Inmune Bio, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This 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 statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” 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; technological advances and failure to successfully develop business relationships. Description of Business Overview We 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 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 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 eliminating residual disease. Residual disease is the cancer left behind after therapy is finished. Residual disease, can grow to cause relapse. 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. The DN-TNF 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. 18 We believe our DN-TNF platform 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. In 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. 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. 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. 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 of dementia. In animal models, elimination of sTNF prevents nerve cell dysfunction and reverses synaptic pruning. The Phase I trial in patients with biomarkers of inflammation with AD has been completed. The open label, dose escalation trial is designed to demonstrate 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 and VILIP-1; 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. The trial 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. Clinical 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). 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. Patients will be treated for 6 weeks. Primary end-points include both clinical and neuroimaging measures. The final trial design has is ongoing and discussions with the FDA are not complete. The Company anticipates receiving authorization to initiate the clinical trial in the second half of 2021. 19 We 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 into memory-like NK cells that kill the patient’s cancer cells. INKmune is a replication incompetent 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. We believe 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 10-fold. 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. In 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. The 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. We classify our operating expenses into two categories: research and development; and general and administrative expenses. 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. 20 We 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 include: ● 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” disclosure; ● 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; and ● 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. We 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. Research and Development Research 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: ● clinical trial and regulatory-related costs; ● expenses incurred under agreements with investigative sites and consultants that conduct our clinical trials; ● manufacturing and testing costs and related supplies and materials; and ● employee-related expenses, including salaries, benefits, travel and stock-based compensation. We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or development programs. 21 We 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. We 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 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. The costs of clinical trials may vary significantly over the life of a project owing to, but not limited to, the following: ● per patient trial costs; ● the number of sites included in the clinical trials; ● the countries in which the clinical trials are conducted; ● the length of time required to enroll eligible patients; ● the number of patients that participate in the clinical trials; ● the number of doses that patients receive; ● the cost of comparative agents used in clinical trials; ● the drop-out or discontinuation rates of patients; ● potential additional safety monitoring or other studies requested by regulatory agencies; ● the duration of patient follow-up; ● the efficacy and safety profile of the product candidate; and ● the cost of manufacturing, finishing, labelling and storage drug used in the clinical trial. 22 We do not expect any of our product candidates to be commercially available for at least the next several years, if ever. 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: ● continue research and development, including preclinical and clinical development of our existing product candidates; ● potentially seek regulatory approval for our product candidates; ● seek to discover and develop additional product candidates; ● establish 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; ● seek to comply with regulatory standards and laws; ● maintain, leverage and expand our intellectual property portfolio; ● hire clinical, manufacturing, scientific and other personnel to support our product candidates development and future commercialization efforts; ● add operational, financial and management information systems and personnel; and ● incur additional legal, accounting and other expenses in operating as a public company. General and Administrative Expenses General and administrative expenses consist principally of payroll and personnel expenses, including stock-based compensation; 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. Other income (expense) Other income (expense) primarily consists of interest expense on debt, interest income on money market accounts and foreign currency exchange gains and losses. Results of Operations Comparison of the Three Months Ended September 30, 2021 and 2020 The following table summarizes our results of operations for the periods indicated: Three Months Ended September 30, (in thousands) 2021 2020 Change Revenues $ 14 $ - $ 14 Operating expenses: Research and development 6,520 2,363 4,157 General and administrative 2,515 2,456 59 Total operating expenses 9,035 4,819 4,216 Loss from operations (9,021 ) (4,819 ) (4,202 ) Other (expense) income (437 ) 102 (539 ) Net loss $ (9,458 ) $ (4,717 ) $ (4,741 ) 23 Revenues 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, 2020. General and Administrative General and administrative 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 $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 The Company’s other expense is higher in 2021 due to the Company incurring interest expense from a loan the Company obtained in June 2021. Comparison of the Nine Months Ended September 30, 2021 and 2020 The following table summarizes our results of operations for the periods indicated: Nine Months Ended September 30, (in thousands) 2021 2020 Change Revenues $ 18 $ — $ 18 Operating expenses: Research and development 13,475 4,059 9,416 General and administrative 6,666 4,960 1,706 Total operating expenses 20,141 9,019 11,122 Loss from operations (20,123 ) (9,019 ) (11,104 ) Other (expense) income (546 ) 124 (670 ) Net loss $ (20,669 ) $ (8,895 ) $ (11,774 ) Revenues 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 $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 $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 higher compensation expense, including stock-based compensation ($1.0 million increase). 24 Other Income (Expense) The Company’s other expense is higher in 2021 due to the Company incurring interest expense from a loan the Company obtained in June 2021. Liquidity and Capital Resources Liquidity 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 $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 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. The 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, 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 hinder our liquidity. As 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, 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 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. 25 ATM Sales Agreements 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. 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. 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. 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. Term Loan On June 10, 2021, we entered into a Loan and Security Agreement with SVB and an affiliate of SVB, providing for a $15.0 million term loan. The Term Loan also provides for us to request an additional $5.0 million term loan from the Lenders, which may be granted or denied at the sole discretion of the Lenders. The Term Loan provides for an annual interest rate equal to the greater of (i) the prime rate then in effect as reported in The Wall Street Journal plus 4.50% and (ii) 7.75% and also includes a final payment fee equal to 6.5% of the original principal amount borrowed payable on the earlier of the repayment of the loan in full and the maturity date. The Company used the proceeds of the term loan to fund the cash consideration for the Option Cancellation Agreement with Xencor. The Lincoln Park Transaction On May 15, 2019, the Company and Lincoln Park entered into 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 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. 26 Cash Flows The following table summarizes our cash flows for the periods indicated: Nine Months Ended September 30, (in thousands) 2021 2020 Net cash and cash equivalents (used in) provided by: Operating activities $ (18,724 ) $ (6,551 ) Investing activities (15,000 ) - Financing activities 96,357 23,895 Change in cash and cash equivalents 62,662 17,344 Impact on cash from foreign currency translation (129 ) (29 ) Cash and cash equivalents, beginning of period 21,967 6,996 Cash and cash equivalents, end of period $ 84,471 $ 24,311 Operating Activities Our cash used in operating activities was primarily driven by our net loss. 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 $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. Investing Activities Investing activities used $15.0 million of cash for the nine months ended September 30, 2021 compared to $0 for the nine months ended September 30, 2020. During 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 asset. Financing Activities 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 million. 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. 27 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 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 Our 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, 2020 and there have been no material changes during the nine months ended September 30, 2021. Item 3. Quantitative and Qualitative Disclosures About Market Risk Pursuant 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,” as defined by Rule 229.10(f)(1).