On April 5, 2023, Eterna Therapeutics Inc., a Delaware corporation (the “Company”), entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park has
committed to purchase up to $10.0 million of the Company’s common stock, par value $0.005 per share (the “Common Stock”), subject to certain limitations and satisfaction
of the conditions set forth in the Purchase Agreement.
Upon the terms and subject to the satisfaction of the conditions set forth in the Purchase Agreement, the Company has the right,
but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to $10.0 million of Common Stock. Such sales of Common Stock by the Company, if any, are subject to certain limitations set forth in the Purchase
Agreement, and may occur from time to time, at the Company’s sole discretion, over a period of up to 24-months, commencing on the date on which each of the conditions to Lincoln Park’s purchase obligations set forth in the Purchase Agreement have
initially been satisfied (such date, the “Commencement Date”), including the effectiveness of a registration statement registering under the Securities Act of 1933, as
amended (the “Securities Act”), the resale by Lincoln Park of shares of Common Stock that have been and may be issued by the Company to Lincoln Park under the Purchase
Agreement. The Company has agreed to file such registration statement with the Securities and Exchange Commission (the “SEC”) not later than 10 business days after the
date of execution of the Purchase Agreement and the Registration Rights Agreement.
From and after the Commencement Date, the Company may from time to time, on any business day selected by the Company on which the
closing sale price per share of Common Stock as reported on The Nasdaq Capital Market is not less than the “floor price” threshold set forth in the Purchase Agreement (each such business day, a “purchase date”), by written notice delivered by the
Company to Lincoln Park, direct Lincoln Park to purchase up to 30,000 shares of Common Stock on such purchase date, at a purchase price per share that will be determined and fixed in accordance with the Purchase Agreement at the time the Company
delivers such written notice to Lincoln Park (each, a “regular purchase”). The maximum number of shares the Company may sell to Lincoln Park in a regular purchase may be increased by certain amounts to up to 90,000 shares, with the applicable
maximum share limit determined by whether the closing sale price per share of Common Stock as reported on The Nasdaq Capital Market on the applicable purchase date for such regular purchase equals or exceeds certain minimum price thresholds set
forth in the Purchase Agreement, in each case, subject to adjustment for any recapitalization, non-cash dividend, forward or reverse stock split or other similar transactions as provided in the Purchase Agreement; however, Lincoln Park’s maximum
purchase commitment in any single regular purchase may not exceed $1,000,000.
In addition to regular purchases, provided that the Company has directed Lincoln Park to purchase the maximum amount of shares
that the Company is then able to sell to Lincoln Park in a regular purchase, the Company may, in its sole discretion, direct Lincoln Park to purchase additional shares of Common Stock in “accelerated purchases” and “additional accelerated
purchases,” as set forth in the Purchase Agreement. The purchase price per share of Common Stock sold in each such accelerated purchase and additional accelerated purchase, if any, will calculated in accordance with the pricing terms for an
accelerated purchase and an additional accelerated purchase, as applicable, set forth in the Purchase Agreement. There are no upper limits on the price per share that Lincoln Park must pay for shares of Common Stock in any purchase under the
Purchase Agreement.
Under the Purchase Agreement, the Company will control the timing and amount of sales of Common Stock to Lincoln Park, if any.
Lincoln Park has no right to require the Company to sell any shares of Common Stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions set forth in the Purchase Agreement. Actual
sales of shares of Common Stock to Lincoln Park, if any, will depend on a variety of factors to be determined by the Company from time to time, including, among others, general market conditions, the trading prices for the Common Stock, and
determinations by the Company as to the appropriate sources of funding for the Company and its operations.
Under applicable Nasdaq listing rules, the aggregate number of shares of Common Stock that the Company may issue to Lincoln Park under the
Purchase Agreement cannot exceed 19.99% of the shares of Common Stock issued and outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange Cap”),
unless (i) the Company first obtains stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq listing rules, or (ii) at the time the Company has issued shares of Common Stock equal to
the Exchange Cap and at all times thereafter, the average price per share of Common Stock for all shares of Common Stock sold by the Company to Lincoln Park under the Purchase Agreement equals or exceeds $3.6094 per share (representing the lower
of the official closing price of the Common Stock on Nasdaq on the trading day immediately preceding the date of the Purchase Agreement and the average official closing price of the Common Stock on Nasdaq for the five consecutive trading days
ending on the trading day immediately preceding the date of the Purchase Agreement, as adjusted under applicable Nasdaq rules to take into account the issuance of shares of Common Stock to Lincoln Park for non-cash consideration as payment of the
commitment fee described below), such that the Exchange Cap limitation would no longer apply to issuances and sales of Common Stock by the Company to Lincoln Park under the Purchase Agreement under applicable Nasdaq listing rules.
Additionally, Company may not direct Lincoln Park to purchase any shares of Common Stock under the Purchase Agreement if such
purchase would result in Lincoln Park beneficially owning more than 4.99% of the issued and outstanding shares of Common Stock.
There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in
the Purchase Agreement or Registration Rights Agreement, except the Company is prohibited, subject to certain exceptions, during the term of the Purchase Agreement or 90 days following the effective date of the termination of the Purchase
Agreement, whichever concludes earlier, from entering into an agreement to effect an “equity line of credit” or other similar offering in which the Company may issue and sell Common Stock, from time to time over a certain period of time, at future
determined prices based on the market prices of the Common Stock at the time of each such issuance and sale. Lincoln Park has agreed not to engage in any short sales of the Common Stock or hedging transaction that establishes a net short position
in the Common Stock during the term of the Purchase Agreement.
As consideration for Lincoln Park’s commitment to purchase shares of Common Stock in accordance with the Purchase Agreement, the
Company has issued 73,659 shares of Common Stock to Lincoln Park as a commitment fee.
The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, conditions and
indemnification obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time with one business day’s prior written notice to Lincoln Park, at no cost or penalty.
The foregoing description of the Purchase Agreement and the Registration Rights Agreement is only a summary and is qualified in
its entirety by reference to the full text of the Purchase Agreement and the Registration Rights Agreement, copies of which are attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively, and incorporated herein by reference. The
representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed
upon by the contracting parties.
(d) Exhibits.