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Item 1. Financial Statements

2023-08-07 compared with 2023-05-03 · 230 added, 205 removed, 399 unchanged (52% of the section changed)

33 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

INMUNE BIO INC.

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(In thousands, except share and per share amounts)

Three months ended

For the Three Months Ended

For the Six Months Ended

OPERATING EXPENSES

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LOSS FROM OPERATIONS

OTHER EXPENSE

OTHER EXPENSE, NET

Total other expense, net

Net loss per common share – basic and diluted

Weighted average number of common shares outstanding – basic and diluted

Weighted average common shares outstanding – basic and diluted

COMPREHENSIVE LOSS

Other comprehensive (loss) income – foreign currency

Other comprehensive loss – foreign currency translation

Total comprehensive loss

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INMUNE BIO INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

CONDENSED CONSOLIDATED STATEMENT OF CHANGES

IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30,

(In thousands, except share amounts)

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Balance as of March 31, 2023

Stock-based compensation

Loss on foreign currency translation

Balance as of June 30, 2023

$ ( 104,051 )

The accompanying

notes are an integral part of these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’

CONDENSED CONSOLIDATED STATEMENT OF CHANGES

IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022

(In thousands, except share amounts)

1 unchanged sentence

Stockholders’

Income (Loss)

Balance as of December 31, 2021

4 unchanged sentences

Balance as of March 31, 2022

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

Stock-based compensation

Loss on foreign currency translation

Balance as of June 30, 2022

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

INMUNE BIO INC.

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(In thousands)

For the Three Months Ended

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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Cash paid for interest expense

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of

these unaudited condensed consolidated financial statements.

INMUNE BIO INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION

INmune Bio Inc.

(the “Company” or “INmune

Bio”) was organized in the State of Nevada on September 25, 2015 and is a clinical stage biotechnology pharmaceutical company focused

on developing and commercializing its product candidates to treat diseases where the innate immune system is not functioning normally

and contributing to the patient’s disease.

(the “Company” or

“INmune Bio”) was organized in the State of Nevada on September 25, 2015 and is a clinical stage biotechnology pharmaceutical

company focused on developing and commercializing its product candidates to treat diseases where the innate immune system is not functioning

normally and contributing to the patient’s disease.

INmune Bio has two product platforms.

The DN-TNF product platform utilizes dominant-negative

technology to selectively neutralize soluble TNF, a key driver of innate immune dysfunction and mechanistic target of many diseases.

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

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.

The DN-TNF product platform utilizes

dominant-negative technology to selectively neutralize soluble TNF, a key driver of innate immune dysfunction and mechanistic target of

many diseases.

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

(“INB03”) 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

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

malignancies, solid tumors and chronic inflammation.

NOTE 2 – LIQUIDITY

As of March 31, 2023, the Company had an accumulated

deficit of $ 97,550,000 and experienced losses since its inception.

The Company had cash, cash equivalents of $ 51,003,000 as of March 31,

2023, 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 March 31, 2023, and based upon

the Company’s current operating plan, the Company believes that it will have sufficient cash to meet its projected operating requirements

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

as of March 31, 2023.

Management 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

As of June 30, 2023, the Company had an accumulated deficit of $ 104,051,000

and experienced losses since its inception.

The Company had cash, cash equivalents of $ 47,825,000 as of June 30, 2023, 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.

it is difficult to predict the Company’s liquidity requirements, as of June 30, 2023, and based upon the Company’s current

operating plan, the Company believes that it will have sufficient cash to meet its projected operating requirements for at least the next

12 months following the filing date of this Quarterly Report on Form 10-Q based on the balance of cash available as of June 30, 2023.

Management 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.

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.

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of, or eliminate development programs, which may adversely affect its business and operations.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

of Presentation

The accompanying financial statements are presented in U.S.

dollars and have been prepared in accordance with accounting principles generally

accepted in the United States of America (“US GAAP”), and pursuant to the accounting and disclosure rules and regulations

The accompanying financial statements are presented

dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US

GAAP”), and pursuant to the accounting and disclosure rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”).

The consolidated financial statements include the accounts of INmune

The consolidated financial statements include the accounts of INmune Bio Inc.

and its subsidiaries.

Intercompany transactions and balances have been eliminated.

Intercompany transactions and balances

have been eliminated.

In the opinion

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around the globe have responded with fiscal policy actions to support the healthcare industry and economy.

The magnitude and

overall effectiveness of these actions remain uncertain.

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.

The magnitude and overall effectiveness

of these actions remain uncertain.

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.

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

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are based on inputs not quoted on active markets but corroborated by market data.

Unobservable inputs are used

when little or no market data is available.

Assets and liabilities are classified based on the

lowest level of input that is significant to the fair value measurements.

Unobservable inputs are

used when little or no market data is available.

Assets and liabilities are classified based on

the lowest level of input that is significant to the fair value measurements.

The Company reviews the fair value hierarchy classification

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the fair value measurement hierarchy during the years presented.

The carrying amounts of financial instruments such

as cash and cash equivalents, research and development tax credit receivable, other receivable, prepaid expenses, and accounts payable

The carrying amounts of financial instruments

such as cash and cash equivalents, research and development tax credit receivable, other receivable, prepaid expenses, and accounts payable

and accrued liabilities approximate the related fair values due to the short-term maturities of these instruments.

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Basic and Diluted Loss per Share

Basic loss per share is computed by dividing net loss

available to common shareholders by the weighted average number of outstanding common shares during the period.

Diluted loss per share

gives effect to all dilutive potential common shares outstanding during the period.

Dilutive loss per share excludes all potential common

shares if their effect is anti-dilutive.

For all periods presented, there is no difference in the number of shares used to calculate basic

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

At March 31, 2023 and 2022, the Company had potentially

Basic loss per share is computed by dividing net

loss available to common shareholders by the weighted average number of outstanding common shares during the period.

Diluted loss per

share gives effect to all dilutive potential common shares outstanding during the period.

Dilutive loss per share excludes all potential

common shares if their effect is anti-dilutive.

For all periods presented, there is no difference in the number of shares used to calculate

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

At June 30, 2023 and 2022, the Company had potentially

issuable shares as follows:

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Revenue Recognition

The Company recognizes revenue when the customer obtains

control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those

goods or services.

The Company recognizes revenue when the customer

obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange

for those goods or services.

The Company recognizes revenue following the five-step model prescribed under ASC Topic 606:

(1) identify contract(s)

with a customer;

contract(s) with a customer;

(2) identify the performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction

price to the performance obligations in the contract;

and (5) recognize revenues when (or as) the Company satisfies the performance obligations.

The Company records the expenses related to revenue in research and development expense, in the periods such expenses were incurred.

The Company records deferred revenues when cash payments

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

the transaction price to the performance obligations in the contract;

and (5) recognize revenues when (or as) the Company satisfies the

performance obligations.

The Company records the expenses related to revenue in research and development expense, in the periods such

expenses were incurred.

The Company records deferred revenues when cash

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

Stock-Based Compensation

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Research and Development

Research and development (“R&D”) costs

are expensed as incurred.

Research and development credits are recorded by the Company as a reduction of research and development costs.

Research and development (“R&D”)

costs are expensed as incurred.

Research and development credits are recorded by the Company as a reduction of research and development

Major components of research and development costs include cash compensation, stock-based compensation, costs of preclinical studies,

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of this standard.

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

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

Adoption of the ASU is on a modified retrospective basis.

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Subsequent Events

evaluates events that have occurred after the balance sheet date of March 31, 2023, through the date which the financial statements are

evaluates events that have occurred after the balance sheet date of June 30, 2023, through the date which the financial statements are

NOTE 4 – RESEARCH AND DEVELOPMENT

According to UK tax law, the Company is allowed an

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

According to UK tax law, the Company is allowed

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

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

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respectively.

During the three months ended March 31, 2023 and 2022, the Company received $ 2,710,000 and $ 0 , respectively, of R&D

tax credit reimbursements 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.

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

March 31, 2023 and December 31, 2022, the Company recorded a research and development tax credit receivable of $ 1,814,000 and $ 5,409,000 ,

During the six months ended June 30, 2023 and 2022, the Company received $ 2,710,000 and $ 0 , respectively, of R&D tax

credit reimbursements 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 June 30, 2023 and December 31, 2022, the Company recorded a research and development tax credit receivable of $ 1,934,000 and $ 5,409,000 ,

respectively, for R&D expenses incurred in Australia.

During the three months ended March 31, 2023 and 2022, the Company received

During the six months ended June 30, 2023 and 2022, the Company received $ 3,763,000

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

License Agreement

On October 3,

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

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INKmune License Agreement

On October 29, 2015, the Company entered into an exclusive

license agreement (the “INKmune License Agreement”) with Immune Ventures, LLC (“Immune Ventures”).

the INKmune License Agreement, the Company was granted exclusive worldwide rights to the patents, including rights to incorporate any

improvements or additions to the patents that may be developed in the future.

In consideration for the patent rights, the Company agreed

to the following milestone payments:

On October 29, 2015, the Company entered into

an exclusive license agreement (the “INKmune License Agreement”) with Immune Ventures, LLC (“Immune Ventures”).

Pursuant to the INKmune License Agreement, the Company was granted exclusive worldwide rights to the patents, including rights to incorporate

any improvements or additions to the patents that may be developed in the future.

In consideration for the patent rights, the Company

agreed to the following milestone payments:

(in thousands)

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The term of the agreement began on October 29,

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

terminated earlier in accordance with the agreement.

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

unless terminated earlier in accordance with the agreement.

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

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achieve milestones pursuant to the agreement.

On April 17, 2023, the parties executed an additional

amendment to the agreement under which the Company removed the milestone achievement requirements to remove the due diligence requirements

to achieve reasonable commercial efforts to bring INKmune to market.

This removed all requirements of clinical trial timelines and the

filing timelines of a NDA or equivalent.

All other provisions in the INKmune License Agreement shall continue in full force and effect.

On April 17, 2023, the parties executed an additional amendment to

the agreement under which the Company removed the due diligence requirements to achieve reasonable commercial efforts to bring INKmune

This removed all requirements of clinical trial timelines and the filing timelines of an NDA or equivalent.

All other provisions

in the INKmune License Agreement shall continue in full force and effect.

University of Pittsburg License Agreement

On October 3, 2017, the Company entered into an Assignment

and Assumption Agreement with Immune Ventures related to intellectual property licensed from the University of Pittsburgh.

the Assignment and Assumption Agreement (“Assignment Agreement”), Immune Ventures assigned all of its rights, obligations

and liabilities under an Exclusive License Agreement between the University of Pittsburgh – Of the Commonwealth System of Higher

Education (“Licensor”) and Immune Ventures to INmune Bio (“Licensee”), (the “PITT Agreement”).

On October 3, 2017, the Company entered into an

Assignment and Assumption Agreement with Immune Ventures related to intellectual property licensed from the University of Pittsburgh.

Pursuant to the Assignment and Assumption Agreement (“Assignment Agreement”), Immune Ventures assigned all of its rights,

obligations and liabilities under an Exclusive License Agreement between the University of Pittsburgh – Of the Commonwealth System

of Higher Education (“Licensor”) and Immune Ventures to INmune Bio (“Licensee”), (the “PITT Agreement”).

Consideration under the PITT Agreement includes:

annual maintenance fees, (ii) royalty payments based on the sale of products making use of the licensed technology, and (iii) milestone

Annual maintenance fees under the PITT Agreement include

the following:

(i) annual maintenance fees, (ii) royalty payments based on the sale of products making use of the licensed technology, and (iii) milestone

Annual maintenance fees under the PITT Agreement

include the following:

(in thousands)

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June 26 of each year 2025 until first commercial sale

Upon first commercial sale of a product making 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

Moreover, under the PITT Agreement the Licensee is

required to make milestone payments as follows:

Upon first commercial sale of a product making

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

Moreover, under the PITT Agreement the Licensee

is required to make milestone payments as follows:

(in thousands)

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First commercial sale of product making use of licensed technology

The Company had no amounts owed pursuant to the PITT

Agreement as of March 31, 2023.

The Company had no amounts owed pursuant to the

PITT Agreement as of June 30, 2023.

The PITT Agreement expires upon the earlier of:

expiration of the last claim of the Patent Rights (as defined in the PITT Agreement) forming the subject matter of the PITT Agreement;

(i) expiration of the last claim of the Patent Rights (as defined in the PITT Agreement) forming the subject matter of the PITT Agreement;

or (ii) the date that is 20 years from the effective date of the agreement (June 26, 2037).

The Licensee may terminate the PITT Agreement upon

3 months prior written notice provided all payments under the license are current.

The Licensor may terminate the PITT Agreement upon

written notice if:

(i) Licensee defaults as to performance of material obligations which have not been cured within 60 days after receiving

written notice;

or (ii) Licensee ceases to carry out its business, becomes bankrupt or insolvent, applies for or consents to the appointment

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

The Licensee may terminate the PITT Agreement

upon 3 months prior written notice provided all payments under the license are current.

The Licensor may terminate the PITT Agreement

upon written notice if:

(i) Licensee defaults as to performance of material obligations which have not been cured within 60 days after

receiving written notice;

or (ii) Licensee ceases to carry out its business, becomes bankrupt or insolvent, applies for or consents to

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:

The following table presents the hierarchy

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

(in thousands)

March 31, 2023:

June 30, 2023:

Cash equivalents

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NOTE 6 – LEASE

The Company leases office space in Florida from a

The Company leases office space in Florida from

a third party.

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

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NOTE 7 – RELATED PARTY TRANSACTIONS

2023 and December 31, 2022, the Company owed UCL Consultants Limited (“UCL”) $ 9,000 in connection with medical research performed

on behalf of the Company.

During the three months ended March 31, 2023 and 2022, the Company paid UCL $ 104,000 and $ 32,000 , respectively,

for medical research performed on behalf of the Company.

At March 31, 2023 and December 31, 2022, the Company recorded $ 35,000

and $ 34,000 , respectively, of prepaid expenses – related party for payments made to UCL in advance

of services to be provided.

30, 2023 and December 31, 2022, the Company owed UCL Consultants Limited (“UCL”) $ 9,000 in connection with medical research

performed on behalf of the Company.

During the six months ended June 30, 2023 and 2022, the Company paid UCL $ 209,000 and $ 123,000 ,

respectively, for medical research performed on behalf of the Company.

At June 30, 2023 and December 31, 2022, the Company recorded $ 30,000

and $ 34,000 , respectively, of prepaid expenses – related party for payments made to UCL in

advance of services to be provided.

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

The Company’s Chief Scientific and Manufacturing

Officer is a professor at the University of London.

At March 31, 2023 and December 31, 2022, the Company

The Company’s Chief Scientific

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

At June 30, 2023 and December 31, 2022, the Company

owed AmplifyBio $ 0 in connection with medical research performed on behalf of the Company.

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

During the three months ended March 31, 2023 and 2022, the Company paid AmplifyBio

During the six months ended June 30, 2023 and 2022, the Company paid AmplifyBio

$ 6,000 and $ 138,000 , respectively, for pre-clinical research performed on behalf of the Company.

NOTE 8 – DEBT

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

Credit Fund VIII, L.P.

The Term Loan provided for a $ 15.0 million term loan, of which the Company borrowed the entire amount

on June 10, 2021, and is secured by the Company’s assets.

The term loan

and debt discount are as follows as of March 31, 2023:

On June 10, 2021, the Company

entered into a Loan and Security Agreement (the “Term Loan”) with Silicon Valley Bank and SVB Innovation Credit Fund VIII,

The Term Loan provided for a $ 15.0 million term loan, of which the Company borrowed the entire amount on June 10, 2021, and

is secured by the Company’s assets.

On June 7, 2023, the Company entered into an amendment to the Term Loan pursuant to which,

among other things, certain covenants to the Term Loan were amended.

loan and debt discount are as follows as of June 30, 2023:

(in thousands)

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Long-term debt

three months ended March 31, 2023 and 2022, the Company recognized interest expense of $ 612,000 and $ 435,000 , respectively, related

to the Term Loan.

three and six months ended June 30, 2023, the Company recognized interest expense of $ 631,000 and $ 1,243,000 , respectively, related to

the Term Loan.

For the three and six months ended June 30, 2022, the Company recognized interest expense of $ 465,000 and $ 900,000 , respectively,

related to the Term Loan.

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

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in effect as reported in The Wall Street Journal plus 4.50 % and (ii) 7.75 %.

At March 31, 2023, the interest rate was 12.5 %.

The Term Loan

includes a final payment fee equal to 6.5 % of the original principal amount borrowed payable on the earlier of the repayment of the

loan in full and the maturity date.

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

to a prepayment premium of (i) 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 March 31, 2023:

At June 30, 2023, the interest rate was 12.75 %.

Loan includes a final payment fee equal to 6.5 % of the original principal amount borrowed payable on the earlier of the repayment

of the loan in full and the maturity date.

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

subject to a prepayment premium of 1% of the original principal amount borrowed for any prepayment before the maturity date.

repayment of the $ 15.0 million Term loan principal is as follows as of June 30, 2023:

(in thousands, except years)

Upon the occurrence

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

breach of certain of its other covenants under the Term Loan, or the occurrence of a material adverse change, the Lenders will have the

right, among other remedies, to declare all principal and interest immediately due and payable, and will have the right to receive the

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

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

debt covenant violations during the three months ended March 31, 2023.

The Company was

in compliance with its debt covenants at March 31, 2023.

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

the Term Loan, the breach of certain of its other covenants under the Term Loan, or the occurrence of a material adverse change, the

Lenders will have the right, among other remedies, to declare all principal and interest immediately due and payable, and will have

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

prepayment fee.

The Company violated certain non-financial debt covenants as of December 31, 2022 and received a waiver from the

Lenders waiving these debt covenant violations during the six months ended June 30, 2023.

The Company was in compliance with its

debt covenants at June 30, 2023 and the filing date of these financial statements.

NOTE 9 – STOCKHOLDERS’ EQUITY

Common Stock – Issuance to Directors and

During the three months ended March 31, 2022, directors

Common Stock – Issuance to Directors

During the six months ended June 30, 2022, directors

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

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Stock options

During the three months ended March 31, 2023, the Company granted certain

employees and directors options to purchase 605,000 shares of its common stock pursuant to the 2017, 2019 and 2021 Incentive Stock Plans.

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

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

(1) discount rate of 3.99 % based on the applicable US Treasury bill rate (2) expected

life of 6.0 years, (3) expected volatility of approximately 91 % based on the trading history of similar companies, and (4) zero expected

On June 1, 2023, the Company’s shareholders approved an amendment

to the 2021 Incentive Stock Plan (“2021 Amended and Restated Incentive Stock Plan”) to increase the shares of the Company’s

common stock available for issuance thereunder to 4,000,000 shares.

During the six months ended June 30, 2023, the Company granted certain

employees and directors options to purchase 665,000 shares of its common stock pursuant to the 2017 and 2019 Incentive Stock Plans and

2021 Amended and Restated Incentive Stock Plan.

The stock options had a fair value of approximately $ 4.9 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 3.84 % –

3.99 % based on the applicable US Treasury bill rate (2) expected life of 6.0 – 6.25 years, (3) expected volatility of approximately

91 % based on the trading history of similar companies, and (4) zero expected dividends.

The following

table summarizes stock option activity during the three months ended March 31, 2023:

table summarizes stock option activity during the six months ended June 30, 2023:

(in thousands, except share and per share amounts)

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Options cancelled

Outstanding at March 31, 2023

Exercisable at March 31, 2023

During the three months ended March 31, 2023 and

2022, the Company recognized stock-based compensation expense of approximately $ 1.7 million and $ 1.5 million, respectively, related to

the vesting of stock options.

As of March 31, 2023, there was approximately $ 9.8 million of total unrecognized compensation cost related

to non-vested stock options which is expected to be recognized over a weighted-average period of 2.88 years.

Outstanding at June 30, 2023

Exercisable at June 30, 2023

During the three and six months ended June 30, 2023, the Company recognized

stock-based compensation expense of approximately $ 1.9 million and $ 3.6 million, respectively, related to the vesting of stock options.

During the three and six months ended June 30, 2022, the Company recognized stock-based compensation expense of approximately $ 1.9 million

and $ 3.4 million, respectively, related to the vesting of stock options.

As of June 30, 2023, there was approximately $ 12.7 million of

total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period

of 1.90 years.

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

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price of $ 14.05 .

At March 31, 2023, 45,386 of these warrants are outstanding and the intrinsic value of these warrants is $ 0 .

At June 30, 2023, 45,386 of these warrants are outstanding and the intrinsic value of these warrants is $ 0 .

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

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

At March 31, 2023, 28,688 of these warrants are outstanding and the

intrinsic value is $ 0 .

During the three months ended March 31, 2022, a third

At June 30, 2023, 28,688 of these warrants are outstanding and the intrinsic

value is $ 0 .

During the six months ended June 30, 2022, a third

party exercised 19,792 warrants for cash proceeds of approximately $ 30,000 .

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The following summarizes the components of stock-based

compensation expense in the consolidated statements of operations for the three months ended March 31, 2023 and 2022 respectively:

compensation expense in the consolidated statements of operations for the six months ended June 30, 2023 and 2022 respectively:

(in thousands)

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NOTE 10 – COLLABORATIVE AGREEMENTS

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 XPro1595 in

patients with treatment resistant depression.

As of March 31, 2023, the Company has not received any proceeds pursuant to this 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 XPro1595

in patients with treatment resistant depression.

As of June 30, 2023, the Company has not received any proceeds pursuant to this grant.

NOTE 11 – COMMITMENTS

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Long-term operating lease liabilities

During the three months ended March 31, 2023 and 2022,

During the three and six months ended June 30,

2023, the Company recognized $ 39,000 and $ 82,000 , respectively, in operating lease expense, which is included in general and administrative

expenses in the Company’s consolidated statement of operations.

During the three and six months ended June 30, 2022, the Company recognized

$ 54,000 and $ 108,000 , respectively, in operating lease expense, which is included in general and administrative expenses in the Company’s

consolidated statement of operations

is subject to claims and suits that arise from time to time in the ordinary course of our business.

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change in the future.

NOTE 12 – SUBSEQUENT EVENTS

2023, the Company sold 75,697 shares of its common stock at an average price of $ 10.56 per share under the 2021 ATM program.

The aggregate net proceeds were approximately $ 775,000 after offering expenses.

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

What changed 10-Q

Item 1. Financial Statements