | Title | |
| Matthew Angel (1) | Former Chief Executive Officer | |
| Sandra Gurrola | Senior Vice President of Finance | |
| Andrew Jackson (1) | Former Chief Financial Officer |
| (1) | Dr. Angel and Mr. Jackson resigned as our Chief Executive Officer and Chief Financial Officer, respectively, effective December 31, 2023 and May 4, 2023, respectively. |
| - 17 - |
Summary Compensation Table
The following table sets out the compensation for our Named Executive Officers for the years ended December 31, 2023 and December 31, 2022:
| 2023 Summary Compensation Table | ||||||||||||||||||||||||||||||||||||
| Name and Principal Position |
Fiscal Year |
Salary (US$) |
Bonus (US$) |
Stock- Based Awards (US$) (1) |
Option- Based Awards (US$) (1) |
Non-Equity Incentive Plan Compensation (US$) |
Nonqualified deferred compensation earnings (US$) |
All Other Compensation (US$) |
Total Compensation (US$) |
|||||||||||||||||||||||||||
| Matthew Angel, Former Chief Executive Officer and President (2) | 2023 | $ | 350,000 | $ | $ | $ | 461,680 | $ | 13,000 | (3) | $ | $ | ) | $ | 824,680 | |||||||||||||||||||||
| 2022 | $ | $ | 210,959 | (4) | $ | $ | 910,453 | $ | $ | $ | 29,842 | (5) | $ | 1,151,254 | ||||||||||||||||||||||
| Sandra Gurrola, Sr. Vice President of Finance (6) | 2023 | $ | 255,833 | $ | 50,050 | (7) | $ | $ | $ | $ | $ | $ | 305,883 | |||||||||||||||||||||||
| Andrew Jackson, Former Chief Financial Officer (8)) | 2023 | $ | 144,621 | $ | $ | $ | $ | $ | $ | 217,487 | (9) | $ | 362,108 | |||||||||||||||||||||||
| 2022 | $ | 243,679 | $ | $ | $ | 305,466 | $ | $ | $ | $ | 549,145 | |||||||||||||||||||||||||
| 1. | The amounts reported in this column represent the aggregate grant date fair value of stock options granted during the applicable year. These amounts were calculated in accordance with FASB ASC Topic 718, Compensation Stock Compensation, except that any estimate of forfeitures was disregarded. For a description of the assumptions used in computing the dollar amount recognized for financial statement reporting purposes, see Note 15, Stock-Based Compensation, in the Notes to the Consolidated Financial Statements contained in this Annual Report on Form 10-K. Dr. Angel was appointed our Interim Chief Executive Officer and President on May 26, 2022 and to our board of directors effective June 6, 2022. Dr. Angel was appointed our Chief Executive Officer and President on January 1, 2023. Dr. Angel resigned as our Chief Executive Officer and President and from our board of directors effective August 4, 2023 and was reappointed as our Chief Executive Officer and President on August 9, 2023. Dr. Angel subsequently resigned as our Chief Executive Officer and President effective December 31, 2023. |
| 3. | Represents amounts earned pursuant to Dr. Angels employment offer letter equal to two percent of the gross proceeds that we received from an exclusive option and license agreement entered into with a third party. |
| 4. | A cash signing bonus, which represents the salary Dr. Angel would have earned for the period during which he served as interim Chief Executive Officer and President, had Dr. Angels appointment as Chief Executive Officer and President been in effect beginning May 26, 2022. |
| 5. | Represents a reimbursement of legal fees Dr. Angel incurred in connection with entering into his employment offer letter. |
| 6. | Ms. Gurrola has served as our Senior Vice President of Finance since May 2023 and was not a named executive officer for the year ended December 31, 2022. |
| 7. | Represents a discretionary spot bonus paid to Ms. Gurrola and approved by our board of directors. |
| 8. | Mr. Jackson was appointed Chief Financial Officer effective May 31, 2022 and resigned as our Chief Financial Officer effective May 4, 2023. |
| 9. | Includes $207,500 of severance payments, $9,787 in reimbursement payments for COBRA and $200 for cell phone reimbursement. |
Narrative to Summary Compensation Table
The following is a discussion of each component of our executive compensation program for 2023.
Base Salary
Each of our named executive officers receives a base salary. The base salary is the fixed cash compensation component of our executive compensation program and it recognizes individual performance, time in role, scope of responsibility, leadership skills and experience. The base salary compensates an executive for performing his or her job responsibilities on a day-to-day basis. Generally, base salaries are reviewed annually company-wide and adjusted (upward or downward) when appropriate based upon individual performance, expanded duties, changes in the competitive marketplace and, with respect to upward adjustments, if we are, financially and otherwise, able to pay it. We try to offer competitive base salaries to help attract and retain executive talent.
In December 2023, upon the recommendation of our compensation committee, our board of directors approved an increase to Ms. Gurrolas annual base salary from $220,000 to $275,000. In addition, our board of directors approved a lump sum payment of $33,542 to Ms. Gurrola, representing the additional amount of salary Ms. Gurrola would have received had the increase to her annual base salary taken effect as of May 5, 2023.
| - 18 - |
Bonus and Incentive Compensation
In addition to base salaries, our compensation committee has the authority to award discretionary annual bonuses to our named executive officers based on corporate and individual performance. Each year, our compensation committee or our board of directors may establish performance goals, which may be based on measures such as revenue, achievement of certain research and development milestones, completion of a strategic transaction, and other metrics the directors and management believe to provide proper incentives for achieving long-term shareholder value. Our board of directors retains full discretion over performance evaluation and the amount of any bonuses to be paid to a named executive officer. Annual bonuses, if any, are intended to reward the individual performance of each named executive officer. In addition to an assessment of corporate and individual performance, the determination of the amount of a named executive officers bonus may vary from year to year depending on our financial condition and conditions in the industry in which we operate. The amount of such bonuses increase with executive rank so that, as rank increases, a greater portion of total annual cash compensation is based on annual corporate and individual performance.
For the year ended December 31, 2023, no performance goals were established for any named executive officer, however, our compensation committee approved a discretionary spot bonus to be paid to Ms. Gurrola in the amount of $50,050 to reward her individual performance during the year.
Under the terms of his offer, Dr. Angel was eligible to receive a performance bonus equal to two percent of the gross proceeds that we actually received under licensing, option, collaboration, partnership, joint venture, settlement, and similar agreements that we enter into, or other actions, judgments, or orders, that generate cash proceeds to us, that are originated, negotiated and/or entered into by us during Dr. Angels employment, subject to certain conditions. During 2023, Dr. Angel received $13,000 in performance bonus payments as a result of an exclusive option and license agreement we entered into with a third party.
Equity-Based Compensation Programs
Historically we have issued stock options to our employees, including our named executive officers, to provide a means whereby our employees may develop a sense of proprietorship and personal involvement in our development and financial success, and to encourage them to devote their best efforts to us, thereby advancing our interests and the interests of stockholders. Our board of directors believes that the granting of equity awards promotes continuity of management and increases incentive and personal interest in our welfare by those who are primarily responsible for shaping and carrying out our long-range plans and pursuing our growth and financial success.
In 2023, we granted to Dr. Angel a time-based incentive stock option covering 132,003 shares of common stock, of which 110,043 shares vested immediately on the grant date and the remaining 21,960 shares vest in 35 substantially equal monthly installments on the first day of each month thereafter, subject to his continuous service. In connection with Dr. Angels resignation effective December 31, 2023, all unvested options were immediately cancelled, and he has 90 days from the date of termination of his employment to exercise any vested options, at which time any unexercised vested options will be cancelled.
Benefits and Perquisites
Employee Benefit Plans
Named executive officers are eligible to participate in our employee benefit plans, including our medical, disability and life insurance plans, in each case, on the same basis as all of our other employees. Our employee benefit plans are designed to assist in attracting and retaining skilled employees. We also maintain a 401(k) plan for the benefit of our eligible employees, including the named executive officers, as discussed below.
401(k) Plan
We maintain a retirement savings plan, or 401(k) plan, that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Under the 401(k) Plan, eligible employees may defer up to 90% of their compensation subject to applicable annual contribution limits imposed by the Internal Revenue Code of 1986, as amended (the Code), and limits imposed by non-discrimination testing. Our employees pre-tax contributions are allocated to each participants individual account and participants are immediately and fully vested in their contributions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plans related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan. Beginning on January 1, 2023, we began matching employees contributions at a rate of 100% of the first 3% of the employees contribution and 50% of the next 2% of the employees contribution, for a maximum match of 4%.
Pension Benefits
We do not maintain any pension benefit or retirement plans other than the 401(k) Plan.
Nonqualified Deferred Compensation
We do not maintain any nonqualified deferred compensation plans.
Named Executive Officer Employment Agreements and Change in Control Arrangements
The following descriptions summarize the principal terms of our employment agreements with our named executive officers.
| - 19 - |
Matthew Angel
On December 30, 2022, we entered into an offer letter with Dr. Angel effective on January 1, 2023 with respect to terms of his employment as our Chief Executive Officer and President. The compensatory terms of the offer letter, including equity awards, were approved by our compensation committee. Dr. Angels hiring, and his offer letter, were approved by our board of directors.
From May 24, 2022 until he was appointed as Chief Executive Officer and President, Dr. Angel served as our interim Chief Executive Officer and President. Dr. Angel did not receive any salary or other cash compensation during his tenure as interim Chief Executive Officer and President.
Under the terms of his offer letter, we paid Dr. Angel an annual base salary of $350,000. We also paid Dr. Angel a cash signing bonus of $210,959, which represented the salary Dr. Angel would have earned for the period during which he served as interim Chief Executive Officer and President .
Dr. Angel was eligible to receive a performance bonus equal to two percent of the gross proceeds that we actually received pursuant to all licensing, option, collaboration, partnership, joint venture, settlement, other similar agreements that we entered into, or other actions, judgments, or orders that generate cash proceeds to us, that are originated, negotiated and/or entered into by us during Dr. Angels employment (commencing on May 26, 2022), subject to certain conditions.
In accordance with the terms of his offer letter, in January 2023, we granted to Dr. Angel a time-based incentive stock option covering 132,003 shares of common stock, of which 110,043 shares vested immediately on the grant date and the remaining 21,960 shares vest in 35 substantially equal monthly installments on the first day of each month thereafter, subject to his continuous service.
Dr. Angel resigned as our Chief Executive Officer and President effective December 31, 2023. Upon termination of Dr. Angels employment, all unvested options were immediately cancelled, and Dr. Angel has 90 days from the date of termination of his employment to exercise any vested options, at which time any unexercised vested options will be cancelled.
For information on related party transactions with Dr. Angel, see the section titled Corporate GovernanceCertain Relationships and Related Party Transactions of this proxy statement.
Sandra Gurrola
We entered into an employment agreement, dated as of June 16, 2021, with Sandra Gurrola, which provides for our at-will employment of Ms. Gurrola commencing on June 21, 2021 and continuing until terminated by us or Ms. Gurrola. Ms. Gurrolas employment agreement provides for an annual base salary of $220,000, which amount is subject to periodic review by our board of directors or our compensation committee. Ms. Gurrola is also eligible to receive an annual cash bonus award in an amount up to 35% of her base salary upon achievement of agreed upon performance targets. The bonus will be determined by our board of directors or our compensation committee and paid annually by March 15 in the year following the performance year on which such bonus is based.
In accordance with the terms of her employment agreement, in June 2021, Ms. Gurrola was granted 1,750 restricted stock units, 25% of which vests on each anniversary of the grant date over four years. Vesting generally requires Ms. Gurrolas continued employment through the relevant vesting date.
If Ms. Gurrolas employment is terminated by us without Cause (as defined in the employment agreement) or by Ms. Gurrola for Good Reason (as defined in the employment agreement), we will pay Ms. Gurrola all amounts accrued but unpaid as of the effective date of such termination, as well as continuation of her salary and benefits for the following six-month period. Notwithstanding the foregoing, if a termination of employment without Cause or for Good Reason occurs within 90 days before or 12 months after a Change in Control (as defined in the employment agreement), Ms. Gurrola will receive the benefits described in the preceding sentence, but the continuation of her salary and benefits will be for 12-month period, and, in addition, Ms. Gurrola will receive a lump-sum payment of her target bonus and the restricted stock units granted to her in June 2021 will fully vest. Any such severance benefits under the employment agreement are contingent on Ms. Gurrola entering into and not revoking a general release of claims in favor of our company.
Andrew Jackson
We entered into an amended and restated employment agreement, dated as of May 10, 2022, which provided for our at-will employment of Mr. Jackson commencing on May 31, 2022 and continuing until terminated by us or Mr. Jackson. Mr. Jackson resigned as our Chief Financial Officer on May 4, 2023.
Under the terms of his employment agreement, we paid Mr. Jackson an annual base salary of $415,000. Mr. Jackson was also eligible to receive an annual cash bonus award in an amount up to 40% of his base salary upon achievement of agreed upon performance targets. The bonus would be determined by our board of directors or our compensation committee and paid annually by March 15 in the year following the performance year on which such bonus was based.
In accordance with the terms of his employment agreement, Mr. Jackson received a time-based nonqualified stock option covering 33,239 shares of common stock, 25% of which would vest on the first anniversary of the employment agreements effective date, and the remainder would vest ratably on a monthly basis over the three-year period thereafter. Vesting generally required Mr. Jacksons continued employment through the relevant vesting date. Due to Mr. Jacksons termination prior to the first anniversary of the employment agreements effective date, none of the shares subject to such option vested and all 33,239 shares were immediately cancelled upon his termination.
| - 20 - |
We entered into a separation agreement and general release with Mr. Jackson on May 2, 2023, pursuant to which, we paid Mr. Jackson a continuation of his salary for the following six-month period as well as reimbursement of up to six months of his COBRA premiums in exchange for Mr. Jackson entering into and not revoking a general release of claims in favor or our company.
Outstanding Equity Awards at 2023 Fiscal Year-End
The following table summarizes the number of shares of our common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2023.
