What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-03 compared with 2022-05-05 · 258 added, 203 removed, 242 unchanged (66% 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.

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.

We are a clinical-stage immunology 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’s drugs are in clinical trials and have not been approved by a regulatory

The Company has two therapeutic platforms – dominant-negative TNF platform (“DN-TNF”, “XPro™”,

“XPro1595™” or “ pegipanermin” ) and the Natural Killer (“NK”, or “INKmune™”)

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 and TNF receptors 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 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 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

Residual disease can grow to cause relapse.

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

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 mechanism by which INKmune improves the ability of the patient’s NK

cells to kill their cancer is complex.

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

A measure of NK

cell binding to cancer cells is avidity.

The higher the avidity, the greater the bond between the NK cell to cancer cell and thus the

greater NK killing of cancer cells.

INKmune increase NK avidity and further improves mitochondrial function and upregulates nutrient receptors.

These metabolic changes may help the INKmune primed NK cell to function in the hostile tumor microenvironment and persist much longer.

These mechanisms improve the ability of INKmune primed NK cells to overcome the immune evasion of the patient’s cancer cells.

believe INKmune is best used to eliminate residual disease after the patient has completed other cancer therapies.

Both the DN-TNF platform

and the INKmune platform can be used to treat multiple diseases.

The DN-TNF platform will be used as an immunotherapy for the treatment

of cancer and neurodegenerative disease.

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

We believe our DN-TNF platform

can be used as a cancer therapy to reverse resistance in immunotherapy and as a CNS (“central nervous system”) 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.

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

As an immunotherapy for cancer, we are using INB03

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

sTNF causes an up-regulation

of MUC4 expression that causes steric hindrance of trastuzumab binding to the HER2/Neu receptor on HER2+ breast cancer cells.

binding, trastuzumab is not effective.

In addition, INB03 changes the immunobiology of the tumor microenvironment by decreasing the number

of immunosuppressive myeloid cells, both myeloid derived suppressor cells and tumor active macrophages, and increasing the number of cytotoxic

lymphocytes in the TME.

The Company has completed an open label dose escalation trial in cancer patients with metastatic solid tumors

that have failed multiple lines of therapy.

The trial informs the design of the Phase II trial by demonstrating that INB03 was safe and

well tolerated, defined the dose of INB03 to carry into Phase II trials, and demonstrated a pharmacodynamic end-point.

A Phase II trial

is planned in women with advanced 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.

INB03™ or XPro™,

respectively, but it is the same drug product.

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

As an immunotherapy for cancer, we are using INB03 to neutralize sTNF produced by HER2+ trastuzumab resistant breast cancers to reverse

resistance to targeted therapy.

sTNF produced by the tumor causes an up-regulation of MUC4 express causing steric hindrance of trastuzumab

binding to the HER receptor on HER2+ breast cancer cells.

Without binding, trastuzumab is not effective.

Neutralizing sTNF reverses MUC4

expression converting a trastuzumab resistant breast cancer cell into a trastuzumab sensitive breast cancer cell.

In addition, INB03 changes

the immunobiology of the tumor microenvironment by decreasing the number of immunosuppressive myeloid cells, both myeloid derived suppressor

cells and tumor active macrophages, and increasing the number of cytotoxic lymphocytes and phagocytic macrophages in the TME.

has completed an open label dose escalation trial in cancer patients with metastatic solid tumors that have failed multiple lines of therapy.

The trial informs the design of the Phase II trial by demonstrating that INB03 was safe and well tolerated, defined the dose of INB03

to carry into Phase II trials, and demonstrated a pharmacodynamic end-point.

A Phase II trial is planned in patients with advanced MUC4+

expressing cancer.

Likewise, we believe the DN-TNF

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

The Company 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 Association.

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

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;

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.

We also 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 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.

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

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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.

Patients will need to have one or

more enrichment criteria:

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

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

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

Clinical and biomarker data will be collected

during the extension trial.

The second Phase II trial

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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

is a large unmet need.

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

Once third of TRD patients have peripheral

biomarkers to inflammation (elevated CRP).

All patients in both trials will be eligible to continue on XPro for at least 6 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 of success.

Effective therapy for TRD is a large unmet need.

Twenty percent of

patients with a Major Depressive Disorder have TRD.

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

This is a large patient population.

The role of TNF and anti-TNF therapeutics was explored

in a small open label clinical trial by Prof.

Andrew Miller, MD of Emory University demonstrated the patients have elevated TNF levels

and treatment with infliximab treated their depression (Miller, 2011).

The Company received a $2.9M USD award from the National Institute

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

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

inflammation to select patients with TRD for enrollment.

The role of TNF and anti-TNF therapeutics was explored in a small open label clinical trial by Prof.

Andrew Miller, MD of Emory University demonstrated the patients have elevated TNF levels and treatment with infliximab treated their depression

(Miller, 2011).

The Company received a $2.9M USD award from the National Institute of Mental Health (“NIMH”) to treat TRD

The blinded, randomized Phase II trial will use biomarkers of peripheral inflammation to select patients with TRD for enrollment.

Patients will be treated for 6 weeks.

Primary end-points include both clinical

and neuroimaging measures.

The final trial design 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 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.

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.

Primary end-points include both clinical and neuroimaging measures.

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.

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/AML,

a form of leukemia.

One patient has been treated in the Phase I trial for MDS and two patients have been treated compassionately in AML.

In the three patients, INKmune therapy is safe, produces memory-like 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.

The Company intends to initiate a separate Phase I trial of INKmune in a solid tumor late 2022 or early 2023.

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.

We have incurred net losses in each

year since our inception and, as of June 30, 2022, we had an accumulated deficit of approximately $77.5 million.

Our net losses were $13,741,000

and $11,211,000 for the six months ended June 30, 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.

We anticipate that we will continue to generate losses for the foreseeable future.

The Company is subject to

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

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

business is highly uncertain and difficult to predict.

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

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

The magnitude and overall effectiveness of these actions remain uncertain.

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Other income (expense)

Other expense consists primarily

of interest expense incurred on debt.

expense consists primarily of interest expense incurred on debt.

Results of Operations

Comparison of the Three Months Ended March

Comparison of the Three Months Ended June

30, 2022 and 2021

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Loss from operations

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.

Other expense

During the six months ended

June 30, 2022, the Company sold MSC’s to one third-party and recognized $16,000 of revenues.

General and Administrative

General and administrative

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).

expenses were approximately $2.2 million during the six months ended June 30, 2022, compared to approximately $2.1 million during the

six months ended June 30, 2021.

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

compensation ($0.6 million higher during the three months ended June 30, 2022), partially offset by lower consulting expense ($0.6 million

lower during the three months ended June 30, 2022).

Research and Development

Research and development expenses

were approximately $4.2 million during the three months ended June 30, 2022, compared to approximately $4.5 million during the three months

ended June 30, 2021.

The decrease in research and development expenses during the three months ending June 30, 2022 compared to the three

months ending June 30, 2021 is largely due to lower costs associated with manufacturing additional drugs ($0.9 million decrease), and

incurring lower costs in connection with the Company’s terminated COVID-19 clinical trial ($1.2 million decrease), partially offset

by higher compensation, including stock-based compensation ($0.7 million) and higher costs incurred on the Company's Alzheimer’s

and mild cognitive impairment clinical trials ($0.7 million higher).

Other Expense

The Company’s other

expense is higher in 2022 due to the Company incurring interest expense from a loan the Company obtained in June 2021.

Comparison of the Six Months Ended June

30, 2022 and 2021

The following table summarizes

our results of operations for the periods indicated:

Six Months Ended

(in thousands)

Operating expenses:

Research and development

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.

General and administrative

Total operating expenses

Loss from operations

Other expense

During the six months ended

June 30, 2022, and 2021, the Company sold MSC’s to one third-party and recognized $179,000 and $4,000, respectively, of revenues.

General and Administrative

General and administrative

expenses were approximately $4.5 million during the three months ended June 30, 2022, compared to approximately $4.2 million during the

six months ended June 30, 2021.

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

compensation ($1.1 million higher during the six months ended June 30, 2022), partially offset by lower consulting expense ($1.0 million

lower during the six months ended June 30, 2022).

Research and Development

Research and development expenses

were approximately $8.5 million during the six months ended June 30, 2022, compared to approximately $7.0 million during the six

months ended June 30, 2021.

The increase in research and development expenses during the six months ending June 30, 2022 compared

to the six months ending June 30, 2021 is largely due to additional amounts incurred related to the Company’s Alzheimer’s

and mild cognitive impairment clinical trials ($2.8 million higher), higher compensation expense, including stock-based compensation ($1.3

million increase), partially offset by incurring less costs in connection with the Company’s terminated COVID-19 clinical trial

($1.9 million decrease), and incurring lower costs manufacturing additional drug ($1.2 million decrease).

Other Income (Expense)

The Company’s other

expense is higher in 2022 due to the Company incurring interest expense from a loan the Company obtained in June 2021.

Liquidity and Capital Resources

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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.

$13.7 million and $11.2 million for the six months ended June 30, 2022 and 2021, respectively.

Net cash used in operating activities was

$13.6 million and $10.8 million for the six months ended June 30, 2022 and 2021, respectively.

Since inception, we have funded our operations

primarily with proceeds from the sales of our common stock.

As of June 30, 2022, we had cash and cash equivalents of approximately $61.2

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

As of March 31, 2022, the

As of June 30, 2022, the

cash balance held by our foreign subsidiaries with currencies other than the United States dollar was approximately $0.4 million.

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make some activities more time-consuming and costly.

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.

As of June 30, 2022, the Company had an accumulated deficit of $77.5

million and working capital of $68.3 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 June 30, 2022, we had cash and cash equivalents of approximately $61.2 million.

We believe our cash

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

Report on Form 10-Q based on the balance of cash available as of June 30, 2022.

We anticipate, however,

that we will continue to generate losses for the foreseeable future, and we expect the losses to increase materially as we continue the

development of, and seek regulatory approvals for, our drug candidates, and seek to commercialize any drugs for which we receive regulatory

We will need to raise additional capital to fund our operations and complete our ongoing and planned clinical trials.

we expect to finance future cash needs through public equity or debt offerings, funding may not be available to us on acceptable terms,

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to delay,

limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market drug candidates

that we would otherwise prefer to develop and market ourselves.

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.

During the six months ended

June 30, 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.

During the six months ended

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

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

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.

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

During July 2021, the Company sold 713,192 shares at an average price per share of $21.73 for net proceeds of approximately $15.0 million

under the 2021 ATM program.

The following table summarizes

our cash flows for the periods indicated:

Three Months Ended

Six Months Ended

(in thousands)

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Operating activities

Investing activities

Financing activities

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Operating activities used

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

approximately $13.6 million of cash during the six months ended June 30, 2022, resulting from our loss of $13.7 million and changes in

our net operating assets and liabilities of $3.4 million, partially offset by non-cash stock-based compensation of $3.4 million.

in our net operating assets and liabilities was mainly due to an increase in prepaid expenses of approximately $1.9 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.

in accounts payable and accrued liabilities of $2.0 million, partially offset by a decrease in other tax receivable of $0.5 million.

Operating activities used approximately $10.8 million of cash during the six months ended June 30,

2021, resulting from our loss of $11.2 million and changes in our net operating assets and liabilities of $1.3 million, partially offset

by non-cash stock-based compensation of $1.7 million.

The change in our net operating assets and liabilities was mainly due to an increase

in prepaid expenses of approximately $1.2 million, and an increase in research and development tax credit receivable of $1.4 million,

partially offset by an increase in deferred liabilities of approximately $0.4 million.

Investing Activities

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

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

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

During the six months ended

June 30, 2022, the Company sold 82,900 shares of its common stock to certain officers and directors for approximately $0.7 million.

the six months ended June 30, 2021, the Company sold 1,439,480 shares of its common stock under its 2020 ATM program for net proceeds

of approximately $28.4 million.

The Company also obtained $15.0 million in cash proceeds from the issuance of debt.

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

ended December 31, 2021 and there have been no material changes during the six months ended June 30, 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