What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-02 compared with 2022-03-03 · 225 added, 273 removed, 583 unchanged (46% of the section changed)

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CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 F-3

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

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

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

2022 AND 2021 F-4

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER

31, 2022 AND 2021 F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 F-6

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and the Board of Directors

To the Stockholders and Board of Directors of

INmune Bio, Inc.

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balance sheets of INmune Bio, Inc.

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

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

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of

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

December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

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(In thousands, except share and per share amounts)

December 31, 2022

December 31, 2021

CURRENT ASSETS

Cash and cash equivalents

Research and development tax credit receivable

Other tax receivable

Prepaid expenses

Prepaid expenses and other current assets

Prepaid expenses – related party

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Deferred liabilities

Current portion of long-term debt

Operating lease, current liabilities

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

Common stock, $ 0.001 par value, 200,000,000 shares authorized, 17,843,303 and 13,481,283 shares issued and outstanding, respectively

Common stock, $ 0.001 par value, 200,000,000 shares authorized,

17,945,995 and 17,843,303 shares issued and outstanding, respectively

Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive (loss) income

Accumulated deficit

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LOSS FROM OPERATIONS

OTHER (EXPENSE) INCOME

Other (expense) income

Total other (expense) income

OTHER EXPENSE, NET

Other expense, net

Total other expense, net

Net loss per common share – basic and diluted

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COMPREHENSIVE LOSS

Other comprehensive (loss) income – foreign currency translation

Other comprehensive loss – foreign currency translation

Total comprehensive loss

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INMUNE BIO INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

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Issuance of common stock for cash, net

Acquisition and retirement of common stock

Capital contribution

Cashless exercise of warrants

Issuance of common stock issuable

Stock-based compensation

Gain on foreign currency translation

Balance as of December 31, 2020

Issuance of common stock for cash, net

Settlement of Xencor warrant for cash and common stock

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Balance as of December 31, 2021

Issuance of common stock for cash

Exercise of warrants for cash

Stock-based compensation

Loss on foreign currency translation

Balance as of December 31, 2022

See accompanying notes to these consolidated financial

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Stock-based compensation

Impairment of right of use asset

Accretion of debt discount

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Other tax receivable

Prepaid expenses

Prepaid expenses and other current assets

Prepaid expenses – related party

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Net proceeds from the exercise of warrants

Purchase of common stock

Net cash provided by financing activities

Impact on cash from foreign currency translation

NET INCREASE IN CASH

NET (DECREASE) INCREASE IN CASH

CASH AT BEGINNING OF YEAR

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Warrants issued to lenders as debt inducement

Capital contribution

Issuance of common stock issuable

See accompanying notes to these consolidated financial

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DN-TNF is currently being developed for Alzheimer’s and treatment resistant depression (“XPro”) and cancer (“INB03”)

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

disease in patients with cancer.

INmune Bio’s product platforms utilize a precision medicine approach for the treatment of a wide

variety of hematologic malignancies, solid tumors and chronic inflammation.

and an out-licensing strategy for Duchenne’s Muscular Dystrophy (“DMD”).

The Natural Killer Cell Priming Platform includes

INKmune aimed at priming the patient’s NK cells to eliminate minimal residual disease in patients with cancer.

product platforms utilize a precision medicine approach for the treatment of a wide variety of hematologic malignancies, solid tumors

and chronic inflammation.

Basis of Presentation and Principles of

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NOTE 2 – LIQUIDITY

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

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

Losses have principally occurred as a result of the substantial resources

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

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

are commercialized.

To meet its current and future obligations the

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

● During July 2021, the Company completed a registered direct

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

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

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

BTIG, LLC (“BTIG”), as agent, to establish an At-The-Market (“ATM”) offering of up to $ 45 million of common stock

(the “2021 ATM”), subject to certain limitations on the amount of common stock that may be offered and sold by the Company

set forth in the sales agreement.

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

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

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

BTIG, as sales agent, to establish an ATM offering to sell up to $ 10.0 million of the Company’s common stock (the “2020 ATM”).

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

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

of approximately $ 0.8 million.

During the year ended December 31, 2021, the Company sold in aggregate 1,439,480 shares on common stock

at an average price of $ 20.17 per share for net proceeds of $ 28.4 million.

As of December 31, 2021, sales of our common stock pursuant

to the 2020 ATM have been completed.

Although it is difficult to predict the Company’s

liquidity requirements, as of December 31, 2021, and based upon the Company’s current operating plan, the Company believes that

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

this Annual Report on Form 10-K based on the balance of cash available as of December 31, 2021.

The Company anticipates that it will continue

to incur net losses for the foreseeable future as it continues the development of its clinical drug candidates and preclinical programs

and incurs additional costs associated with being a public company.

As of December

31, 2022, the Company had an accumulated deficit of $ 91,014,000 and experienced losses since its inception.

The Company had cash,

cash equivalents of $ 52,153,000 as of December 31, 2022 and has not generated positive cash flows from operations.

To date, the Company

has funded its operations primarily through the sale of its common stock.

Although it is difficult to predict the Company’s liquidity

requirements, as of December 31, 2022, and based upon the Company’s current operating plan, the Company believes that it will have

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

Report on Form 10-K based on the balance of cash available as of December 31, 2022.

expects operating losses to continue for the foreseeable future.

There can be no assurance that the Company will ever earn revenues or

achieve profitability, or if achieved, that they will be sustained on a continuing basis.

In addition, the manufacturing, clinical and

preclinical development activities as well as the commercialization of the Company’s products, if approved, will require significant

additional financing.

The Company may be unable to secure such financing when needed, or if available, such financings may be under terms

that are unfavorable to the Company or the current stockholders.

If the Company is unable to raise additional funds when needed, it may

be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations.

NOTE 3 – SUMMARY OF SIGNIFICANT

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

During the fourth quarter and if business factors

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

and development.

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

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

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

equal to that excess.

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

research and development and determined that there was no impairment.

During the fourth quarter and if business factors indicate more frequently,

the Company performs an assessment of the qualitative factors affecting the fair value of our in-process research and development.

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

The quantitative analysis

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

If the carrying amount of

the in-process research and development exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

the years ended December 31, 2022 and 2021, the Company performed a qualitative assessment of its in-process research and development

and determined that there were no indicators of impairment.

Basic and Diluted Loss per Share

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

The Company’s 2021 revenues were from the

sale of MSC’s to three customers.

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

The Company’s 2020 revenue was from the

sale of MSC’s to one customer.

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

The Company’s 2022 and 2021 revenue was

from the sale of MSC’s to one and three customers, respectively, and was recognized when the MSC’s were delivered to the customers.

Stock-Based Compensation

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Recently Adopted Accounting Pronouncements

There were various accounting standards and interpretations

issued recently, none of which are expected to a have a material impact on the Company´s consolidated financial position, operations,

or cash flows.

Reclassifications

Certain amounts from the prior period have been

adjusted to conform to the current period presentation.

In June 2016, the FASB issued ASU No.

2016-13, Financial

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

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

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

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

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

trade receivables.

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

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

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

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

Company does not expect this standard to have a material effect on the Company’s financial statements.

Subsequent Events

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

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

31, 2022 and 2021, the Company had a research and development tax credit receivable of $ 2,690,000 and $ 3,319,000 , respectively for

R&D expenses incurred in the UK.

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

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

According to AUS tax law, the Company is allowed

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

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

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

for R&D expenses incurred in Australia.

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

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

During the years ended December 31, 2022 and 2021, the Company received $ 0 and $ 814,000 of R&D

tax credit reimbursements, respectively from the UK.

During January 2023, the Company received $ 2,710,000 of R&D tax credit reimbursements

According to AUS tax law, the Company is allowed an R&D tax

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

The Company’s

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

At December 31, 2022

and 2021, the Company had a research and development tax credit receivable of $ 5,409,000 and $ 1,594,000 , respectively, for R&D

expenses incurred in Australia.

During the years ended December 31, 2022 and 2021, the Company received $ 0 and $ 1,296,000 of R&D tax

credit reimbursements, respectively from Australia.

During February 2023, the Company received $ 3,763,000 of R&D tax credit reimbursements

from Australia.

License Agreement

On October 3, 2017, the Company entered into a

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

(“Xencor”), which has discovered and developed

a proprietary biological molecule that inhibits soluble tumor necrosis factor.

During June 2021, the Company entered into the First Amendment

to License Agreement.

Pursuant to the license agreement, Xencor granted the Company an exclusive worldwide, royalty-bearing license in

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

import any pharmaceutical product that comprises, contains, or incorporates Xencor’s proprietary protein known as “XPro”

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

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

The Company believes the protein has numerous medical applications.

Such additional alternative applications of the

technology are available under the Xencor License Agreement.

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

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

a fair value of $ 12,221,000 .

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

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

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

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

On October 3, 2017, the Company entered into a license agreement (“Xencor

License Agreement”) with Xencor, Inc.

(“Xencor”), which has discovered and developed a proprietary biological molecule

that inhibits soluble tumor necrosis factor.

During June 2021, the Company entered into the First Amendment to License Agreement.

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

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

that comprises, contains, or incorporates Xencor’s proprietary protein known as “XPro” that inhibits soluble tumor necrosis

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

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

believes the protein has numerous medical applications.

Such additional alternative applications of the technology are available under

the Xencor License Agreement.

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

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

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

equal to 10 % of the fully diluted company shares immediately following such purchase, which warrant has since been cancelled (see the

description below).

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

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

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

The Company also agreed to pay Xencor a royalty

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

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

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

The Company also agreed to pay Xencor a 5 % royalty on Net Sales of

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

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

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

Under the Xencor License Agreement, the Company

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

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

technology under the PITT Agreement in 2021.

There were no commercial sales of product making use of the licensed technology under the PITT Agreement in 2022.

Moreover, under the PITT Agreement the Licensee

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

NOTE 5 – FAIR VALUE MEASUREMENTS

The following table presents the hierarchy

for assets and liabilities measured at fair value on a recurring basis:

(in thousands)

Active Market

Observable Inputs

December 31, 2022:

Cash equivalents

Money market fund

Total cash equivalents

The Company had no assets and liabilities measured

at fair value on a recurring basis as of December 31, 2021.

NOTE 6 – LEASE

In May 2019, the Company signed a sublease agreement

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

The lease has a

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

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

with CTI Clinical Trial & Consulting Services (“CTI”) for office space in La Jolla, California.

The lessor was CTI Clinical

Trial & Consulting Services (“CTI”).

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

During 2021, the Company moved its corporate headquarters

to Boca Raton, Florida.

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

In September 2021, the Company signed a lease

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

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

quarter of 2021.

2022, the Company entered into a sublease termination agreement with CTI whereby the Company paid CTI $ 153,000 to terminate the sublease.

During the year ended December 31, 2022, the Company recorded a right-of-use asset impairment of $ 89,000 within general and administrative

In September 2021, the Company signed a lease with a third party for

office space in Boca Raton, Florida.

The lease agreement has a 64 -month term and commenced during the fourth quarter of 2021.

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

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At December 31, 2022 and 2021, the Company owed

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

of the Company.

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

research performed on behalf of the Company.

UCL Consultants Limited (“UCL”) $ 0 and $ 10,000 , respectively, in connection with medical research performed on behalf of the

During the years ended December 31, 2022 and 2021, the Company paid UCL $ 586,000 and $ 218,000 , respectively, for medical research

performed on behalf of the Company.

UCL is a wholly owned subsidiary of the University of London.

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and Manufacturing Officer is a professor at the University of London.

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

of the Company.

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

of certain accounts payable due to CTI.

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

pursuant to its sublease agreement with CTI.

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

AmplifyBio is on the Board of Directors of the Company.

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

No amounts were paid

to AmplifyBio during 2021.

The Company had no transactions with AmplifyBio during 2020.

years ended December 31, 2022 and 2021, the Company paid CTI $ 153,000 and $ 38,000 , respectively, pursuant to its sublease agreement with

The Company also paid CTI $ 5,000 in 2022 for medical research performed on behalf of the Company.

During the years ended December

31, 2022 and 2021, the Company paid AmplifyBio $ 230,000 and $ 0 , respectively, to perform certain medical research on behalf of the Company.

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

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

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of the Lenders.

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

interest expense over the term of the loan.

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

loan and debt discount are as follows as of December 31, 2022:

(in thousands)

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Long-term debt

For the year ended December 31,

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

years ended December 31, 2022 and 2021, the Company recognized interest expense of $ 2,014,000 and $ 985,000 , respectively, related to the

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

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

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

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

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

of the loan but before the maturity date.

subject to a prepayment premium of (i) 2 % of the original principal amount borrowed for any prepayment after the first anniversary and

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

second anniversary of the loan but before the maturity date.

repayment of the $ 15.0 million Term loan principal is as follows as of December 31, 2022:

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

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

violated certain non-financial debt covenants as of December 31, 2022 and received a waiver from the Lenders waiving these debt covenant

NOTE 9 – STOCKHOLDERS’ EQUITY

Stock – Issuance to Directors and Officers

year ended December 31, 2022, directors and officers of the Company purchased 82,900 shares of the Company’s common stock

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

gross proceeds of $ 699,000 .

Common Stock – At the Market Offerings

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 2020 ATM agreement.

The aggregate net

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

During the year ended December 31, 2021, the Company

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

The aggregate net proceeds

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

April 2020, the Company entered into a sales agreement with BTIG, LLC (“BTIG"), as sales agent, to establish an ATM

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

In August 2020, the

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

the year ended December 31, 2021, the Company sold 1,439,480 shares of its common stock at an average price of $20.17 per share

under the 2020 ATM agreement.

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

offering expenses.

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

BTIG, as agent, to establish an At-The-Market (“ATM”) offering of up to $ 45 million of common stock (the “2021

ATM”), subject to certain limitations on the amount of common stock that may be offered and sold by the Company set forth in the

sales agreement.

During the year ended December 31, 2021, the Company

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

Underwritten Stock Offering

During July 2020, the Company completed an underwritten

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

The 2,500,000 shares

sold included the full exercise of the underwriters’ option to purchase 326,086 shares at a price of $ 10.00 per share.

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

commissions and offering expenses.

of shares to Xencor

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its common stock to Xencor (See Note 4).

On May 15, 2019, the Company entered into both

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

the terms and subject to the conditions of the securities purchase agreement, the Company had the right to sell to Lincoln Park, and Lincoln

Park was obligated to purchase, up to $20.0 million in shares of the Company’s common stock, subject to certain limitations, over

the 24-month period that commenced on May 15, 2019.

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

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

During April 2021, the Company terminated the

securities purchase agreement with Lincoln Park.

Purchase and retirement of common stock

During January 2020, the Company purchased and

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

Immediately following the purchase,

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

Common Stock Issued for Services

During July 2020, the Company granted a consultant

50,000 fully vested warrants with a 5 -year term, of which 25,000 warrants had an exercise price of $ 5.50 per share and 25,000 warrants

had an exercise price of $ 10.00 per share.

The fair value of these warrants was $ 356,874 based on the Black-Scholes Option Pricing Model

and was recorded within general and administrative expense.

The assumptions used for these warrants consist of the exercise prices, expected

dividends of 0 %, expected volatility of 111.67 % based on the trading history of similar companies, risk-free rate of 0.30 % based on the

applicable US Treasury bill rate and an expected life of 5.0 years.

During July 2020, the Company issued the consultant 20,000 shares

of common stock and cancelled the 50,000 warrants.

The 20,000 shares were issued from the Company’s 2019 Incentive Stock Plan and

had a fair value of approximately $ 230,000 based on the market value of the Company’s common stock on the grant date.

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

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

In 2016, the Company entered into a settlement

agreement whereby the Company agreed to issue 33,335 shares of the Company’s common stock to an individual to settle a claim in

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

Stock options

During September 2020, the Company granted an

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

The stock options vest over

four years and had a fair value of $ 339,731 that was calculated using the Black-Scholes option-pricing model.

Variables used in the Black-Scholes

option-pricing model include:

(1) discount rate of 0.46 % based on the applicable US Treasury bill rate (2) expected life of 6.25 years,

(3) expected volatility of approximately 106 % based on the trading history of similar companies, and (4) zero expected dividends.

the Company granted certain employees and directors options to purchase 819,000 shares of its common stock pursuant to the 2021

Incentive Stock Plan.

The stock options had a fair value of approximately $ 5.5 million that was calculated using the Black-Scholes

option-pricing model.

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

(1) discount rate of 1.60 % - 3.06 % based

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

- 108 % based on the trading history of similar companies, and (4) zero expected dividends.

During 2021, the Company granted various employees,

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

(1) discount rate of 0.78 -1.

49 %% based on the applicable US Treasury

(1) discount rate of 0.78 - 1.49 %% based on the applicable US Treasury

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

companies, and (4) zero expected dividends.

At December 31, 2022, the Company had 607,108 shares reserved for issuance,

of which 591,132 shares were available for issuance pursuant to the 2021 Incentive Stock Plan, 7,313 shares were available for issuance

pursuant to the 2019 Incentive Stock Plan, and 8,663 shares were available for issuance pursuant to the 2017 Stock Incentive Plan.

The following table summarizes stock option activity:

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Options cancelled

Outstanding at January 1, 2021

Outstanding at December 31, 2021

Options granted

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Exercisable at December 31, 2022

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

During the years ended December 31, 2022 and 2021,

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over a weighted-average period of 2.23 years.

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

The warrants have a 10-year term

and an exercise price of $ 14.05 .

The warrants have a fair value of approximately $ 0.6 million that was calculated using the Black-Scholes

option-pricing model.

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

(1) discount rate of 1.45 % based on the applicable

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

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

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

In connection

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

Company’s common stock at an exercise price of $ 9.60 per common share, which warrants are exercisable until December 19, 2023.

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

of common stock.

The Company issued warrants to the Company’s

lenders upon obtaining its loan in June 2021.

The warrants have a 10 -year term and an exercise price of $ 14.05 .

At December 31, 2022, 45,386 of

these warrants are outstanding and the intrinsic value of these warrants is $ 0 .

The Company issued warrants to its placement agents

in connection with its February 2019 initial public offering.

The warrants are exercisable until December 19, 2023 and have an exercise

price of $ 9.60 .

At December 31, 2022, 28,688 of these warrants are outstanding and the intrinsic value is $ 0 .

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

party in conjunction with the common stock sold for cash.

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

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

At December 31,

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

During the year ended December 31, 2022, a third

party exercised 19,792 warrants which were issued in 2017 for cash proceeds of approximately $ 30,000 .

The Company issued 19,792 shares of its common stock in connection with the exercise of warrants.

Stock-based Compensation by Class of Expense

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persons) becomes the beneficial owner of twenty percent or more of the Company’s common stock without the approval of the Board.

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

The Rights Agreement shall expire on December 30, 2023.

Preferred Stock

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2022 and 2021.

NOTE 9– INCOME TAXES

NOTE 10 – INCOME

The provision for income taxes consists of the

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Stock-based compensation

Research and development

Federal NOL carryforwards

State NOL carryforwards

Foreign NOL carryforwards

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Net deferred tax assets

At December 31, 2021, the Company had a federal

net operating loss carryforward of approximately $ 15.7 million.

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

the year ending December 31, 2037 .

At December 31, 2022, the Company had a federal net

operating loss carryforward of approximately $ 25.9 million.

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

year ending December 31, 2037.

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

The Company’s gross deferred tax assets

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

income tax purposes.

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

the net deferred tax assets will be realized.

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

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

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

the year ended December 31, 2021.

The Company’s gross deferred tax assets of $ 13.7 million and $ 6.8

million at December 31, 2022 and 2021, respectively, primarily consist of net operating loss carryforwards for income tax purposes.

valuation allowance is required to be recorded when it is not more likely than not that some portion or all of the net deferred tax assets

will be realized.

Since the Company cannot be assured of generating taxable income and thereby realizing the net deferred tax assets,

a full valuation allowance has been recorded.

The change in the valuation allowance was $ 6,943,000 during the year ended December

The Company recognizes uncertain tax positions

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NOTE 11 – COLLABORATIVE AGREEMENTS

During the year ended December 31, 2020, the Company

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

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

During the years

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

the Company recorded as deferred liabilities.

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

As of December 31, 2021, the Company has $ 257,000 recorded as deferred liabilities related to the ALS grant.

During September 2020, the Company was awarded

a grant of up to $2.9 million from the National Institutes of Health (“NIH”).

The grant will support a Phase 2 study of XPro

in patients with treatment resistant depression.

During 2020, the Company was awarded a $ 500,000

grant from the Amyotrophic Lateral Sclerosis (“ALS”) Association to fund a study of the efficacy of XPro to reverse ALS in

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

All of the proceeds pursuant to the

grant were received prior to 2022.

The grant period for the study ended December 31, 2022 and the Company has recorded a payable of $ 18,000

to the ALS Association in accounts payable and accrued liabilities for amounts received but not spent as of December 31, 2022.

During September 2020, the Company was awarded a grant of up to $2.9

million from the National Institutes of Health (“NIH”).

The grant will support a Phase 2 study of XPro in patients with treatment

resistant depression.

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

12 – COMMITMENTS AND CONTINGENCIES

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

The lease has a 61-month term,

which corresponds to the lease term of the lessor.

The lessor is CTI.

During September

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

The lease agreement has a 64-month

term and commenced during the fourth quarter of 2021.

During September 2021, the Company

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

The operating lease has a 64-month term and

commenced during the fourth quarter of 2021.

Future minimum payments pursuant

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change in the future.

13 – SUBSEQUENT EVENTS

During February

2023, the Company issued 605,000 stock options with a 10 -year life and an exercise price of $ 9.74 to certain employees and directors.

The stock options had a fair value of approximately $ 4.5 million that was calculated using the Black-Scholes option-pricing model.

Changes in and Disagreements with Accountants

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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 8. Financial Statements and Supplementary Data