What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-05 compared with 2021-11-03 · 214 added, 305 removed, 231 unchanged (69% of the section changed)

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Description of Business

We are a clinical-stage immunotherapy

company focused on developing drugs that may reprogram the patient’s innate immune system to treat disease.

We believe this may

be done by targeting cells of the innate immune system that cause acute and chronic inflammation and are involved in the immune dysfunction

associated with chronic diseases such as cancer and neurodegenerative diseases.

The Company has two therapeutic platforms – dominant-negative

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

The DN-TNF platform neutralizes soluble TNF (“sTNF”)

without affecting trans-membrane TNF (“tmTNF”) or TNF receptors -TNFR1 and TNFR2.

This unique biologic mechanism differentiates

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

Protecting the function of tmTNF

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

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

Currently approved non-selective TNF inhibitors are approved to treat

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

of infection, cancer and demyelinating neurologic diseases, respectively;

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

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

NK cells are part

of the normal immunologic response to cancer with important roles in immunosurveillance to prevent cancer and in preventing relapse by

eliminating residual disease.

We are a clinical-stage

immunotherapy company focused on developing drugs that may reprogram the patient’s innate immune system to treat disease.

this may be done by targeting cells of the innate immune system that cause acute and chronic inflammation and are involved in the immune

dysfunction associated with chronic diseases such as cancer and neurodegenerative diseases.

The Company has two therapeutic platforms

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

The DN-TNF platform

neutralizes soluble TNF (“sTNF”) without affecting trans-membrane TNF (“tmTNF”) or TNF receptors -TNFR1 and TNFR2.

This unique biologic mechanism differentiates the DN-TNF drugs from currently approved non-selective TNF inhibitors that inhibit both

sTNF and tmTNF.

Protecting the function of tmTNF while neutralizing the function of sTNF is a potent anti-inflammatory strategy that does

not cause immunosuppression or demyelination which occur in the currently approved non-selective TNF inhibitors.

Currently approved non-selective

TNF inhibitors are approved to treat autoimmune disease, but are contraindicated in patients with infection, cancer and neurologic diseases

because they increase the risk of infection, cancer and demyelinating neurologic diseases, respectively;

all the safety problems are due

to off-target effects on inhibiting tmTNF.

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

patients with cancer.

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

cancer and in preventing relapse by eliminating residual disease.

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

Residual disease, can grow to cause

Residual disease, can grow to cause relapse.

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

The strength of the bond of binding to cancer

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

INKmune improves avidity of the patients NK cells to overcome the

immune evasion of the patient’s cancer cells.

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

completed other cancer therapies.

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

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

INKmune is being developed to treat

NK sensitive hematologic malignancies and solid tumors.

We believe our DN-TNF platform

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

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

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

of the bond of binding to cancer cells, called avidity, is a necessary step NK killing of cancer cells.

INKmune improves avidity of the

patients NK cells to overcome the immune evasion of the patient’s cancer cells.

We believe INKmune is best used to eliminate residual

disease after the patient has completed other cancer therapies.

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

multiple diseases.

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

is being developed to treat NK sensitive hematologic malignancies and solid tumors.

We believe our DN-TNF

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

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

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

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

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

As an immunotherapy for cancer, we are using

INB03 to neutralize sTNF produced by HER2+ trastuzumab resistant breast cancers to reverse resistance to therapy.

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

As an immunotherapy for cancer, we are using INB03

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

sTNF causes an up-regulation

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A Phase II trial

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

Likewise, we believe the DN-TNF

platform can be used to treat selected neurodegenerative diseases.

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

of neurodegeneration and synaptic dysfunction.

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

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

We believe XPro1595 targets activated microglia

and astrocytes of the brain that produce sTNF that promotes nerve cell loss and synaptic dysfunction, key elements in the development

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

The Phase I trial in

patients with biomarkers of inflammation with AD has been completed.

The open label, dose escalation trial is designed to demonstrate

that XPro1595 can safely decrease neuroinflammation in patients with AD.

The endpoints of the trial are measures of neuroinflammation

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

white matter free water.

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

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

We also studied downstream benefits of decreasing

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

XPro1595 significantly

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

is planned in women with advanced MUC4+ breast cancer with advanced disease.

Likewise, we believe

the DN-TNF platform can be used to treat selected neurodegenerative diseases by modifying the brain microenvironment (BME).

believes the core pathology of cognitive decline is a combination of neurodegeneration and synaptic dysfunction.

XPro completed a Phase

I trial treating patients with Alzheimer’s disease that was partially funded by a Part-the-Clouds Award from the Alzheimer’s

We believe XPro targets activated microglia and astrocytes of the brain that produce sTNF that promotes nerve cell loss and

synaptic dysfunction, key elements in the development of dementia.

In animal models, elimination of sTNF prevents nerve cell dysfunction

and reverses synaptic pruning.

The Phase I trial in patients with biomarkers of inflammation with AD has been completed.

The open label,

dose escalation trial is designed to demonstrate that XPro can safely decrease neuroinflammation in patients with AD.

The endpoints of

the trial are measures of neuroinflammation and neurodegeneration in blood and cerebral spinal fluid, measures of neuroinflammation by

measuring cytokines in the CSF and MRI by measuring white matter free water.

XPro, at the 1mg/kg/week dose decreased inflammatory cytokines

in the CSF and white matter free water in the brain demonstrating that XPro can decrease neuroinflammation in patients with AD.

studied downstream benefits of decreasing neuroinflammation by measuring changes in the CSF proteome and quantifying changes in novel

white matter MRI biomarkers.

XPro significantly decreases biomarkers of neurodegeneration as measured by changes in the CSF proteome

including neurofilament light chain, phospho Tau 217 and VILIP-1;

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

Three months of XPro1595 therapy improved measures

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

that contribute to improved synaptic function.

Three months of XPro therapy improved measures of synaptic function, as measured in the CSF proteome including a 222% increase in Contactin

2 and a 56% decrease neurogranin, proteins that contribute to improved synaptic function.

The successful completion

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

The Company plans a blinded randomized

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

of the Phase I trial in AD has informed the design of two Phase II trials in patients with AD;

one in mild AD and the other in mild cognitive

impairment (MCI).

The mild AD trial will be a blinded randomized trial to test if treatment of mild AD patients with neuroinflammation

will affect cognitive decline.

The Phase II trial has six important elements.

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

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

for six months.

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

have neuroinflammation.

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

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

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

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

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

We expect top-line clinical

data to be available mid-2023.

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

and biomarker data will be collected during the extension trial.

Two hundred patients will be enrolled in a 2:1 ratio (XPro

The patients will receive 1mg/kg/week as a subcutaneous injection for six months.

An enrichment strategy identical to the

successful strategy used in the Phase I trial will be used to ensure patients have neuroinflammation.

Patients will need to have some

combination of elevated C-reactive protein, hemoglobin A1c, erythrocyte sedimentation rated in the blood and at least one allele of ApoE4.

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

is more sensitive than traditional end-points used in many studies of patients with early AD.

The trial will be performed in North America

and Australia and enrolled its first patient in April 2022.

We expect top-line clinical data to be available late-2023.

All patients will

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

Clinical and biomarker data will be collected during the extension

The second Phase II trial

will be a blinded randomized trial in patients with MCI in which the Company plans to enroll 60 patients in two arms in a 2:1 ratio (1mg/kg/week

XPro, placebo).

Patients will be treated for 3 months.

Patients must have at least one ApoE4 allele to qualify for the trial.

end-point is EMACC, a sensitive cognitive end-point validated for use in patients with early AD.

Secondary clinical endpoints include

the CDR-SB, Cogstate Battery, E-Cog, NPI, and ADCS-ADL.

Imaging endpoints of neuroinflammation (White matter free water), white matter

integrity (apparent fiber density, radial diffusivity), and gray matter quality (cortical disarray measurement) will be assessed via MRI.

Changes in brain metabolism will be assessed via FDG-PET.

Additional secondary measures of function include EEG, and speech and language.

All patients will be eligible to continue on XPro for at least 9 additional months.

Clinical and MRI metrics will be followed during the

extension trial.

The Company may amend the clinical trial design from time-to-time to improve the quality of the data or the probability

Effective therapy for TRD

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of Mental Health (“NIMH”) to treat TRD with XPro.

The blinded, randomized Phase II trial will use a biomarkers of peripheral

The blinded, randomized Phase II trial will use biomarkers of peripheral

inflammation to select patients with TRD for enrollment.

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and neuroimaging measures.

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

The Company anticipates

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

We believe that INKmune improves

the ability of the patient’s own NK cells to attack their tumor.

INKmune interacts with the patient’s NK cells to convert

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

INKmune is a replication incompetent

proprietary cell line that is given to the patient after determining that i) the patient has adequate NK cells in their circulation and

ii) those NK cells are functional when exposed to INKmune in vitro.

INKmune is designed to be given to patients after their immune system

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

INKmune can be used to treat numerous hematologic malignancies and solid tumors including leukemia, multiple myeloma, lymphoma, lung,

ovary, breast, renal and prostate cancer.

The Company has initiated a Phase I trial using INKmune to treat patients with high risk MDS,

a form of leukemia.

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

The Company anticipates receiving

authorization to initiate the clinical trial in the second half of 2022.

We believe that INKmune

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

INKmune interacts with the patient’s NK cells to

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

INKmune is a replication

incompetent proprietary cell line that is given to the patient after determining that i) the patient has adequate NK cells in their circulation

and ii) those NK cells are functional when exposed to INKmune in vitro.

INKmune is designed to be given to patients after their immune

system has recovered after cytotoxic chemotherapy to target the residual disease the remains after treatment with cytotoxic therapy.

believe INKmune can be used to treat numerous hematologic malignancies and solid tumors including leukemia, multiple myeloma, lymphoma,

lung, ovary, breast, renal and prostate cancer.

The Company has initiated a Phase I trial using INKmune to treat patients with high risk

MDS, a form of leukemia.

One patient has been treated in the Phase I trial.

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

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

The Company will continue to enroll patients

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

The Company intends to treat women with relapsed refractory

ovarian in separate Phase I trial beginning during 2022.

Since our inception in 2015, we have devoted substantially all of our

resources to the discovery and development of our product candidates, including clinical trials and preclinical studies as well as general

and administrative support for these operations.

To date, we have generated no significant revenue.

We have incurred net losses in each

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

Our net losses were

$20,669,000 and $8,900,000 for the nine months ended September 30, 2021 and 2020, respectively.

Substantially all of our net losses resulted

from costs incurred in connection with our research and development programs and from general and administrative costs associated with

our operations, including stock-based compensation.

The Company has supported

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

This blinded randomized Phase II

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

The FDA is no longer offering emergency use

authorization approvals for this type of therapy.

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

to the Phase II trial.

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

Mortality rates have decreased

Immunosuppressive corticosteroid treatments are routine.

High risk patients have receive vaccinations and oral therapies have

been developed to prevent the need for hospitalization.

The Company has decided clinical development for prevention of respiratory failure

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

NK cells that kill cancer in vitro, promotes development of cancer killing memory-like NK cells that can be found in the patient’s

circulation of 4 months.

The Company will continue to enroll patients in the Phase I trial with a goal of completing patient enrollment

The Company intends to treat women with relapsed refractory ovarian in separate Phase I trial beginning during 2022.

The Company has presented

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

The Company has decided to defer the NASH program

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

The Company may choose to reactivate the program

or abandon the program in the future.

The Company is subject to

risks and uncertainties as a result of the COVID-19 pandemic.

The extent of the impact of the COVID-19 pandemic on the Company’s

business is highly uncertain and difficult to predict.

Also, economies worldwide have also been negatively impacted by the COVID-19 pandemic,

however policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole.

The Company has decided to defer the

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

The Company may choose to reactivate

the program or abandon the program in the future.

Since our inception in 2015, we have devoted

substantially all of our resources to the discovery and development of our product candidates, including clinical trials and preclinical

studies as well as general and administrative support for these operations.

To date, we have generated no significant revenue.

incurred net losses in each year since our inception and, as of March 31, 2022, we had an accumulated deficit of approximately $70.6

Our net losses were $6,903,000 and $4,556,000 for the three months ended March 31, 2022 and 2021, respectively.

Substantially

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

costs associated with our operations, including stock-based compensation.

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

The extent of the impact of the COVID-19 pandemic

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

Also, economies worldwide have also been negatively impacted

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

and economy as a whole.

The magnitude and overall effectiveness of these actions remain uncertain.

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

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

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

The Company expects to receive research and development

tax incentives during 2022 for qualifying expenditures incurred prior to December 31, 2021.

However, the United Kingdom recently enacted

changes to the research and development tax incentive whereby the Company does not expect to be eligible to receive the United Kingdom

tax incentives beginning with expenditures incurred during 2022.

Substantially all of our research

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Other income (expense)

Other income (expense) primarily consists of interest

expense on debt, interest income on money market accounts and foreign currency exchange gains and losses.

Other expense consists primarily

of interest expense incurred on debt.

Results of Operations

Comparison of the Three Months Ended September

Comparison of the Three Months Ended March

31, 2022 and 2021

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Three Months Ended

September 30,

(in thousands)

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Loss from operations

Other (expense) income

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

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

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

Other expense, net

During the three months ended

March 31, 2022 and 2021, the Company sold mesenchymal stem/stromal cells

(MSC’s) to one third-party and recognized $163,000 and $4,000, respectively, of revenues.

General and Administrative

General and administrative

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

Research and Development

Research and development expenses

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

months ended September 30, 2020.

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

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

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

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

Other Expense

The Company’s other

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

Comparison of the Nine Months Ended September

30, 2021 and 2020

The following table summarizes

our results of operations for the periods indicated:

Nine Months Ended

September 30,

(in thousands)

Operating expenses:

expenses were approximately $2.3 million during the three months ended March 31, 2022, compared to approximately $2.1 million during

the three months ended March 31, 2021.

The increase in general and administrative expenses is largely due to higher stock-based compensation

($0.3 million higher during the three months ended March 31, 2022).

Research and Development

General and administrative

Total operating expenses

Loss from operations

Other (expense) income

During the nine months ended

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

There were no revenues during

the nine months ended September 30, 2020.

General and Administrative

General and administrative

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

during the nine months ended September 30, 2020.

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

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

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

Research and development

Research and development expenses

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

months ended September 30, 2020.

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

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

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

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

higher compensation expense, including stock-based compensation ($1.0 million increase).

Other Income (Expense)

The Company’s other

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

expenses were approximately $4.3 million during the three months ended March 31, 2022, compared to approximately $2.5 million

during the three months ended March 31, 2021.

The increase in research and development expenses during the three months

ending March 31, 2022 compared to the three months ending March 31, 2021 is largely due to the Company incurring higher expenses on

the Company’s clinical trials in mild AD and MCI ($2.1 million higher) and higher compensation expense, including stock-based

compensation ($0.7 million higher), partially offset by lower COVID-19 clinical trial expense ($0.7 million

lower) and lower manufacturing expense ($0.3 million lower).

Other Expense, net

The increase in other expense

is due to the Company incurring interest expense on debt which the Company obtained during June 2021.

Liquidity and Capital Resources

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

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

ended September 30, 2021 and 2020, respectively.

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

ended September 30, 2021 and 2020, respectively.

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

sales of our common stock.

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

We anticipate that

operating losses and net cash used in operating activities will increase over the next few years as we advance our products under development.

We incurred a net loss of

$6.9 million and $4.6 million for the three months ended March 31, 2022 and 2021, respectively.

Net cash used in operating activities

was $8.9 million and $5.1 million for the three months ended March 31, 2022 and 2021, respectively.

Since inception, we have funded

our operations primarily with proceeds from the sales of our common stock.

As of March 31, 2022, we had cash and cash equivalents of approximately

$66.7 million.

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

we advance our products under development.

Our primary uses of capital

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flexibility in managing our spending.

The Company incurs the majority

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

Fluctuations in the rate of exchange between the United

States dollar and the pound sterling as well as the Australian dollar could adversely affect our financial results, including our

expenses as well as assets and liabilities.

We currently do not hedge foreign currencies but will continue to assess whether that strategy

is appropriate.

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

dollar was approximately $0.4 million.

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

hinder our liquidity.

The Company incurs various

expenses in Australia and the United Kingdom.

Fluctuations in the rate of exchange between the United States dollar and the pound sterling

as well as the Australian dollar could adversely affect our financial results, including our expenses as well as assets and liabilities.

We currently do not hedge foreign currencies but will continue to assess whether that strategy is appropriate.

As of March 31, 2022, the

cash balance held by our foreign subsidiaries with currencies other than the United States dollar was approximately $0.2 million.

not have any material financial exposure to one customer or one country that would significantly hinder our liquidity.

As a publicly traded company,

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make some activities more time-consuming and costly.

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

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

Losses have principally occurred as a result of stock-based compensation expense as well

as the substantial resources required for research and development of the Company’s products which included the general and administrative

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

products are commercialized.

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

We believe our

cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months following the filing date of this

Quarterly Report on Form 10-Q based on the balance of cash available as of September 30, 2021.

Registered Direct Offering

During July 2021, the Company

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

$36.9 million.

ATM Sales Agreements

During the nine months ended

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

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

During the nine months ended

September 30, 2021, we issued and sold 1,439,480 shares of common stock at an average price of $20.17 per share under the 2020 ATM program.

As of March 31, 2022, the

Company had an accumulated deficit of $70.6 million and working capital of $73.8 million.

Losses have principally occurred as a result

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

products which included the general and administrative expenses associated with its organization and product development, as well as the

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

As of March 31, 2022, we had cash and

cash equivalents of approximately $66.7 million.

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

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

of March 31, 2022.

Common Stock – Issuance to Directors

During the three months ended

March 31, 2022, certain directors and officers of the Company purchased 82,900 shares of the Company’s common stock for $0.7 million.

ATM Sales Agreement

During the three months ended

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

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

As of September

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

During March 2021, the Company

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

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

of approximately $14.9 million under the 2021 ATM program.

On June 10, 2021, we entered

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

The Term Loan also provides

for us to request an additional $5.0 million term loan from the Lenders, which may be granted or denied at the sole discretion of the

The Term Loan provides for an annual interest rate equal to the greater of (i) the prime rate then in effect as reported in The

Wall Street Journal plus 4.50% and (ii) 7.75% and also includes a final payment fee equal to 6.5% of the original principal

amount borrowed payable on the earlier of the repayment of the loan in full and the maturity date.

The Company used the proceeds of the

term loan to fund the cash consideration for the Option Cancellation Agreement with Xencor.

The Lincoln Park Transaction

On May 15, 2019, the Company

and Lincoln Park entered into a purchase agreement (the “Purchase Agreement”) pursuant to which the Company had the right

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

set forth in the Purchase Agreement.

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

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

During April 2021, the Company terminated the Purchase Agreement.

The following table summarizes

our cash flows for the periods indicated:

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

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Operating activities

Investing activities

Financing activities

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activities was primarily driven by our net loss.

Operating activities used approximately $18.7 million of cash during

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

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

The change in our net operating assets and liabilities

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

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

in deferred liabilities of approximately $0.4 million.

Operating activities used

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

$8.9 million, a net cash outflow of approximately $0.1 million for changes in our net operating assets and liabilities, and non-cash stock-based

compensation charges of approximately $2.4 million.

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

increase in research and development tax incentive receivable of approximately $0.9 million, partially offset by an increase in accounts

payable and accrued liabilities of approximately $0.8 million.

Investing Activities

Investing activities used

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

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

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

Financing Activities

During the nine months ended

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

$28.4 million.

During the nine months ended

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

During July 2021, the Company

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

approximately $8.9 million of cash during the three months ended March 31, 2022, resulting from our loss of $6.9 million and changes in

our net operating assets and liabilities of $3.6 million, partially offset by non-cash stock-based compensation of $1.5 million.

in our net operating assets and liabilities was mainly due to an increase in prepaid expenses of approximately $2.4 million, and a decrease

in accounts payable and accrued liabilities of $1.2 million.

Operating activities used

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

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

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

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

$0.4 million.

During June 2021, we entered

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

During the nine months ended

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

During July 2020, the Company

completed an underwritten public offering in which it sold 2,500,000 shares of common stock at a public offering price of $10.00 per share.

Aggregate net proceeds from the underwritten public offering were approximately $23.1 million, net of approximately $1.9 million in underwriting

discounts and commissions and offering expenses.

During the nine months ended

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

In addition, the Company sold

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

During the nine months ended

September 30, 2020, the Company issued and sold 178,600 shares of common stock at an average price of $5.45 per share under the ATM program

for net cash proceeds of approximately $0.9 million.

Financing Activities

During the three months ended

March 31, 2022, the Company sold 82,900 shares of its common stock to certain officers and directors for approximately $0.7 million.

During the three months ended

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

Critical Accounting Policies

7 unchanged sentences

Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year

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

ended December 31, 2021 and there have been no material changes during the three months ended March 31, 2022.

Quantitative and Qualitative Disclosures

4 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis