What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-02 compared with 2022-03-03 · 252 added, 250 removed, 284 unchanged (64% of the section changed)

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differences below and elsewhere in this Form 10-K, including those set forth under “Risk Factors” and “Forward-Looking

We are a clinical-stage immunotherapy

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

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

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

Residual disease, can grow to cause

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 Company’s drugs are in clinical trials and have

not been approved by a regulatory authority.

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

“XPro™”, “XPro1595™” or “ pegipanermin” ) and a Natural Killer (“NK”,

or “INKmune™”) 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 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 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 reduce 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”) and as a drug to prevent muscle degeneration, prevent fibrosis and promote muscle regeneration

in Duchene muscular dystrophy (DMD).

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).

INB03™ or XPro™,

respectively, but it is the same drug product.

For DMD, the company is exploring DN-TNF compounds that is optimized for the treatment

This novel compound has the same mechanism of action but has novel IP protection.

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

based therapies are 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.

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

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”).

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.

Neurodegeneration is

nerve cell death that may include demyelination.

Synaptic dysfunction means the connections between nerve cells stop working efficiently

and may decrease in number.

The combination of neurodegeneration and synaptic dysfunction causes cognitive decline and behavioral changes

associated with Alzheimer’s disease (AD.

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.

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 was designed to demonstrate that XPro can safely decrease

neuroinflammation in patients with ADi.

The endpoints of the trial are measures of neuroinflammation and neurodegeneration in blood and

cerebral spinal fluid by measuring changes in inflammatory cytokine levels in the CNS and using MRI-DTI to measure white matter free water.

White matter free water;

a validated measure of neuroinflammation in the brain.

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 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.

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

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

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, changes that contribute to improved synaptic function.

The successful completion

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 MCI.

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

The Phase II trial has six important elements.

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

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

An enrichment strategy identical to the successful strategy used

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

Patients will need to have some combination of elevated C-reactive

protein, hemoglobin A1c, erythrocyte sedimentation rated in the blood and at least one allele of ApoE4.

The primary end-point will be

Early/mild Alzheimer’s Cognitive Composite (“EMACC”), a validated cognitive measure that is more sensitive than traditional

end-points used in many studies of patients with early AD.

The trial will be performed in North America and Australia, is expected to

start enrolling patients in early 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 trial.

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).

will be treated for 3 months.

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

The primary 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.

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.

of the Phase I trial in AD has informed the design of a blinded randomized, placebo controlled Phase II trials in patients with early

Early ADi includes patients with AD and MCI who have at least one biomarker of inflammation (ADi and MCI 2 respectively).

The early ADi trial is a blinded randomized trial to test if treatment of early AD patients with neuroinflammation with XPro will affect

cognitive decline.

The Phase II trial in early ADi has six important elements.

Two hundred patients are being enrolled in a 2:1 ratio

(XPro 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

one or more enrichment criteria:

elevated blood level of at least one of C-reactive protein, hemoglobin A1c, erythrocyte sedimentation

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.

trial is open in Australia and Canada and will open in the US pending the lift of a clinical hold by the US FDA.

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

Effective therapy for TRD

is a large unmet need.

Twenty percent of patients with a Major Depressive Disorder have 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 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.

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

lung, ovary, breast, renal and prostate cancer.

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

MDS, a form of leukemia.

One patient has been treated in the Phase I trial.

In the single patient, INKmune therapy is safe, produces

memory-like NK cells that kill cancer in vitro, promotes 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 in 2022.

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

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.

To date, we have generated no significant revenue.

We have incurred net losses in each

year since our inception and, as of December 31, 2021, we had an accumulated deficit of approximately $63.7 million.

Our net losses were

$30,340,000 and $12,099,000 for the year ended December 31, 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 final trial design is ongoing and discussions with the FDA are not complete.

The Company anticipates receiving

authorization to initiate the clinical trial once the pending clinical hold is lifted.

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 three patients have been treated compassionately in

In the four 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/2 trial of INKmune in a solid tumor during 2023.

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 three patients have been treated compassionately in

In the four 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.

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 December 31, 2022, we had an

accumulated deficit of approximately $91.0 million.

Our net losses were $27,299,000 and $30,340,000 for the years ended December 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.

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

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The magnitude and overall effectiveness of these actions remain uncertain.

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

site initiation and patient enrollment have and may continue to be delayed due to prioritization of hospital resources toward the COVID-19

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

or interrupt healthcare services.

Similarly, the ability to recruit and retain patients and principal investigators and site staff who,

as healthcare providers, may have heightened exposure to COVID-19, may adversely impact the Company’s clinical trial operations.

In addition, the Company’s clinical trials have been affected

by and may continue to be affected by the COVID-19 pandemic.

Clinical site initiation and patient enrollment have and may continue to

be delayed due to prioritization of hospital resources toward the COVID-19 pandemic.

Some patients have not, and others may not be able

to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.

Similarly, the ability

to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to

COVID-19, may adversely impact the Company’s clinical trial operations.

severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not

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

We participate, through our wholly-owned subsidiary

in the United Kingdom, in the research and development program provided by the United Kingdom tax relief program, such that a percentage

of our qualifying research and development expenditures are reimbursed by the United Kingdom government, and such incentives are reflected

as a reduction of research and development expense.

The United Kingdom research and development tax incentive is recognized when there

is reasonable assurance that the incentive will be received, the relevant expenditure has been incurred and the amount of the consideration

can be reliably measured.

During 2022, the Company expects to receive a research and development tax rebate for eligible expenditures

incurred in 2021, however the Company will be ineligible for research and development tax incentives for expenditures incurred after 2021

as a result of changes in the United Kingdom tax relief program.

We participate, through our wholly-owned subsidiary in the United Kingdom,

in the research and development program provided by the United Kingdom tax relief program, such that a percentage of our qualifying research

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

and development expense.

The United Kingdom has recently enacted certain changes to the research and development program which will limit

the research and development tax incentive available to the Company.

The United Kingdom research and development tax incentive is recognized

when there is reasonable assurance that the incentive will be received, the relevant expenditure has been incurred and the amount of the

consideration can be reliably measured.

Substantially all of our research and development

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maintain, leverage and expand our intellectual property portfolio;

hire clinical, manufacturing, scientific and other personnel to support our product candidates development and future commercialization efforts;

hire clinical, manufacturing, scientific and other personnel to support

our product candidate’s development and future commercialization efforts;

add operational, financial and management information systems and personnel;

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and other general operating expenses not otherwise classified as research and development

Other income (expense)

Other expense consists primarily of interest expense

incurred on debt in 2021.

Other income primarily consists of income from a settlement in 2020.

Other income, net

Other expense consists primarily of interest expense incurred on debt,

partially offset by interest income from a money market investment.

Critical Accounting Policies and Significant

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R&D expenditures are charged to operations as incurred.

We recognize R&D tax credits receivable from

the United Kingdom and Australian government for spending on R&D as an offset of R&D expenses.

We recognize R&D tax credits receivable from the United Kingdom

and Australian government for spending on R&D as a reduction of R&D expenses.

Stock-Based Compensation

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Research and Development

Other Expense (Income)

During 2021, the Company sold MSC’s to three

customers and recognized $181,000 of revenues.

We recorded $11,000 of revenues in 2020 as a result of selling MSC’s to one customer.

Other Expense, net

During 2022 and 2021, the Company sold MSC’s to one and three

customers, respectively, and recognized $374,000 and $181,000 of revenues, respectively.

General and Administrative

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ended December 31, 2022, compared to $8.8 million for the year ended December 31, 2021.

The increase was primarily attributable to higher

professional fees ($1.0 million higher in 2021), higher stock-based compensation expense ($0.6 million higher in 2021), and higher salary

expense ($0.5 million higher in 2021).

The increase in general and administrative expenses

is largely due to higher compensation, including stock-based compensation ($1.5 million higher during the year ended December 31, 2022)

and higher rent expense and right of use asset impairment ($0.2 million higher during the year ended December 31, 2022), partially offset

by lower consulting expense ($1.5 million lower during the year ended December 31, 2022).

Research and Development

Research and development expenses increased to $20.5 million for the

year ended December 31, 2021 from $5.9 million for the year ended December 31, 2020.

The increase in research and development expenses

during the year ended December 31, 2021 compared to 2020 is due to $5.4 million of higher expenses for the Alzheimer’s clinical

program, $1.9 million of higher expenses on the COVID-19 clinical trial, and due to the Company incurring $5.5 million of higher manufacturing

costs in connection with producing its DN-TNF product.

In addition, the Company’s stock-based compensation was $1.1 million higher

in 2021 compared to 2020.

Other Expense (Income)

Other expense increased during the year ended

December 31, 2021 compared to 2020 as a result of the incurring $1.0 million of interest expense

from a loan the Company obtained in June 2021.

During 2020, the Company received a refund from a third-party vendor pursuant to

a release and settlement agreement of approximately $0.1 million for services provided in a previous year.

Research and development expenses decreased to

$17.1 million for the year ended December 31, 2022 from $20.5 million for the year ended December 31, 2021.

The decrease in research

and development expenses during the year ended December 31, 2022 compared to 2021 is mainly due to the Company incurring $4.6 million

of lower manufacturing costs in connection with producing its DN-TNF product and also due to incurring $2.6 million of lower expenses

on the COVID-19 clinical trial, partially offset by the Company’s compensation (including stock-based compensation) which

was $1.8 million higher in 2022 compared to 2021.

Other Expense, net

Other expense, net increased

to $1.3 million during the year ending December 31, 2022, compared to $1.2 million during the year ending December 31, 2021.

in other expense is due to higher interest expense on the Company’s debt ($1.0 million higher), partially offset by $0.7 million

higher interest income from money market investments.

Liquidity and Capital Resources

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funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis.

We incurred a net loss of $30,340,000 and $12,099,000 for the years

ended December 31, 2021 and 2020, respectively.

Net cash used in operating activities was $28,504,000 and $8,943,000 for the years ended

December 31, 2021 and 2020, respectively.

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

common stock and from the receipts of grants.

As of December 31, 2021, we had cash and cash equivalents of $74.8 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

We incurred a net loss

of $27,299,000 and $30,340,000 for the years ended December 31, 2022 and 2021, respectively.

Net cash used in operating activities

was $22,686,000 and $28,504,000 for the years ended December 31, 2022 and 2021, respectively.

Since inception, we have funded our

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

As of December 31, 2022, we

had cash and cash equivalents of $52,153,000.

We anticipate that operating losses and net cash used in operating activities will

increase over the next few years as we advance our products under development.

Our primary uses of capital are, and we expect

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use of CROs provides us with flexibility in managing our spending.

The Company incurs the majority of its research

and development expenses in Australia and the United Kingdom.

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

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

as assets and liabilities.

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 December 31, 2021, the cash balance held by our foreign subsidiaries with currencies other than the United States dollar was approximately

$0.2 million.

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

As of December 31, 2022,

the cash balance held by our foreign subsidiaries with currencies other than the United States dollar was approximately $0.1 million.

As of December 31, 2022, the Company had an accumulated deficit of

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

During the year ended

December 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 agreement.

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

As of December

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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.

the year ended December 31, 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 provides information regarding

our cash flows for the years ended December 31, 2021 and 2020:

The following table provides information regarding our cash flows for

the years ended December 31, 2022 and 2021:

Net cash used in operating activities

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Impact on cash from foreign currency translation

Net increase in cash and cash equivalents

Net(decrease) increase in cash and cash equivalents

Net Cash Used in Operating Activities

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driven by our net loss.

Operating activities used $28.5 million of cash for the year ended

December 31, 2021, primarily resulting from our net loss of $30.3 million, a net cash outflow of $3.1 million for changes in our net operating

assets and liabilities, and non-cash stock-based compensation charges of $4.8 million.

The change in our net operating assets and liabilities

was primarily due to an increase in research and development tax credit receivable of $3.2 million and an increase in prepaid expenses

of $2.1 million, partially offset by an increase in accounts payable and accrued liabilities of $2.2 million.

Operating activities used $8.9 million of cash

for the year ended December 31, 2020, primarily resulting from our net loss of $12.1 million, partially offset by non-cash stock-based

compensation charges of $3.1 million.

Operating activities

used $22.7 million of cash for the year ended December 31, 2022, primarily resulting from our net loss of $27.3 million, a net cash

outflow of $2.9 million for changes in our net operating assets and liabilities, and non-cash stock-based compensation charges of

$7.1 million.

The change in our net operating assets and liabilities was primarily due to an increase in research and development

tax credit receivable of $3.2 million and an increase in prepaid expenses and other current assets of $1.7 million, partially offset

by an increase in accounts payable and accrued liabilities of $1.5 million.

Operating activities

used $28.5 million of cash for the year ended December 31, 2021, primarily resulting from our net loss of $30.3 million, a net cash

outflow of $3.1 million for changes in our net operating assets and liabilities, and non-cash stock-based compensation charges of

$4.8 million.

The change in our net operating assets and liabilities was primarily due to an increase in research and development

tax credit receivable of $3.2 million and an increase in prepaid expenses and other current assets of $2.1 million, partially offset

by an increase in accounts payable and accrued liabilities of $2.2 million.

Investing activities used $15.0 million of cash for the year ended

December 31, 2021 compared to $0 for the year ended December 31, 2020.

During the year ended December 31, 2021, the Company paid Xencor

$15.0 million to settle an option to acquire 10% of the Company’s common stock on a fully diluted basis which was issued to acquire

the Company’s acquired in-process research and development intangible asset.

December 31, 2021.

During the year ended December 31, 2021, the Company paid Xencor $15.0 million to settle an option to acquire 10%

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

and development intangible asset.

Net Cash Provided by Financing Activities

During the year ended December

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

During the year ended

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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 year ended December 31, 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 year ended December 31, 2020, the Company issued and sold

178,600 shares of common stock at an average price of $5.45 per share under the ATM agreement for net cash proceeds of approximately $0.8

Quantitative and Qualitative Disclosures

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

What changed 10-K

Item 7. Management’s Discussion and Analysis