What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-04 compared with 2020-03-11 · 598 added, 673 removed, 186 unchanged (87% of the section changed)

Financial Statements and Supplementary

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AUDITED FINANCIAL STATEMENTS:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

Financial Statements and Supplementary Data

TO CONSOLIDATED FINANCIAL STATEMENTS

AUDITED FINANCIAL

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2020 AND 2019

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Stockholders and the Board of Directors

INmune Bio, Inc.

La Jolla, California

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of INmune Bio, Inc.

(the “Company”) as of December 31, 2019 and 2018, the related consolidated

statements of operations and comprehensive loss, stockholders’

equity and cash flows for the years ended December 31, 2019

and 2018, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and

the results of its operations and its cash flows for the years ended December 31, 2019 and 2018, in conformity with accounting

principles generally accepted in the United States of America.

Explanatory Paragraph –

The accompanying consolidated financial

statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the

Company has suffered recurring losses from operations and has not yet generated any revenue from operations since inception.

conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management's plans in regard

to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might

result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have,

nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company's internal control over financial reporting.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and the Board of Directors of

Jolla, California

on the Financial Statements

have audited the accompanying consolidated balance sheets of INmune Bio, Inc.

(the “Company”) as of December 31,

2020 and 2019, the related consolidated statements of operations and comprehensive loss, stockholders’

equity and cash flows

for the years ended December 31, 2020 and 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of

December 31, 2020 and 2019, and the results of its operations and its cash flows for the years ended December 31, 2020 and 2019,

in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

/s/ Marcum LLP

We have served as the Company's auditor

Houston, Texas

March 10, 2020

INMUNE BIO, INC.

CONSOLIDATED BALANCE SHEETS

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

have served as the Company’s auditor since 2017.

BALANCE SHEETS

CURRENT ASSETS

1 unchanged sentence

Other tax receivable

Joint development cost receivable

Prepaid expenses

11 unchanged sentences

related parties

Deferred liabilities

Operating lease, current liability –

14 unchanged sentences

(21,276,181 )

TOTAL STOCKHOLDERS' EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

See accompanying notes to these consolidated

financial statements.

INMUNE BIO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2019

TOTAL STOCKHOLDERS’

TOTAL LIABILITIES AND STOCKHOLDERS’

accompanying notes to these consolidated financial statements.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

THE YEARS ENDED DECEMBER 31, 2020 AND 2019

OPERATING EXPENSES

5 unchanged sentences

(12,227,676 )

Interest income

Total other income

8 unchanged sentences

$ (7,678,313 )

Other comprehensive loss –

loss on foreign currency translation

Other comprehensive (income) loss –

foreign currency translation

Total comprehensive loss

1 unchanged sentence

$ (7,693,357 )

See accompanying

notes to these consolidated financial statements.

INMUNE BIO, INC.

CONSOLIDATED STATEMENT OF CHANGES IN

STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2019

accompanying notes to these consolidated financial statements.

STATEMENT OF CHANGES IN STOCKHOLDERS’

THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Comprehensive

3 unchanged sentences

$ (13,597,868 )

Issuance of common stock for cash

Common stock issuable for services

Issuance of common stock and warrants for cash, net

Issuance of common stock issuable

Waiver of common stock issuable

Stock-based compensation

Loss on foreign currency translation

(12,440,023 )

Balance as of December 31, 2019

(21,276,181 )

Issuance of common stock and warrants for cash, net

Issuance of common stock for cash, net

Acquisition and retirement of common stock

Capital contribution

Cashless exercise of warrants

Issuance of common stock issuable

Waiver of common stock issuable

Stock-based compensation

Loss on foreign currency translation

Gain on foreign currency translation

(12,099,159 )

Balance as of December 31, 2020

$ (33,375,340 )

See accompanying notes to these

consolidated financial statements.

INMUNE BIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019

accompanying notes to these consolidated financial statements.

STATEMENTS OF CASH FLOWS

THE YEARS ENDED DECEMBER 31, 2020 AND 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

14 unchanged sentences

related parties

Deferred liabilities

Operating lease liability –

3 unchanged sentences

Net proceeds from sale of common stock

Purchase of common stock

Net cash provided by financing activities

Impact on cash from foreign currency translation

NET INCREASE (DECREASE) IN CASH

NET INCREASE IN CASH

CASH AT BEGINNING OF YEAR

4 unchanged sentences

NONCASH INVESTING AND FINANCING ACTIVITIES:

Issuance of warrants to placement agents

Capital contribution

Cashless exercise of warrants

Issuance of common stock issuable

See accompanying notes to these consolidated

financial statements.

INMUNE BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 –

ORGANIZATION AND

BASIS OF PRESENTATION

Organization and Business Overview

INmune Bio, Inc.

(“INmune Bio”) was organized in

the State of Nevada on September 25, 2015, and is an early stage specialty pharmaceutical company focused on developing and commercializing

its product candidates to treat diseases where the innate immune system is not functioning normally and contributing to the patient’s

INmune Bio’s focus is on the innate immune system that include natural killer cells (“NK cells”), hepatic

stellate cells of the liver (HSC cells), myeloid derived suppressor cells (“MDSC cells”), microglial cells and dendritic

cells (“DC cells”), to offer unique therapeutic opportunities.

INmune Bio plans to develop their four existing drug

INKmune (“INKmune”) which primes NK cells, INB03 (“INB03”) which down regulates MDSC cells,

LivNate, which targets soluble TNF –

a key cytokine driving pathologic chronic inflammation, and XPro1595 that targets microglial

cell activation in the brain –

a cause of neuroinflammation.

Basis of Presentation and Principles

of Consolidation

The accompanying consolidated

financial statements of the Company have been prepared in accordance with Generally Accepted Accounting Principles (“US

GAAP”) in the United States of America and the rules of the Securities and Exchange Commission (“SEC”).

The consolidated financial statements

herein have been prepared in accordance with US GAAP and include the accounts of INmune Bio, its wholly-owned UK subsidiary,

and its wholly-owned Australia subsidiary (collectively, the “Company”).

All significant intercompany accounts

and transactions have been eliminated.

NOTE 2 –

GOING CONCERN

As of December 31, 2019, the Company had

an accumulated deficit of $21,276,181 and experienced losses since its inception.

Losses have principally occurred as a result

of non-cash stock-based compensation expense and the substantial resources required

for research and development of the Company’s products which included the general and administrative expenses associated

with its organization and product development as well as the lack of sources of revenues until such time as the Company’s

products are commercialized.

These factors raise substantial doubt about the Company’s ability to continue as a going concern

for the 12 months following the issuance date of these financial statements.

These financial statements do not include any adjustments

to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of

liabilities that may result from the outcome of these uncertainties.

Management plans to seek additional funding through the issuance

of common stock for cash and by implementing its strategic plan to develop its pharmaceutical products and allow the opportunity

for the Company to continue as a going concern, however there cannot be any assurance that we will be successful in doing so.

Company raised net proceeds of approximately $12.2 million from sales of its common stock during the year ended December 31, 2019,

and received $0.9 million in grants during 2019, which the Company estimates should meet its planned operating requirements into

the third quarter of 2020.

The Company plans to seek to raise additional capital to meet its future operating requirements until

such time as it develops a recurring source of revenues, which is not expected for several years.

The amount and timing of these

capital raises is subject to general market conditions.

There cannot be any assurance that the Company will be able to complete

these capital raises.

NOTE 3 –

SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

Use of Estimates

Preparing financial statements in conformity with US GAAP requires

management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.

results and outcomes may differ from management’s estimates and assumptions.

Cash and Cash Equivalents

Issuance of warrants to placement agents

accompanying notes to these consolidated financial statements.

TO CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND BASIS OF PRESENTATION

and Business Overview

(the “Company”

or “INmune Bio”) was organized in the State of Nevada on September 25, 2015,

and is a clinical stage biotechnology pharmaceutical company focused on developing and commercializing its product candidates

to treat diseases where the innate immune system is not functioning normally and contributing to the patient’s disease.

INmune Bio has two product platforms.

The DN-TNF product platform utilizes dominant-negative technology to selectively neutralize

soluble TNF, a key driver of innate immune dysfunction and mechanistic target of many diseases.

DN-TNF is currently being developed

for COVID-19 complications (Quellor), cancer (INB03), Alzheimer’s and treatment resistant depression (XPro595), and NASH

The Natural Killer Cell Priming Platform includes INKmune aimed at priming the patient’s NK cells to eliminate

minimal residual disease in patients with cancer.

INmune Bio’s product platforms utilize a precision medicine approach for

the treatment of a wide variety of hematologic malignancies, solid tumors and chronic inflammation.

of Presentation and Principles of Consolidation

accompanying consolidated financial statements of the Company have been prepared in accordance with Generally Accepted Accounting

Principles (“US GAAP”) in the United States of America and the rules of the Securities and Exchange Commission (“SEC”).

consolidated financial statements herein have been prepared in accordance with US GAAP and include the accounts of INmune Bio,

its wholly-owned UK subsidiary, and its wholly-owned Australia subsidiary (collectively, the “Company”).

All significant

intercompany accounts and transactions have been eliminated.

of December 31, 2020, the Company had an accumulated deficit of $33,375,340 and experienced losses since its inception.

have principally occurred as a result of non-cash stock-based compensation expense and the substantial resources required for

research and development of the Company’s products, which included the general and administrative expenses associated with

its organization and product development as well as the lack of sources of revenues until such time as the Company’s products

are commercialized.

meet its current and future obligations the Company has taken the following steps to capitalize the business and achieve its business

During July 2020,

the Company completed an underwritten public offering in which it sold 2,500,000 shares of common stock at a public offering

price of $10.00 per share.

The 2,500,000 shares sold included the full exercise of the underwriters’

option to purchase

326,086 shares at a price of $10.00 per share.

Aggregate net proceeds from the underwritten public offering were approximately

$23.1 million, net of approximately $1.9 million in underwriting discounts and commissions and offering expenses.

During April 2020,

the Company entered into a sales agreement with BTIG, LLC (“BTIG”), as sales agent, to establish an At-The-Market

(“ATM”) offering program.

The Company was required to pay BTIG a commission of 3% of the gross proceeds from the

sale of shares.

The ATM program will remain in full force and effect until the earlier of the sale of all of the shares under

the ATM program or the termination of the sales agreement by the Company or BTIG.

From April 2020 through December 2020, the

Company sold 178,600 shares of common stock at an average price of $5.45 per share for net proceeds of approximately $0.8

During January and February 2021, the Company sold in aggregate 1,439,480 shares on common stock at an average price

of $20.17 per share for net proceeds of approximately $28.4 million.

During May 2019,

the Company entered into a securities purchase agreement (“Purchase Agreement”) with Lincoln Park Capital Fund

LLC (“Lincoln Park”), pursuant to which Lincoln Park has agreed to purchase from the Company up to an aggregate

of $20.0 million of common stock of the Company (subject to certain limitations) from time to time over the term of the Purchase

The extent we rely on Lincoln Park as a source of funding will depend on a number of factors including, the prevailing

market price of our common stock and the extent to which we are able to secure working capital from other sources.

date of issuance of this Annual Report on Form 10-K, the Company has already received approximately $1.3 million from the

Purchase Agreement from the sale of 296,000 shares of common stock to Lincoln Park from the inception of the Purchase Agreement

through the date of issuance of this Form 10-K, leaving the Company an additional $18.7 million to draw upon, subject to the

Company’s compliance with the terms and conditions of the Purchase Agreement.

it is difficult to predict the Company’s liquidity requirements, as of December 31, 2020, and based upon the Company’s

current operating plan, the Company believes that it will have sufficient cash to meet its projected operating requirements for

at least the next 12 months following the filing date of this Annual Report on Form 10-K based on the balance of cash available

as of December 31, 2020 and the proceeds received from the Company’s ATM sales during January and February 2021.

anticipates that it will continue to incur net losses for the foreseeable future as it continues the development of its clinical

drug candidates and preclinical programs and incurs additional costs associated with being a public company.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets, liabilities, revenue, and expenses.

Actual results and outcomes may differ from management’s estimates

and assumptions.

and Uncertainties

Company is subject to risks and uncertainties as a result of the COVID-19 pandemic.

The extent of the impact of the COVID-19 pandemic

on the Company’s business is highly uncertain and difficult to predict.

Also, economies worldwide have also been negatively

impacted by the COVID-19 pandemic, however policymakers around the globe have responded with fiscal policy actions to support

the healthcare industry and economy as a whole.

The magnitude and overall effectiveness of these actions remain uncertain.

addition, the Company’s clinical trials have been affected by and may continue to be affected by the COVID-19 pandemic.

Clinical site initiation and patient enrollment have and may continue to be delayed due to prioritization of hospital resources

toward the COVID-19 pandemic.

Some patients have not and others may not be able to comply with clinical trial protocols if quarantines

impede patient movement or interrupt healthcare services.

Similarly, the ability to recruit and retain patients and principal

investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, may adversely impact the

Company’s clinical trial operations.

severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including,

but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s

service providers, suppliers, contract research organizations (“CROs”) and the Company’s clinical trials, all

of which are uncertain and cannot be predicted.

As of the date of issuance of Company’s financial statements, the extent

to which the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity or results of operations

is uncertain.

and Cash Equivalents

The Company considers all highly liquid

instruments purchased with an original maturity of three months or less to be cash equivalents.

From time to time, the Company may carry

cash balances at financial institutions in excess of the federally insured limit of $250,000.

of December 31, 2019, the Company had cash of approximately $6.5 million that was in excess of the federally insured limit.

Company maintains its cash deposits with major financial institutions.

Receivables currently consist of R&D

tax credit receivable, value added tax (“VAT”) receivable, and a Goods and Services tax (“GST”) receivable.

The R&D tax credit receivable is recorded when R&D is incurred.

At that time, the Company records a receivable for the

amount of the credit it expects to receive based on the expenses incurred.

VAT receivables and GST receivables are recorded when

the Company receives an invoice with VAT or GST.

The collectability of these receivables are evaluated periodically based on the

actual R&D credit returns submitted, the VAT returns submitted, and the GST returns submitted.

As of December 31, 2019 and

2018, there were no trade receivables.

Intangible Assets

The Company capitalizes costs incurred

in connection with in-process research and development purchased from others if the asset has alternative uses and such uses are

not restricted under applicable license agreements;

patent applications (principally legal fees), patent purchases, and trademarks

related to its cell line as intangible assets.

Acquired in-process research and development costs that do not have alternative

uses are expensed as incurred.

Amortization is initiated for acquired in-process research and development intangible assets when

their useful lives have been determined.

These acquired in-process research and development intangible assets are tested at least

annually or when a triggering event occurs that could indicate a potential impairment.

No impairments of intangible assets were

recognized during the years ended December 31, 2019 and 2018.

Basic and Diluted Loss per Share

Basic loss per share is computed by dividing

net loss available to common shareholders by the weighted average number of outstanding common shares during the period.

loss per share gives effect to all dilutive potential common shares outstanding during the period.

Dilutive loss per share excludes

all potential common shares if their effect is anti-dilutive.

For all periods presented, there is no difference in the number of

shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

At December 31, 2019, the Company had 3,417,000

potentially issuable shares of common stock upon the exercise of stock options and 1,660,874 potentially issuable shares of common

stock upon the exercise of warrants.

At December 31, 2018, the Company had 1,632,000

potentially issuable shares of common stock upon the exercise of stock options and 1,255,667 potentially issuable shares of common

stock upon the exercise of warrants.

Stock-Based Compensation

instruments purchased with an original maturity of three month s or less to be cash equivalents.

The Company holds cash in banks

in excess of Federal Deposit Insurance Corporation insurance limits.

However, the Company believes risk of loss is minimal as the

cash is held by large, highly-rated financial institutions.

and Development Tax Incentive Receivable

Company, through its wholly-owned subsidiary in Australia, participates in the Australian research and development tax incentive

program, such that a percentage of our qualifying research and development expenditures are reimbursed by the Australian government,

and such incentives are reflected as a reduction of research and development expense.

The Australian research and development

tax incentive is recognized when there is reasonable assurance that the incentive will be received, the relevant expenditure has

been incurred and the amount of the consideration can be reliably measured.

At each period end, management estimates the reimbursement

available to the Company based on available information at the time.

Company, through its wholly-owned subsidiary in the United Kingdom, participates in the research and development program provided

by the United Kingdom tax relief program, such that a percentage of our qualifying research and development expenditures are reimbursed

by the United Kingdom government, and such incentives are reflected as a reduction of research and development expense.

Kingdom research and development tax incentive is recognized when there is reasonable assurance that the incentive will be received,

the relevant expenditure has been incurred and the amount of the consideration can be reliably measured.

At each period end, management

estimates the reimbursement available to the Company based on available information at the time.

Company capitalizes costs incurred in connection with in-process research and development purchased from others if the asset has

alternative uses and such uses are not restricted under applicable license agreements;

patent applications (principally legal

fees), patent purchases, and trademarks related to its cell line as intangible assets.

Acquired in-process research and development

costs that do not have alternative uses are expensed as incurred.

Amortization is initiated for acquired in-process research and

development intangible assets when their useful lives have been determined.

These acquired in-process research and development

intangible assets are tested at least annually or when a triggering event occurs that could indicate a potential impairment.

impairments of intangible assets were recognized during the years ended December 31, 2020 and 2019.

and Diluted Loss per Share

loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding

common shares during the period.

Diluted loss per share gives effect to all dilutive potential common shares outstanding during

Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

For all periods presented,

there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s

net loss position.

December 31, 2020, the Company had 3,457,000 potentially issuable shares of common stock upon the exercise of stock options and

1,955,922 potentially issuable shares of common stock upon the exercise of warrants.

December 31, 2019, the Company had 3,417,000 potentially issuable shares of common stock upon the exercise of stock options and

1,660,874 potentially issuable shares of common stock upon the exercise of warrants.

Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration

the Company expects to receive in exchange for those goods or services.

The Company recognizes revenue following the five-step

model prescribed under ASC Topic 606:

(1) identify contract(s) with a customer;

(2) identify the performance obligations in the

(3) determine the transaction price;

(4) allocate the transaction price to the performance obligations in the contract;

and (5) recognize revenues when (or as) the Company satisfies the performance obligations.

The Company records the expenses related

to revenue in research and development expense, in the periods such expenses were incurred.

Company records deferred revenues when cash payments are received or due in advance of performance, including amounts which are

Company’s 2020 revenue was from the sale of MSC’s to one third-party customer.

The revenue was recognized when the

MSC’s were shipped to the customer.

Company utilizes the Black-Scholes option pricing model to estimate the fair value of stock option awards at the date of grant,

10 unchanged sentences

The Company accounts for forfeitures of stock options as they occur.

Research and Development

Research and development (“R&D”)

costs are expensed as incurred.

Research and development credits are recorded by the Company as a reduction of research and development

Major components of research and development costs include cash compensation, stock-based compensation, costs of preclinical

studies, clinical trials and related clinical manufacturing, costs of drug development, costs of materials and supplies, facilities

cost, overhead costs, regulatory and compliance costs, and fees paid to consultants and other entities that conduct certain research

and development activities on the Company’s behalf.

and Development

and development (“R&D”) costs are expensed as incurred.

Research and development credits are recorded by the Company

as a reduction of research and development costs.

Major components of research and development costs include cash compensation,

stock-based compensation, costs of preclinical studies, clinical trials and related clinical manufacturing, costs of drug development,

costs of materials and supplies, facilities cost, overhead costs, regulatory and compliance costs, and fees paid to consultants

and other entities that conduct certain research and development activities on the Company’s behalf.

Company recognizes grants as contra research and development expense in the consolidated statement of operations on a systematic

basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate.

The Company follows the liability method

of accounting for income taxes.

Under this method, deferred income tax assets and liabilities are recognized for the estimated

tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis

(temporary differences).

The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income

in the period that includes the enactment date.

Foreign Currency Translation

The Company’s financial statements

are presented in the U.S.

dollar (“$”), which is the Company’s reporting currency, while its functional currencies

Company follows the liability method of accounting for income taxes.

Under this method, deferred income tax assets and liabilities

are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values

and their respective income tax basis (temporary differences).

The effect on deferred income tax assets and liabilities of a change

in tax rates is recognized in income in the period that includes the enactment date.

Currency Translation

Company’s financial statements are presented in the U.S.

dollar (“$”), which is the Company’s reporting

currency, while its functional currencies are the U.S.

Dollar for its U.S.

based operations, British Pound (“GBP”) for its United Kingdom-based operations and

Australian Dollars (“AUD”) for its Australian-based operations.

All assets and liabilities are translated at the exchange

rate on the balance sheet date, stockholders’

equity is translated at historical rates and statement of operations items

are translated at the weighted average exchange rate for the period.

The resulting translation adjustments are reported under other

comprehensive income.

Gains and losses resulting from the translations of foreign currency transactions and balances are reflected

in the statement of operations and comprehensive income (loss).

Reclassifications

Certain reclassifications have been made

to the prior period financial statements to conform with the current period presentation.

Recently Adopted Accounting Pronouncements

During the first quarter of 2019, the Company

adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-02, Leases (ASC 842), which

introduces the balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating

leases under previous guidance.

The Company has adopted the new lease standard using the new transition option issued under the

amendments in ASU 2018-11, Leases , which allowed the Company to continue to apply the legacy guidance in Accounting Standards

Codification (ASC) 840, Leases , in the comparative periods presented in the year of adoption.

The Company elected the package

of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the

Company to carry forward the historical lease classification.

The Company made an accounting policy election to keep leases with

an initial term of 12 months or less off of the balance sheet.

The Company recognizes those lease payments in the Consolidated

Statements of Operations and Comprehensive Income on a straight-line basis over the lease term.

The adoption had no impact on the

Company’s consolidated statement of operations, loss per share or cash flows.

In June 2018, the FASB issued ASU No.

“Compensation –

Stock Compensation (Topic 718):

Improvements to Nonemployee Share-based Payment Accounting.”

ASU 2018-07 aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance

of Topic 718, with certain exceptions.

This update supersedes previous guidance for equity-based payments to nonemployees under

Subtopic 505-50, “Equity –

Equity-based Payments to Nonemployees.”

It is effective for annual reporting periods

beginning after December 15, 2018.

The adoption had no impact on the Company’s consolidated statement of operations, loss

per share or cash flows.

Subsequent Events

The Company has evaluated all transactions

through the financial statement issuance date for subsequent disclosure consideration.

NOTE 4 –

RESEARCH AND DEVELOPMENT

According to UK tax law, the Company is

allowed an R&D tax credit that reduces a company’s tax bill in the UK for expenses incurred in R&D subject to certain

requirements.

The Company’s UK subsidiary submits R&D tax credit requests annually for research and development expenses

incurred, and recorded a related receivable in the amount of $395,850 and $370,900 as of December 31, 2019 and December 31, 2018,

respectively.

During the years ended December 31, 2019 and 2018, the Company received $443,929 and $0 of R&D tax credit reimbursements,

respectively from the UK.

According to AUS tax law, the Company is

allowed an R&D tax credit that reduces a company’s tax bill in AUS for expenses incurred in R&D subject to certain

requirements.

The Company’s Australian subsidiary submits R&D tax credit requests annually for research and development

expenses incurred.

At December 31, 2019 and 2018, the Company recorded a research and development tax credit receivable of $172,289

and $221,761, respectively, for R&D expenses incurred in Australia.

During the years ended December 31, 2019 and 2018, the

Company received $410,857 and $0 of R&D tax credit reimbursements, respectively from Australia.

The Company is eligible to recover all

VAT for all R&D expenses paid.

The Company’s UK subsidiary recorded other tax receivable of $42,046 and $6,282 for VAT

as of December 31, 2019 and December 31, 2018, respectively.

During the years ended December 31, 2019 and 2018, the Company received

$214,388 and $187,728 of VAT reimbursements, respectively.

The Company is eligible to recover all

GST for all R&D expenses paid.

The Company’s Australian subsidiary recorded other tax receivable of $35,179 and $26,127

for GST as of December 31, 2019 and December 31, 2018, respectively.

During the years ended December 31, 2019 and 2018, the Company

received $61,794 and $0 of GST reimbursements, respectively.

based operations, British Pound (“GBP”)

for its United Kingdom-based operations and Australian Dollars (“AUD”) for its Australian-based operations.

and liabilities are translated at the exchange rate on the balance sheet date, stockholders’

equity is translated at historical

rates and statement of operations items are translated at the weighted average exchange rate for the period.

The resulting translation

adjustments are reported under other comprehensive income.

Gains and losses resulting from the translations of foreign currency

transactions and balances are reflected in the statement of operations and comprehensive income (loss).

Adopted Accounting Pronouncements

were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact

on the Company´s consolidated financial position, operations, or cash flows.

Company has evaluated all transactions through the financial statement issuance date for subsequent disclosure consideration.

RESEARCH AND DEVELOPMENT ACTIVITY

to UK tax law, the Company is allowed an R&D tax credit that reduces a company’s tax bill in the UK for expenses incurred

in R&D subject to certain requirements.

The Company’s UK subsidiary submits R&D tax credit requests annually for

research and development expenses incurred.

At December 31, 2020 and 2019, the Company recorded a research and development tax

credit receivable of $833,024 and $395,850, respectively for R&D expenses incurred in the UK.

During the years ended December

31, 2020 and 2019, the Company received $305,593 and $443,929 of R&D tax credit reimbursements, respectively from the UK.

to AUS tax law, the Company is allowed an R&D tax credit that reduces a company’s tax bill in AUS for expenses incurred

in R&D subject to certain requirements.

The Company’s Australian subsidiary submits R&D tax credit requests annually

for research and development expenses incurred.

At December 31, 2020 and 2019, the Company recorded a research and development

tax credit receivable of $853,041 and $172,289, respectively, for R&D expenses incurred in Australia.

During the years ended

December 31, 2020 and 2019, the Company received $178,029 and $410,857 of R&D tax credit reimbursements, respectively from

License Agreement

On October 3, 2017, the Company entered

into a license agreement (“Xencor License Agreement”) with Xencor, Inc.

(“Xencor”), which has discovered

and developed a proprietary biological molecule that inhibits soluble tumor necrosis factor.

Pursuant to the license agreement,

Xencor granted the Company an exclusive worldwide, royalty-bearing license in licensed patent rights, licensed know-how and licensed

materials (as defined in the license agreement) to make, develop, use, sell and import any pharmaceutical product that comprises,

contains, or incorporates Xencor’s proprietary protein known as “XPro1595”

that inhibits soluble tumor necrosis

factor (or all modifications, formulations and variants of the licensed protein that specifically bind soluble tumor necrosis factor)

October 3, 2017, the Company entered into a license agreement (“Xencor License Agreement”) with Xencor, Inc.

(“Xencor”),

which has discovered and developed a proprietary biological molecule that inhibits soluble tumor necrosis factor.

the license agreement, Xencor granted the Company an exclusive worldwide, royalty-bearing license in licensed patent rights, licensed

know-how and licensed materials (as defined in the license agreement) to make, develop, use, sell and import any pharmaceutical

product that comprises, contains, or incorporates Xencor’s proprietary protein that inhibits soluble tumor necrosis factor

(or all modifications, formulations and variants of the licensed protein that specifically bind soluble tumor necrosis factor)

alone or in combination with one or more active ingredients, in any dosage or formulation (“Licensed Products”).

Company believes the protein has numerous medical applications.

Such additional alternative applications of the technology are

available under the license agreement.

In connection with the license agreement, the Company paid Xencor a one-time non-creditable

and non-refundable fee of $100,000 and issued Xencor 1,585,000 shares of the Company’s common stock with a fair value of

In addition, the Company issued Xencor fully vested warrants with a fair value of $4,193,000 to purchase an additional

number of shares of common stock equal to 10% of the fully diluted company shares immediately following such purchase.

have an exercise price based on a valuation of the Company at $100,000,000 and expire on October 3, 2023.

The aggregate purchase

price for the full exercise of the option is $10,000,000 which purchase price shall be pro-rated for any partial exercise of the

In August 2018, the Company entered into a First Amendment to Stock Issuance Agreement.

Pursuant to the amendment, the

purchase price for the additional shares may only be paid by cash.

The Company recorded $16,514,000 for the

acquisition of intangible assets for the in-process research and development as the fair value of the cash, stock and warrants

on the date of the License Agreement acquisition in accordance with Accounting Standards Codification 730 –

Development .

The Company has the license rights to pursue alternative applications of the technology as part of its future

development plans.

The Company also agreed to pay Xencor a

royalty on Net Sales of all Licensed Products in a given calendar year, which are payable on a country-by- country and licensed

product by licensed product basis until the date that is the later of (a) the expiration of the last to expire valid claim covering

such Licensed Product in such country or (b) ten years following the first sale to a third party of the licensed product in such

Under the Xencor License Agreement, the

Company also agreed to pay Xencor a percentage of any sublicensing revenue that it receives.

Novamune Joint Development Agreement

September 3, 2016, the Company entered into a joint development agreement with Novamune, Inc.

(“Novamune”) (the “Development

Agreement”).

Novamune is owned by a significant shareholder of the Company.

Novamune had previously developed and licensed

technology relating to ex-vivo activation of NK cells for the treatment of cancer and other diseases.

The parties agreed to exclusively

collaborate on the further development of technologies related to NK cells for therapeutic applications.

The Company and Novamune

agreed to share equally in the costs related to such joint development projects and agreed to jointly own any intellectual property

developed by the joint projects, provided that Novamune shall have an exclusive royalty free license to use any such intellectual

property relating to ex-vivo applications and the Company shall have an exclusive royalty free license to use any such intellectual

property relating to in-vivo applications.

The Company completed its part of the Novamune Agreement and does not currently expect

to receive any future reimbursements from Novamune.

As of December 31, 2019 and December 31, 2018, the Company had a joint development

receivable outstanding related to Novamune’s portion of R&D costs incurred of $0 and $17,989, respectively.

INKmune License Agreement

On October 29, 2015, the Company entered

into an exclusive license agreement with Immune Ventures, LLC (“Immune Ventures”), owner of all of the rights related

to our principal patent (the “INKmune License Agreement”).

Pursuant to the INKmune License Agreement, the Company was

granted exclusive worldwide rights to the patents, including rights to incorporate any improvements or additions to the patents

that may be developed in the future.

In consideration for the patent rights, the Company agreed to the following milestone payments

(of which none have been met as of December 31, 2019):

Company refers to this licensed protein as DN-TNF and the Company has labeled it as XPro1595 for the Company’s Alzheimer’s

and Treatment Resistant Depression indications, Quellor for the COVID-19 indication and LIVNate for the NASH indication.

believes the protein has numerous other medical applications.

Such additional alternative applications of the technology are available

under the license agreement.

In connection with the license agreement, the Company paid Xencor a one-time non-creditable and non-refundable

fee of $100,000 and issued Xencor 1,585,000 shares of the Company’s common stock with a fair value of $12,221,000.

the Company issued Xencor fully vested warrants with a fair value of $4,193,000 to purchase an additional number of shares of

common stock equal to 10% of the fully diluted company shares immediately following such purchase.

The warrants have an exercise

price based on a valuation of the Company at $100,000,000 and expire on October 3, 2023.

The aggregate purchase price for the

full exercise of the option is $10,000,000 which purchase price shall be pro-rated for any partial exercise of the Warrant.

August 2018, the Company entered into a First Amendment to Stock Issuance Agreement.

Pursuant to the amendment, the purchase price

for the additional shares may only be paid by cash.

Company recorded $16,514,000 for the acquisition of intangible assets for the in-process research and development as the fair

value of the cash, stock and warrants on the date of the License Agreement acquisition in accordance with Accounting Standards

Codification 730 –

Research and Development .

The Company has the license rights to pursue alternative applications

of the technology as part of its future development plans.

Company also agreed to pay Xencor a royalty on Net Sales of all Licensed Products in a given calendar year, which are payable

on a country-by- country and licensed product by licensed product basis until the date that is the later of (a) the expiration

of the last to expire valid claim covering such Licensed Product in such country or (b) ten years following the first sale to

a third party of the licensed product in such country.

The Company had no sales of Licensed Products during 2020.

the Xencor License Agreement, the Company also agreed to pay Xencor a percentage of any sublicensing revenue that it receives.

License Agreement

October 29, 2015, the Company entered into an exclusive license agreement (the “INKmune License Agreement”) with Immune

Ventures, LLC (“Immune Ventures”).

Pursuant to the INKmune License Agreement, the Company was granted exclusive worldwide

rights to the patents, including rights to incorporate any improvements or additions to the patents that may be developed in the

In consideration for the patent rights, the Company agreed to the following milestone payments (of which none have been

met as of December 31, 2020):

Each Phase I initiation

3 unchanged sentences

Each NDA/EMA awarded

In addition, the Company agreed to pay

the licensor a royalty of 1% of net sales during the life of each patent granted to the Company.

The License is owned by RJ Tesi,

the Company’s President and a member of our Board of Directors, David Moss, its Chief Financial Officer and Treasurer and

Mark Lowdell, its Chief Scientific Officer.

As of December 31, 2019 and December 31, 2018, no sales had occurred under this

The term of the agreement began on October

29, 2015 and, if not terminated sooner pursuant to the agreement, ends on a country by country basis on the date of the expiration

of the last to expire patent rights where patent rights exists.

Upon the termination of the agreement we shall have a fully paid

up, perpetual, royalty-free license without further obligation to Immune Ventures.

The agreement can be terminated by Immune Ventures

if, after 60 days from the Company’s receipt of notice that the Company has not made a payment under the agreement, and the

Company still does not make this payment.

On July 20, 2018, the parties amended the agreement under which the Company is required

achieve the following milestones:

Initiation of Phase 1 clinical or equivalent

trials by October 29, 2020

Initiation of Phase II clinical trials

or equivalent by October 29, 2022

Initiation of Phase III clinical trials

or equivalent by October 29, 2024

Filing of NDA or equivalent by October

29, 2025 or equivalent

If the Company doesn’t achieve the

above milestones, it is required to negotiate in good faith with Immune Ventures to determine how it can either remedy the failure

or achieve an alternate development.

If the Company fails to make any required efforts or if the efforts do not remedy the situation

within 60 days of written notice by Immune Ventures then Immune Ventures may provide notice to terminate the license or convert

it to a non-exclusive license.

University of Pittsburg License Agreement

On October 3, 2017, the Company entered

into an Assignment and Assumption Agreement with Immune Ventures related to intellectual property licensed from the University

of Pittsburgh.

Pursuant to the Assignment and Assumption Agreement (“Assignment Agreement”), Immune Ventures assigned

all of its rights, obligations and liabilities under an Exclusive License Agreement between the University of Pittsburgh –

Of the Commonwealth System of Higher Education (“Licensor”) and Immune Ventures to INmune Bio (“Licensee”),

(the “PITT Agreement”).

Consideration under the PITT Agreement

(i) annual maintenance fees, (ii) royalty payments based on the sale of products making use of the licensed technology,

and (iii) milestone payments.

Annual maintenance fees under the PITT

Agreement include:

addition, the Company agreed to pay the licensor a royalty of 1% of net sales during the life of each patent granted to the Company.

The License is owned by Immune Ventures.

RJ Tesi, the Company’s President and a member of our Board of Directors, David

Moss, its Chief Financial Officer and Treasurer and Mark Lowdell, its Chief Scientific Officer, are the owners of Immune Ventures.

As of December 31, 2020 and December 31, 2019, no sales had occurred under this license.

term of the agreement began on October 29, 2015 and, if not terminated sooner pursuant to the agreement, ends on a country-by-country

basis on the date of the expiration of the last to expire patent rights where patent rights exists.

Upon the termination of the

agreement we shall have a fully paid up, perpetual, royalty-free license without further obligation to Immune Ventures.

The agreement

can be terminated by Immune Ventures if, after 60 days from the Company’s receipt of notice that the Company has not made

a payment under the agreement, and the Company still does not make this payment.

On July 20, 2018, the parties amended the

agreement under which the Company was required achieve milestones pursuant to the agreement.

On October 30, 2020, the parties

executed an additional amendment to the agreement under which the Company is required to achieve the following milestones:

of Phase 1 clinical or equivalent trials by October 29, 2021

of Phase II clinical trials or equivalent by October 29, 2023

of Phase III clinical trials or equivalent by October 29, 2025

of NDA or equivalent by October 29, 2026 or equivalent

the Company doesn’t achieve the above milestones, it is required to negotiate in good faith with Immune Ventures to determine

how it can either remedy the failure or achieve an alternate development.

If the Company fails to make any required efforts, or

if the efforts do not remedy the situation within 60 days of written notice by Immune Ventures, then Immune Ventures may provide

notice to terminate the license or convert it to a non-exclusive license.

of Pittsburg License Agreement

October 3, 2017, the Company entered into an Assignment and Assumption Agreement with Immune Ventures related to intellectual

property licensed from the University of Pittsburgh.

Pursuant to the Assignment and Assumption Agreement (“Assignment Agreement”),

Immune Ventures assigned all of its rights, obligations and liabilities under an Exclusive License Agreement between the University

of Pittsburgh –

Of the Commonwealth System of Higher Education (“Licensor”) and Immune Ventures to INmune Bio

(“Licensee”), (the “PITT Agreement”).

Consideration

under the PITT Agreement includes:

(i) annual maintenance fees, (ii) royalty payments based on the sale of products making use

of the licensed technology, and (iii) milestone payments.

maintenance fees under the PITT Agreement include:

$5,000 due June 26 of each year 2020-2022;

$10,000 due on June 26 of each year

and $25,000 due on

June 26 of each year 2025 and annually thereafter until first commercial sale.

and $25,000 due on June 26 of each year 2025 and annually thereafter until first commercial sale.

The Company had no

amounts owed pursuant to the PITT Agreement as of December 31, 2020.

June 26 of each year 2020-2022

1 unchanged sentence

June 26 of each year 2025 until first commercial sale

Upon first commercial sale of a product

making use of the licensed technology under the PITT Agreement, the Licensee is required to pay royalties equal to 2.5% of Net

Sales each calendar quarter.

Moreover, under the

PITT Agreement the Licensee is required to make milestone payments as follows:

first commercial sale of a product making use of the licensed technology under the PITT Agreement, the Licensee is required to

pay royalties equal to 2.5% of Net Sales each calendar quarter.

under the PITT Agreement the Licensee is required to make milestone payments as follows:

Each Phase I initiation

1 unchanged sentence

First commercial sale of product making use of licensed technology

The Company made a $50,000 milestone payment

in March 2019 pursuant to the PITT Agreement as a result of a Phase I initiation.

The PITT Agreement expires upon the earlier of:

(i) expiration of the last claim of the Patent Rights forming the subject matter of the PITT Agreement;

or (ii) the date that is

20 years from the effective date of the agreement (June 26, 2037).

Licensee may terminate the PITT Agreement

upon 3 months prior written notice provided all payments under the license are current.

Licensor may terminate the PITT Agreement

upon written notice if:

(i) Licensee defaults as to performance of material obligations which have not been cured within 60 days

after receiving written notice;

or (ii) Licensee ceases to carry out its business, becomes bankrupt or insolvent, applies for or

consents to the appointment of a trustee, receiver or liquidator of its assets or seeks relief under any law for the aid of debtors.

University College London License

Agreement –

On July 19, 2019, the Company entered into

license agreement with UCL Business PLC (“UCLB”) with a ten (10) year term.

Pursuant to the license agreement, the

Company acquired an exclusive license (and a right to sub-license) to the technology and know-how relating to an isolation and

commercial scale expansion methodology of GMP grade human umbilical cord mesenchymal stem/stromal cells (“MSC”).

In exchange for the license agreement,

the Company paid UCLB an initial license fee of approximately $10,000 and shall pay annual licensing fees of approximately $13,000

per year for the remaining term of the agreement beginning in July 2020.

The Company will pay UCLB a royalty of 3-3.5%% of the

net sales value (as defined in the agreement) of all licensed products sold or used by the Company.

In the event the Company sub-licenses

the technology and know-how, the Company will pay UCLB a royalty of twelve (12) percent of consideration (cash or non-cash) received

by the Company in relation to the development or sub-licensing of any of the technology and know-how.

NOTE 5 –

In May 2019, the Company signed a sublease

agreement with a related party for office space in La Jolla, California, which serves as the new headquarters of the Company.

lease has a 61-month term, which corresponds to the lease term of the lessor.

The lessor is CTI Clinical Trial & Consulting

Services (“CTI”).

CTI is majority-owned by a member of the Company’s Board of Directors.

The lessor may extend

its lease for an additional 5 years, and, if it does, the Company may also extend its sublease for 5 years.

The Company did not

include the option to extend in the calculation of the lease liabilities as such extension is not reasonably certain to occur.

Variable lease costs for the Company’s lease consists of operating expenses for the spaces.

Below is a summary of the Company’s

right-of-use assets and liabilities as of December 31, 2019:

Company made a $50,000 milestone payment in March 2019 pursuant to the PITT Agreement as a result of a Phase I initiation.

PITT Agreement expires upon the earlier of:

(i) expiration of the last claim of the Patent Rights forming the subject matter of

the PITT Agreement;

or (ii) the date that is 20 years from the effective date of the agreement (June 26, 2037).

Licensee may terminate the PITT Agreement upon 3 months prior written notice provided all payments under the license are current.

The Licensor may terminate the PITT Agreement upon written notice if:

(i) Licensee defaults as to performance of material obligations

which have not been cured within 60 days after receiving written notice;

or (ii) Licensee ceases to carry out its business, becomes

bankrupt or insolvent, applies for or consents to the appointment of a trustee, receiver or liquidator of its assets or seeks

relief under any law for the aid of debtors.

College London License Agreement –

July 19, 2019, the Company entered into license agreement with UCL Business PLC (“UCLB”) with a ten (10) year term.

Pursuant to the license agreement, the Company acquired an exclusive license (and a right to sub-license) to the technology and

know-how relating to an isolation and commercial scale expansion methodology of GMP grade human umbilical cord mesenchymal stem/stromal

cells (“MSC”).

exchange for the license agreement, the Company paid UCLB an initial license fee of approximately $10,000 and shall pay annual

licensing fees of approximately $13,000 per year for the remaining term of the agreement beginning in July 2020.

The Company will

pay UCLB a royalty of 3-3.5%of the net sales value (as defined in the agreement) of all licensed products sold or used by the

In the event the Company sub-licenses the technology and know-how, the Company will pay UCLB a royalty of 12 percent

of consideration (cash or non-cash) received by the Company in relation to the development or sub-licensing of any of the technology

and know-how.

The Company had no amounts owed to UCLB as of December 31, 2020.

May 2019, the Company signed a sublease agreement with a related party for office space in La Jolla, California, which serves

as the new headquarters of the Company.

The lease has a 61-month term, which corresponds to the lease term of the lessor.

lessor is CTI Clinical Trial & Consulting Services (“CTI”).

CTI is majority-owned by a member of the Company’s

Board of Directors.

The lessor may extend its lease for an additional 5 years, and, if it does, the Company may also extend its

sublease for 5 years.

The Company did not include the option to extend in the calculation of the lease liabilities as such extension

is not reasonably certain to occur.

Variable lease costs for the Company’s lease consists of operating expenses for the

Below is a summary of the Company’s right-of-use assets and liabilities:

Right-of-use asset –

7 unchanged sentences

Weighted-average discount rate

During the year ended December 31, 2019,

the Company recognized $33,204 in operating lease expense, which is included in general and administrative expenses in the Company’s

consolidated statement of operations.

NOTE 6 –

RELATED PARTY

At December 31, 2019 and 2018, the Company

owed UCL Consultants Limited (“UCL”) $9,379 and $9,020, respectively, in connection with medical research performed

on behalf of the Company.

During the years ending December 31, 2019 and 2018, the Company paid UCL $349,071 and $238,100, respectively,

for medical research performed on behalf of the Company.

UCL is a wholly owned subsidiary of the University of London.

The Company’s

Chief Scientific and Manufacturing Officer is a professor at the University of London.

At December 31, 2019 and 2018, the Company

owed CTI $280,723 and $261,525, respectively, for medical research performed on behalf of the Company.

During the years ending

December 31, 2019 and 2018, the Company paid CTI $1,071,126 and $448,282, respectively, for medical research performed on behalf

of the Company.

In addition, during May 2019, the Company entered into a sublease agreement with CTI for office space.

year ended December 31, 2019, the Company paid CTI $49,305 pursuant to its sublease agreement with CTI.

Advent Bioservices

At December, 31, 2019 and 2018, the Company

owed Advent Bioservices, Ltd.

(“Advent Bioservices”) $0 and $0, respectively, in connection with medical research performed

on behalf of the Company.

During the years ending December, 2019 and 2018, the Company paid Advent Bioservices $0 and $298,230,

respectively, for medical research performed on behalf of the Company.

Advent Bioservices is owned by a significant shareholder

of the Company.

NOTE 7 –

the years ended December 31, 2020 and 2019, the Company recognized $52,428 and $33,204, respectively, in operating lease expense,

which is included in general and administrative expenses in the Company’s consolidated statement of operations.

RELATED PARTY TRANSACTIONS

December 31, 2020 and 2019, the Company owed UCL Consultants Limited (“UCL”) $33,664 and $9,379, respectively, in

connection with medical research performed on behalf of the Company.

During the years ending December 31, 2020 and 2019, the Company

paid UCL $334,738 and $349,071, respectively, for medical research performed on behalf of the Company.

UCL is a wholly owned subsidiary

of the University of London.

The Company’s Chief Scientific and Manufacturing Officer is a professor at the University of

December 31, 2020 and 2019, the Company owed CTI $0 and $280,723, respectively, for medical research performed on behalf of the

During the years ending December 31, 2020 and 2019, the Company paid CTI $126,850 and $1,071,126, respectively, for medical

research performed on behalf of the Company.

During the years ended December 31, 2020 and 2019, the Company paid CTI $25,392 and

$49,305, respectively, pursuant to its sublease agreement with CTI.

During the year ended December 31, 2020, the Company

recorded a capital contribution of $215,761 for the forgiveness of certain accounts payable due to CTI.

STOCKHOLDERS’

Initial Public Offering

During February 2019, the Company completed

its initial public offering in which the Company sold 1,020,820 shares of its common stock for gross proceeds of $8,166,560 (net

proceeds of $7,251,142).

Lincoln Park Transaction

On May 15, 2019, the Company entered into the Lincoln Park Purchase

Agreement pursuant to which Lincoln Park has agreed to purchase from us up to an aggregate of $20.0 million of the Company’s

common stock (subject to certain limitations) from time to time over the 24-month term of the agreement.

The Company also entered

into a registration rights agreement with Lincoln Park pursuant to which the Company filed with the SEC the registration statement

to register for resale under the Securities Act of 1933, as amended, or the Securities Act, the shares of common stock that have

been or may be issued to Lincoln Park under the Purchase Agreement.

The registration statement was effective as of July 2, 2019.

On May 15, 2019, 70,000 newly issued shares

of the Company’s common stock were issued to Lincoln Park as consideration for Lincoln Park’s commitment to purchase

shares of the Company’s common stock under the agreement, and 30,000 newly issued shares of common stock, valued at $10.00

per share, were sold to Lincoln Park in an initial purchase for an aggregate gross purchase price of $300,000 ($230,000 net of

offering costs).

Under the terms and subject to the conditions

of the Lincoln Park 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, an additional $19.7 million worth of shares of the Company’s common stock.

sales of common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company’s

option, over the 24-month term of the agreement.

As contemplated by the Lincoln Park Purchase

Agreement, and so long as the closing price of the Company’s common stock exceeds $3.50 per share, then the Company may direct

Lincoln Park, at its sole discretion to purchase up to 20,000 shares of its common stock on any business day.

The price per share

for such purchases will be equal to the lower of:

(i) the lowest sale price on the applicable purchase date and (ii) the arithmetic

average of the three (3) lowest closing sale prices for the Company’s common stock during the twelve (12) consecutive business

days ending on the business day immediately preceding such purchase date (in each case, to be appropriately adjusted for any reorganization,

recapitalization, non-cash dividend, stock split or other similar transaction that occurs on or after the date of the purchase

The maximum amount of shares subject to any single regular purchase increases as the Company’s share price increases,

subject to a maximum of $1.0 million.

In addition to regular purchases, the Company

may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional purchases if the closing sale

price of the common stock exceeds certain threshold prices as set forth in the purchase agreement.

There are no trading volume

requirements or restrictions under the purchase agreement nor any upper limits on the price per share that Lincoln Park must pay

for shares of common stock.

The Lincoln Park Purchase Agreement and

the registration rights agreement contain customary representations, warranties, agreements and conditions to completing future

sale transactions, indemnification rights and obligations of the parties.

The Company has the right to terminate the purchase agreement

at any time, at no cost or penalty.

During any “event of default”

under the purchase agreement, all of which are outside

of Lincoln Park’s control, Lincoln Park does not have the right to terminate the purchase agreement;

however, the Company

may not initiate any regular or other purchase of shares by Lincoln Park, until such event of default is cured.

In addition, in

the event of bankruptcy proceedings by or against the Company, the purchase agreement will automatically terminate.

Actual sales of shares of common stock

to Lincoln Park under the purchase agreement will depend on a variety of factors to be determined by the Company from time to time,

including, among others, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate

sources of funding for the Company and its operations.

Lincoln Park has no right to require any sales by the Company, but is obligated

to make purchases from the Company as it directs in accordance with the purchase agreement.

Lincoln Park has covenanted not to

cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s shares.

April and May 2019 Stock Sale

During April and May 2019, the Company

sold 522,212 shares of its common stock to certain investors for cash proceeds of $4,727,879, of which the Company’s CEO

purchased 11,100 shares for $119,325 of cash and the Company’s CFO purchased 5,000 shares for $53,550 of cash.

Luminus Stock Sale

During the year ended December 31, 2018,

to complete a series of funding provided for in the Company’s joint development agreement dated September 3, 2016, the Company

received $900,000 in cash from Luminus in exchange for 400,000 shares of the Company’s common stock.

Luminus is owned by

a significant shareholder of the Company.

Common Stock for Services

Strategic consulting and corporate development

During November 2019, the Company issued

8,475 shares of common stock to a third party in exchange for strategic consulting and corporate development services pursuant

to the Company’s 2019 Equity Incentive Plan.

The grant date fair value of these shares was $47,205.

Pacific Seaboard Consulting Agreement

On May 16, 2018, the Company entered into

a consulting agreement with Pacific Seaboard Investments Ltd.

(“Pacific Seaboard”) for corporate governance, compliance

services regarding the filing of a listing application and assist with activities related to its initial public offering.

of the consulting agreement is from April 24, 2018 to May 1, 2021.

In consideration of the consultant’s services, the Company

agreed to issue 600,000 shares of its restricted common stock, of which 200,000 shares were to be issued on May 16, 2018, 200,000

shares shall be locked up for six months after the effective date of the Company’s registration statement and 200,000 shares

shall be locked up for 10 months after the date of the Company’s offering.

Pursuant to this agreement, the Company recorded

$4,626,000 as common stock issuable as of December 31, 2018 for the 600,000 shares of common stock to be issued.

During June 2019,

the Company issued 400,000 shares of its common stock to Pacific Seaboard, whereby the Company was initially required to issue

600,000 shares to Pacific Seaboard, but subsequently received a waiver from Pacific Seaboard during April 2019 permanently waiving

the last 200,000 shares owed.

The Company recorded a waiver of common stock issuable of $1,542,000 during the year ended December

31, 2019 pursuant to the waiver agreement.

In November 2016, the Company entered into

a settlement agreement whereby the Company agreed to issue 33,335 shares of the Company’s common stock to an individual to

settle a claim in full.

The Company assessed the value of the common stock owed form the most readily determinable value of the

shares of the Company’s common stock issuable as a part of this settlement.

These shares have not been issued and are subject

to a restriction on transfer for a period of two years from the date the Company completes an initial public offering or otherwise

becomes a public company after which the Company will deliver the shares to the individual.

The obligation was recorded as common

stock issuable of $50,000 as of December 31, 2019 and 2018, respectively, pending delivery of the shares to the individual after

the restriction period expires.

Stock options

Public Offering

February 2019, the Company completed its initial public offering in which the Company sold 1,020,820 shares of its common stock

for gross proceeds of $8,166,560 (net proceeds of $7,251,142).

and May 2019 Stock Sale

April and May 2019, the Company sold 522,212 shares of its common stock to certain investors for cash proceeds of $4,727,879,

of which the Company’s CEO purchased 11,100 shares for $119,325 of cash and the Company’s CFO purchased 5,000 shares

for $53,550 of cash.

May 15, 2019, the Company entered into both a securities purchase agreement and registration rights agreement with Lincoln Park

Capital Fund, LLC (“Lincoln Park”).

Under the terms and subject to the conditions of the securities purchase agreement,

the Company has the right to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to $20.0 million in shares of

the Company’s common stock, subject to certain limitations, from time to time, over the 24-month period that commenced on

May 15, 2019.

During May 2019, the Company issued 70,000 shares of the Company’s common stock to Lincoln Park as consideration

for Lincoln Park’s commitment to purchase shares of the Company’s common stock under the agreement, and 30,000 shares

of common stock were sold to Lincoln Park in an initial purchase for an aggregate gross purchase price of $300,000 ($230,000 net

of offering costs).

the year ended December 31, 2020, the Company issued 196,000 shares of its common stock to Lincoln Park for $1,002,644 of cash.

At December 31, 2020, Lincoln Park is obligated to purchase up to $18.7 million worth of the Company’s common stock.

contemplated by the securities purchase agreement with Lincoln Park, and so long as the closing price of the Company’s common

stock exceeds $3.50 per share, then the Company may, subject to the terms and conditions of the Agreement, direct Lincoln Park,

at its sole discretion to purchase up to 20,000 shares of its common stock on any business day.

The purchase price will be based

on the market prices of the common stock at the time of such purchases as set forth in the securities purchase agreement.

addition to regular purchases, the Company may, subject to the terms and conditions of the Agreement, also direct Lincoln Park

to purchase other amounts as accelerated purchases or as additional purchases if the closing sale price of the common stock exceeds

certain threshold prices as set forth in the purchase agreement.

There are no trading volume requirements or restrictions under

the purchase agreement nor any upper limits on the price per share that Lincoln Park must pay for shares of common stock.

and retirement of common stock

January 2020, the Company purchased and cancelled 220,000 shares of its common stock from a shareholder in exchange for $1,012,000

Immediately following the purchase, the investor owned less than 10% of the outstanding common stock of the Company.

Stock –

At the Market Offering

April 2020, the Company entered into a sales agreement with BTIG, LLC (“BTIG”), as sales agent, to establish an At-The-Market

(“ATM”) offering program.

The sales agreement with BTIG was subsequently amended during August 2020.

The Company was

required to pay BTIG a commission of 3% of the gross proceeds from the sale of shares.

The ATM program will remain in full force

and effect until the earlier of the sale of all of the shares under the ATM program or the termination of the sales agreement

by the Company or BTIG.

From the inception of the agreement through December 31, 2020, the Company sold 178,600 shares of common

stock at an average price of $5.45 per share for gross proceeds of $972,879 (net proceeds of $812,828) and the Company paid BTIG

commissions and fees of $79,187.

Stock Offering

July 2020, the Company completed an underwritten public offering in which it sold 2,500,000 shares of common stock at a public

offering price of $10.00 per share.

The 2,500,000 shares sold included the full exercise of the underwriters’

purchase 326,086 shares at a price of $10.00 per share.

Aggregate net proceeds from the underwritten public offering were $23.1

million, net of approximately $1.9 million in underwriting discounts and commissions and offering expenses.

Stock Issued for Services

July 2020, the Company granted a consultant 50,000 fully vested warrants with a 5-year term, of which 25,000 warrants had an exercise

price of $5.50 per share and 25,000 warrants had an exercise price of $10.00 per share.

The fair value of these warrants was $356,874

based on the Black-Scholes Option Pricing Model and was recorded within general and administrative expense.

The assumptions used

for these warrants consist of the exercise prices, expected dividends of 0%, expected volatility of 111.67% based on the trading

history of similar companies, risk-free rate of 0.30% based on the applicable US Treasury bill rate and an expected life of 5.0

During July 2020, the Company issued the consultant 20,000 shares of common stock and cancelled the 50,000 warrants.

20,000 shares were issued from the Company’s 2019 Incentive Stock Plan and had a fair value of approximately $230,000 based

on the market value of the Company’s common stock on the grant date.

The Company accounted for the exchange of the warrants

for shares of common stock as a modification and recorded no additional expense in connection with the exchange as the fair value

of warrants exceeded the fair value of the shares issued.

Stock Issuable

Seaboard Consulting Agreement

May 16, 2018, the Company entered into a consulting agreement with Pacific Seaboard Investments Ltd.

(“Pacific Seaboard”)

for corporate governance, compliance services regarding the filing of a listing application and assist with activities related

to its initial public offering.

In consideration of the consultant’s services, the Company agreed to issue 600,000 shares

of its restricted common stock.

Pursuant to this agreement, the Company recorded $4,626,000 as common stock issuable for the 600,000

shares of common stock to be issued.

During June 2019, the Company issued 400,000 shares of its common stock to Pacific Seaboard,

whereby the Company was initially required to issue 600,000 shares to Pacific Seaboard, but subsequently received a waiver from

Pacific Seaboard during April 2019 permanently waiving the last 200,000 shares owed.

November 2016, the Company entered into a settlement agreement whereby the Company agreed to issue 33,335 shares of the Company’s

common stock to an individual to settle a claim in full.

The obligation was recorded as common stock issuable of $50,000 as of

December 31, 2019.

During December 2020, the Company issued the 33,335 shares.

September 2019, upon obtaining stockholder approval, the Company implemented the 2019 Stock Incentive Plan (2019 Stock Plan).

2019 Stock Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock and other stock-based

compensation awards to employees, officers, directors and consultants of the Company.

The administration of the 2019 Stock Plan

is under the general supervision of the compensation committee of the board of directors.

The exercise price of the stock options

is determined by the compensation committee of the board of directors, provided that stock options are granted with an exercise

price not less than fair market value of the common stock on the date of grant.

As of December 31, 2019, the Company had options

outstanding to purchase 1,785,000 shares of its common stock, pursuant to the 2019 Stock Plan.

The stock options issued pursuant

to the 2019 Stock Plan have an aggregated fair value of $ 5,500,616 that was calculated using the Black-Scholes option-pricing model.

The 2019 Stock Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock and other

stock-based compensation awards to employees, officers, directors and consultants of the Company.

The administration of the 2019

Stock Plan is under the general supervision of the compensation committee of the board of directors.

As of December 31, 2019,

the Company had options outstanding to purchase 1,785,000 shares of its common stock, pursuant to the 2019 Stock Plan.

options issued pursuant to the 2019 Stock Plan had an aggregated fair value of $5,500,616 that was calculated using the Black-Scholes

option-pricing model.

Variables used in the Black-Scholes option-pricing model include:

(1) discount rate of 1.71%-1.76% based on the applicable US Treasury

bill rates (2) expected life of 6.0 –

10.0 years, (3) expected volatility of approximately 94% based on the trading history

of similar companies, and (4) zero expected dividends.

following table summarizes stock option activity during the year ended December 31, 2019:

Weighted- average

(1) discount rate of 1.71%-1.76% based

on the applicable US Treasury bill rates (2) expected life of 6.0 –

10.0 years, (3) expected volatility of approximately

94% based on the trading history of similar companies, and (4) zero expected dividends.

September 2020, the Company granted an employee options to purchase 40,000 shares of its common stock pursuant to the 2019 Incentive

The stock options had a fair value of $339,731 that was calculated using the Black-Scholes option-pricing model.

used in the Black-Scholes option-pricing model include:

(1) discount rate of 0.46% based on the applicable US Treasury bill rate

(2) expected life of 6.25 years, (3) expected volatility of approximately 106% based on the trading history of similar companies,

and (4) zero expected dividends.

following table summarizes stock option activity:

Weighted-average

9 unchanged sentences

Exercisable at December 31, 2020

During the years ended December 31, 2019

and 2018, the Company recognized stock-based compensation expense of $4,049,333 and $5,375,359, respectively, related to stock

As of December 31, 2019, there was $6,492,888 of total unrecognized compensation cost related to non-vested stock options

which is expected to be recognized over a weighted-average period of 2.66 years.

The weighted-average

grant date fair values, based on the Black-Scholes option model, of options granted during the year ended December 31, 2019

and 2018 was $3.07 and $6.37, respectively.

In connection with the Company’s

initial public offering in February 2019, the Company issued warrants to the placement agents to purchase 40,982 shares of the

Company’s common stock at an exercise price of $9.60 per common share, which warrants are exercisable until December 19,

The fair value of these warrants was valued at $247,452 based on the Black-Scholes Option Pricing Model and accounted for

as an offering cost in equity.

The assumptions used for these warrants consist of an exercise price of $9.60 per share, expected

dividends of 0%, expected volatility of 106.85% based on a trading history of similar companies, a risk-free rate of 2.51% based

on the applicable US Treasury bill rates and an expected life of 4.9 years.

These warrants had no intrinsic value as of December

In October 2017, in connection with the

Xencor License Agreement, the Company issued fully vested warrants to purchase an additional number of shares of common stock equal

to 10% of the fully diluted Company shares immediately following such purchase.

These warrants had no intrinsic value

as of December 31, 2019.

On June 30, 2017, the Company issued fully

vested warrants to purchase 31,667 shares of the Company’s common stock to a third party in conjunction with the common stock

sold for cash.

The warrants have a $1.50 exercise price and expire on June 30, 2020.

These warrants had an intrinsic value of $136,168

as of December 31, 2019.

Stock-based Compensation by Class of

The following summarizes the components

of stock-based compensation expense in the consolidated statements of operations for the years ended December 31, 2019 and 2018

respectively:

the years ended December 31, 2020 and 2019, the Company recognized stock-based compensation expense of $2,755,130 and $4,049,333,

respectively, related to stock options.

As of December 31, 2020, there was $4,077,489 of total unrecognized compensation cost

related to non-vested stock options which is expected to be recognized over a weighted-average period of 2.00 years.

connection with the Company’s initial public offering in February 2019, the Company issued warrants to the placement agents

to purchase 40,982 shares of the Company’s common stock at an exercise price of $9.60 per common share, which warrants are

exercisable until December 19, 2023.

During July 2020, 6,147 of these warrants were exercised on a cashless basis in exchange

for 2,400 shares of the Company’s common stock.

At December 31, 2020, 34,835 of these warrants are outstanding and the intrinsic

value is $265,443.

October 2017, in connection with the Xencor License Agreement, the Company issued fully vested warrants to purchase an additional

number of shares of common stock equal to 10% of the fully diluted Company shares immediately following such purchase.

These warrants had an intrinsic value of $22,535,812 as of December 31, 2020.

June 30, 2017, the Company issued fully vested warrants with a maturity date of June 30, 2022 and an exercise price of $1.50 to

purchase 31,667 shares of the Company’s common stock to a third party in conjunction with common stock sold for cash.

warrants had an intrinsic value of $497,805 as of December 31, 2020.

Compensation by Class of Expense

following summarizes the components of stock-based compensation expense in the consolidated statements of operations for the years

ended December 31, 2020 and 2019 respectively:

Research and development

General and administrative

NOTE 8 –

The provision for income taxes consists

of the following components:

Rights Agreement

On December 30, 2020, the Board of Directors

(the “Board”) of the Company approved and adopted a Rights Agreement, dated as of December 30, 2020, by and between

the Company and VStock Transfer, LLC, as rights agent, pursuant to which the Board declared a dividend of one preferred share purchase

right (each, a “Right”) for each outstanding share of the Company’s common stock held by stockholders as of the

close of business on January 11, 2021.

When exercisable, each right initially would represent the right to purchase from the Company

one one-thousandth of a share of a newly designated series of preferred stock, Series A Junior Participating Preferred Stock, par

value $0.001 per share, of the Company, at an exercise price of $300.00 per one one-thousandth of a Series A Junior Participating

Preferred Share, subject to adjustment.

Subject to various exceptions, the Rights become exercisable in the event any person (excluding

certain exempted or grandfathered persons) becomes the beneficial owner of twenty percent or more of the Company’s common

stock without the approval of the Board.

The Rights are scheduled to expire on December 30, 2021.

Preferred Stock

In 2020, the Company

designated 45,000 shares of its preferred stock with par value of $0.001 per share as Series A Junior Participating

Preferred Stock.

The remaining 9,955,000 shares of preferred stock with par value of $0.001 remain undesignated.

None of the preferred shares were issued and outstanding at December 31, 2020 and 2019.

provision for income taxes consists of the following components:

Current expense (benefit)

3 unchanged sentences

Net deferred taxes

A reconciliation of income tax benefit

computed using the federal statutory income tax rate to the Company’s tax expense is as follows:

reconciliation of income tax benefit computed using the federal statutory income tax rate to the Company’s tax expense is

Federal tax benefit at statutory rate (21%)

9 unchanged sentences

Income tax benefit

The principal components of deferred tax

assets and liabilities consist of the following at December 31, 2019 and 2018, respectively:

principal components of deferred tax assets and liabilities consist of the following at December 31, 2020 and 2019, respectively:

Deferred tax assets

11 unchanged sentences

in the valuation allowance was $1,638,407 during the year ended December 31, 2020.

The Company recognizes uncertain tax positions

in accordance with ASC 740 on the basis of evaluating whether it is more likely than not that the tax positions will be sustained

upon examination by tax authorities.

For those tax positions that meet the more-likely-than not recognition threshold, we recognize

the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement.

As of December 31,

2019, and 2018, the Company has no significant uncertain tax positions.

There are no unrecognized tax benefits included on the

balance sheet that would, if recognized, impact the effective tax rate.

The Company does not anticipate there will be a significant

change in unrecognized tax benefits within the next 12 months.

NOTE 9 –

Company recognizes uncertain tax positions in accordance with ASC 740 on the basis of evaluating whether it is more likely than

not that the tax positions will be sustained upon examination by tax authorities.

For those tax positions that meet the more-likely-than

not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon

ultimate settlement.

As of December 31, 2020, and 2019, the Company has no significant uncertain tax positions.

There are no unrecognized

tax benefits included on the balance sheet that would, if recognized, impact the effective tax rate.

The Company does not anticipate

there will be a significant change in unrecognized tax benefits within the next 12 months.

COLLABORATIVE AGREEMENTS

2019, the Company was awarded a $1,000,000 grant from the Alzheimer’s Association to advance XPro1595, a novel therapy targeting

neuroinflammation as a cause of Alzheimer’s disease.

The endowment was awarded under the Part the Cloud to RESCUE grant.

During the year ended December 31, 2020 and 2019, the Company received $150,000 and $850,000, respectively, related to the grant,

which the Company recorded as a reduction of research and development expense.

As of December 31, 2020, the Company has received

$1,000,000 of cash proceeds from the Alzheimer’s Association and no additional amounts are available to the Company pursuant

to this grant.

the year ended December 31, 2020, the Company was awarded a $500,000 grant from the Amyotrophic Lateral Sclerosis (“ALS”)

Association to fund a study of the efficacy of XPro1595 to reverse ALS in vitro and to fund a study of the efficacy of XPro1595

to protect against ALS model phenotypes in vivo.

During the year ended December 31, 2020, the Company received $300,000 of cash

proceeds pursuant to this grant which the Company recorded as deferred liabilities.

During the year ended December 31, 2020, the

Company recorded $177,704 as a reduction of deferred liabilities as a result of incurring costs related to the ALS grant.

December 31, 2020, the Company recorded $122,296 as deferred liabilities in the consolidated balance sheet related to the ALS

September 2020, the Company was awarded a grant of up to $2.9 million from the National Institutes of Health (“NIH”).

The grant will support a Phase 2 study of XPro1595 in patients with treatment resistant depression.

As of December 31, 2020, the

Company has not received any proceeds pursuant to this grant.

SUBSEQUENT EVENTS

During January 2020, the Company purchased

220,000 shares of its common stock from a shareholder pursuant to a repurchase agreement.

The purchase price was $4.60 per share,

resulting in a total purchase price of $1,012,000.

The Company then cancelled these shares.

During January 2020, the Company sold 196,000

shares of common stock to Lincoln Park for total cash proceeds of $1,002,684.

During February 2020, the Company was awarded

a $500,000 grant from The Amyotrophic Lateral Sclerosis (ALS) Association to Fund studies of the use of XPro1595 against ALS.

ALS Association paid $300,000 of the grant in February 2020, and the Company expects to receive $100,000 in February 2021 and the

remaining $100,000 in August 2021, subject to the Company providing the ALS Association certain research progress reports and expenditure

reports pursuant to the grant award.

Changes in and Disagreements

with Accountants on Accounting and Financial Disclosure

During January and February 2021, the Company

sold 1,439,480 shares of its common stock for aggregate gross proceeds of $29.0 million (net proceeds of $28.4 million) under the

The Company paid BTIG commissions and fees of $581,500 in connection with the sale of these shares.

January 2021, the Company granted 198,549 stock options with an exercise price of $24.82 to executives and directors of the Company

which vest over 3-4 years.

The fair value of these options was approximately $4.2 million.

During February 2021, the Company received

$100,000 of cash proceeds pursuant to its grant from the ALS Association.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data