QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Trading symbol
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Name of each exchange on which registered
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||
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Large accelerated filer
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☐ |
Accelerated filer
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☐
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☒ |
Smaller reporting company
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Emerging growth company
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Page
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Item 1.
|
1 |
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1
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||
2
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||
3
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||
4
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||
5
|
||
Item 2.
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17
|
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Item 3.
|
26
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Item 4.
|
26
|
|
27 |
||
Item 1.
|
27
|
|
Item 1A.
|
27
|
|
Item 2.
|
27
|
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Item 3.
|
27
|
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Item 4.
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27
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Item 5.
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27
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Item 6.
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28
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29
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March 31, | December 31, | |||||||
2023
|
2022
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash
|
$
|
|
$
|
|
||||
Other receivables
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Total current assets
|
|
|
||||||
Restricted cash
|
||||||||
Property and equipment, net
|
|
|
||||||
Right-of-use assets - operating leases
|
|
|
||||||
Goodwill
|
|
|
||||||
Investment in non-controlling interest
|
||||||||
Other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
|
$
|
|
||||
Accrued expenses
|
|
|
||||||
Income taxes payable
|
||||||||
Operating lease liabilities, current
|
|
|
||||||
Due to related party, current
|
||||||||
Other current liabilities | ||||||||
Total current liabilities
|
|
|
||||||
Warrant liabilities
|
|
|
||||||
Operating lease liabilities, non-current
|
|
|
||||||
Due to related party, non-current
|
||||||||
Deferred revenue
|
||||||||
Other liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Stockholders’ equity:
|
||||||||
Preferred stock, $
|
||||||||
Common stock, $
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
Total liabilities and stockholders’ equity
|
$
|
|
$
|
|
Three months ended March 31, | ||||||||
2023
|
2022
|
|||||||
Operating expenses:
|
||||||||
License costs |
$ | $ | ||||||
Research and development
|
|
|
||||||
General and administrative
|
|
|
||||||
Total operating expenses
|
|
|
||||||
Loss from operations
|
(
|
)
|
(
|
)
|
||||
Other expense, net:
|
||||||||
Change in fair value of warrant liabilities
|
( |
) | ( |
) | ||||
Loss on non-controlling investment
|
( |
) | ( |
) | ||||
Other income (expense), net | ( |
) | ||||||
Total other expense, net
|
(
|
)
|
(
|
)
|
||||
Loss before income taxes
|
( |
) | ( |
) | ||||
Provision for income taxes
|
( |
) | ||||||
Net loss
|
$ |
(
|
)
|
$ |
(
|
)
|
||
Net loss per common share - basic and diluted | $ | ( |
) | $ | ( |
) | ||
Weighted average shares outstanding - basic and diluted
|
|
|
Series A Preferred | Additional Paid- | |||||||||||||||||||||||||||
|
Stock
|
Common Stock
|
in
|
Accumulated | ||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
|||||||||||||||||||||
Balances at January 1, 2023
|
$ |
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
Stock-based compensation
|
- |
-
|
|
|
|
|
||||||||||||||||||||||
Net loss
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||
Balances at March 31, 2023
|
$ |
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
|
||||||||||||||||||||||||||||
Balances at January 1, 2022
|
$ |
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||||
Issuance of common stock and pre-funded warrants in connection with private offering, net.
|
( |
) | ||||||||||||||||||||||||||
Forfeiture of unvested restricted stock
|
( |
) | ||||||||||||||||||||||||||
Issuance of common stock from vested restricted stock units
|
||||||||||||||||||||||||||||
Stock-based compensation
|
- | - | ||||||||||||||||||||||||||
Net loss
|
- |
-
|
|
|
( |
) |
(
|
)
|
||||||||||||||||||||
Balances at March 31, 2022
|
$ |
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
For the three months ended | ||||||||
|
March 31,
|
|||||||
|
2023
|
2022
|
||||||
Cash flows used in operating activities:
|
||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Stock-based compensation
|
|
|
||||||
Amortization of right-of-use asset
|
|
|
||||||
Loss on disposal of fixed assets
|
||||||||
Gain on lease termination
|
( |
) | ||||||
Loss on change in warrant liabilities
|
||||||||
Loss on non-controlling investment
|
|
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Other receivables
|
|
(
|
)
|
|||||
Prepaid expenses and other current assets
|
|
|
||||||
Other non-current assets
|
(
|
)
|
|
|||||
Accounts payable and accrued expenses
|
(
|
)
|
|
|||||
Operating lease liability
|
(
|
)
|
(
|
)
|
||||
Due to related party
|
( |
) | ||||||
Deferred revenue
|
||||||||
Other liabilities
|
(
|
)
|
(
|
)
|
||||
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
||||
Cash flows used in investing activities:
|
||||||||
Purchase of property and equipment
|
|
(
|
)
|
|||||
Net cash used in investing activities
|
|
(
|
)
|
|||||
Cash flows provided by financing activities:
|
||||||||
Proceeds from issuance of common stock and warrants in connection with private offering
|
||||||||
Net cash provided by financing activities
|
|
|
||||||
Net (decrease) increase in cash and cash equivalents |
(
|
)
|
|
|||||
Cash, cash equivalents and restricted cash at beginning of period
|
|
|
||||||
Cash, cash equivalents and restricted cash at end of period
|
$
|
|
$
|
|
||||
|
||||||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$
|
|
$
|
|
||||
Income taxes
|
$ | $ | ||||||
|
||||||||
Reconciliation of cash, cash equivalents and restricted cash at end of period:
|
||||||||
Cash and cash equivalents
|
$ | $ | ||||||
Restricted cash
|
||||||||
Total Cash, cash equivalents and restriced cash at end of period
|
$ | $ |
1) |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
|
2) |
LIQUIDITY AND CAPITAL RESOURCES
|
3) |
CONTRACT WITH CUSTOMER
|
1.
|
Identify the contract with a customer;
|
2.
|
Identify the performance obligations in the contracts;
|
3.
|
Determine the transaction price;
|
4.
|
Allocate the transaction price to the performance obligations; and
|
5.
|
Recognize revenue when (or as) the performance obligations are satisfied.
|
4) |
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
• |
Level 1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement
date.
|
• |
Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might
include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or
liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
|
• |
Level 3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to develop its own assumptions.
|
Description
|
Level
|
March 31,
2023
|
December 31,
2022
|
|||||||||
Liabilities:
|
||||||||||||
Warrant liabilities - Common Warrants
|
3
|
$ |
|
$ |
|
|
||||
Fair value at January 1, 2023
|
$
|
|
||
Change in fair value of warrant liabilities
|
|
|||
Fair value at March 31, 2023
|
$
|
|
5)
|
LEASES
|
Three months ended
|
||||||||
2023 |
2022 |
|||||||
Operating lease expense
|
$
|
|
$
|
|
||||
Sublease income
|
(
|
)
|
(
|
)
|
||||
Variable lease expense
|
|
|
||||||
Total lease expense
|
$
|
|
$
|
|
Operating Lease ROU Assets
|
||||
Operating lease ROU assets at January 1, 2023
|
$
|
|
||
Amortization of operating lease ROU assets
|
(
|
)
|
||
Operating lease ROU assets at March 31, 2023
|
$
|
|
Operating Lease Liabilities
|
||||
Operating lease liabilities at January 1, 2023
|
$
|
|
||
Principal payments on operating lease liabilties
|
(
|
)
|
||
Operating lease liabilities at March 31, 2023
|
|
|||
Less non-current portion
|
|
|||
Current portion at March 31, 2023
|
$
|
|
As of
March 31,
2023
|
||||
2023
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
Thereafter
|
|
|||
Total payments
|
|
|||
Less imputed interest
|
(
|
)
|
||
Total operating lease liabilities
|
$
|
|
6) |
GOODWILL
|
7) |
RELATED PARTY TRANSACTIONS
|
8)
|
ACCRUED EXPENSES
|
March 31,
2023 |
December 31,
2022
|
|||||||
Legal fees and settlements
|
$
|
|
$
|
|
||||
Clinical
|
|
|
||||||
Professional fees
|
|
|
||||||
Accrued compensation
|
|
|
||||||
Other
|
|
|
||||||
Total accrued expenses
|
$
|
|
$
|
|
9) |
COMMITMENTS AND CONTINGENCIES
|
10) |
STOCK-BASED COMPENSATION
|
|
Three months ended March 31,
|
|||||||
|
2023
|
2022
|
||||||
Stock options granted
|
|
|
Three months ended March 31, | ||||||||
|
2023
|
2022
|
||||||
Weighted average risk-free rate
|
|
%
|
|
%
|
||||
Weighted average volatility
|
|
%
|
|
%
|
||||
Dividend yield
|
|
%
|
|
%
|
||||
Expected term
|
|
|
|
Three months ended March 31,
|
|||||||
|
2023
|
2022
|
||||||
Research and development
|
$
|
|
$
|
|
||||
General and administrative
|
|
|
||||||
Total
|
$
|
|
$
|
|
11) |
WARRANTS
|
Private Placement
|
Warrants
Outstanding (in thousands) |
Exercise
Price |
Date
Exerciseable |
Expiration
Date |
Classification
|
||||||||
March 2022 PIPE
|
|
$
|
|
|
|
Liability
|
|||||||
November 2022 PIPE
|
|
$
|
|
|
|
Equity
|
|||||||
|
|
|
|
12) |
EARNINGS PER SHARE
|
Three months ended March 31,
|
||||||||
2023
|
2022
|
|||||||
Warrants
|
|
|
||||||
Stock options
|
|
|
||||||
Preferred stock converted into common stock
|
|
|
||||||
RSUs
|
|
|
||||||
Total potential common shares excluded from computation
|
|
|
13) |
RECENT ACCOUNTING PRONOUNCEMENTS
|
14) |
SUBSEQUENT EVENTS
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
|
Three months ended March 31,
|
|||||||||||
|
2023
|
2022
|
Change
|
|||||||||
(in thousands)
|
||||||||||||
Operating expenses:
|
||||||||||||
License costs
|
$
|
50
|
$
|
-
|
$
|
50
|
||||||
Research and development
|
1,674
|
1,782
|
(108
|
)
|
||||||||
General and administrative
|
3,592
|
4,514
|
(922
|
)
|
||||||||
Total operating expenses
|
5,316
|
6,296
|
(980
|
)
|
||||||||
Loss from operations
|
(5,316
|
)
|
(6,296
|
)
|
980
|
|||||||
Other expense, net:
|
||||||||||||
Change in fair value of warrant liabilities
|
(45
|
)
|
(1,322
|
)
|
1,277
|
|||||||
Loss on non-controlling investment
|
(51
|
)
|
(615
|
)
|
564
|
|||||||
Other income (expense), net
|
1
|
(1,142
|
)
|
1,143
|
||||||||
Total other expense, net
|
(95
|
)
|
(3,079
|
)
|
2,984
|
|||||||
Loss before income taxes
|
(5,411
|
)
|
(9,375
|
)
|
3,964
|
|||||||
Provision for income taxes
|
(5
|
)
|
-
|
(5
|
)
|
|||||||
Net loss
|
$
|
(5,416
|
)
|
$
|
(9,375
|
)
|
$
|
3,959
|
|
Three months ended March 31,
|
|||||||||||
|
2023
|
2022
|
Change
|
|||||||||
(in thousands)
|
||||||||||||
MSA expense
|
$
|
813
|
$
|
-
|
$
|
813
|
||||||
Payroll-related
|
203
|
962
|
(759
|
)
|
||||||||
Stock-based compensation
|
64
|
422
|
(358
|
)
|
||||||||
Other expenses, net
|
594
|
398
|
196
|
|||||||||
Total research and development expenses
|
$
|
1,674
|
$
|
1,782
|
$
|
(108
|
)
|
|
Three months ended March 31,
|
|||||||||||
|
2023
|
2022
|
Change
|
|||||||||
(in thousands)
|
||||||||||||
Payroll-related
|
$
|
357
|
$
|
749
|
$
|
(392
|
)
|
|||||
Stock-based compensation
|
625
|
761
|
(136
|
)
|
||||||||
Occupancy expense
|
23
|
171
|
(148
|
)
|
||||||||
Professional fees
|
1,935
|
2,071
|
(136
|
)
|
||||||||
Other expenses, net
|
652
|
762
|
(110
|
)
|
||||||||
Total general and administrative expenses
|
$
|
3,592
|
$
|
4,514
|
$
|
(922
|
)
|
|
Three months ended March 31,
|
|||||||||||
|
2023
|
2022
|
Change
|
|||||||||
(in thousands)
|
||||||||||||
Private placement transaction fees
|
$
|
-
|
$
|
(992
|
)
|
$
|
992
|
|||||
Liquidated damages
|
-
|
(240
|
)
|
240
|
||||||||
Interest income (expense), net
|
2
|
(1
|
)
|
3
|
||||||||
Other
|
(1
|
)
|
91
|
(92
|
)
|
|||||||
Total other income (expense), net
|
$
|
1
|
$
|
(1,142
|
)
|
$
|
1,143
|
• |
the terms and timing of any collaborative, licensing and other agreements that we may establish;
|
• |
the cost of filing and potentially prosecuting, defending and enforcing any patent claims and other intellectual property rights;
|
• |
the cost and timing of regulatory approvals;
|
• |
the cost and delays in product development as a result of any changes in regulatory oversight applicable to our products;
|
• |
the cost and timing of establishing sales, marketing and distribution capabilities;
|
• |
the effect of competition and market developments;
|
• |
the scope, rate of progress and cost of clinical trials and other product development activities; and
|
• |
future clinical trial results.
|
|
For the three months ended
March 31, |
|||||||||||
(in thousands)
|
2023
|
2022
|
Change
|
|||||||||
Cash (used in) provided by:
|
||||||||||||
Operating activities
|
$
|
(6,049
|
)
|
$
|
(5,432
|
)
|
$
|
(617
|
)
|
|||
Investing activities
|
-
|
(46
|
)
|
46
|
||||||||
Financing activities
|
-
|
11,993
|
(11,993
|
)
|
||||||||
Net (decrease) increase in cash and cash equivalents
|
$
|
(6,049
|
)
|
$
|
6,515
|
$
|
(12,564
|
)
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4. |
Controls and Procedures.
|
• |
enhancing the business process controls related to reviews over technical, complex, and non-recurring transactions;
|
• |
providing additional training to accounting personnel; and
|
• |
consulting with an accounting advisor for technical, complex and non-recurring matters, with whom we have engaged and begun consulting.
|
Item 1. |
Legal Proceedings.
|
Item 1A. |
Risk Factors.
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Item 3. |
Defaults Upon Senior Securities.
|
Item 4. |
Mine Safety Disclosures.
|
Item 5. |
Other Information.
|
Item 6. |
Exhibits.
|
Exhibit
|
Description
|
Incorporated By
Reference
|
Exclusive License Agreement, dated February 20, 2023, by and between Factor Bioscience Limited and Eterna Therapeutics Inc.
|
Exhibit 10.1 to Form 8-K filed on February 22, 2023
|
|
Purchase Agreement, dated as of April 5, 2023, by and between Eterna Therapeutics Inc. and Lincoln Park Capital Fund, LLC
|
Exhibit 10.1 to Form 8-K filed on April 11, 2023
|
|
Registration Rights Agreement, dated as of April 5, 2023, by and between Eterna Therapeutics Inc. and Lincoln Park Capital Fund, LLC
|
Exhibit 10.1 to Form 8-K filed on April 11, 2023
|
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Filed herewith
|
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Filed herewith
|
|
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Furnished herewith
|
|
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Furnished herewith
|
|
101.INS
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
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Filed herewith
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101.SCH
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Inline XBRL Taxonomy Extension Schema Document
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Filed herewith
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101.CAL
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Inline XBRL Taxonomy Extension Calculation Linkbase Document
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Filed herewith
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101.DEF
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Inline XBRL Taxonomy Extension Definition Linkbase Document
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Filed herewith
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101.LAB
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Inline XBRL Taxonomy Extension Label Linkbase Document
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Filed herewith
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101.PRE
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Inline XBRL Taxonomy Extension Presentation Linkbase Document
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Filed herewith
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104
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
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ETERNA THERAPEUTICS INC.
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Date: May 11, 2023
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By:
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/s/ Matthew Angel
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Matthew Angel
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Chief Executive Officer and President
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(on behalf of the Registrant and as Principal Executive Officer)
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