What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2020-11-05 · 778 added, 977 removed, 196 unchanged (90% of the section changed)

1 unchanged sentence

BALANCE SHEETS

September 30,

and cash equivalents

and development tax incentive receivable

tax receivable

expenses –

related party

(In thousands, except share and per share amounts)

CURRENT ASSETS

lease –

Cash and cash equivalents

Research and development tax credit receivable

Other tax receivable

Prepaid expenses

Prepaid expenses –

related party

TOTAL CURRENT ASSETS

Operating lease –

right of use asset –

related party

in-process research and development intangible assets

AND STOCKHOLDERS’

payable and accrued liabilities

payable and accrued liabilities –

Acquired in-process research and development intangible assets

LIABILITIES AND STOCKHOLDERS’

CURRENT LIABILITIES

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities –

related parties

lease, current liability –

Deferred liabilities

Operating lease, current liability –

related party

CURRENT LIABILITIES

operating lease liability –

TOTAL CURRENT LIABILITIES

Long-term operating lease liability –

related party

AND CONTINGENCIES

STOCKHOLDERS’

stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding

stock, $0.001 par value, 200,000,000 shares authorized, 13,447,948 and 10,770,948 shares issued and outstanding, respectively

paid-in capital

stock issuable

other comprehensive loss

(30,171,054 )

(21,276,181 )

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS' EQUITY

Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding

Common stock, $0.001 par value, 200,000,000 shares authorized, 14,932,638 and 13,481,283 shares issued and outstanding, respectively

Additional paid-in capital

Accumulated other comprehensive income

Accumulated deficit

TOTAL STOCKHOLDERS’

TOTAL LIABILITIES AND STOCKHOLDERS’

accompanying notes are an integral part of these unaudited consolidated financial statements.

STATEMENTS OF OPERATIONS

the Three Months Ended

September 30,

the Nine Months Ended

September 30,

and administrative

and development

of common stock issuable

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

Three months ended

OPERATING EXPENSES

FROM OPERATIONS

$ (4,716,662 )

$ (3,066,966 )

$ (8,894,873 )

$ (5,360,094 )

loss per common share –

General and administrative

Research and development

Total operating expenses

LOSS FROM OPERATIONS

OTHER (EXPENSE) INCOME

Other (expense) income

Total other (expense) income

Net loss per common share –

basic and diluted

average common shares outstanding - basic and diluted

COMPREHENSIVE

$ (4,716,662 )

$ (3,066,966 )

$ (8,894,873 )

$ (5,360,094 )

comprehensive loss on foreign currency translation

Weighted average number of common shares outstanding –

basic and diluted

COMPREHENSIVE LOSS

$ (4,764,523 )

$ (3,102,508 )

$ (8,924,093 )

$ (5,421,372 )

Other comprehensive income (loss) –

foreign currency translation

Total comprehensive loss

accompanying notes are an integral part of these unaudited consolidated financial statements.

STATEMENT OF CHANGES IN STOCKHOLDERS’

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020

Other Comprehensive

THE THREE MONTHS ENDED MARCH 31, 2021

(In thousands, except share amounts)

Comprehensive

Stockholders’

January 1, 2020

$ (21,276,181 )

of common stock for cash

and retirement of common stock

on foreign currency translation

March 31, 2020

(23,346,588 )

of common stock for cash, net

on foreign currency translation

June 30, 2020

(25,454,392 )

of common stock for cash, net

exercise of warrants

on foreign currency translation

September 30, 2020

$ (30,171,054 )

The accompanying notes are an integral part

of these unaudited consolidated financial statements.

Balance as of December 31, 2020

Issuance of common stock for cash

Exercise of warrants for cash

Stock-based compensation

Gain on foreign currency translation

Balance as of March 31, 2021

accompanying notes are an integral part of these unaudited consolidated financial statements.

STATEMENT OF CHANGES IN STOCKHOLDERS’

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

Other Comprehensive

THE THREE MONTHS ENDED MARCH 31, 2020

(In thousands, except share amounts)

Comprehensive

Stockholders’

January 1, 2019

$ (13,597,868 )

of common stock and warrants for cash, net

on foreign currency translation

March 31, 2019

(15,498,913 )

of common stock for cash, net

of common stock issuable

on foreign currency translation

June 30, 2019

(15,890,996 )

on foreign currency translation

September 30, 2019

$ (18,957,962 )

Balance as of December 31, 2019

Issuance of common stock and warrants for cash, net

Acquisition and retirement of common stock

Capital contribution

Stock-based compensation

Loss on foreign currency translation

Balance as of March 31, 2020

accompanying notes are an integral part of these unaudited consolidated financial statements.

STATEMENTS OF CASH FLOWS

the Nine Months Ended

September 30,

FLOWS FROM OPERATING ACTIVITIES:

$ (8,894,873 )

$ (5,360,094 )

to reconcile net loss to net cash used in operating activities:

of common stock issuable

in operating assets and liabilities:

and development tax incentive receivable

tax receivable

development cost receivable

expenses –

For the Three Months

Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Changes in operating assets and liabilities:

Research and development tax credit receivable

Other tax receivable

Prepaid expenses

Prepaid expenses –

related party

payable and accrued liabilities

payable and accrued liabilities –

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities –

related parties

lease liability –

Deferred liabilities

Operating lease liability –

related party

cash used in operating activities

FLOWS FROM FINANCING ACTIVITIES:

proceeds from sale of common stock

of common stock

cash provided by financing activities

on cash from foreign currency translation

INCREASE IN CASH

AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

AND CASH EQUIVALENTS AT END OF PERIOD

DISCLOSURE OF CASH FLOWS INFORMATION:

paid for income taxes

paid for interest expense

INVESTING AND FINANCING ACTIVITIES:

exercise of warrants

of warrants to placement agents

of common stock issuable

Net cash used in operating activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from sale of common stock

Net proceeds from the exercise of warrants

Purchase of common stock

Net cash provided by (used in) financing activities

Impact on cash from foreign currency translation

NET INCREASE (DECREASE) IN CASH

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS AT END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

Cash paid for income taxes

Cash paid for interest expense

NONCASH INVESTING AND FINANCING ACTIVITIES:

Capital contribution

accompanying notes are an integral part of these unaudited consolidated financial statements.

2 unchanged sentences

(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 September 30, 2020, the Company had an accumulated deficit of $30,171,054 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.

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

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 (LIVNate).

The Natural Killer Cell

Priming Platform includes INKmune aimed at priming the patient’s NK cells to eliminate minimal residual disease in patients with

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 March 31, 2021, the Company had an accumulated deficit of approximately $37.9 million 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.

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 September 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 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 Quarterly Report on Form 10-Q, 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-Q, 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.

Although it is difficult to predict the

Company’s liquidity requirements, as of September 30, 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 Quarterly Report on Form 10-Q based on the balance of cash available as of September 30, 2020.

The Company 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.

During March 2021, the Company entered into a sales agreement with BTIG, LLC (“BTIG”), as sales agent, to establish an At-The-Market (“ATM”) offering program of up to $45 million of common stock (the “2021 ATM”), subject to certain limitations on the amount of common stock that may be offered and sold by the Company set forth in the sales agreement.

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

There have been no sales of the Company’s common stock pursuant to the 2021 ATM.

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.

Aggregate net proceeds

from the underwritten public offering were approximately $23.1 million, net of $1.9 million in underwriting discounts and commissions

and offering expenses.

During April 2020, the Company entered into a

sales agreement with BTIG, as sales agent, to establish an ATM offering program to sell up to $10.0 million of the Company’s common

stock (the “2020 ATM”).

In August 2020, the sales agreement was amended whereby the aggregate offering was increased from

$10.0 million to $30.0 million.

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 million.

During the three months ended March 31, 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 $28.4 million.

31, 2021, sales of our common stock pursuant to the 2020 ATM have been completed.

Although it is difficult to predict the Company’s

liquidity requirements, as of March 31, 2021, 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

Quarterly Report on Form 10-Q based on the balance of cash available as of March 31, 2021.

The Company 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

1 unchanged sentence

accompanying financial statements are presented in U.S.

dollars and have been prepared in accordance with accounting principles

generally accepted in the United States of America (“US GAAP”), and pursuant to the accounting and disclosure rules

and regulations of the U.S.

dollars and have been prepared in accordance with accounting principles generally

accepted in the United States of America (“US GAAP”), and pursuant to the accounting and disclosure rules and regulations

Securities and Exchange Commission (“SEC”).

The consolidated financial statements include

the accounts of INmune Bio, Inc.

The consolidated financial statements include the accounts of INmune

and its subsidiaries.

Intercompany transactions and balances have been eliminated.

unaudited consolidated interim financial statements should be read in conjunction with the audited financial statements and notes

thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the year ended December

31, 2019, filed with the SEC on March 11, 2020.

opinion of management, the interim financial information includes all normal recurring adjustments necessary for a fair statement of

the results for the interim periods.

These unaudited consolidated interim financial statements should be read in conjunction with

the audited financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report

on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 4, 2021.

and Uncertainties

2 unchanged sentences

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.

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.

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.

site initiation and patient enrollment have and may continue to be delayed due to prioritization of hospital resources toward the COVID-19

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.

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 Cash Equivalents

Company considers all short-term, highly liquid investments with an original maturity at the date of purchase of three months

or less to be cash equivalents.

The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal

Deposit Insurance Corporation limits.

Company considers all short-term, highly liquid investments with an original maturity at the date of purchase of three months or less

to be cash equivalents.

The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal Deposit

Insurance Corporation limits.

The Company maintains its cash deposits with major 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,

The Company, through its wholly-owned subsidiary

in Australia (“AUS”), 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

The Company, through its wholly-owned subsidiary

in the United Kingdom (“UK”), 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.

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.

The United 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.

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

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 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.

September 30, 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.

September 30, 2019, the Company had 1,632,000 potentially issuable shares of common stock upon the exercise of stock options and

1,461,649 potentially issuable shares of common stock upon the exercise of warrants.

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

which requires the input of highly subjective assumptions, including expected volatility and expected life.

Changes in these inputs

and assumptions can materially affect the measure of estimated fair value of our share-based compensation.

These assumptions are

subjective and generally require significant analysis and judgment to develop.

When estimating fair value, some of the assumptions

will be based on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based

payment arrangements.

The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts

and circumstances.

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

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.

March 31, 2021 and 2020, the Company had potentially issuable shares as follows:

Stock options

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 contract;

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 refundable.

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

requires the input of highly subjective assumptions, including expected volatility and expected life.

Changes in these inputs and assumptions

can materially affect the measure of estimated fair value of our share-based compensation.

These assumptions are subjective and generally

require significant analysis and judgment to develop.

When estimating fair value, some of the assumptions will be based on, or determined

from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements.

The appropriate

weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances.

The Company accounts for

forfeitures of stock options as they occur.

and Development

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

Research and development tax incentives 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.

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.

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.

On March 27, 2020, the Coronavirus Aid, Relief,

and Economic Security Act, or the CARES Act, was enacted in the United States.

The impact of the CARES Act on the Company for

the period ending September 30, 2020 was not significant.

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 (“$”), 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.

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).

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).

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 evaluates events that have occurred after the balance sheet date of September 30, 2020, through the date which the financial

statements are issued.

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 evaluates events that have occurred after the balance sheet date of March 31, 2021, through the date which the financial statements

RESEARCH AND DEVELOPMENT ACTIVITY

to UK tax law, the Company is allowed an R&D tax incentive 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 incentive requests

annually for research and development expenses incurred and recorded a related receivable in the amount of $865,228 and $395,850

as of September 30, 2020 and December 31, 2019, respectively.

During the nine months ended September 30, 2020 and 2019, the Company

received $0 and $152,514, respectively, of R&D tax incentive reimbursements from the UK.

to AUS tax law, the Company is allowed an R&D tax incentive 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 incentive requests annually

for research and development expenses incurred.

On September 30, 2020 and December 31, 2019, the Company recorded a research and

development tax incentive receivable of $600,149 and $172,289, respectively, for R&D expenses incurred in Australia.

the nine months ended September 30, 2020 and 2019, the Company received $178,029 and $0, respectively, of R&D tax incentive

reimbursements from Australia.

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 March 31, 2021 and December 31, 2020, the Company recorded a research and development tax credit

receivable in the amount of $1,104,000 and $833,000, respectively.

During the three months ended March 31, 2021 and 2020, the Company

received $0 of R&D tax credit reimbursements 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 March 31, 2021 and December 31, 2020, the Company recorded a research and development tax credit

receivable of $1,086,000 and $853,000, respectively, for R&D expenses incurred in Australia.

During the three months ended March

31, 2021 and 2020, the Company received $0 R&D tax credit reimbursements from Australia.

License Agreement

2 unchanged sentences

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

Products”).

The 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 $12,221,000.

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) alone or

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

The Company believes

the protein has numerous medical applications.

Such additional alternative applications of the technology are available under the Xencor

License Agreement .

In connection with the Xencor 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.

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.

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

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.

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

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.

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.

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 –

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

The warrants expire on October 3, 2023.

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 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 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 September 30, 2020):

Phase I initiation

Phase II initiation

Phase III initiation

NDA/EMA filing

NDA/EMA awarded

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 September 30, 2020, 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 which the Company is required to achieve the following

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 future.

In consideration

for the patent rights, the Company agreed to the following milestone payments (of which none have been met as of March 31, 2021):

Each Phase I initiation

Each Phase II initiation

Each Phase III initiation

Each NDA/EMA filing

Each NDA/EMA awarded

In addition, the Company agreed to pay Immune

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

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 March 31, 2021, 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

2 unchanged sentences

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.

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.

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”).

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.

(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 the following:

June 26 of each year 2021-2022

June 26 of each year 2023-2024

June 26 of each year 2025 until first

commercial sale

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

June 26 of each year 2025 until first commercial sale

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:

Phase I initiation

Each Phase III initiation

First commercial sale of product

making use of licensed technology

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

First commercial sale of

product making use of licensed technology

Company had no a mounts owed pursuant to the PITT Agreement

as of March 31, 2021.

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;

(i) expiration of the last claim of the Patent Rights (as defined in the PITT Agreement) 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).

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

may terminate the PITT Agreement upon written notice if:

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.

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 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.

In May 2019, the Company signed a sublease

agreement with a related party for office space in La Jolla, California, which serves as the 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”).

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 $10,000 and shall pay annual licensing fees of approximately

$13,000 per year for the remaining term of the agreement.

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.

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.

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.

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.

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

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:

December 31, 2019

September 30, 2020

Below is a summary of the

Company’s right-of-use assets and liabilities as of March 31, 2021:

thousands, except years and rate)

Right-of-use asset –

7 unchanged sentences

Weighted-average discount rate

the nine months ended September 30, 2020, the Company recognized $39,321 in operating lease expense, which is included in general

and administrative expenses in the Company’s consolidated statement of operations.

the three months ended March 31, 2021, the Company recognized $13,000 in operating lease expense, which is included in general and administrative

expenses in the Company’s consolidated statement of operations.

RELATED PARTY TRANSACTIONS

September 30, 2020 and December 31, 2019, the Company owed UCL Consultants Limited (“UCL”) $9,132 and $9,379, respectively,

in connection with medical research performed on behalf of the Company.

During the nine months ending September 30, 2020 and 2019,

the Company paid UCL $334,738 and $291,622, 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.

September 30, 2020 and December 31, 2019, the Company owed CTI $0 and $280,723, respectively, for medical research performed on

At March 31, 2021 and December 31, 2020, the

Company owed UCL Consultants Limited (“UCL”) $10,000 and $34,000, respectively, in connection with medical research performed

on behalf of the Company.

At March 31, 2021 and December 31, 2020, the Company recorded prepaid expenses of $15,000 and $0, respectively,

for medical research to be performed on behalf of the Company by UCL.

During the three months ending March 31, 2021 and 2020, the Company

paid UCL $88,000 and $0, 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.

the three months ending March 31, 2021 and 2020, the Company paid CTI $0 and $79,000, respectively, for medical research performed on

behalf of the Company.

During the nine months ending September 30, 2020 and 2019, the Company paid CTI $126,850 and $1,060,110,

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

During the nine months ended September 30, 2020 and 2019,

the Company paid CTI $25,392 and $24,653, respectively, pursuant to its sublease agreement with CTI.

During the nine

months ended September 30, 2020, the Company recorded a capital contribution of $215,761 for the forgiveness of certain accounts

payable due to CTI.

During the three months ended March 31, 2020, the Company recorded a capital contribution of $216,000 for the

forgiveness of certain accounts payable due to CTI.

The Company had no amounts payable to CTI as of March 31, 2021 and December 31, 2020.

STOCKHOLDERS’

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 nine months ended September 30, 2020, the Company issued 196,000 shares of its common stock to Lincoln Park for $1,002,644

At September 30, 2020, Lincoln Park is obligated to purchase up to $18.7 million worth of the Company’s common

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.

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

had the right to sell to Lincoln Park, and Lincoln Park was obligated to purchase, up to $20.0 million in shares of the Company’s

common stock, subject to certain limitations, over the 24-month period that commenced on May 15, 2019.

During the three months ended

March 31, 2020, the Company issued 196,000 shares of its common stock to Lincoln Park for approximately $1.0 million of cash.

April 2021, the Company terminated the securities purchase agreement with Lincoln Park.

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.

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

$1.0 million of cash.

Stock –

At the Market Offering

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

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.

inception of the agreement through September 30, 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), of which 150,682 shares were sold for gross proceeds

of $820,319 (net proceeds $664,845) during the three months ended June 30, 2020 and 27,918 shares were sold for gross proceeds

of $152,560 (net proceeds of $147,983) during the three months ended September 30, 2020.

Pursuant to the ATM, the Company paid

BTIG commissions and fees of $74,610 during the three months ended June 30, 2020 and $4,577 during the three months ended September

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

During 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 years.

During July 2020, the Company issued

the consultant 20,000 shares of common stock and cancelled the 50,000 warrants.

The 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

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 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.

have not been issued and are subject to a restriction on transfer for a period of two years from the date the Company completed

its initial public offering, which occurred during February 2019, after which the Company will deliver the shares to the individual.

The obligation was recorded as common stock issuable of $50,000 as of September 30, 2020 and December 31, 2019, respectively,

pending delivery of the shares to the individual after the restriction period expires.

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

During the three months ended March 31, 2021, the

Company sold 1,439,480 shares of its common stock for aggregate gross proceeds of approximately $29.0 million (net proceeds of approximately

$28.4 million) under the 2020 ATM program.

The Company paid BTIG commissions and fees of $582,000 in connection with the sale of these

January 2021, the Company granted certain employees and directors options to purchase 198,549 shares of its common stock pursuant to

the 2017 and 2019 Incentive Stock Plans.

The stock options have a fair value of approximately $4.2 million that was calculated using

the Black-Scholes option-pricing model.

Variables 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 during the nine months ended September 30, 2020:

(1) discount rate of 0.78%

based on the applicable US Treasury bill rate (2) expected life of 6.0 - 6.25 years, (3) expected volatility of approximately 113% -

114% based on the trading history of similar companies, and (4) zero expected dividends.

following table summarizes stock option activity during the three months ended March 31, 2021:

(in thousands, except share and per share amounts)

Weighted- average

Weighted-average

Outstanding at January 1, 2021

2 unchanged sentences

Options cancelled

at September 30, 2020

the nine months ended September 30, 2020 and 2019, the Company recognized stock-based compensation expense of $2,052,192 and $2,924,091,

respectively, related to stock options.

As of September 30, 2020, there was $4,780,427 of total unrecognized compensation cost

related to non-vested stock options which is expected to be recognized over a weighted-average period of 2.17 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 September 30, 2020, 34,835 of these warrants are outstanding and the

intrinsic value is $24,733.

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 $9,479,920 as of September 30, 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 $278,986 as of September 30, 2020.

Outstanding at March 31, 2021

Exercisable at March 31, 2021

During the three months ended March 31, 2021 and

2020, the Company recognized stock-based compensation expense of approximately $0.9 million and $0.7 million, respectively, related to

the vesting of stock options.

As of March 31, 2021, there was approximately $7.3 million of total unrecognized compensation cost related

to non-vested stock options which is expected to be recognized over a weighted-average period of 2.72 years.

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

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

At March 31, 2021, 34,835 of these warrants are outstanding and the intrinsic value is $79,000.

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 approximately $14.6 million as of March 31, 2021.

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

The warrants have a $1.50 exercise price and expire on June 30, 2022.

During the three months ended March 31, 2021, 11,875 of these

warrants were exercised for cash proceeds of $18,000.

At March 31, 2021, 19,792 of these warrants are outstanding, with an intrinsic value

Compensation by Class of Expense

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

and nine months ended September 30, 2020 and 2019 respectively:

September 30,

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

ended March 31, 2021 and 2020 respectively:

(in thousands)

Research and development

General and administrative

Shareholder 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

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.

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 nine months ending September 30, 2020 and 2019, the Company received $150,000 and $600,000, respectively, related to

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

As of September 30, 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 nine months ended September 30, 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 nine months ended September 30, 2020, the Company received $300,000

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

During the three and nine months ended

September 30, 2020, the Company recorded $110,878 as a reduction of deferred liabilities as a result of incurring costs related

to the ALS grant.

As of September 30, 2020, the Company recorded $189,122 as deferred liabilities in the consolidated balance

sheet related to the ALS grant.

During September 2020, the Company was awarded

a grant of up to $2.9 million from the National Institutes of Health (NIH), of which the Company expects to receive approximately

$0.7 million in 2020, approximately $1.2 million in 20201 and approximately $1.0 million in 2022.

The grant will support a Phase

2 study of XPro1595 in patients with treatment resistant depression.

As of September 30, 2020, the Company has not received any

proceeds pursuant to this grant.

During 2020, the Company was awarded a $0.5 million

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 three months ended

March 31, 2021 and 2020, the Company received $0.1 million and $0.3 million, respectively, of cash proceeds pursuant to this grant which

the Company recorded as deferred liabilities.

The Company offsets costs incurred related to this research against the grants.

31, 2021 and December 31, 2020, the Company recorded approximately $0.2 million and $0.1 million, respectively, as deferred liabilities

in the consolidated balance sheet related to the ALS grant.

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

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

As of March 31, 2021, the Company has

not received any proceeds pursuant to this grant.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking

this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking

Without limiting the foregoing, words such as “may,”

5 unchanged sentences

or “continue”

or comparable terminology are intended to identify

forward-looking statements.

These statements by their nature involve substantial risks and uncertainties, and actual results may

differ materially depending on a variety of factors, many of which are not within our control.

These factors include but are not

limited to economic conditions generally and in the industries in which we may participate;

competition within our chosen industry,

including competition from much larger competitors;

or comparable terminology are intended to identify forward-looking

These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending

on a variety of factors, many of which are not within our control.

These factors include but are not limited to economic conditions generally

and in the industries in which we may participate;

competition within our chosen industry, including competition from much larger competitors;

technological advances and failure to successfully develop business relationships.

are a clinical-stage immunotherapy company focused on developing drugs that may reprogram the patient’s innate immune system

to treat disease.

We believe this may be done by targeting cells of the innate immune system that cause acute and chronic inflammation

and are involved in the immune dysfunction associated with chronic diseases such as cancer, neurodegenerative, metabolic and infectious

are a clinical-stage immunotherapy company focused on developing drugs that may reprogram the patient’s innate immune system to

treat disease.

We believe this may be done by targeting cells of the innate immune system that cause acute and chronic inflammation and

are involved in the immune dysfunction associated with chronic diseases such as cancer, neurodegenerative, metabolic and infectious diseases.

The Company has two therapeutic platforms –

dominant-negative TNF platform (“DN-TNF”) and the Natural

Killer (“NK”) platform.

The DN-TNF platform neutralizes soluble TNF (“sTNF”) without affecting trans-membrane

TNF (“tmTNF”) or the receptors TNFR1 and TNFR2.

This unique biologic mechanism differentiates the DN-TNF drugs from

currently approved non-selective TNF inhibitors that inhibit the function of both sTNF and tmTNF.

Protecting the function of tmTNF

while neutralizing the function of sTNF is a potent anti-inflammatory drug that does not cause immunosuppression or demyelination.

Currently approved non-selective TNF inhibitors are approved to treat autoimmune disease, however they are contraindicated in

patients with infection, cancer and neurologic diseases because they increase the risk of infection, cancer and demyelinating

neurologic diseases, respectively, because of off-target effects on inhibiting tmTNF.

The NK platform targets the dysfunctional

natural killer cells (“NK cells”) in patients with cancer.

NK cells are part of the normal immunologic response to

cancer with important roles in immunosurveillance to prevent cancer and in preventing relapse by clearing residual disease.

disease is the cancer left behind, often undetected, that can grow and cause relapse.

The NK cells of cancer patients have the

ability to kill cancer cells but are not effective because cancer cells mutate to evade NK cell immune surveillance.

INKmune provides

the missing signals needed to prime NK cells to overcome the immune evasion mutation to allow NK cells to kill the cancer cell.

We believe INKmune is best used to eliminate residual disease after the patient has completed other cancer therapies.

DN-TNF platform and the INKmune platform can be used to treat multiple diseases.

The DN-TNF platform will be used as an immunotherapy

for the treatment of cancer, neurodegenerative, metabolic and infectious diseases.

INKmune is being developed to treat NK sensitive

hematologic malignancies and solid tumors.

believe our DN-TNF platform can be used to reverse resistance in immunotherapy, to target glial activation to prevent progression

of Alzheimer’s disease (“AD”), to target intestinal leak and inflammation to treat non-alcoholic steatohepatitis

(“NASH”) and to treat complications of the cytokine storm associated with COVID-19 infection.

The drug is named differently

for each indication;

INB03, XPro1595, LIVNate and Quellor, respectively, but it is the same drug product.

In each case, we believe

neutralizing sTNF is a cornerstone to the treatment of each of these diseases.

As an immunotherapy for cancer, we are using INB03

to neutralize sTNF produced by HER2+ trastuzumab resistant breast cancers to reverse resistance to therapy.

sTNF causes an up-regulation

of MUC4 expression that causes steric hindrance of trastuzumab binding to the HER2/Neu receptor on HER2+ breast cancer cells.

dominant-negative TNF platform (“DN-TNF”) and the Natural Killer (“NK”)

The DN-TNF platform neutralizes soluble TNF (“sTNF”) without affecting trans-membrane TNF (“tmTNF”)

or the receptors TNFR1 and TNFR2.

This unique biologic mechanism differentiates the DN-TNF drugs from currently approved non-selective

TNF inhibitors that inhibit the function of both sTNF and tmTNF.

Protecting the function of tmTNF while neutralizing the function of

sTNF is a potent anti-inflammatory drug that does not cause immunosuppression or demyelination.

Currently approved non-selective TNF

inhibitors are approved to treat autoimmune disease, however they are contraindicated in patients with infection, cancer and neurologic

diseases because they increase the risk of infection, cancer and demyelinating neurologic diseases, respectively, because of off-target

effects on inhibiting tmTNF.

The NK platform targets the dysfunctional natural killer cells (“NK cells”) in patients with

NK cells are part of the normal immunologic response to cancer with important roles in immunosurveillance to prevent cancer and

in preventing relapse by clearing residual disease.

Residual disease is the cancer left behind, often undetected, that can grow and cause

The NK cells of cancer patients have the ability to kill cancer cells but are not effective because cancer cells mutate to evade

NK cell immune surveillance.

INKmune provides the missing signals needed to prime NK cells to overcome the immune evasion mutation to

allow NK cells to kill the cancer cell.

We believe INKmune is best used to eliminate residual disease after the patient has completed

other cancer therapies.

Both the DN-TNF platform and the INKmune platform can be used to treat multiple diseases.

The DN-TNF platform

will be used as an immunotherapy for the treatment of cancer, neurodegenerative, metabolic and infectious diseases.

INKmune is being

developed to treat NK sensitive hematologic malignancies and solid tumors.

believe our DN-TNF platform can be used to reverse resistance in immunotherapy, to target glial activation to prevent progression of

Alzheimer’s disease (“AD”), to target neuroinflammation in treatment resistant depression (“TRD”), to target

intestinal leak and inflammation to treat non-alcoholic steatohepatitis (“NASH”) and to treat complications of the cytokine

storm associated with COVID-19 infection.

The drug is named differently for each indication;

INB03, XPro1595, LIVNate and Quellor, respectively,

but it is the same drug product.

In each case, we believe neutralizing sTNF is a cornerstone to the treatment of each of these diseases.

As an immunotherapy for cancer, we are using INB03 to neutralize sTNF produced by HER2+ trastuzumab resistant breast cancers to reverse

resistance to therapy.

sTNF causes an up-regulation of MUC4 expression that causes steric hindrance of trastuzumab binding to the HER2/Neu

receptor on HER2+ breast cancer cells.

Without binding, trastuzumab is not effective.

In addition, INB03 changes the immunobiology of the tumor microenvironment by decreasing

the number of immunosuppressive myeloid cells, both myeloid derived suppressor cells and tumor active macrophages, and increasing

the number of cytotoxic lymphocytes in the TME.

The Company has completed an open label dose escalation trial in cancer patients

with metastatic solid tumors that have failed multiple lines of therapy.

The trial informs the design of the Phase II trial by

demonstrating that INB03 was safe and well tolerated, defined the dose of INB03 to carry into Phase II trials, and demonstrated

a pharmacodynamic end-point.

In addition, INB03 changes the immunobiology of

the tumor microenvironment by decreasing the number of immunosuppressive myeloid cells, both myeloid derived suppressor cells and tumor

active macrophages, and increasing the number of cytotoxic lymphocytes in the TME.

The Company has completed an open label dose escalation

trial in cancer patients with metastatic solid tumors that have failed multiple lines of therapy.

The trial informs the design of the

Phase II trial by demonstrating that INB03 was safe and well tolerated, defined the dose of INB03 to carry into Phase II trials, and

demonstrated a pharmacodynamic end-point.

A Phase II trial is planned in women with advanced HER2+ breast cancer with metastasis.

we believe the DN-TNF platform can be used to treat selected neurodegenerative diseases.

XPro1595 is being used to treat patients

with Alzheimer’s disease in a Phase I trial partially funded by a Part-the-Clouds Award from the Alzheimer’s Association.

XPro1595 targets activated microglia and astrocytes of the brain that produce sTNF that promotes nerve cell loss and synaptic

dysfunction, key elements in the development of dementia.

In animal models, elimination of sTNF prevents nerve cell dysfunction

and reverses synaptic pruning.

XPro1595 is being used to treat patients with

Alzheimer’s disease in a Phase I trial partially funded by a Part-the-Clouds Award from the Alzheimer’s Association.

targets activated microglia and astrocytes of the brain that produce sTNF that promotes nerve cell loss and synaptic dysfunction, key

elements in the development of dementia.

In animal models, elimination of sTNF prevents nerve cell dysfunction and reverses synaptic

The Phase I trial in patients with biomarkers of inflammation with AD is enrolling patients.

open label, dose escalation trial is designed to demonstrate that XPro1595 decreases neuroinflammation in patients with AD.

end-points of the trial are measures of neuroinflammation and neurodegeneration in blood and cerebral spinal fluid, measures of

neuroinflammation by MRI by measuring white matter free water and breath by measuring volatile organic compounds in exhaled breath

and by monitoring neuropsychiatric symptoms known to be associated with neuroinflammation including depression, apathy, aggression,

hallucinations and sleep disorders.

The open label, dose escalation

trial is designed to demonstrate that XPro1595 decreases neuroinflammation in patients with AD.

This end-points of the trial are measures

of neuroinflammation and neurodegeneration in blood and cerebral spinal fluid, measures of neuroinflammation by MRI by measuring white

matter free water and breath by measuring volatile organic compounds in exhaled breath and by monitoring neuropsychiatric symptoms known

to be associated with neuroinflammation including depression, apathy, aggression, hallucinations and sleep disorders.

addition, we believe the DN-TNF platform can be used to treat selected metabolic diseases.

LIVNate is being developed to treat

LIVNate is being developed to treat NASH.

NASH is a pleiotropic disease caused by a complex mix of metabolic, inflammatory and fibrotic pathophysiology.

targeting inflammation caused by intestinal leak, mesenteric and peripheral fat will prevent lipotoxicity, hepatic stellate cell

activation and hepatocyte death that causes fibrosis and liver dysfunction associated with advanced disease.

sTNF is elevated

in obesity and is believed to cause intestinal leak.

Intestinal leak combined with cytokines coming from mesenteric fat may dramatically

increase the concentration of inflammatory cytokines in portal blood destined for the liver.

The cytokine load contributes to

the development of non-alcoholic fatty liver disease (“NAFLD”) and progression to NASH.

LIVNate, by neutralizing sTNF

improves insulin sensitivity, decreases the inflammation in peripheral and mesenteric fat and may also seal the intestinal leak.

This combination prevents development of NAFLD or NASH in animal models.

The Company is planning a Phase II open label randomized

study using non-invasive measures to enroll patients with NASH in a study using a fixed dose of LIVNate delivered as a once a

week sub-cutaneous injection.

also believe the DN-TNF platform may be used to treat the complications associated with the cytokine storm caused by coronavirus

disease 2019 (“COVID-19”).

Three inflammatory cytokines make up the cytokine storm associated with COVID19 infection

sTNF, IL-6 and IL-1β.

Targeting sTNF with Quellor may have advantages because IL-6 and IL-1 expression occur after

sTNF expression;

sTNF promotes endothelial activation causing expression of proteins that promote trafficking of immune cells

from the blood vessel to the tissue and expression of Tissue Factor that stimulates the coagulopathy that is a prominent pathology

of COVID-19 infection.

The Company plans a Phase II trial in patients with symptomatic COVID-19 infection and hypoxia.

of the study is to prevent the catastrophic complications of advanced COVID-19 infection including one or more of the need for

mechanical ventilation, new onset of cardiovascular, neurologic or thromboembolic disease, admission to an intensive care unit

The randomized trial will treat patients requiring hospitalization because of their disease.

We believe targeting inflammation

caused by intestinal leak, mesenteric and peripheral fat will prevent lipotoxicity, hepatic stellate cell activation and hepatocyte death

that causes fibrosis and liver dysfunction associated with advanced disease.

sTNF is elevated in obesity and is believed to cause intestinal

Intestinal leak combined with cytokines coming from mesenteric fat may dramatically increase the concentration of inflammatory

cytokines in portal blood destined for the liver.

The cytokine load contributes to the development of non-alcoholic fatty liver disease

(“NAFLD”) and progression to NASH.

LIVNate, by neutralizing sTNF improves insulin sensitivity, decreases the inflammation

in peripheral and mesenteric fat and may also seal the intestinal leak.

This combination prevents development of NAFLD or NASH in animal

The Company is planning a Phase II open label randomized study using non-invasive measures to enroll patients with NASH in a

study using a fixed dose of LIVNate delivered as a once a week sub-cutaneous injection.

also believe the DN-TNF platform may be used to treat the complications associated with the cytokine storm caused by coronavirus disease

2019 (“COVID-19”).

Three inflammatory cytokines make up the cytokine storm associated with COVID19 infection –

IL-6 and IL-1β.

Targeting sTNF with Quellor may have advantages because IL-6 and IL-1 expression occur after sTNF expression;

promotes endothelial activation causing expression of proteins that promote trafficking of immune cells from the blood vessel to the

tissue and expression of Tissue Factor that stimulates the coagulopathy that is a prominent pathology of COVID-19 infection.

plans a Phase II trial in patients with symptomatic COVID-19 infection and hypoxia.

The goal of the study is to prevent the catastrophic

complications of advanced COVID-19 infection including one or more of the need for mechanical ventilation, new onset of cardiovascular,

neurologic or thromboembolic disease, admission to an intensive care unit or death.

The randomized trial will treat patients requiring

hospitalization because of their disease.

therapy for treatment resistant depression (TRD) is a large unmet need.

Twenty percent of patients with a Major Depressive Disorder have

Once third of TRD patients have peripheral biomarkers to inflammation (elevated CRP).

This is a large patient population.

of TNF and anti-TNF therapeutics was explored in a small open label clinical trial by Prof.

Andrew Miller, MD of Emory University demonstrated

the patients have elevated TNF levels and treatment with infliximab treated their depression (Miller, 2011).

The Company received a $2.9M

USD award from the National Institute of Mental Health (NIMH) to treat TRD with XPro1595.

The blinded, randomized Phase II trial will

use a biomarkers of peripheral inflammation to select patients with TRD for enrollment.

Patients will be treated for 6 weeks.

end-points include both clinical and neuroimaging measures.

The final trial design has is ongoing and discussions with the FDA are not

The Company anticipates receiving authorization to initiate the clinical trial in the second half of 2021.

believe that INKmune improves the ability of the patient’s own NK cells to attack their tumor.

INKmune interacts with the

patient’s NK cells to convert them from inert resting NK cells that ignores the cancer into primed NK cells that kill the

INKmune is a replication incompetent proprietary cell line we have named INB16 that is given to the patient after

determining that i) the patient has adequate NK cells in their circulation and ii) those NK cells are functional when exposed

to INKmune in vitro.

INKmune is designed to be given to patients after their immune system has recovered after cytotoxic chemotherapy

to target the residual disease the remains after treatment with cytotoxic therapy.

INKmune can be used to treat numerous

hematologic malignancies and solid tumors including leukemia, multiple myeloma, lymphoma, lung, ovary, breast, renal and prostate

The Company plans Phase I trials using INKmune to treat patients with high risk MDS, a form of leukemia and women with

relapsed refractory ovarian.

INKmune interacts with the patient’s

NK cells to convert them from inert resting NK cells that ignores the cancer into primed NK cells that kill the cancer cell.

is a replication incompetent proprietary cell line we have named INB16 that is given to the patient after determining that i) the patient

has adequate NK cells in their circulation and ii) those NK cells are functional when exposed to INKmune in vitro.

INKmune is designed

to be given to patients after their immune system has recovered after cytotoxic chemotherapy to target the residual disease the remains

after treatment with cytotoxic therapy.

INKmune can be used to treat numerous hematologic malignancies and solid tumors including leukemia,

multiple myeloma, lymphoma, lung, ovary, breast, renal and prostate cancer.

The Company plans Phase I trials using INKmune to treat patients

with high risk MDS, a form of leukemia and women with relapsed refractory ovarian.

our inception in 2015, we have devoted substantially all of our resources to the discovery and development of our product candidates,

including clinical trials and preclinical studies as well as general and administrative support for these operations.

we have generated no revenue.

We have incurred net losses in each year since our inception and, as of September 30, 2020, we had

an accumulated deficit of $30,171,054.

Our net losses were $8,894,873 and $5,360,094 for the nine months ended September 30, 2020

and 2019, respectively.

Substantially all of our net losses resulted from costs incurred in connection with our research and development

programs and from general and administrative costs associated with our operations, including stock-based compensation.

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

To date, we have

generated no significant revenue.

We have incurred net losses in each year since our inception and, as of March 31, 2021, we had an accumulated

deficit of approximately $37.9 million.

Our net losses were $4,556,000 and $2,070,000 for the three months ended March 31, 2021 and 2020,

respectively.

Substantially all of our net losses resulted from costs incurred in connection with our research and development programs

and from general and administrative costs associated with our operations, including stock-based compensation.

The 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.

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.

site initiation and patient enrollment have and may continue to be delayed due to prioritization of hospital resources toward the COVID-19

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.

classify our operating expenses into two categories:

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and general and administrative expenses.

costs including salaries, benefits and stock-based compensation expense comprise a significant component of our research and development

and general and administrative expense categories.

Personnel costs

including salaries, benefits and stock-based compensation expense comprise a significant component of our research and development and

general and administrative expense categories.

qualify as an “emerging growth company”

under the JOBS Act.

As an emerging growth company, we may take advantage of

specified reduced disclosure and other requirements that are otherwise applicable generally to public companies.

These provisions

only two years of

audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”

reduced disclosure

about our executive compensation arrangements;

no non-binding advisory

votes on executive compensation or golden parachute arrangements;

exemption from the

auditor attestation requirement in the assessment of our internal control over financial reporting;

delaying the adoption

of new or revised accounting standards that have different effective dates for public and private companies until those standards

apply to private companies.

have elected to take advantage of the above-referenced exemptions and we may take advantage of these exemptions for up to five

years or such earlier time that we are no longer an emerging growth company.

We would cease to be an emerging growth company if

we have more than $1.07 billion in annual revenues, we have more than $700 million in market value of our stock held by non-affiliates,

or we issue more than $1 billion of non-convertible debt over a three-year period.

We may choose to take advantage of some but

not all of these reduced burdens.

As an emerging growth company, we may take advantage of specified

reduced disclosure and other requirements that are otherwise applicable generally to public companies.

These provisions include:

two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly

reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

disclosure about our executive compensation arrangements;

non-binding advisory votes on executive compensation or golden parachute arrangements;

from the auditor attestation requirement in the assessment of our internal control over financial reporting;

the adoption of new or revised accounting standards that have different effective dates for public and private companies until those

standards apply to private companies.

have elected to take advantage of the above-referenced exemptions and we may take advantage of these exemptions for up to five years

or such earlier time that we are no longer an emerging growth company.

We would cease to be an emerging growth company if we have more

than $1.07 billion in annual revenues, we have more than $700 million in market value of our stock held by non-affiliates, or we issue

more than $1 billion of non-convertible debt over a three-year period.

We may choose to take advantage of some but not all of these reduced

and Development

and development expense consists of expenses incurred while performing research and development activities to discover and develop

our product candidates.

This includes conducting preclinical studies and clinical trials, manufacturing development efforts and

activities related to regulatory filings for product candidates.

and development expense consists of expenses incurred while performing research and development activities to discover and develop our

product candidates.

This includes conducting preclinical studies and clinical trials, manufacturing development efforts and activities

related to regulatory filings for product candidates.

We recognize research and development expenses as they are incurred.

Our research and development expense primarily consist of:

and development expense primarily consist of:

trial and regulatory-related costs;

2 unchanged sentences

and testing costs and related supplies and materials;

employee-related

expenses, including salaries, benefits, travel and stock-based compensation.

employee-related expenses, including salaries, benefits, travel and

stock-based compensation.

typically use our employee, consultant and infrastructure resources across our development programs.

2 unchanged sentences

costs to specific product candidates or development programs.

participate, through our wholly-owned subsidiary in Australia, 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.

participate, through our wholly-owned subsidiary in the United Kingdom, 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.

Substantially

all of our research and development expenses to date have been incurred in connection with our current and future product candidates.

We expect our research and development expenses to increase significantly for the foreseeable future as we advance an increased

number of our product candidates through clinical development, including the conduct of our planned clinical trials and manufacturing

drug to be used in those clinical trials.

The process of conducting clinical trials necessary to obtain regulatory approval is

costly and time consuming.

The successful development of product candidates is highly uncertain.

At this time, we cannot reasonably

estimate the nature, timing or costs required to complete the remaining development of any product candidates.

This is due to

the numerous risks and uncertainties associated with the development of product candidates.

participate, through our wholly-owned subsidiary in Australia, 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.

In the future, the Company may elect to cease to perform research and development in Australia

at which point the Company may not participate the Australian research and development tax incentive program.

participate, through our wholly-owned subsidiary in the United Kingdom, 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.

The United 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.

In the future, the Company may elect to cease to perform

research and development in the United Kingdom at which point the Company may not participate in the United Kingdom tax relief program.

Substantially all of our research

and development expenses to date have been incurred in connection with our current and future product candidates.

We expect our research

and development expenses to increase significantly for the foreseeable future as we advance an increased number of our product candidates

through clinical development, including the conduct of our planned clinical trials and manufacturing drug to be used in those clinical

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming.

The successful

development of product candidates is highly uncertain.

At this time, we cannot reasonably estimate the nature, timing or costs required

to complete the remaining development of any product candidates.

This is due to the numerous risks and uncertainties associated with

the development of product candidates.

costs of clinical trials may vary significantly over the life of a project owing to, but not limited to, the following:

12 unchanged sentences

do not expect any of our product candidates to be commercially available for at least the next several years, if ever.

to continue to incur significant expenses and increasing operating losses for the foreseeable future, which may fluctuate significantly

from quarter-to-quarter and year-to-year.

We expect to continue

to incur significant expenses and increasing operating losses for the foreseeable future, which may fluctuate significantly from quarter-to-quarter

and year-to-year.

We anticipate that our expenses will increase substantially as we:

2 unchanged sentences

to discover and develop additional product candidates;

a commercialization infrastructure and scale up our manufacturing and distribution capabilities to commercialize any of our

product candidates for which we may obtain regulatory approval;

a commercialization infrastructure and scale up our manufacturing and distribution capabilities to commercialize any of our product

candidates for which we may obtain regulatory approval;

to comply with regulatory standards and laws;

5 unchanged sentences

and administrative expenses consist principally of payroll and personnel expenses, including stock-based compensation;

fees for legal, consulting, accounting and tax services;

professional fees

for legal, consulting, accounting and tax services;

overhead, including rent and utilities;

and other general operating expenses

not otherwise classified as research and development expenses.

income primarily consists of interest income on money market accounts, foreign exchange gain (loss) and other non-operating income

and other general operating expenses not

otherwise classified as research and development expenses.

income (expense)

Other income primarily consists of interest income

on money market accounts and foreign currency exchange gains and losses.

of Operations

of the Three Months Ended September 30, 2020 and 2019

of the Three Months Ended March 31, 2021 and 2020

following table summarizes our results of operations for the periods indicated:

Three Months Ended

September 30,

(in thousands)

Operating expenses:

General and administrative

Research and development

Total operating expenses

Loss from operations

$ (4,716,662 )

$ (3,066,966 )

$ (1,649,696 )

and Administrative

and administrative expenses were $2.5 million during the three months ended September 30, 2020, compared to $1.9 million during

the three months ended September 30, 2019, reflecting an increase of approximately $0.6 million.

The increase was largely attributable

to the Company incurring additional professional fees ($0.6 million) and stock-based compensation ($0.4 million), partially offset

by lower investor relations expense ($0.5 million) during the three months ended September 30, 2020 compared to the three months

ended September 30, 2019.

and Development

and development expenses were approximately $2.4 million during the three months ended September 30, 2020, compared to approximately

$1.2 million during the three months ended September 30, 2019.

During the three months ended September 30, 2020 and 2019,

the Company incurred approximately $0.1 million and $0.4 million, respectively, of stock-based compensation, which the Company

classified as research and development expenses.

Also, during the three months ending September 30, 2020 and 2019, the Company

recorded $0.2 million and $Nil, respectively, of grants which the Company recorded as a reduction of research and development

The increase in research and development expenses during the three months ending September 30, 2020 compared to the

three months ending September 30, 2019 is due to additional amounts incurred for the advancement of our drug platform and due

to the Company incurring manufacturing costs in connection with producing its DN-TNF product.

income increased during the three months ended September 30, 2020 compared to 2019 as a result of the Company receiving a refund

pursuant to a release and settlement agreement from a third-party vendor of approximately $0.1 million for services provided in

a previous year.

of the Nine Months Ended September 30, 2020 and 2019

following table summarizes our results of operations for the periods indicated:

Nine Months Ended

September 30,

Operating expenses:

General and administrative

Research and development

Waiver of common stock issuable

Total operating expenses

Loss from operations

$ (8,894,873 )

$ (5,360,094 )

$ (3,534,779 )

Other (expense) income

the three months ended March 31, 2021, the Company sold MSC’s to one third-party and recognized $4,000 of revenues.

no revenues during the three months ended March 31, 2020.

and Administrative

and administrative expenses were $5.0 million during the nine months ended September 30, 2020, compared to $4.6 million during

the nine months ended September 30, 2019, reflecting an increase of approximately $0.4 million.

The increase was largely attributable

to the Company incurring higher professional fees ($0.6 million), stock-based compensation ($0.3 million) and salary and benefits

expense ($0.2 million), partially offset by lower investor relations expense ($1.0 million) during the nine months ended September

30, 2020 compared to the nine months ended September 30, 2019.

and administrative expenses were approximately $2.1 million during the three months ended March 31, 2021, compared to approximately

$1.3 million during the three months ended March 31, 2020.

The increase in general and administrative expenses is largely due to higher

professional fees ($0.5 million higher during the three months ended March 31, 2021) and higher stock-based compensation ($0.2 million

higher during the three months ended March 31, 2021).

and Development

Research and development expenses were approximately

$4.1 million during the nine months ended September 30, 2020, compared to approximately $2.4 million during the nine months ended

September 30, 2019.

During the nine months ended September 30, 2020 and 2019, the Company incurred approximately $0.4 million

and $1.3 million, respectively, of stock-based compensation, which the Company classified as research and development expenses.

Also, during the nine months ending September 30, 2020 and 2019, the Company recorded $0.2 and $0.6 million, respectively, of grants

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

The increase in research and development expenses

during the nine months ending September 30, 2020 compared to the nine months ending September 30, 2019 is largely due to additional

amounts incurred for the advancement of our drug platform and due to the Company incurring manufacturing costs in connection with

producing its DN-TNF product.

of Common Stock Issuable

the nine months ended September 30, 2019, the Company reversed $1.5 million of expense as a result of a consultant permanently

waiving the Company’s obligation to issue 200,000 shares owed to the consultant which were expensed in a prior period.

similar transaction occurred during the nine months ended September 30, 2020.

income increased during the nine months ended September 30, 2020 compared to 2019 as a result of the Company receiving a refund

from a third-party vendor pursuant to a release and settlement agreement of approximately $0.1 million for services provided in

a previous year.

and development expenses were approximately $2.5 million during the three months ended March 31, 2021, compared to approximately

$0.8 million during the three months ended March 31, 2020.

The increase in research and development expenses during the three

months ending March 31, 2021 compared to the three months ending March 31, 2020 is largely due to additional amounts incurred related

to manufacturing additional drugs and amounts incurred in connection with the Company’s COVID-19 clinical trial.

Income (Expense)

The Company’s other

income (expense) is mainly interest earned from money market accounts and foreign exchange gains and losses.

and Capital Resources

is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise

operate on an ongoing basis.

incurred a net loss of $8,894,873 and $5,360,094 for the nine months ended September 30, 2020 and 2019, respectively.

used in operating activities was $6,550,933 and $4,951,286 for the nine months ended September 30, 2020 and 2019, respectively.

Since inception, we have funded our operations primarily with proceeds from the sales of our common stock.

As of September 30,

2020, we had cash and cash equivalents of $24.3 million.

We anticipate that operating losses and net cash used in operating activities

will increase over the next few years as we advance our products under development.

primary uses of capital are, and we expect will continue to be, third-party clinical and preclinical research and development

services, compensation and related expenses, legal, patent and other regulatory expenses and general overhead costs.

our use of CROs provides us with flexibility in managing our spending.

is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate

on an ongoing basis.

We incurred a net loss of

$4,556,000 and $2,070,000 for the three months ended March 31, 2021 and 2020, respectively.

Net cash used in operating activities was

$5,092,000 and $1,035,000 for the three months ended March 31, 2021 and 2020, respectively.

Since inception, we have funded our operations

primarily with proceeds from the sales of our common stock.

As of March 31, 2021, we had cash and cash equivalents of approximately $45.3

We anticipate that operating losses and net cash used in operating activities will increase over the next few years as we advance

our products under development.

primary uses of capital are, and we expect will continue to be, third-party clinical and preclinical research and development services,

compensation and related expenses, professional fees, patent and other regulatory expenses and general overhead costs.

We believe our

use of CROs provides us with flexibility in managing our spending.

Company incurs the majority of its research and development expenses in Australia and the United Kingdom.

Fluctuations in the

rate of exchange between the United States dollar and the pound sterling as well as the Australian dollar could adversely

affect our financial results, including our expenses as well as assets and liabilities.

We currently do not hedge foreign currencies

but will continue to assess whether that strategy is appropriate.

As of September 30, 2020, the cash balance held by our foreign

subsidiaries with currencies other than the United States dollar was approximately $0.6 million.

We do not have any material financial

exposure to one customer or one country that would significantly hinder our liquidity.

Fluctuations in the rate of

exchange between the United States dollar and the pound sterling as well as the Australian dollar could adversely affect our financial

results, including our expenses as well as assets and liabilities.

We currently do not hedge foreign currencies but will continue to

assess whether that strategy is appropriate.

As of March 31, 2021, the cash balance held by our foreign subsidiaries with currencies

other than the United States dollar was approximately $0.3 million.

We do not have any material financial exposure to one customer or

one country that would significantly hinder our liquidity.

a publicly traded company, we incur significant legal, accounting and other expenses.

In addition, the Sarbanes-Oxley Act

of 2002, as well as rules adopted by the SEC and The Nasdaq Stock Market, require public companies to implement specified

corporate governance practices that were inapplicable to us as a private company.

We expect these rules and regulations will

increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

As of September 30, 2020, the Company had

an accumulated deficit of $30,171,054 and working capital of $24,662,948.

Losses have principally occurred as a result of stock-based

compensation expense as well as 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.

As of September 30, 2020, we had

cash and cash equivalents of $24.3 million.

We believe our cash and cash equivalents will be sufficient to fund our operations

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

as of September 30, 2020.

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 sale of common stock

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.

In addition, the Sarbanes-Oxley Act of 2002,

as well as rules adopted by the SEC and The Nasdaq Stock Market, require public companies to implement specified corporate governance

practices that were inapplicable to us as a private company.

We expect these rules and regulations will increase our legal and financial

compliance costs and will make some activities more time-consuming and costly.

of March 31, 2021, the Company had an accumulated deficit of $37,931,000 and working capital of $47,017,000.

Losses have principally

occurred as a result of stock-based compensation expense as well as 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.

As of March 31, 2021,

we had cash and cash equivalents of approximately $45.3 million.

We believe our cash and cash equivalents will be sufficient to fund

our operations for at least the next 12 months following the filing date of this Quarterly Report on Form 10-Q based on the balance of

cash available as of March 31, 2021.

Sales Agreement

During the three months ended

March 31, 2021, we issued and sold 1,439,480 shares of common stock at an average price of $20.17 per share under the 2020 ATM program.

The aggregate net proceeds were approximately $28.4 million after BTIG’s commission and other offering expenses.

During March 2021, the Company

entered into the 2021 ATM program with BTIG, as sales agent, to establish an ATM offering program of up to $45 million of common stock.

There have been no sales of the Company’s common stock pursuant to 2021 ATM.

Lincoln Park Transaction

May 15, 2019, the Company and Lincoln Park entered a purchase agreement (the “Purchase Agreement”) pursuant to which

the Company has the right to sell to Lincoln Park up to $20.0 million in shares of the Company’s common stock, subject to

certain limitations and conditions set forth in the Purchase Agreement.

The Company has the right, from time to time at its sole

discretion, subject to the terms and conditions of the Agreement, over the 24-month Purchase Agreement, to direct Lincoln Park

to purchase up to 20,000 shares of common stock on any business day (subject to certain limitations contained in the Purchase

Agreement), with such amounts increasing based on certain threshold prices set forth in the Purchase Agreement.

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.

The purchase price of shares of common stock that the Company elects to sell to Lincoln Park pursuant to the

Purchase Agreement will be based on the market prices of the common stock at the time of such purchases as set forth in the Purchase

In addition to regular purchases, as described above, the Company may also direct Lincoln Park to purchase additional

amounts as accelerated purchases or as additional purchases if the closing sale price of the common stock is not below certain

threshold prices, as set forth in the Purchase Agreement.

From inception of the Purchase Agreement through December 31, 2019,

100,000 shares were issued pursuant to the Purchase Agreement resulting in aggregate gross proceeds of $300,000 (net proceeds

of $230,000) to the Company.

During the nine months ended September 30, 2020, the Company issued 196,000 shares of

May 15, 2019, the Company and Lincoln Park entered a purchase agreement (the “Purchase Agreement”) pursuant to which the

Company had the right to sell to Lincoln Park up to $20.0 million in shares of the Company’s common stock, subject to certain limitations

and conditions set forth in the Purchase Agreement.

During the three months ended March 31, 2020, the Company issued 196,000 shares of

the Company’s common stock to Lincoln Park for gross proceeds of $1,003,000.

Sales Agreement

April 16, 2020, we entered into a sales agreement with BTIG, as sales agent, to establish an ATM offering program.

We were required

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

During the nine months ended September 30, 2020,

we issued and sold 178,600 shares of common stock at an average price of $5.45 per share under the ATM program.

The aggregate

net proceeds were approximately $0.8 million after BTIG’s commission and other offering expenses.

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 approximately

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

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 nine months ending September 30, 2020 and 2019, the Company received $150,000 and $600,000, respectively, related to

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

As of September 30, 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 nine months ended September 30, 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 nine months ended September 30, 2020, the Company received $300,000

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

During the three and nine months ended

September 30, 2020, the Company recorded $110,878 as a reduction of research and development expense related to the ALS grant.

As of September 30, 2020, the Company recorded $189,122 as deferred liabilities in the consolidated balance sheet related

to the ALS grant.

During September 2020, the Company was awarded

a grant of up to $2.9 million from the National Institutes of Health (NIH), of which the Company expects to receive approximately

$0.7 million in 2020, approximately $1.2 million in 20201 and approximately $1.0 million in 2022.

The grant will support a Phase

2 study of XPro1595 in patients with treatment resistant depression.

As of September 30, 2020, the Company has not received any

proceeds pursuant to this grant.

During April 2021, the Company terminated the Purchase

During the three months ended

March 31, 2020, the Company was awarded a $500,000 grant from the Amyotrophic Lateral Sclerosis Association (“ALS”) 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 three months ended March 31, 2021 and 2020, the Company received $100,000 and $300,000, respectively, of

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

The Company records costs incurred related

to the ALS study as a reduction of deferred liabilities.

As of March 31, 2021 and December 31, 2020, the Company recorded $222,000 and

$122,000, respectively, as deferred liabilities in the consolidated balance sheets related to the ALS grant.

following table summarizes our cash flows for the periods indicated:

September 30,

Net cash and cash equivalents (used

in) provided by:

Three Months Ended

(in thousands)

Net cash and cash equivalents (used in) provided by:

Operating activities

$ (6,550,933 )

$ (4,951,286 )

Financing activities

Change in cash and cash equivalents

Impact on cash from foreign currency

Cash and cash

equivalents, beginning of period

Cash and cash

equivalents, end of period

Impact on cash from foreign currency translation

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

cash used in operating activities was primarily driven by our net loss.

activities used approximately $6.6 million of cash for the nine months ended September 30, 2020, primarily resulting from our

net loss of approximately $8.9 million, a net cash outflow of approximately $0.1 million for changes in our net operating assets

and liabilities, and non-cash stock-based compensation charges of approximately $2.4 million.

The change in our net operating

assets and liabilities was primarily driven by an increase in research and development tax incentive receivable of approximately

$0.9 million, partially offset by an increase in accounts payable and accrued liabilities of approximately $0.8 million.

activities used $5.0 million of cash for the nine months ended September 30, 2019, primarily resulting from our net loss of $5.4

million, a net cash outflow of $1.0 million for changes in our net operating assets and liabilities, offset by non-cash stock-based

compensation charges of $2.9 million, partially offset by a waiver of common stock issuable of $1.5 million.

The change in our

net operating assets and liabilities was primarily driven by an increase in our research and development tax incentive receivable

of $0.4 million, a decrease in accounts payable and accrued liabilities of $0.2 million, a decrease in accounts payable and accrued

liabilities –

related parties of $0.1 million, an increase in other tax receivable of $0.1 million, an increase in prepaid

expenses –

related party of $0.1 million and an increase in prepaid expenses of $0.1 million.

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.

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.

the nine months ended September 30, 2020, the Company purchased 220,000 shares from an investor for approximately $1.0 million.

In addition, the Company sold 196,000 shares of its common stock to Lincoln Park for cash proceeds of approximately $1.0 million.

the nine months ended September 30, 2020, the Company issued and sold 178,600 shares of common stock at an average price of $5.45

per share under the ATM program for net cash proceeds of approximately $0.9 million.

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 approximately $8.2 million (net proceeds of approximately $7.3 million).

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

$4.7 million 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 sold 30,000 shares of its common stock to Lincoln Park for $300,000 in gross cash proceeds (net cash

proceeds of $230,000) and issued 70,000 shares of its common stock to Lincoln Park pursuant to the terms of the purchase agreement

as consideration for its commitment to purchase shares under the purchase agreement.

activities used approximately $5.1 million of cash during the three months ended March 31, 2021, resulting from our loss of $4.6 million

and changes in our net operating assets and liabilities of $1.4 million, partially offset by non-cash stock-based compensation of $0.9

The change in our net operating assets and liabilities was mainly due to an increase in prepaid expenses of approximately $1.3

million, and an increase in research and development tax credit receivable of $0.5 million, partially offset by an increase in deferred

liabilities of approximately $0.4 million.

activities used approximately $1.0 million of cash for the three months ended March 31, 2020, primarily resulting from our net loss of

approximately $2.1 million, a net cash inflow of approximately $0.4 million for changes in our net operating assets and liabilities,

and non-cash stock-based compensation charges of approximately $0.7 million.

The change in our net operating assets and liabilities was

primarily driven by an increase in accounts payable and accrued liabilities of approximately $0.3 million and an increase in deferred

grant of $0.3 million, partially offset by an increase in prepaid expenses of approximately $0.2 million, and an increase in research

and development tax credit receivable of approximately $0.1 million.

During the three months ended

March 31, 2021, the Company sold 1,439,480 shares of its common stock under its 2020 ATM program for net proceeds of approximately $28.4

the three months ended March 31, 2020, the Company purchased 220,000 shares from an investor for approximately $1.0 million.

the Company sold 196,000 shares of its common stock to Lincoln Park for cash proceeds of approximately $1.0 million.

Accounting Policies

discussion and analysis of our financial condition and results of operations is based upon our unaudited consolidated financial

statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of

assets, liabilities and expenses.

discussion and analysis of our financial condition and results of operations is based upon our unaudited consolidated financial statements,

which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP.

The preparation of

these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses.

Actual results may differ from these estimates.

Our critical accounting policies and estimates

are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and there have been no material changes

during the nine months ended September 30, 2020.

Our critical accounting policies and estimates are discussed in our Annual Report on

Form 10-K for the fiscal year ended December 31, 2020 and there have been no material changes during the three months ended March 31,

Quantitative and Qualitative Disclosures About Market Risk

to Item 305(e) of Regulation S-K (§

229.305(e)), the Company is not required to provide the information required by this

Item as it is a “smaller reporting company,”

Pursuant to Item 305(e) of Regulation

229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting

company,”

as defined by Rule 229.10(f)(1).

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-Q

Item 1. Financial Statements