What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-04 · 257 added, 222 removed, 279 unchanged (63% of the section changed)

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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.

platform neutralizes soluble TNF (“sTNF”) without affecting trans-membrane TNF (“tmTNF”) or the receptors TNFR1

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.

Residual 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.

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.

associated with chronic diseases such as cancer and neurodegenerative 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 TNF receptors -TNFR1 and TNFR2.

This unique biologic mechanism differentiates

the DN-TNF drugs from currently approved non-selective TNF inhibitors that inhibit both sTNF and tmTNF.

Protecting the function of tmTNF

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

which occur in the currently approved non-selective TNF inhibitors.

Currently approved non-selective TNF inhibitors are approved to treat

autoimmune disease, but are contraindicated in patients with infection, cancer and neurologic diseases because they increase the risk

of infection, cancer and demyelinating neurologic diseases, respectively;

all the safety problems are due to off-target effects on inhibiting

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

eliminating residual disease.

Residual disease is the cancer left behind after therapy is finished.

Residual disease, can grow to cause

The NK cells of cancer patients loses the ability to bind and kill cancer cells.

The strength of the bond of binding to cancer

cells, called avidity, is a necessary step NK killing of cancer cells.

INKmune improves avidity of the patients NK cells to overcome the

immune evasion of the patient’s cancer cells.

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.

platform will be used as an immunotherapy for the treatment of cancer and neurodegenerative disease.

INKmune is being developed to treat

NK sensitive hematologic malignancies and solid tumors.

We 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.

an up-regulation of MUC4 expression that causes steric hindrance of trastuzumab binding to the HER2/Neu receptor on HER2+ breast cancer

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.

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

can be used as a cancer therapy to reverse resistance in immunotherapy and as a CNS therapy to target glial activation to prevent progression

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

The drug is named differently for the oncology and CNS indication;

INB03 or XPro1595, respectively, but it is the same drug product.

each case, we believe neutralizing sTNF is a cornerstone to the treatment 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.

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.

A Phase II trial

is planned in women with advanced HER2+ breast cancer with metastasis.

Likewise, 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

The Company believes the core pathology of cognitive decline is a combination

of neurodegeneration and synaptic dysfunction.

XPro1595 completed a Phase I trial treating patients with Alzheimer’s disease that

was partially funded by a Part-the-Clouds Award from the Alzheimer’s Association.

We believe 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

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The Phase I trial in

patients with biomarkers of inflammation with AD is enrolling patients.

patients with biomarkers of inflammation with AD has been completed.

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.

In addition, we believe the

DN-TNF platform can be used to treat selected metabolic diseases.

LIVNate is being developed to treat NASH.

NASH is a pleiotropic disease

caused by a complex mix of metabolic, inflammatory and fibrotic pathophysiology.

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 leak.

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.

We 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.

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.

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.

Effective therapy for treatment

resistant depression (TRD) is a large unmet need.

that XPro1595 can safely decrease neuroinflammation in patients with AD.

The endpoints of the trial are measures of neuroinflammation

and neurodegeneration in blood and cerebral spinal fluid, measures of neuroinflammation by measuring cytokines in the CSF and MRI by measuring

white matter free water.

XPro1595, at the 1mg/kg/week dose decreased inflammatory cytokines in the CSF and white matter free water in

the brain demonstrating that XPro1595 can decrease neuroinflammation in patients with AD.

We also studied downstream benefits of decreasing

neuroinflammation by measuring changes in the CSF proteome and quantifying changes in novel white matter MRI biomarkers.

XPro1595 significantly

decreases biomarkers of neurodegeneration as measure by decreases in the CSF proteome of neurofilament light chain, phospho Tau 217

decreases of 84%, 46% and 91% respectively after 3 months of therapy.

Three months of XPro1595 therapy improved measures

of synaptic function, as measured in the CSF proteome including a 222% increase in Contactin 2 and a 56% decrease neurogranin, proteins

that contribute to improved synaptic function.

The successful completion

of the Phase I trial in AD has informed the design of the Phase II trial in patients with mild AD.

The Company plans a blinded randomized

trial to test if treatment of AD patients with neuroinflammation will affect cognitive decline.

The Phase II trial has six important elements.

Two hundred patients will be enrolled in a 2:1 ration (XPro1595 vs placebo).

The patients will receive 1mg/kg/week as a subcutaneous injection

for six months.

An enrichment strategy identical to the successful strategy used in the Phase I trial will be used to ensure patients

have neuroinflammation.

Patients will need to have some combination of elevated C-reactive protein, hemoglobin A1c, erythrocyte sedimentation

rated in the blood and at least one allele of ApoE4.

The primary end-point will be Early/mild Alzheimer’s Cognitive Composite (“EMACC”),

a validated cognitive measure that is more sensitive than traditional end-points used in many studies of patients with early AD.

will be performed in North America and Australia, is expected to start enrolling patients in December 2021.

We expect top-line clinical

data to be available mid-2023.

All patients will be offered to stay on therapy for at least 12 months in an extension trial.

and biomarker data will be collected during the extension trial.

Effective therapy for TRD

is a large unmet need.

Twenty percent of patients with a Major Depressive Disorder have TRD.

Once third of

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

Once third of TRD patients have peripheral

biomarkers to inflammation (elevated CRP).

This is a large patient population.

The role 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.

The role 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.

Primary end-points include

both clinical and neuroimaging measures.

Primary end-points include both clinical

and neuroimaging measures.

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

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

The Company anticipates

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

We believe that INKmune improves

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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.

them from inert resting NK cells into memory-like NK cells that kill the patient’s cancer cells.

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

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.

During July 2021, the Company’s Phase I trial using INKmune was initiated

and its first patient was dosed.

Since 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.

To date, we have generated no significant

We have incurred net losses in each year since our inception and, as of June 30, 2021, we had an accumulated deficit of approximately

$44.6 million.

Our net losses were $11,211,000 and $4,178,000 for the six months ended June 30, 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.

proprietary cell line 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 has initiated a Phase I trial using INKmune to treat patients with high risk MDS,

a form of leukemia.

One patient has been treated in the Phase I trial.

In the single patient, INKmune therapy is safe, produces memory-like

NK cells that kill cancer in vitro, promotes proliferation and persistence of the NK cells.

The Company will continue to enroll patients

in the Phase I trial with a goal of completing patient enrollment in 2022.

The Company intends to treat women with relapsed refractory

ovarian in separate Phase I trial beginning during 2022.

Since 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.

To date, we have generated no significant revenue.

We have incurred net losses in each

year since our inception and, as of September 30, 2021, we had an accumulated deficit of approximately $54.0 million.

Our net losses were

$20,669,000 and $8,900,000 for the nine months ended September 30, 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 has supported

a trial using Quellor, the DN-TNF platform, to treat patients with hypoxia due to COVID-19 infection.

This blinded randomized Phase II

trial has been closed by the Company because of the changing COVID-19 therapeutic landscape.

The FDA is no longer offering emergency use

authorization approvals for this type of therapy.

This means at least one large Phase III clinical trial will be required in addition

to the Phase II trial.

The therapeutic landscape has changed dramatically since the first patient was enrolled.

Mortality rates have decreased

Immunosuppressive corticosteroid treatments are routine.

High risk patients have receive vaccinations and oral therapies have

been developed to prevent the need for hospitalization.

The Company has decided clinical development for prevention of respiratory failure

is a high risk, low reward program that will dilute efforts from our core programs in CNS disease and oncology.

The Company has presented

pre-clinical data on the use of DN-TNF to treat non-alcoholic steatohepatitis (“NASH”).

The Company has decided to defer the NASH program

for the near future due to the complex and evolving clinical and regulatory environment.

The Company may choose to reactivate the program

or abandon the program in the future.

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.

The magnitude and overall effectiveness of these actions remain uncertain.

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Our research and development expense primarily

trial and regulatory-related costs;

clinical trial and regulatory-related costs;

expenses incurred under agreements with investigative sites and consultants that conduct our clinical trials;

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Results of Operations

Comparison of the Three Months Ended June

Comparison of the Three Months Ended September

30, 2021 and 2020

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Three Months Ended

September 30,

(in thousands)

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Loss from operations

Other expense

Other (expense) income

During the three months ended September 30, 2021, the Company sold

MSC’s to one third-party and recognized $14,000 of revenues.

There were no revenues during the three months ended September 30,

General and Administrative

General and administrative

expenses were approximately $2.1 million during the three months ended June 30, 2021, compared to approximately $1.2 million during the

three months ended June 30, 2020.

The increase in general and administrative expenses is largely due to higher professional fees ($0.6

million higher during the three months ended June 30, 2021) and higher payroll expense ($0.2 million higher during the three months ended

June 30, 2021).

expenses were approximately $2.5 million during the three months ended September 30, 2021 and September 30, 2020.

Research and Development

Research and development expenses

were approximately $4.5 million during the three months ended June 30, 2021, compared to approximately $0.9 million during the three months

ended June 30, 2020.

The increase in research and development expenses during the three months ending June 30, 2021 compared to

the three months ending June 30, 2020 is largely due to higher costs associated with manufacturing additional drugs ($0.9 million increase),

incurring additional costs in connection with the Company’s COVID-19 clinical trial ($1.2 million increase), and incurring higher

compensation expense, including stock-based compensation ($0.2 million increase).

were approximately $6.5 million during the three months ended September 30, 2021, compared to approximately $2.4 million during the three

months ended September 30, 2020.

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

2021 compared to the three months ending September 30, 2020 is largely due to incurring costs in connection with the Company’s Phase

2 Alzheimer’s clinical trial ($2.1 million increase), higher costs associated with manufacturing additional drugs ($1.4 million

increase), and incurring higher compensation expense, including stock-based compensation ($0.7 million increase).

Other Expense

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expense is higher in 2021 due to the Company incurring interest expense from a loan the Company obtained in June 2021.

Comparison of the Six Months Ended June

Comparison of the Nine Months Ended September

30, 2021 and 2020

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our results of operations for the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Other (expense) income

During the six months ended

June 30, 2021, the Company sold MSC’s to one third-party and recognized $4,000 of revenues.

There were no revenues during the six

months ended June 30, 2020.

During the nine months ended

September 30, 2021, the Company sold MSC’s to one third-party and recognized $18,000 of revenues.

There were no revenues during

the nine months ended September 30, 2020.

General and Administrative

General and administrative

expenses were approximately $4.2 million during the six months ended June 30, 2021, compared to approximately $2.5 million during

the six months ended June 30, 2020.

The increase in general and administrative expenses is largely due to higher professional fees ($1.2

million higher during the six months ended June 30, 2021), higher stock-based compensation ($0.2 million higher during the six months

ended June 30, 2021) and higher payroll expense ($0.2 million higher during the six months ended June 30, 2021).

expenses were approximately $6.7 million during the nine months ended September 30, 2021, compared to approximately $5.0 million

during the nine months ended September 30, 2020.

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

fees ($0.9 million higher during the nine months ended September 30, 2021), and higher compensation expense, including stock-based compensation

($0.6 million higher during the nine months ended September 30, 2021).

Research and Development

Research and development expenses

were approximately $7.0 million during the six months ended June 30, 2021, compared to approximately $1.7 million during the six

months ended June 30, 2020.

The increase in research and development expenses during the six months ending June 30, 2021 compared

to the six months ending June 30, 2020 is largely due to additional amounts incurred related to manufacturing additional drugs ($1.2 million

were approximately $13.5 million during the nine months ended September 30, 2021, compared to approximately $4.1 million during the nine

months ended September 30, 2020.

The increase in research and development expenses during the nine months ending September 30,

2021 compared to the nine months ending September 30, 2020 is largely due to additional amounts incurred related to manufacturing additional

drugs ($2.7 million increase), incurring costs in connection with the Company’s Phase 2 Alzheimer’s clinical trial ($2.2 million

increase), incurring additional costs in connection with the Company’s COVID-19 clinical trial ($2.0 million increase), and incurring

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a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing

We incurred a net loss of

$11,211,000 and $4,178,000 for the six months ended June 30, 2021 and 2020, respectively.

Net cash used in operating activities was $10,801,000

and $2,853,000 for the six months ended June 30, 2021 and 2020, respectively.

Since inception, we have funded our operations primarily

with proceeds from the sales of our common stock.

As of June 30, 2021, we had cash and cash equivalents of approximately $39.5 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.

We incurred a net loss of $20,669,000 and $8,895,000 for the nine months

ended September 30, 2021 and 2020, respectively.

Net cash used in operating activities was $18,724,000 and $6,551,000 for the nine months

ended September 30, 2021 and 2020, respectively.

Since inception, we have funded our operations primarily with proceeds from the

sales of our common stock.

As of September 30, 2021, we had cash and cash equivalents of approximately $84.5 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.

Our primary uses of capital

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is appropriate.

As of June 30, 2021, the cash balance held by our foreign subsidiaries with currencies other than the United States dollar

was approximately $0.2 million.

As of September 30, 2021, the cash balance held by our foreign subsidiaries with currencies other than the United States

dollar was approximately $0.4 million.

We do not have any material financial exposure to one customer or one country that would significantly

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make some activities more time-consuming and costly.

As of June 30, 2021, the Company

had an accumulated deficit of $44,586,000 and working capital of $41,060,000.

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 June 30, 2021, we had cash and cash equivalents

of approximately $39.5 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 June 30, 2021.

As of September 30, 2021, the Company had an accumulated deficit of

$54,044,000 and working capital of $86,121,000.

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 September 30, 2021, we had cash and cash equivalents of approximately $84.5 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, 2021.

Registered Direct Offering

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ATM Sales Agreements

During the six months ended

June 30, 2020, we issued and sold 150,682 shares of common stock at an average price of $5.44 per share under the 2020 ATM program.

aggregate net proceeds were approximately $0.7 million after BTIG’s commission and other offering expenses.

During the six months ended

June 30, 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.

During the nine months ended

September 30, 2020, we issued and sold 150,682 shares of common stock at an average price of $5.44 per share under the 2020 ATM program.

The aggregate net proceeds were approximately $0.7 million after BTIG’s commission and other offering expenses.

As of June 30,

During the nine months ended

September 30, 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.

As of September

30, 2021, sales of our common stock pursuant to the 2020 ATM have been completed.

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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.

The Company had no sales of common stock during the six months ended June 30, 2021 under the 2021 ATM program.

During July 2021, the Company

sold 713,192 shares at an average price per share of $21.73 for net proceeds of approximately $15.0 million under the 2021 ATM program.

During the nine months ended September 30, 2021, the Company sold 713,192 shares at an average price per share of $21.73 for net proceeds

of approximately $14.9 million under the 2021 ATM program.

On June 10, 2021, we entered

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set forth in the Purchase Agreement.

During the six months ended June 30, 2020, the Company issued 196,000 shares of the Company’s

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

common stock to Lincoln Park for gross proceeds of $1,003,000.

During April 2021, the Company terminated the Purchase Agreement.

During the six months ended

June 30, 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 six months ended June 30, 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 within deferred liabilities.

The Company records costs incurred related

to the ALS study as a reduction of deferred liabilities.

As of June 30, 2021 and December 31, 2020, the Company recorded $0.2 million

and $0.1 million, respectively, as deferred liabilities in the consolidated balance sheets related to the ALS grant.

The following table summarizes

our cash flows for the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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activities was primarily driven by our net loss.

Operating activities used

approximately $10.8 million of cash during the six months ended June 30, 2021, resulting from our loss of $11.2 million and changes in

our net operating assets and liabilities of $1.3 million, partially offset by non-cash stock-based compensation of $1.7 million.

in our net operating assets and liabilities was mainly due to an increase in prepaid expenses of approximately $1.2 million, and an increase

in research and development tax credit receivable of $1.4 million, partially offset by an increase in deferred liabilities of approximately

$0.4 million.

Operating activities used approximately $18.7 million of cash during

the nine months ended September 30, 2021, resulting from our loss of $20.7 million and changes in our net operating assets and liabilities

of $1.4 million, partially offset by non-cash stock-based compensation of $3.3 million.

The change in our net operating assets and liabilities

was mainly due to an increase in prepaid expenses of approximately $1.1 million, and an increase in research and development tax credit

receivable of $3.3 million, partially offset by an increase in accounts payable and accrued liabilities of $2.7 million and an increase

in deferred liabilities of approximately $0.4 million.

Operating activities used

approximately $2.9 million of cash for the six months ended June 30, 2020, primarily resulting from our net loss of approximately $4.2

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

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The change in our net operating assets and liabilities was primarily driven by an

increase in research and development tax credit receivable of approximately $0.5 million, and an increase in prepaid expenses of approximately

$0.2 million, partially offset by an increase in deferred liabilities of approximately $0.4 million and an increase in accounts payable

and accrued liabilities of $0.2 million.

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.

Investing Activities

Investing activities used

$15.0 million of cash for the six months ended June 30, 2021 compared to $0 for the six months ended June 30, 2020.

During the six months

ended June 30, 2021, the Company paid Xencor $15.0 million to settle an option to acquire 10% of the Company’s common stock on a

fully diluted basis which was issued to acquire the Company’s acquired in-process research and development intangible asset.

$15.0 million of cash for the nine months ended September 30, 2021 compared to $0 for the nine months ended September 30, 2020.

the nine months ended September 30, 2021, the Company paid Xencor $15.0 million to settle an option to acquire 10% of the Company’s

common stock on a fully diluted basis which was issued to acquire the Company’s acquired in-process research and development intangible

Financing Activities

During the six months ended

June 30, 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 Company also obtained $15.0 million in cash proceeds from the issuance of debt.

During the six months ended

June 30, 2020, the Company purchased 220,000 shares from an investor for approximately $1.0 million.

During the nine months ended

September 30, 2021, the Company sold 1,439,480 shares of its common stock under its 2020 ATM program for net proceeds of approximately

$28.4 million.

During the nine months ended

September 30, 2021, the Company sold 713,192 shares of its common stock under the 2021 ATM program for net proceeds of approximately $14.9

During July 2021, the Company

completed a registered direct offering whereby the Company sold 1,818,182 shares of its common stock to investors for net proceeds of

$36.9 million.

During June 2021, we entered

into a Loan and Security Agreement with SVB and an affiliate of SVB, providing for a $15.0 million term loan.

During the nine months ended

September 30, 2021, the Company received approximately 1.2 million in connection with the exercise of stock options and warrants.

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 approximately $1.9 million in underwriting

discounts and commissions and offering expenses.

During 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.

During the six months ended June 30, 2020,

the Company issued and sold 150,682 shares of common stock at an average price of $5.44 per share under the ATM program for net cash proceeds

of approximately $0.7 million.

During 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.

Critical Accounting Policies

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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 six months ended June 30, 2021.

ended December 31, 2020 and there have been no material changes during the nine months ended September 30, 2021.

Quantitative and Qualitative Disclosures

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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 2. Management’s Discussion and Analysis