What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-03 · 238 added, 353 removed, 392 unchanged (60% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

CURRENT ASSETS

12 unchanged sentences

Deferred liabilities

Operating lease, current liability – related party

Operating lease, current liabilities

TOTAL CURRENT LIABILITIES

Long-term debt, less debt discount

Long-term operating lease liability – related party

Accrued liabilities – long-term

Long-term operating lease liabilities

Accrued liability – long-term

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES (Note 10)

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY

2 unchanged sentences

Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated other comprehensive income

Accumulated deficit

7 unchanged sentences

(In thousands, except share and per share amounts)

For the Three

September 30,

Three months ended

OPERATING EXPENSES

3 unchanged sentences

LOSS FROM OPERATIONS

OTHER (EXPENSE) INCOME

OTHER EXPENSE

Other expense, net

Total other expense, net

Net loss per common share – basic and diluted

Weighted average common shares outstanding - basic and diluted

Weighted average number of common shares outstanding – basic and diluted

COMPREHENSIVE LOSS

Other comprehensive loss - foreign currency translation

Other comprehensive income – foreign currency translation

Total comprehensive loss

4 unchanged sentences

IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

FOR THE THREE MONTHS ENDED MARCH 31, 2022

(In thousands, except share amounts)

1 unchanged sentence

Stockholders’

Income (Loss)

Balance as of December 31, 2021

4 unchanged sentences

Balance as of March 31, 2022

Stock-based compensation

Settlement of Xencor warrant for cash and common stock

Warrants issued to lenders as debt inducement

Loss on foreign currency translation

Balance as of June 30, 2021

Issuance of common stock for cash

Cashless exercise of warrants

Exercise of stock options

Stock-based compensation

Loss on foreign currency translation

Balance as of September 30, 2021

The accompanying

2 unchanged sentences

IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020

FOR THE THREE MONTHS ENDED MARCH 31, 2021

(In thousands, except share amounts)

1 unchanged sentence

Stockholders’

Income (Loss)

Balance as of December 31, 2020

Issuance of common stock and warrants for cash, net

Acquisition and retirement of common stock

Capital contribution

Issuance of common stock for cash

Exercise of warrants for cash

Stock-based compensation

Loss on foreign currency translation

Gain on foreign currency translation

Balance as of March 31, 2021

Issuance of common stock for cash, net

Stock-based compensation

Loss on foreign currency translation

Balance at June 30, 2020

Issuance of common stock for cash, net

Cashless exercise of warrants

Stock-based compensation

Loss on foreign currency translation

Balance as of September 30, 2020

The accompanying notes are an integral part of

3 unchanged sentences

(In thousands)

September 30,

For the Three Months

Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

10 unchanged sentences

Deferred liabilities

Accrued liabilities – long term

Operating lease liability – related party

Accrued liability – long-term

Operating lease liabilities

Net cash used in operating activities

CASH FLOWS 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 exercise of stock options

Net proceeds from the exercise of warrants

Purchase of common stock

Net cash provided by financing activities

Impact on cash from foreign currency translation

NET INCREASE IN CASH

NET (DECREASE) INCREASE IN CASH

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

3 unchanged sentences

Cash paid for interest expense

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

The accompanying notes are an integral part of

3 unchanged sentences

FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND

DESCRIPTION OF BUSINESS

NOTE 1 – ORGANIZATION AND DESCRIPTION

INmune Bio, Inc.

4 unchanged sentences

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 Alzheimer’s and treatment resistant depression (XPro595) 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.

The DN-TNF product platform (XPro1595,

XPro™, pegipanermin ) 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.

NOTE 2 – LIQUIDITY

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

deficit of approximately $ 54.0 million and experienced losses since its inception.

Losses have principally occurred as a result of non-cash

stock-based compensation expense and the substantial resources required for research and development of the Company’s products,

which included the general and administrative expenses associated with its organization and product development as well as the lack of

sources of revenues until such time as the Company’s products are commercialized.

As of March 31, 2022, the Company had an accumulated

deficit of $ 70,618,000 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.

To meet its current and future obligations the

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

● During March 2022, the Company sold 82,900 shares of common stock to

certain officers and directors of the Company at a price per share of $ 8.43 (which was the closing

price of the Company’s common stock on March 22, 2022) for gross proceeds of $ 0.7 million

● 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 term loan.

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

● 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 program to sell up to $ 10.0 million of the Company’s common stock (the “2020 ATM”).

In August 2020, the sales agreement was amended whereby the aggregate offering was increased from $ 10.0 million to $ 30.0 million.

From April 2020 through December 2020, the Company sold 178,600 shares of common stock at an average price of $ 5.45 per share for net proceeds of approximately $ 0.8 million.

During the nine months ended September 30, 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 September 30, 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 September 30, 2021, and based upon the Company’s current operating plan, the Company believes that

it will have sufficient cash to meet its projected operating requirements for at least the next 12 months following the filing date of

this Quarterly Report on Form 10-Q based on the balance of cash available as of September 30, 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.

liquidity requirements, as of March 31, 2022, and based upon the Company’s current operating plan, the Company believes that it

will have sufficient cash to meet its projected operating requirements for at least the next 12 months following the filing date of this

Quarterly Report on Form 10-Q based on the balance of cash available as of March 31, 2022.

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

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

The Company’s significant estimates and assumptions include the valuation of stock-based compensation instruments, and the net realizable

value of research and development tax credit receivables.

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

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

Cash and Cash Equivalents

27 unchanged sentences

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

is initiated for acquired in-process research and development intangible assets when their useful lives have been determined.

These acquired

in-process research and development intangible assets are tested at least annually or when a triggering event occurs that could indicate

a potential impairment.

the 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.

Basic and Diluted Loss per Share

7 unchanged sentences

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

At September 30, 2021 and 2020, the Company had

potentially issuable shares as follows:

September 30,

At March 31, 2022 and 2021, the Company had potentially

issuable shares as follows:

Stock options

53 unchanged sentences

Recently Adopted Accounting Pronouncements

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.

In June 2016, the FASB issued ASU No.

2016-13, Financial

Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, as clarified in subsequent amendments.

ASU 2016-13 changes the impairment model for certain financial instruments.

The new model is a forward-looking expected loss model and

will apply to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet credit exposures.

This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees and net investments in leases, as well as

trade receivables.

For available-for-sale debt securities with unrealized losses, credit losses will be measured in a manner similar to

today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities.

2019, the FASB voted to delay the effective date of this standard.

Topic 326 will be effective for the Company on January 1, 2023.

adoption is permitted.

The Company is currently assessing the effect that this ASU will have on its condensed financial position,

results of operations, and disclosures.

Subsequent Events

evaluates events that have occurred after the balance sheet date of September 30, 2021, through the date which the financial statements

evaluates events that have occurred after the balance sheet date of March 31, 2022, through the date which the financial statements are

NOTE 4 – RESEARCH AND DEVELOPMENT

4 unchanged sentences

$ 3,319,000 , respectively.

During the nine months ended September 30, 2021 and 2020, the Company received $ 0 of R&D tax credit reimbursements

The UK subsidiary expects to receive R&D tax credit reimbursements during the fourth quarter of 2021.

During the three months ended March 31, 2022 and 2021, the Company received $ 0 of R&D tax credit reimbursements

According to AUS tax law, the Company is allowed

1 unchanged sentence

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

At September 30, 2021 and December 31, 2020, the Company recorded a research and development tax credit receivable of $ 2,016,000 and $ 853,000 ,

At March 31, 2022 and December 31, 2021, the Company recorded a research and development tax credit receivable of $ 1,924,000 and $ 1,594,000 ,

respectively, for R&D expenses incurred in Australia.

During the nine months ended September 30, 2021 and 2020, the Company received

$ 0 and $ 0.2 million, respectively, of R&D tax credit reimbursements from Australia.

The Australian subsidiary received an R&D

tax reimbursement of approximately $ 1.3 million during October 2021.

During the three months ended March 31, 2022 and 2021, the Company received

$ 0 R&D tax credit reimbursements from Australia.

License Agreement

On October 3, 2017, the Company entered into a

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

(“Xencor”), which has discovered and developed

a proprietary biological molecule that inhibits soluble tumor necrosis factor.

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 “XPro1595”

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

bind soluble tumor necrosis factor) alone or in combination with one or more active ingredients, in any dosage or formulation (“Licensed

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

which 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 Xencor 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 Products”).

The Company believes the protein has numerous medical applications.

Such additional alternative applications of the

technology are available under the Xencor License Agreement.

In connection with the Xencor License Agreement, the Company paid Xencor

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

a fair value of $ 12,221,000 .

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

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

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.

additional alternative applications of the technology are available under the Xencor License Agreement.

As part of the purchase price

for entering into the Xencor License Agreement, the Company issued Xencor 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.

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.

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.

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.

In addition, the Company agreed to pay Xencor a percentage of any sublicensing revenue that it receives.

INKmune License Agreement

11 unchanged sentences

Each NDA/EMA awarded

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 Immune

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

RJ Tesi, the Company’s President and

a member of our Board of Directors, David Moss, its Chief Financial Officer and Treasurer and Mark Lowdell, its Chief Scientific Officer,

are the owners of Immune Ventures.

As of September 30, 2021, no sales had occurred under this license.

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.

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.

No sales have 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.

2015 and ends on a country-by-country basis on the date of the expiration of the last to expire patent rights where patent rights exists,

unless terminated earlier in accordance with the agreement.

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

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The Company had no amounts owed pursuant to the

PITT Agreement as of September 30, 2021.

PITT Agreement as of March 31, 2022.

The PITT Agreement expires upon the earlier of:

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

University College London License Agreement

On July 19, 2019, the Company entered into license

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

Pursuant to the license agreement, the Company acquired

an exclusive license (and a right to sub-license) to the technology and know-how relating to an isolation and commercial scale expansion

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

During July 2021, the Company terminated

its license agreement with UCLB.

NOTE 5 – LEASE

In May 2019, 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

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.

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

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

certain to occur.

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

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

for office space in Boca Raton, Florida.

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 as of September 30, 2021:

assets and liabilities:

(in thousands, except years and rate)

Right-of-use asset – related party

Operating lease, current liability – related party

Long-term operating lease liability – related party

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

2 unchanged sentences

NOTE 6 – RELATED PARTY TRANSACTIONS

At September 30, 2021 and December 31, 2020, the

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

on behalf of the Company.

At September 30, 2021 and December 31, 2020, the Company recorded prepaid expenses of $ 14,000 and $ 0 , respectively,

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

During the nine months ended September 30, 2021 and 2020, the Company

31, 2022 and December 31, 2021, the Company owed UCL Consultants Limited (“UCL”) $ 9,000 and $ 10,000 , respectively, in

connection with medical research performed on behalf of the Company.

During the three months ended March 31, 2022 and 2021, the Company

paid UCL $ 32,000 and $ 88,000 , respectively, for medical research performed on behalf of the Company.

UCL is a wholly owned subsidiary

of the University of London.

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

During the nine months ended September 30, 2021

and 2020, the Company paid CTI $ 0 and $ 127,000 , respectively, for medical research performed on behalf of the Company.

During the nine

months ended September 30, 2020, the Company recorded a capital contribution of $ 216,000 for the forgiveness of certain accounts payable

The Company had no amounts payable to CTI as of September 30, 2021 and December 31, 2020.

At March 31, 2022 and December

31, 2021, the Company recorded $ 14,000 of prepaid expenses – related party for payments made to UCL in advance of services to be

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.

31, 2022 and December 31, 2021, the Company owed AmplifyBio $ 0 and $ 70,000 , respectively in connection with medical research performed

on behalf of the Company.

The CEO of AmplifyBio is on the Board of Directors of the Company.

During the three months ended March 31, 2022

and 2021, the Company paid AmplifyBio $ 80,000 and $ 0 , respectively, for pre-clinical research performed on behalf of the Company.

NOTE 7 – DEBT

On June 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

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.

The Company 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 September 30, 2021:

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.

The term loan and debt discount are as follows as of March 31, 2022:

(in thousands)

2 unchanged sentences

Long-term debt

three and nine months ended September 30, 2021 the Company recognized interest expense of $ 0.4 million and $ 0.5 million, respectively,

related to the Term Loan.

The term 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, 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 September 30, 2021, the

interest rate was 7.75 %.

The Term 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 September 30, 2021:

(in thousands, except years)

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

three months ended March 31, 2022, the Company recognized interest expense of $ 435,000 related to the Term Loan.

is required to make interest only payments monthly until July 1, 2023 at which time the Company shall make interest and principal payments

monthly through the maturity date of January 1, 2025.

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 March 31, 2022, the interest rate was 8.0 %.

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 March 31, 2022:

(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

1 unchanged sentence

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 March 31, 2022.

NOTE 8 – STOCKHOLDERS’ EQUITY

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 nine months ended September 30, 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 approximately $ 1.0 million of cash.

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 $ 1.9 million in underwriting discounts and commissions and

offering expenses.

Common Stock – Issuance to Directors

During the three months ended March 31, 2022,

directors and officers of the Company purchased 82,900 shares of the Company’s common stock at

a per share of $ 8.43 (which was the closing price of the Company’s common stock on March 22, 2022) for gross proceeds

of $ 699,000 .

Common Stock – At the Market Offering

During the nine months ended September 30, 2020,

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

The aggregate net

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

During the nine months ended September 30, 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 program.

The aggregate

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

During the nine months ended September 30, 2021,

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

The aggregate

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

Registered Direct Offering

During July 2021, the Company completed a registered

direct offering whereby the Company sold 1,818,182 shares of its common stock to investors for net proceeds of $ 36.9 million.

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.

Issuance of shares to Xencor

On June 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).

During the three months ended March 31, 2021,

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

$28.4 million) under the 2020 ATM program.

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

Stock options

During January 2021, the Company granted certain

employees and directors options to purchase 198,549 shares of its common stock pursuant to the 2017 and 2019 Incentive Stock Plans.

stock options have a fair value of approximately $ 4.2 million that was calculated using the Black-Scholes option-pricing model.

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

(1) discount rate of 0.78 % based on the applicable US Treasury bill rate (2) expected

life of 6.0 - 6.25 years, (3) expected volatility of approximately 113 % - 114 % based on the trading history of similar companies, and

(4) zero expected dividends.

During June 2021, the Company granted certain

employees and directors options to purchase 236,451 shares of its common stock pursuant to the 2021 Incentive Stock Plan.

The stock options

have a fair value of approximately $ 3.3 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 1.23 % based on the applicable US Treasury bill rate (2) expected life

of 6.0 - 6.25 years, (3) expected volatility of approximately 107 % - 108 % based on the trading history of similar companies, and (4) zero

expected dividends.

During July, August and September 2021,

the Company granted certain employees and consultants options to purchase in aggregate 373,000 shares of its common stock pursuant to

the 2021 Incentive Stock Plan.

The stock options have a fair value of approximately $ 6.3 million that was calculated using the Black-Scholes

option-pricing model.

During the three months ended March 31, 2022,

the Company granted certain employees and directors options to purchase 789,000 shares of its common stock pursuant to the 2021 Incentive

The stock options have a fair value of approximately $ 5.3 million that was calculated using the Black-Scholes option-pricing

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

(1) discount rate of 0.96 % - 1.31 % based on the

applicable US Treasury bill rate (2) expected life of 6.0 – 10.0 years, (3) expected volatility of approximately 105 % - 109 % based

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

(1) discount rate of 1.60 % - 2.36 % based on the applicable US

Treasury bill rate (2) expected life of 6.0 – 10.0 years, (3) expected volatility of approximately 105 % - 108 % based on the trading

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

The following

table summarizes stock option activity during the nine months ended September 30, 2021:

table summarizes stock option activity during the three months ended March 31, 2022:

(in thousands, except share and per share amounts)

Weighted- average

Weighted-average

Outstanding at January 1, 2022

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Options cancelled

Outstanding at September 30, 2021

Exercisable at September 30, 2021

During the nine months ended September 30, 2021

and 2020, the Company recognized stock-based compensation expense of approximately $ 3.3 million and $ 2.1 million, respectively, related

to the vesting of stock options.

As of September 30, 2021, there was approximately $ 14.6 million of total unrecognized compensation cost

related to non-vested stock options which is expected to be recognized over a weighted-average period of 2.73 years.

The Company 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.

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 September 30, 2021, the intrinsic value of these warrants is $ 244,000 .

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.

During the nine months ended September

30, 2021, 6,147 of these warrants were exercised on a cashless basis in exchange for 3,758 shares of common stock.

At September 30, 2021,

28,688 of these warrants are outstanding and the intrinsic value is $ 282,000 .

On June 30, 2017, the Company issued fully vested

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

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

During the nine months ended September 30, 2021, 11,875 of

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

At September 30, 2021, 19,792 of these warrants are outstanding, with an intrinsic

value of $ 355,000 .

Outstanding at March 31, 2022

Exercisable at March 31, 2022

During the three months ended March 31, 2022 and

2021, the Company recognized stock-based compensation expense of approximately $ 1.5 million and $ 0.9 million, respectively, related to

the vesting of stock options.

As of March 31, 2022, there was approximately $ 17.1 million of total unrecognized compensation cost related

to non-vested stock options which is expected to be recognized over a weighted-average period of 2.64 years.

issued 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 .

At March 31, 2022, 45,386 of these warrants are outstanding and the intrinsic value of these warrants is $ 0 .

issued warrants to its placement agents in connection with its February 2019 initial public offering.

The warrants are exercisable until

December 19, 2023 and have an exercise price of $ 9.60 .

At March 31, 2021, 28,688 of these warrants are outstanding and the intrinsic

value is $ 0 .

the Company issued warrants to purchase shares of the Company’s common stock to a third party in conjunction with common stock

sold for cash.

The warrants had a $ 1.50 exercise price.

During the three months ended March 31, 2022, the 19,792 of these

warrants were exercised for cash proceeds of approximately $ 30,000 .

At March 31, 2022, none of these warrants are outstanding.

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 three and nine months ended September 30, 2021 and 2020

respectively:

compensation expense in the consolidated statements of operations for the three months ended March 31, 2022 and 2021 respectively:

(in thousands)

September 30,

Research and development

11 unchanged sentences

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.

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

NOTE 9 – COLLABORATIVE AGREEMENTS

2 unchanged sentences

in vitro and to fund a study of the efficacy of XPro1595 to protect against ALS model phenotypes in vivo.

During the nine months ended

September 30, 2021 and 2020, the Company received $ 0.1 million and $ 0.3 million, respectively, of cash proceeds pursuant to this grant

which the Company recorded as deferred liabilities.

During the three months ended

March 31, 2022 and 2021, the Company received $ 0.0 million and $ 0.1 million, respectively, of cash proceeds pursuant to this grant which

the Company recorded as deferred liabilities.

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

of September 30, 2021 and December 31, 2020, the Company recorded approximately $ 0.2 million and $ 0.1 million, respectively, as deferred

liabilities in the consolidated balance sheet related to the ALS grant.

31, 2022 and December 31, 2021, the Company recorded approximately $ 0.2 million and $ 0.3 million, respectively, as deferred liabilities

in the consolidated balance sheet related to the ALS grant.

During September 2020, the Company was awarded

2 unchanged sentences

in patients with treatment resistant depression.

As of September 30, 2021, the Company has not received any proceeds pursuant to this

NOTE 10 – COMMITMENTS AND CONTINGENCIES

In May 2019, 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.

As of March 31, 2022, the Company has not received any proceeds pursuant to this grant.

NOTE 10 – COMMITMENTS

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.

1 unchanged sentence

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 will commence during the fourth quarter of 2021.

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)

During the three and nine months ended September

(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 three months ended March 31, 2022 and

2021, the Company recognized $ 54,000 and $ 13,000 , respectively, in operating lease expense, which is included in general and administrative

expenses in the Company’s consolidated statement of operations.

The Company 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.

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.

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

What changed 10-Q

Item 1. Financial Statements