What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-07 compared with 2023-05-03 · 240 added, 202 removed, 268 unchanged (62% of the section changed)

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Description of Business

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

The Company’s drugs are in

clinical trials and have not been approved by a regulatory authority.

are a clinical-stage immunology company focused on developing drugs that may reprogram the patient’s innate immune system to treat

We believe this may 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’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.

TNF platform (“DN-TNF”, “XPro™”, “XPro1595™” or “ pegipanermin and pSar DN-TNF” )

and a Natural Killer (“NK”, or “INKmune™”) platform.

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

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of infection, cancer and demyelinating neurologic diseases, respectively;

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

these safety problems are due to off-target effects on inhibiting

The NK platform targets the dysfunctional natural killer cells in patients with cancer.

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to treat NK sensitive hematologic malignancies and solid tumors.

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).

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.

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

for the treatment of DMD.

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 expression 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 endpoint.

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

INB03™ or XPro™, respectively, but it is the same drug

For DMD, the company is exploring pSar DN-TNF compounds optimized for the treatment of DMD.

The pSar DN-TNF compound has the

same mechanism of action, a different half-life extender and 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 expression

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.

Recently, the Company has shown the combination for INB03 with trastuzumab-deruxtecan (Enhertu),

decreases tumor growth in the multi-resistant JIMT-1 tumor model.

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

endpoint – a decrease in inflammatory cytokines in the blood.

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

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

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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.

ADi is the term used to delineate patients with AD with biomarkers of inflammation.

to be more than 40% of patients with AD.

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 is a validated measure of neuroinflammation in the brain.

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

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

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

changes in novel white matter MRI biomarkers.

XPro significantly decreases biomarkers of neurodegeneration as measured by changes

in the CSF proteome including neurofilament light chain, phospho Tau 217 and VILIP-1;

decreases of 84%, 46% and 91% respectively after

3 months of therapy.

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

222% increase in Contactin 2 and a 56% decrease neurogranin, changes that contribute to improved synaptic function.

and may decrease in number or become disconnected.

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.

XPro targets activated microglia and astrocytes of the brain that produce sTNF that promotes nerve cell loss and synaptic dysfunction,

key elements in the development of dementia.

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

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

The open label, dose escalation trial

was designed to demonstrate that XPro can safely decrease neuroinflammation in patients with ADi.

ADi is the term used to delineate patients

with AD with biomarkers of inflammation.

This appears to be more than 40% of patients with AD.

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 is a validated measure of neuroinflammation in the

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

that XPro can decrease neuroinflammation in patients with ADi.

We also studied downstream benefits of decreasing neuroinflammation by

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

XPro significantly decreases biomarkers

of neurodegeneration as measured by changes in the CSF proteome including neurofilament light chain, phospho Tau 217 and VILIP-1;

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

Three months of XPro therapy improved measures of synaptic function,

as measured in the CSF proteome including a 222% increase in Contactin 2 and a 56% decrease neurogranin, changes that contribute to improved

synaptic function.

successful completion of the Phase I trial in AD has informed the design of a blinded randomized, placebo-controlled Phase II trials in

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and/or at least one allele of ApoE4.

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

The primary endpoint will be Early/ild 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.

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

completed an extensive series of studies in murine models of DMD.

The data shows DN-TNF decreases muscle fiber inflammation and degeneration,

increases muscle fiber regeneration in an acute model of DMD.

Cardiac function was studied using echocardiography after 30 weeks of treatment.

Company completed an extensive series of studies in murine models of DMD.

The data shows DN-TNF decreases muscle fiber inflammation and

degeneration, increases muscle fiber regeneration in an acute model of DMD.

Cardiac function was studied using echocardiography after

30 weeks of treatment.

Cardiac function did not change compared to placebo treated or prednisone treated animals.

These data strongly suggest DN-TNF may be a

therapy for treatment of patients with DMD that may have unique biologic attributes, muscle fiber regeneration, without corticosteroid

associated metabolic toxicity – insulin resistance, diabetes, obesity, hirsutism, short stature and muscle weakness.

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

These data strongly

suggest DN-TNF may be a therapy for treatment of patients with DMD that may have unique biologic attributes, muscle fiber regeneration,

without corticosteroid associated metabolic toxicity – insulin resistance, diabetes, obesity, hirsutism, short stature and muscle

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

INKmune interacts with the patient’s

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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/AML, a form of leukemia.

Two patients have been treated in the Phase I trial for MDS and three patients have been treated

compassionately in AML.

In the five 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/II trial of INKmune in a metastatic

castration resistant prostate cancer (“mCRPC”) tumor during 2024.

An IND for a Phase I/II trial in men with mCRPC was submitted late March

lymphoma, lung, ovary, breast, renal, nasopharyngeal 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.

Two patients have been treated in the Phase I trial for MDS and three patients have

been treated compassionately in AML.

In the five 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.

Company will continue to enroll patients in the Phase I trial.

The Company intends to initiate a separate Phase I/II trial of INKmune

in a metastatic castration resistant prostate cancer (“mCRPC”) tumor during 2024.

An IND for a Phase I/II trial in men with

mCRPC was opened in May 2023.

The trial will treat up to 30 patients with mCRPC in a open label trial.

The trial has four goals:

i) demonstrate safety of INKmune

in men with mCRPC;

ii) determine what dose of INKmune should be used in a blinded randomized Phase II trial on men with mCRPC;

iii) determine

tumor response using traditional biomarkers of mCRPC including blood PSA level and iv) use exploratory biomarkers of tumor response including

circulating tumor DNA and PET PMSA imaging studies.

The first patients should be treated 9 months after the IND is open.

Since our inception in 2015,

we have devoted substantially all 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

We have incurred net losses in each year since our inception and, as of March 31, 2023, we had an accumulated deficit of approximately

$97.6 million.

Our net losses were $6,536,000 and $6,903,000 for the three months ended March 31, 2023 and 2022, respectively.

Substantially

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

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

We anticipate that we will continue to generate losses

for the foreseeable future.

i) demonstrate

safety of INKmune in men with mCRPC;

ii) determine what dose of INKmune should be used in a blinded randomized Phase II trial on men with

iii) determine tumor response using traditional biomarkers of mCRPC including blood PSA level and iv) use exploratory biomarkers

of tumor response including circulating tumor DNA and PET PMSA imaging studies.

The first patients should be treated 9 months after the

Since our inception in 2015, we have devoted substantially all 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 June 30, 2023, we had an accumulated deficit of approximately $104.1 million.

Our net losses were $13,037,000 and $13,741,000

for the six months ended June 30, 2023 and 2022, respectively.

Substantially all of our net losses resulted from costs incurred in connection

with our research and development programs and from general and administrative costs associated with our operations, including stock-based

compensation.

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

The Company is subject to

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financial condition, liquidity or results of operations is uncertain.

We classify our operating expenses

into two categories:

We classify our operating

expenses into two categories:

research and development;

and general and administrative expenses.

Personnel costs including salaries, benefits and

stock-based compensation expense comprise a significant component of our research and development and general and administrative expense

Personnel costs including salaries, benefits

and stock-based compensation expense comprise a significant component of our research and development and general and administrative expense

We qualify as an “emerging

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employee-related expenses, including salaries, benefits, travel and stock-based compensation.

The following table summarizes our research

and development expenses by product candidate for the periods indicated (in thousands):

The following table summarizes

our research and development expenses by product candidate for the periods indicated (in thousands):

Three Months Ended

Six Months Ended

External Costs

DN-TNF - Alzheimer’s disease

INKmune – High Risk MDS/AML

INKmune - High Risk MDS/AML & Prostate cancer

Preclinical and other programs

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development of product candidates.

The costs of clinical trials may

vary significantly over the life of a project owing to, but not limited to, the following:

The costs of clinical trials

may vary significantly over the life of a project owing to, but not limited to, the following:

per patient trial costs;

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the cost of manufacturing, finishing, labelling and storage drug used in the clinical trial.

We do not expect any of our product

candidates to be commercially available for at least the next several years, if ever.

We expect to continue to incur significant expenses

and increasing operating losses for the foreseeable future, which may fluctuate significantly from quarter-to-quarter and year-to-year.

We do not expect any of our

product candidates to be commercially available for at least the next several years, if ever.

We expect to continue to incur significant

expenses and increasing operating losses for the foreseeable future, which may fluctuate significantly from quarter-to-quarter and year-to-year.

We anticipate that our expenses will increase substantially as we:

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General and Administrative Expenses

General and administrative expenses

consist principally of payroll and personnel expenses, including stock-based compensation;

professional fees for legal, consulting, accounting

and tax services;

General and administrative

expenses consist principally of payroll and personnel expenses, including stock-based compensation;

professional fees for legal, consulting,

accounting and tax services;

overhead, including rent and utilities;

and other general operating expenses not otherwise classified as research and

development expenses.

and other general operating expenses not otherwise classified as

research and development expenses.

Other income (expense)

Other income (expense consists)

primarily of interest expense incurred on debt and interest income on investments in money market accounts.

income (expense consists) primarily of interest expense incurred on debt and interest income on investments in money market accounts.

Results of Operations

Comparison of the Three Months Ended March 31,

Comparison of the Three Months Ended June

30, 2023 and 2022

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During the three months ended

March 31, 2023 and 2022, the Company sold MSC’s to one third-party and recognized $38,000 and $163,000, respectively, of revenues.

June 30, 2023 and 2022, the Company sold MSC’s to one third-party and recognized $46,000 and $16,000, respectively, of revenues.

General and Administrative

General and administrative expenses were approximately $2.3 million

during the three months ended March 31, 2023 and 2022.

General and administrative

expenses were approximately $2.3 and $2.2 million during the three months ended June 30, 2023 and 2022, respectively.

The $0.1 million

increase in general and administrative expenses was due to higher consulting expense in 2023.

Research and Development

Research and development expenses were approximately $4.1 million during

the three months ended March 31, 2023, compared to approximately $4.3 million during the three months ended March 31, 2022.

in research and development expenses during the three months ending March 31, 2023 compared to the three months ending March 31, 2022

is largely due to incurring $0.3 million less expenses with our Alzheimer’s clinical program and $0.4 million less related to our

preclinical and other programs, partially offset by $0.2 million higher INKmune costs pursuant to our high risk MDS/AML clinical program,

$0.1 million higher salaries and stock-based compensation and $0.1 million less accrued research and development rebates.

the three months ended June 30, 2023, compared to approximately $4.2 million during the three months ended June 30, 2022.

in research and development expenses during the three months ending June 30, 2023 compared to the three months ending June 30, 2022

is largely due to incurring $0.5 million less expenses related to our preclinical and other programs, partially offset by $0.3 million

higher INKmune costs pursuant to our high risk MDS/AML and prostate cancer clinical programs, $0.2 million higher salaries and stock-based

compensation.

Other Expense, net

The Company’s other expense, net is lower during the three months

ended March 31, 2023, due to the Company earning interest income on its money market accounts, which partially offsets the interest expense

incurred on our debt.

The Company’s other

expense, net is lower during the three months ended June 30, 2023, due to the Company earning interest income on its money market accounts,

which partially offsets the interest expense incurred on our debt.

Comparison of the Six Months Ended

June 30, 2023 and 2022

The following table summarizes

our results of operations for the periods indicated:

Six Months Ended

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other expense, net

During the six months ended

June 30, 2023, and 2022, the Company sold MSC’s to one third-party and recognized $84,000 and $179,000, respectively, of revenues.

General and Administrative

General and administrative expenses were approximately $4.6 million

and $4.5 million during the six months ended June 30, 2023 and 2022, respectively.

The $0.1 million increase in general and administrative

expenses was due to higher stock-based compensation expense in 2023.

Research and Development

Research and development expenses were approximately $8.3 million and

$8.5 million during the six months ended June 30, 2023 and 2022, respectively.

The decrease in research and development expenses

during the six months ending June 30, 2023 compared to the six months ending June 30, 2022 is largely due to incurring $0.3 million less

expenses with our Alzheimer’s clinical program and $0.9 million less related to our preclinical and other programs, partially offset

by $0.5 million higher INKmune costs pursuant to our high risk MDS/AML and prostate cancer clinical programs, $0.3 million higher salaries

and stock-based compensation.

Other Expense, net

The Company’s other

expense, net is lower during the six months ended June 30, 2023, due to the Company earning interest income on its money market accounts,

which partially offsets the interest expense incurred on our debt.

Liquidity and Capital Resources

Liquidity is the ability of a

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

We incurred a net loss of $6.5 million and $6.9 million for the three

months ended March 31, 2023 and 2022, respectively.

Net cash used in operating activities was $1.1 million and $8.9 million for the three

months ended March 31, 2023 and 2022, respectively.

Liquidity is the ability of

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

We incurred a net loss of $13.0 million and $13.7 million for the six

months ended June 30, 2023 and 2022, respectively.

Net cash used in operating activities was $4.3 million and $13.6 million for the six

months ended June 30, 2023 and 2022, respectively.

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

sales of our common stock.

As of March 31, 2023, we had cash and cash equivalents of approximately $51.0 million.

As of June 30, 2023, we had cash and cash equivalents of approximately $47.8 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 development.

Our primary uses of capital are,

and we expect will continue to be, third-party clinical and preclinical research and development services, compensation and related expenses,

professional fees, patent and other regulatory expenses and general overhead costs.

We believe our use of CROs provides us with flexibility

in managing our spending.

The Company incurs various expenses

in Australia and the United Kingdom.

Our primary uses of capital

are, and we expect will continue to be, third-party clinical and preclinical research and development services, compensation and related

expenses, professional fees, patent and other regulatory expenses and general overhead costs.

We believe our use of CROs provides us with

flexibility in managing our spending.

The Company incurs various

expenses in Australia and the United Kingdom.

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

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

As of March 31, 2023, the

As of June 30, 2023, the

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

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make some activities more time-consuming and costly.

As of March 31, 2023, the Company

had an accumulated deficit of $97.6 million and working capital of $46.6 million.

Losses have principally occurred as a result of stock-based

compensation expense as well as the substantial resources required for research and development of the Company’s products which

included the general and administrative expenses associated with its organization and product development, as well as the lack of sources

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

As of March 31, 2023, we had cash and cash equivalents

of approximately $51.0 million.

We believe our cash and cash equivalents will be sufficient to fund our operations for at least the next

12 months following the filing date of this Quarterly Report on Form 10-Q based on the balance of cash available as of March 31, 2023.

We anticipate, however, that we will continue to generate losses for the foreseeable future, and

we expect the losses to increase materially as we continue the development of, and seek regulatory approvals for, our drug candidates,

and seek to commercialize any drugs for which we receive regulatory approval.

We will need to raise additional capital to fund our operations

and complete our ongoing and planned clinical trials.

Although we expect to finance future cash needs through public equity or debt offerings,

no assurance can be given that any future funding will be available to us, or if available that such proposed funding will be on terms

that are acceptable to us.

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

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

market drug candidates that we would otherwise prefer to develop and market ourselves.

Common Stock – Issuance to Directors and

During the three months ended March 31, 2022, certain directors and

officers of the Company purchased 82,900 shares of the Company’s common stock for $0.7 million.

As of June 30, 2023, the Company had an accumulated deficit of $104.1

million and working capital of $39.6 million.

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

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

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

products are commercialized.

As of June 30, 2023, we had cash and cash equivalents of approximately $47.8 million.

We believe our cash

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

Report on Form 10-Q based on the balance of cash available as of June 30, 2023.

We anticipate, however,

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

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

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

we expect to finance future cash needs through public equity or debt offerings, no assurance can be given that any future funding will

be available to us, or if available that such proposed funding will be on terms that are acceptable to us.

If we are unable to raise additional

capital in sufficient amounts or on terms acceptable to us, we may be required to delay, limit, reduce or terminate our drug development

or future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and

market ourselves.

Common Stock – At the Market Offering

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

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

Common Stock – Issuance to Directors

During the six months ended

June 30, 2022, certain directors and officers of the Company purchased 82,900 shares of the Company’s common stock for $0.7 million.

The following table summarizes

our cash flows for the periods indicated:

Three Months Ended

Six Months Ended

(in thousands)

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Operating Activities

Our cash used in operating activities

was primarily driven by our net loss.

Operating activities used approximately

$1.1 million of cash during the three months ended March 31, 2023, resulting from our loss of $6.5 million, partially offset by changes

in our net operating assets and liabilities of $3.6 million and non-cash stock-based compensation of $1.7 million.

The change in our net

operating assets and liabilities was mainly due to a decrease in research and development tax credit receivable of approximately $6.3

million and an increase in prepaid expenses of $0.4 million, partially offset by a decrease in accounts payable and accrued liabilities

of $3.1 million.

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

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

The change in our net operating assets and liabilities was mainly due to an increase in prepaid expenses of approximately $2.4

million, and a decrease in accounts payable and accrued liabilities of $1.2 million.

Our cash used in operating

activities was primarily driven by our net loss.

Operating activities used approximately $4.3 million of cash during

the six months ended June 30, 2023, resulting from our loss of $13.0 million, partially offset by changes in our net operating assets

and liabilities of $5.0 million and non-cash stock-based compensation of $3.6 million.

The change in our net operating assets and liabilities

was mainly due to a decrease in research and development tax credit receivable of $6.2 million and a decrease in prepaid expenses of $1.3

million, partially offset by a decrease in accounts payable and accrued liabilities of $2.8 million.

Operating activities used

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

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

in our net operating assets and liabilities was mainly due to an increase in prepaid expenses of approximately $1.9 million, and a decrease

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

Financing Activities

During the three months ended March 31, 2022, the Company sold 82,900

shares of its common stock to certain officers and directors for approximately $0.7 million.

During the six months ended

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

Critical Accounting Policies

Our discussion and analysis of our financial condition and results

of operations is based upon our unaudited consolidated financial statements, which have been prepared in accordance with generally accepted

accounting principles in the United States, or GAAP.

The preparation of these financial statements requires us to make estimates and judgments

that affect the reported amounts of assets, liabilities and expenses.

Actual results may differ from these estimates.

Our critical accounting

policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and there have been

no material changes during the three months ended March 31, 2023.

Our discussion and analysis

of our financial condition and results of operations is based upon our unaudited consolidated financial statements, which have been prepared

in accordance with generally accepted accounting principles in the United States, or GAAP.

The preparation of these financial statements

requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses.

Actual results may differ

from these estimates.

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

ended December 31, 2022, and there have been no material changes during the six months ended June 30, 2023.

Quantitative and Qualitative Disclosures

About Market Risk

Pursuant to Item 305(e) of Regulation

S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting

company,” as defined by Rule 229.10(f)(1).

Pursuant to Item 305(e) of

Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller

reporting company,” as defined by Rule 229.10(f)(1).

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis