What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-03 compared with 2021-03-04 · 736 added, 664 removed, 120 unchanged (92% of the section changed)

Financial Statements and Supplementary Data

TO CONSOLIDATED FINANCIAL STATEMENTS

AUDITED FINANCIAL

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2020 AND 2019

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

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and the Board of Directors of

Jolla, California

on the Financial Statements

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

(the “Company”) as of December 31,

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

equity and cash flows

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

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

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

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

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

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

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

in accordance with the U.S.

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

and the PCAOB.

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

Those standards require that we plan and perform the audits

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

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

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

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

Financial Statements and Supplementary

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AUDITED FINANCIAL STATEMENTS:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID Number 688 )

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 AND 2020 F-2

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 F-3

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 F-5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and the Board of Directors

INmune Bio, Inc.

Boca Raton, Florida

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of INmune Bio, Inc.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements

of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended

December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results

of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles

generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility

of the Company's management.

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

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are

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

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

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

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

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal

control over financial reporting.

Accordingly, we express no such opinion.

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

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

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

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

Our audits included performing procedures to assess

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

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

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

have served as the Company’s auditor since 2017.

BALANCE SHEETS

/s/ Marcum llp

We have served as the Company’s auditor since 2017.

Houston, Texas

March 3, 2022

INMUNE BIO, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

CURRENT ASSETS

2 unchanged sentences

Prepaid expenses

Prepaid expenses –

related party

Prepaid expenses – related party

TOTAL CURRENT ASSETS

Operating lease –

right of use asset –

related party

Operating lease – right of use assets

Acquired in-process research and development intangible assets

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities –

related parties

Accounts payable and accrued liabilities – related parties

Deferred liabilities

Operating lease, current liability –

related party

Operating lease, current liabilities

TOTAL CURRENT LIABILITIES

Long-term operating lease liability –

related party

Long-term debt, less debt discount

Long-term operating lease liabilities

Accrued liability – long-term

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’

STOCKHOLDERS’ EQUITY

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

1 unchanged sentence

Additional paid-in capital

Common stock issuable

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

(33,375,340 )

(21,276,181 )

TOTAL STOCKHOLDERS’

TOTAL LIABILITIES AND STOCKHOLDERS’

accompanying notes to these consolidated financial statements.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

THE YEARS ENDED DECEMBER 31, 2020 AND 2019

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

See accompanying notes to these consolidated financial

INMUNE BIO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

thousands, except share and per share amounts)

OPERATING EXPENSES

1 unchanged sentence

Research and development

Gain on waiver of common stock issuable

Total operating expenses

LOSS FROM OPERATIONS

(12,227,676 )

Total other income

$ (12,099,159 )

$ (7,678,313 )

Net loss per common share –

basic and diluted

Weighted average number of common shares outstanding –

basic and diluted

OTHER (EXPENSE) INCOME

Other (expense) income

Total other (expense) income

Net loss per common share – basic and diluted

Weighted average number of common shares outstanding – basic and diluted

COMPREHENSIVE LOSS

$ (12,099,159 )

$ (7,678,313 )

Other comprehensive (income) loss –

foreign currency translation

Other comprehensive (loss) income – foreign currency translation

Total comprehensive loss

$ (12,079,936 )

$ (7,693,357 )

accompanying notes to these consolidated financial statements.

STATEMENT OF CHANGES IN STOCKHOLDERS’

THE YEARS ENDED DECEMBER 31, 2020 AND 2019

See accompanying notes to these consolidated financial

INMUNE BIO, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

(In thousands, except share amounts)

Comprehensive

Stockholders’

Income (loss)

Balance as of January 1, 2020

$ (13,597,868 )

Issuance of common stock and warrants for cash, net

Issuance of common stock issuable

Waiver of common stock issuable

Stock-based compensation

Loss on foreign currency translation

Balance as of December 31, 2019

(21,276,181 )

Issuance of common stock for cash, net

5 unchanged sentences

Gain on foreign currency translation

(12,099,159 )

Balance as of December 31, 2020

$ (33,375,340 )

accompanying notes to these consolidated financial statements.

STATEMENTS OF CASH FLOWS

THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Issuance of common stock for cash, net

Settlement of Xencor warrant for cash and common stock

Warrants issued to lenders as debt inducement

Exercise of warrants

Exercise of stock options

Stock-based compensation

Loss on foreign currency translation

Balance as of December 31, 2021

See accompanying notes to these consolidated financial

INMUNE BIO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

$ (12,099,159 )

$ (7,678,313 )

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

Stock-based compensation

Gain on waiver of common stock issuable

Accretion of debt discount

Changes in operating assets and liabilities:

1 unchanged sentence

Other tax receivable

Joint development cost receivable

Prepaid expenses

Prepaid expenses –

related party

Prepaid expenses – related party

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities –

related parties

Accounts payable and accrued liabilities – related parties

Deferred liabilities

Operating lease liability –

related party

Accrued liability – long-term

Operating lease liabilities

Net cash used in operating activities

CASH FROM INVESTING ACTIVITIES

Cash paid to Xencor to settle warrant for acquired research and development intangible assets

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from the issuance of debt

Net proceeds from sale of common stock

Net proceeds from the exercise of stock options

Net proceeds from the exercise of warrants

Purchase of common stock

8 unchanged sentences

NONCASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued to Xencor to settle warrant issued for acquired research and development intangible assets

Warrants issued to lenders as debt inducement

Capital contribution

Cashless exercise of warrants

Issuance of common stock issuable

Issuance of warrants to placement agents

accompanying notes to these consolidated financial statements.

TO CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND BASIS OF PRESENTATION

and Business Overview

(the “Company”

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

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

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

See accompanying notes to these consolidated financial

INMUNE BIO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND BASIS

OF PRESENTATION

Organization and Business Overview

INmune Bio, Inc.

(the “Company” or

“INmune Bio”) was organized in the State of Nevada on September 25, 2015, and is a clinical stage biotechnology pharmaceutical

company focused on developing and commercializing its product candidates to treat diseases where the innate immune system is not functioning

normally and contributing to the patient’s disease.

INmune Bio has two product platforms.

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

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

DN-TNF is currently being developed

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

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

minimal residual disease in patients with cancer.

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

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

of Presentation and Principles of Consolidation

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

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

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

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

All significant

intercompany accounts and transactions have been eliminated.

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

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

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

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

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 Alzheimer’s and treatment resistant depression (XPro) and cancer (INB03).

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.

Basis of Presentation and Principles of

Consolidation

The accompanying consolidated financial statements

of the Company have been prepared in accordance with Generally Accepted Accounting Principles (“US GAAP”) in the United States

of America and the rules of the Securities and Exchange Commission (“SEC”).

The consolidated financial statements herein have

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

Australia subsidiary (collectively, the “Company”).

All significant intercompany accounts and transactions have been eliminated.

NOTE 2 – LIQUIDITY

As of December 31, 2021, the Company had an accumulated

deficit of $ 63,715,000 and experienced losses since its inception.

Losses have principally occurred as a result of the substantial resources

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

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

are commercialized.

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

During July 2020,

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

price of $10.00 per share.

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

option to purchase

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

Aggregate net proceeds from the underwritten public offering were approximately

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

During April 2020,

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

(“ATM”) offering program.

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

sale of shares.

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

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

From April 2020 through December 2020, the

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

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

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

During May 2019,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

amounts of assets, liabilities, revenue, and expenses.

Actual results and outcomes may differ from management’s estimates

and assumptions.

and Uncertainties

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

The extent of the impact of the COVID-19 pandemic

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

Also, economies worldwide have also been negatively

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

the healthcare industry and economy as a whole.

The magnitude and overall effectiveness of these actions remain uncertain.

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

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

toward the COVID-19 pandemic.

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

impede patient movement or interrupt healthcare services.

Similarly, the ability to recruit and retain patients and principal

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

Company’s clinical trial operations.

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

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

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

of which are uncertain and cannot be predicted.

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

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

is uncertain.

and Cash Equivalents

The Company considers all highly liquid

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

The Company holds cash in banks

in excess of Federal Deposit Insurance Corporation insurance limits.

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

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

and Development Tax Incentive Receivable

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

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

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

The Australian research and development

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

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

At each period end, management estimates the reimbursement

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

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

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

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

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

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

At each period end, management

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

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

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

patent applications (principally legal

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

Acquired in-process research and development

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

Amortization is initiated for acquired in-process research and

development intangible assets when their useful lives have been determined.

These acquired in-process research and development

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

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

and Diluted Loss per Share

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

common shares during the period.

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

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

For all periods presented,

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

net loss position.

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

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

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

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

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

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

The Company recognizes revenue following the five-step

model prescribed under ASC Topic 606:

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

(2) identify the performance obligations in the

To meet its current and future obligations the

Company has taken the following steps to capitalize the business and achieve its business plan:

● During July 2021, the Company completed a registered direct

public offering in which it sold 1,818,182 shares of common stock to investors for estimated net proceeds of $ 36.9 million.

● During June 2021, the Company entered into a loan and security agreement and drew down a $ 15.0 million

● During March 2021, the Company entered into a sales agreement with

BTIG, LLC (“BTIG”), as agent, to establish an At-The-Market (“ATM”) offering 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.

The Company has sold 713,192 shares of its common stock at an average price of $ 21.73 through the 2021 ATM for net proceeds of $ 14.9 million.

● During April 2020, the Company entered into a sales agreement with

BTIG, as sales agent, to establish an ATM offering 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.

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 year ended December 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.

As of December 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 December 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 Annual Report on Form 10-K based on the balance of cash available as of December 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.

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

Use of Estimates

Preparing financial statements in conformity with

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

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

Risks and Uncertainties

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.

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.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with

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

The Company holds cash in banks in excess of Federal Deposit Insurance

Corporation insurance limits.

However, the Company believes risk of loss is minimal as the cash is held by large, highly-rated financial

institutions.

Research and Development Tax Incentive Receivable

The Company, through its wholly-owned subsidiary

in Australia, participates in the Australian research and development tax incentive program, such that a percentage of our qualifying

research and development expenditures are reimbursed by the Australian government, and such incentives are reflected as a reduction of

research and development expense.

The Australian research and development tax incentive is recognized when there is reasonable assurance

that the incentive will be received, the relevant expenditure has been incurred and the amount of the consideration can be reliably measured.

At each period end, management estimates the reimbursement available to the Company based on available information at the time.

The 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.

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.

Intangible Assets

The Company capitalizes costs incurred in connection

with in-process research and development purchased from others if the asset has alternative uses and such uses are not restricted under

applicable license agreements;

patent applications (principally legal fees), patent purchases, and trademarks related to its cell line

as intangible assets.

Acquired in-process research and development costs that do not have alternative uses are expensed as incurred.

the assets are determined to have a finite life (upon completion of the development of the in-process research and development for its

DN-TNF platform), the useful life will be determined and the in-process research and development intangible assets will be amortized.

During the fourth quarter and if business factors

indicate more frequently, the Company performs an assessment of the qualitative factors affecting the fair value of our in-process research

and development.

If the qualitative assessment suggests that impairment is more likely than not, a quantitative analysis is performed.

The quantitative analysis involves a comparison of the fair value of the in-process research and development with the carrying amount.

If the carrying amount of the in-process research and development exceeds its fair value, an impairment loss is recognized in an amount

equal to that excess.

During the years ended December 31, 2020 and 2021, the Company performed a qualitative assessment of its in-process

research and development and determined that there was no impairment.

Basic and Diluted Loss per Share

Basic loss per share is computed by dividing net

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

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.

At December 31, 2021, the Company had 4,097,000

potentially issuable shares of common stock upon the exercise of stock options and 93,866 potentially issuable shares of common stock

upon the exercise of warrants.

At December 31, 2020, the Company had 3,457,000

potentially issuable shares of common stock upon the exercise of stock options and 1,955,922 potentially issuable shares of common stock

upon the exercise of warrants.

Revenue Recognition

The 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:

contract(s) with a customer;

(2) identify the performance obligations in the contract;

(3) determine the transaction price;

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

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

The Company records the expenses related

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

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

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

The revenue was recognized when the

MSC’s were shipped to the customer.

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

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 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.

The Company records deferred revenues when cash

payments are received or due in advance of performance, including amounts which are refundable.

The Company’s 2021 revenues were from the

sale of MSC’s to three customers.

The sales were recognized when the MSC’s were delivered to the customers.

The Company’s 2020 revenue was from the

sale of MSC’s to one customer.

The revenue was recognized when the MSC’s were delivered to the customer.

Stock-Based Compensation

The 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

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 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.

Currency Translation

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

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

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

Dollar for its U.S.

based operations, British Pound (“GBP”)

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

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

equity is translated at historical

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

The resulting translation

adjustments are reported under other comprehensive income.

Gains and losses resulting from the translations of foreign currency

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

Adopted Accounting Pronouncements

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

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

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

RESEARCH AND DEVELOPMENT ACTIVITY

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

in R&D subject to certain requirements.

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

research and development expenses incurred.

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

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

During the years ended December

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

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

in R&D subject to certain requirements.

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

for research and development expenses incurred.

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

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

During the years ended

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

License Agreement

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

(“Xencor”),

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

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

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

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

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

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

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

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

believes the protein has numerous other medical applications.

Such additional alternative applications of the technology are available

under the license agreement.

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

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

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

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

The warrants have an exercise

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

The aggregate purchase price for the

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

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

Pursuant to the amendment, the purchase price

for the additional shares may only be paid by cash.

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

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

Codification 730 –

Research and Development

The Company has the license rights to pursue alternative applications

of the technology as part of its future development plans.

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

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

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

a third party of the licensed product in such country.

The Company had no sales of Licensed Products during 2020.

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

Research and development (“R&D”)

costs are expensed as incurred.

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

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

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

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

activities on the Company’s behalf.

The Company recognizes grants as contra research

and development expense in the consolidated statement of operations on a systematic basis over the periods in which the entity recognizes

as expenses the related costs for which the grants are intended to compensate.

The Company follows the liability method of accounting

for income taxes.

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

to differences between the financial statement carrying values and their respective income tax basis (temporary differences).

on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment

Foreign Currency Translation

The Company’s financial statements are presented

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

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

for its Australian-based operations.

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

equity is translated at historical rates and statement of operations items are translated at the weighted average exchange rate for the

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 loss.

Recently Adopted Accounting Pronouncements

There 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.

Reclassifications

Certain amounts from the prior period have been

adjusted to conform to the current period presentation.

Subsequent Events

The Company has evaluated all transactions through

the financial statement issuance date for subsequent disclosure consideration.

NOTE 4 – RESEARCH AND DEVELOPMENT

According to UK tax law, the Company is allowed

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

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

31, 2021 and 2020, the Company recorded a research and development tax credit receivable of $ 3,319,000 and $ 833,000 , respectively for

R&D expenses incurred in the UK.

During the years ended December 31, 2021 and 2020, the Company received $ 814,000 and $ 306,000 of

R&D tax credit reimbursements, respectively from the UK.

According to AUS tax law, the Company is allowed

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

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

At December 31, 2021 and 2020, the Company recorded a research and development tax credit receivable of $ 1,594,000 and $ 853,000 , respectively,

for R&D expenses incurred in Australia.

During the years ended December 31, 2021 and 2020, the Company received $ 1,296,000 and $ 178,000

of R&D tax credit reimbursements, respectively from Australia.

License Agreement

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

Ventures, LLC (“Immune Ventures”).

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

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

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

met as of December 31, 2020):

On October 3, 2017, the Company entered into a

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

(“Xencor”), which has discovered and developed

a proprietary biological molecule that inhibits soluble tumor necrosis factor.

During June 2021, the Company entered into the First Amendment

to License Agreement.

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 “XPro”

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

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, which

warrant has since been cancelled (see the description below).

The aggregate purchase price for the full exercise of the option was $ 10,000,000 .

The Company recorded $ 16,514,000 for the acquisition

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

License Agreement acquisition in accordance with Accounting Standards Codification 730 – Research and Development .

has the license rights to pursue alternative applications of the technology as part of its future development plans.

The Company also agreed to pay Xencor a royalty

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

product basis until the date that is the later of (a) the expiration of the last to expire valid claim covering such Licensed Product

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

Under the Xencor License Agreement, the Company

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

On June 10, 2021, the Company and Xencor entered

into an Option Cancellation Agreement whereby Xencor terminated its warrant to purchase 10 % of the fully diluted shares of the Company

in exchange for a cash payment of $ 15,000,000 and 192,533 shares of the Company’s common stock with a fair value of $ 3,300,000 based

on the market price of the common stock as of June 10, 2021, which the Company issued in June 2021.

The Company filed a registration statement

covering the resale of these shares during September 2021 and agreed to keep the registration statement continuously effective until all

such shares cease to be outstanding or otherwise cease to be registrable securities as defined in the Option Cancellation Agreement.

Company charged the cash consideration paid to Xencor to enter into the Option Cancellation Agreement to equity as the fair value of the

warrant immediately prior to the Option Cancellation Agreement was greater than the consideration paid to Xencor.

INKmune License Agreement

On 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:

(in thousands)

Each Phase I initiation

3 unchanged sentences

Each 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.

During July 2021, the Company initiated a Phase

I clinical trial using INKmune and the Company paid Immune Ventures a $ 25,000 milestone payment.

In addition, the Company agreed to pay the licensor

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

The License is owned by Immune Ventures.

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

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

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

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

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

Upon the termination of the

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

The agreement

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

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

On July 20, 2018, the parties amended the

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

On October 30, 2020, the parties

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

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

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

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

of NDA or equivalent by October 29, 2026 or equivalent

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

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

If the Company fails to make any required efforts, or

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

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

of Pittsburg License Agreement

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

property licensed from the University of Pittsburgh.

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

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

of Pittsburgh –

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

(“Licensee”), (the “PITT Agreement”).

Consideration

under the PITT Agreement includes:

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

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

maintenance fees under the PITT Agreement include:

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

its Chief Scientific Officer, are the owners of Immune Ventures.

As of December 31, 2021 and December 31, 2020, no sales had occurred

under this license.

The term of the agreement began on October 29,

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

last to expire patent rights where patent rights exists.

Upon the termination of the agreement we shall have a fully paid up, perpetual,

royalty-free license without further obligation to Immune Ventures.

The agreement can be terminated by Immune Ventures if, after 60 days

from the Company’s receipt of notice that the Company has not made a payment under the agreement, and the Company still does not

make this payment.

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

Initiation of Phase II clinical trials or equivalent

by October 29, 2023

Initiation of Phase III clinical trials or equivalent

by October 29, 2025

Filing of NDA or equivalent by October 29, 2026

or equivalent

If the Company doesn’t achieve the above

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

an alternate development.

If the Company fails to make any required efforts, or if the efforts do not remedy the situation within 60 days

of written notice by Immune Ventures, then Immune Ventures may provide notice to terminate the license or convert it to a non-exclusive

University of Pittsburg License Agreement

On October 3, 2017, the Company entered into an

Assignment and Assumption Agreement with Immune Ventures related to intellectual property licensed from the University of Pittsburgh.

Pursuant to the Assignment and Assumption Agreement (“Assignment Agreement”), Immune Ventures assigned all of its rights,

obligations and liabilities under an Exclusive License Agreement between the University of Pittsburgh – Of the Commonwealth System

of Higher Education (“Licensor”) and Immune Ventures to INmune Bio (“Licensee”), (the “PITT Agreement”).

Consideration under the PITT Agreement includes:

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

Annual maintenance fees under the PITT Agreement

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

$10,000 due on June 26 of each year 2023-2024;

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

The Company had no

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

and $25,000 due on June 26 of each

year 2025 and annually thereafter until first commercial sale.

The Company had no amounts owed pursuant to the PITT Agreement as of December

(in thousands)

June 26 of each year 2020-2022

1 unchanged sentence

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:

Upon first commercial sale of a product making

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

There were no commercial sales of product making use of the licensed

technology under the PITT Agreement in 2021.

Moreover, under the PITT Agreement the Licensee

is required to make milestone payments as follows:

(in thousands)

Each Phase I initiation

1 unchanged sentence

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.

PITT Agreement expires upon the earlier of:

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

the PITT Agreement;

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

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

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

(i) Licensee defaults as to performance of material obligations

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

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

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

relief under any law for the aid of debtors.

College London License Agreement –

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

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

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

cells (“MSC”).

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

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

The Company will

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

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

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

and know-how.

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

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

as the new headquarters of the Company.

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

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

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

Board of Directors.

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

sublease for 5 years.

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

is not reasonably certain to occur.

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

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

Right-of-use asset –

related party

Operating lease, current liability –

related party

Long-term operating lease liability –

related party

The Company made a $ 50,000 milestone payment in

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

The PITT Agreement expires upon the earlier of:

(i) expiration

of the last claim of the Patent Rights forming the subject matter of the PITT Agreement;

or (ii) the date that is 20 years from the effective

date of the agreement (June 26, 2037).

The Licensee may terminate the PITT Agreement

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

The Licensor may terminate the PITT Agreement

upon written notice if:

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

receiving written notice;

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

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

NOTE 5 – LEASE

In May 2019, the Company signed a sublease agreement

with a related party for office space in La Jolla, California, which served as the former 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.

During 2021, the Company moved its corporate headquarters

to Boca Raton, Florida.

The Company intends to sublease its office space in La Jolla.

In September 2021, the Company signed a lease

with a third party for office space in Boca Raton, Florida.

The lease agreement has a 64 -month term and commenced during the fourth

quarter of 2021.

Below is a summary of the Company’s right-of-use

assets and liabilities:

(in thousands, except years and rate)

Right-of-use asset (La Jolla lease)

Right-of-use asset (Boca Raton lease)

Operating lease, current liability (La Jolla lease)

Operating lease, current liability (Boca Raton lease)

Long-term operating lease liability (La Jolla lease)

Long-term operating lease liability (Boca Raton lease)

Total lease liability

1 unchanged sentence

Weighted-average discount rate

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

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

RELATED PARTY TRANSACTIONS

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

connection with medical research performed on behalf of the Company.

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

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

UCL is a wholly owned subsidiary

of the University of London.

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

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

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

NOTE 6 – RELATED PARTY TRANSACTIONS

At December 31, 2021 and 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.

During the years ended December 31, 2021 and 2020, the Company paid UCL $ 218,000 and $ 335,000 , respectively, for medical

research performed on behalf of the Company.

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

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

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.

year ended December 31, 2021 and 2020, the Company paid CTI $ 0 and $ 127,000 , respectively, for medical research performed on behalf

of the Company.

During the year ended December 31, 2020, the Company recorded a capital contribution of $ 216,000 for the forgiveness

of certain accounts payable due to CTI.

During the years ended December 31, 2021 and 2020, the Company paid CTI $ 38,000 and $ 25,000 , respectively,

pursuant to its sublease agreement with CTI.

year ended December 31, 2021, the Company engaged AmplifyBio to perform certain medical research on behalf of the Company.

AmplifyBio is on the Board of Directors of the Company.

At December 31, 2021, the Company owed AmplifyBio $ 70,000 .

No amounts were paid

to AmplifyBio during 2021.

The Company had no transactions with AmplifyBio during 2020.

10, 2021, the Company entered into a Loan and Security Agreement (the “Term Loan”) with Silicon Valley Bank and SVB Innovation

Credit Fund VIII, L.P., together (the “Lenders”).

The Term Loan provides for a $ 15.0 million term loan, of which

the Company borrowed the entire amount on June 10, 2021, and is secured by the Company’s assets.

The Term Loan also provides

for the Company 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.

paid the Lenders $ 47,000 to access the term loan, which has been included as a component of the debt discount and is amortized to

interest expense over the term of the loan.

The term loan and debt discount are as follows as of December 31, 2021:

(in thousands)

debt discount and financing costs, net

current portion

Long-term debt

For the year ended December 31,

2021, the Company recognized interest expense of $ 985,000 related to the Term Loan.

loan repayment schedule provided for interest only payments beginning on July 1, 2021, and continuing for 12 months, followed by monthly

principal and interest payments, starting on July 1, 2022 and continuing through the maturity date of January 1, 2025.

During August

2021, the Lenders extended the interest-only period for one year due to the Company achieving an equity milestone as fully defined

in the Term Loan.

As a result of achieving the equity milestone, monthly principal and interest payments begin on July 1, 2023.

All outstanding

principal and accrued and unpaid interest will be due and payable on the maturity date.

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 %.

At December 31, 2021, the interest rate was 7.75 %.

Loan 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 has the option to prepay the outstanding balance of the term loans in full,

subject to a prepayment premium of (i) 3 % of the original principal amount borrowed for any prepayment on or prior to the first anniversary

of the loan, (ii) 2 % of the original principal amount borrowed for any prepayment after the first anniversary and on or before the

second anniversary of the loan or (iii) 1 % of the original principal amount borrowed for any prepayment after the second anniversary

of the loan but before the maturity date.

repayment of the $ 15.0 million Term loan principal is as follows as of December 31, 2021:

(in thousands,

except years)

occurrence of certain events, including but not limited to the Company’s failure to satisfy its payment obligations under the Term

Loan, the breach of certain of its other covenants under the Term Loan, or the occurrence of a material adverse change, the Lenders will

have the right, among other remedies, to declare all principal and interest immediately due and payable, and will have the right to receive

the final payment fee and, if the payment of principal and interest is due prior to maturity, the applicable prepayment fee.

was in compliance with its debt covenants at December 31, 2021.

NOTE 8 – STOCKHOLDERS’ EQUITY

Common Stock – At the Market Offerings

During the year ended December 31, 2020, the Company

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

STOCKHOLDERS’

Public Offering

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

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

and May 2019 Stock Sale

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

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

for $53,550 of cash.

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

Capital Fund, LLC (“Lincoln Park”).

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

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

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

May 15, 2019.

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

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

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

of offering costs).

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

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

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

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

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

The purchase price will be based

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

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

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

certain threshold prices as set forth in the purchase agreement.

There are no trading volume requirements or restrictions under

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

and retirement of common stock

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

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

Stock –

At the Market Offering

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

(“ATM”) offering program.

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

The Company was

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

The ATM program will remain in full force

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

by the Company or BTIG.

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

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

commissions and fees of $79,187.

Stock Offering

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

offering price of $10.00 per share.

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

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

Aggregate net proceeds from the underwritten public offering were $23.1

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

Stock Issued for Services

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

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

The fair value of these warrants was $356,874

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

The assumptions used

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

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

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

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

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

The Company accounted for the exchange of the warrants

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

of warrants exceeded the fair value of the shares issued.

Stock Issuable

Seaboard Consulting Agreement

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

(“Pacific Seaboard”)

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

to its initial public offering.

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

of its restricted common stock.

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

shares of common stock to be issued.

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

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

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

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

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

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

December 31, 2019.

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

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

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

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

The administration of the 2019

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

As of December 31, 2019,

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

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

option-pricing model.

issued and sold 178,600 shares of common stock at an average price of $ 5.45 per share under the 2020 ATM agreement.

The aggregate net

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

During the year ended December 31, 2021, the Company

sold 1,439,480 shares of its common stock at an average price of $ 20.17 per share under the 2020 ATM agreement.

The aggregate net proceeds

were approximately $ 28.4 million after BTIG’s commission and other offering expenses.

During the year ended December 31, 2021, the Company

sold 713,192 shares of its common stock at an average price of $ 21.73 per share under the 2021 ATM agreement.

The aggregate net proceeds

were approximately $ 14.9 million after BTIG’s commission and other offering expenses.

Direct Offering

2021, the Company completed a registered direct offering whereby the Company sold 1,818,182 shares of its common stock to investors

for gross proceeds of $ 38.0 million (net proceeds of $ 36.9 million).

Underwritten Stock Offering

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.

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.

of shares to Xencor

10, 2021, the Company and Xencor entered into an Option Cancellation Agreement whereby the Company issued 192,533 shares of

its common stock to Xencor (See Note 4).

On May 15, 2019, the Company entered into both

a securities purchase agreement and registration rights agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”).

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 year ended December 31, 2020, the Company issued 196,000 shares of its

common stock to Lincoln Park for approximately $1.0 million of cash.

During April 2021, the Company terminated the

securities purchase agreement with Lincoln Park.

Purchase and retirement of common stock

During January 2020, the Company purchased and

cancelled 220,000 shares of its common stock from a shareholder in exchange for $ 1,012,000 of cash.

Immediately following the purchase,

the investor owned less than 10 % of the outstanding common stock of the Company.

Common 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.

accounted for the exchange of the warrants for shares of common stock as a modification and recorded no additional expense in connection

with the exchange as the fair value of warrants exceeded the fair value of the shares issued.

In 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

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

Stock options

During September 2020, the Company granted an

employee an option to purchase 40,000 shares of its common stock pursuant to the 2019 Incentive Stock Plan.

The stock options vest over

four years and had a fair value of $ 339,731 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.

During 2021, the Company granted various employees,

consultants and directors options to purchase 823,000 shares of common stock pursuant to the 2021, 2019 and 2017 Incentive Stock Plans.

The stock options vest over zero to four years and had a fair value of $ 14,027,000 that was calculated using the Black-Scholes option-pricing

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

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

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

10.0 years, (3) expected volatility of approximately

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

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

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

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

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

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

and (4) zero expected dividends.

following table summarizes stock option activity:

Weighted-average

(1) discount rate of 0.78 -1.

49 %% based on the applicable US Treasury

bill rate (2) expected life of 6.00 - 10.00 years, (3) expected volatility of approximately 105 %- 114 % based on the trading history of similar

companies, and (4) zero expected dividends.

The following table summarizes stock option activity:

(in thousands, except share and per share amounts)

Outstanding at January 1, 2020

8 unchanged sentences

Exercisable at December 31, 2021

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

respectively, related to stock options.

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

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

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

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

exercisable until December 19, 2023.

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

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

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

value is $265,443.

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

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

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

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

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

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

Compensation by Class of Expense

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

ended December 31, 2020 and 2019 respectively:

received $ 1,135,000 in cash proceeds from exercises of stock options during the year ended December 31, 2021.

During the years ended December 31, 2021 and 2020,

the Company recognized stock-based compensation expense of $ 4,796,000 and $ 2,755,000 , respectively, related to stock options.

As of December

31, 2021, there was $ 13,308,000 of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized

over a weighted-average period of 2.52 years.

issued 45,386 warrants to the Company’s lenders upon obtaining its loan in June 2021.

The warrants have a 10-year term

and an exercise price of $ 14.05 .

The warrants have a fair value of approximately $ 0.6 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 1.45 % based on the applicable

US Treasury bill rate (2) expected life of 10.0 years, (3) expected volatility of approximately 103 % based on the trading

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

At December 31, 2021, the intrinsic value of these warrants is

In 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 19, 2023.

the year ended December 31, 2021, 6,147 of these warrants were exercised on a cashless basis in exchange for 3,758 shares

of common stock.

At December 31, 2021, 28,688 of these warrants are outstanding and the intrinsic value is $ 17,000 .

30, 2017, the Company issued fully vested warrants to purchase 31,667 shares of the Company’s common stock to a third

party in conjunction with the common stock sold for cash.

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

During the year ended December 31, 2021, 11,875 of these warrants were exercised for cash proceeds of $ 18,000 .

At December 31,

2021, 19,792 of these warrants are outstanding, with an intrinsic value of $ 172,000 .

Stock-based Compensation by Class of Expense

The following summarizes the components of stock-based

compensation expense in the consolidated statements of operations for the years ended December 31, 2021 and 2020 respectively:

Research and development

General and administrative

Rights Agreement

On December 30, 2020, the Board of Directors

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

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

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

close of business on January 11, 2021.

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

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

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

Preferred Share, subject to adjustment.

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

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

stock without the approval of the Board.

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

Preferred Stock

In 2020, the Company

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

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 Agreement was scheduled to expire on December 30, 2021 but was extended until December 30, 2022 by the Board.

Preferred Stock

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

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

provision for income taxes consists of the following components:

In 2020, the Company designated 45,000 shares

of its preferred stock with par value of $ 0.001 per share as Series A Junior Participating Preferred Stock.

The remaining 9,955,000 shares

of preferred stock with par value of $ 0.001 remain undesignated.

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

2021 and 2020.

NOTE 9– INCOME TAXES

The provision for income taxes consists of the

following components:

Current expense (benefit)

3 unchanged sentences

Net deferred taxes

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

A reconciliation of income tax benefit computed

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

(in thousands, except percentage)

Federal tax benefit at statutory rate (21%)

$ (2,540,824 )

$ (1,612,444 )

Stock-based compensation

2 unchanged sentences

Research credits

Forgiveness of stock payable

Return to provision adjustment

1 unchanged sentence

Income tax benefit

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

The principal components of deferred tax assets

and liabilities consist of the following at December 31, 2021 and 2020, respectively:

(in thousands)

Deferred tax assets

5 unchanged sentences

Net deferred tax assets

At December 31, 2020, the Company had a

federal net operating loss carryforward of approximately $10.5 million.

The net operating loss carryforwards for 2017 will begin

to expire in the year ending December 31, 2037.

At December 31, 2021, the Company had a federal

net operating loss carryforward of approximately $ 15.7 million.

The net operating loss carryforwards for 2017 will begin to expire in

the year ending December 31, 2037 .

The net operating loss carryforwards starting in 2018 have no expiration.

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

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

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

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

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

ultimate settlement.

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

There are no unrecognized

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

The Company does not anticipate

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

COLLABORATIVE AGREEMENTS

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

neuroinflammation as a cause of Alzheimer’s disease.

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

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

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

As of December 31, 2020, the Company has received

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

to this grant.

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

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

to protect against ALS model phenotypes in vivo.

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

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

During the year ended December 31, 2020, the

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

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

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

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

As of December 31, 2020, the

Company has not received any proceeds pursuant to this grant.

SUBSEQUENT EVENTS

During January and February 2021, the Company

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

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

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

which vest over 3-4 years.

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

During February 2021, the Company received

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

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The Company’s gross deferred tax assets

of $ 6.8 million and $ 3.5 million at December 31, 2021 and 2020, respectively, primarily consist of net operating loss carryforwards for

income tax purposes.

A valuation allowance is required to be recorded when it is not more likely than not that some portion or all of

the net deferred tax assets will be realized.

Since the Company cannot be assured of generating taxable income and thereby realizing the

net deferred tax assets, a full valuation allowance has been recorded.

The change in the valuation allowance was $ 3,245,000 during

the year ended December 31, 2021.

The Company recognizes uncertain tax positions

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

examination by tax authorities.

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

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

As of December 31, 2021, and 2020,

the Company has no significant uncertain tax positions.

There are no unrecognized tax benefits included on the balance sheet that would,

if recognized, impact the effective tax rate.

The Company does not anticipate there will be a significant change in unrecognized tax benefits

within the next 12 months.

NOTE 10 – COLLABORATIVE AGREEMENTS

During the year ended December 31, 2020, the Company

was awarded a $500,000 grant from the Amyotrophic Lateral Sclerosis (“ALS”) Association to fund a study of the efficacy of

XPro to reverse ALS in vitro and to fund a study of the efficacy of XPro to protect against ALS model phenotypes in vivo.

During the years

ended December 31, 2021 and 2020, the Company received $ 200,000 , and $ 300,000 , respectively of cash proceeds pursuant to this grant which

the Company recorded as deferred liabilities.

The Company records costs incurred related to the ALS study as a reduction of the deferred

As of December 31, 2021, the Company has $ 257,000 recorded as deferred liabilities 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”).

The grant will support a Phase 2 study of XPro

in patients with treatment resistant depression.

As of December 31, 2021, the Company has not received any proceeds pursuant to this grant.

11 – COMMITMENTS AND CONTINGENCIES

the Company signed a sublease agreement with a related party for office space in La Jolla, California.

The lease has a 61-month term,

which corresponds to the lease term of the lessor.

The lessor is CTI.

During September

2021, the Company signed a lease agreement with a third party for office space in Boca Raton, Florida.

The lease agreement has a 64-month

term and commenced during the fourth quarter of 2021.

Future minimum payments pursuant

to the leases are as follows:

(in thousands,

except years)

Total lease payments

imputed interest

Present value of future lease payments

operating lease, current liabilities

Long-term operating lease liabilities

During the years ended December 31, 2021 and 2020,

the Company recognized $ 102,000 and $ 52,000 , respectively, in operating lease expense, which is included in general and administrative

expenses in the Company’s consolidated statement of operations.

is subject to claims and suits that arise from time to time in the ordinary course of our business.

Although management currently believes

that resolving claims against the Company, individually or in aggregate, will not have a material adverse impact in the Company’s

consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may

change in the future.

Changes in and Disagreements with Accountants

on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data