What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-01 compared with 2023-08-07 · 402 added, 403 removed, 105 unchanged (88% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains certain

forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

For this purpose, any statements

contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements.

Without limiting

the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,”

“estimate” or “continue” or comparable terminology are intended to identify forward-looking statements.

statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety

of factors, many of which are not within our control.

These factors include but are not limited to economic conditions generally and in

the industries in which we may participate;

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking

Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking

Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,”

“anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking

These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending

on a variety of factors, many of which are not within our control.

These factors include but are not limited to economic conditions generally

and in the industries in which we may participate;

competition within our chosen industry, including competition from much larger competitors;

technological advances and failure to successfully develop business relationships.

Description of Business

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

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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 pSar DN-TNF” )

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

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

without affecting trans-membrane TNF (“tmTNF”) or TNF receptors -TNFR1 and TNFR2.

This unique biologic mechanism differentiates

the DN-TNF drugs from currently approved non-selective TNF inhibitors that inhibit both sTNF and tmTNF.

Protecting the function of tmTNF

and TNF receptors while neutralizing the function of sTNF is a potent anti-inflammatory strategy that does not cause immunosuppression

or demyelination which occur in the currently approved non-selective TNF inhibitors.

Currently approved non-selective TNF inhibitors treat

autoimmune disease, but are contraindicated in patients with infection, cancer and neurologic diseases because they increase the risk

of infection, cancer and demyelinating neurologic diseases, respectively;

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

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

NK cells are part of the normal immunologic

response to cancer with important roles in immunosurveillance to prevent cancer and in preventing relapse by eliminating residual disease.

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

are still in the clinical trial stage 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 pSar DN-TNF” ) and a Natural Killer (“NK”, or “INKmune™”) platform.

The DN-TNF platform neutralizes

soluble tumor necrosis factor (“sTNF”) without affecting trans-membrane TNF (“tmTNF”) or TNF receptors -TNFR1

This unique biologic mechanism differentiates the DN-TNF drugs from currently approved non-selective TNF inhibitors that inhibit

both sTNF and tmTNF.

Protecting the function of tmTNF and TNF receptors while neutralizing the function of sTNF is a potentially potent

anti-inflammatory strategy that does not cause immunosuppression or demyelination which occur in the currently approved non-selective

TNF inhibitors.

Currently approved non-selective TNF inhibitors treat autoimmune disease, but are contraindicated in patients with infection,

cancer and neurologic diseases because they increase the risk of infection, cancer and demyelinating neurologic diseases, respectively;

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

The NK platform targets the dysfunctional natural killer cells

in patients with cancer.

NK cells are part of the normal immunologic response to cancer with important roles in immunosurveillance to

prevent cancer and in preventing relapse by eliminating residual disease.

Residual disease is the cancer left behind after therapy is

Residual disease can grow to cause relapse.

The mechanism by which

INKmune improves the ability of the patient’s NK cells to kill their cancer is complex.

The NK cells of cancer patients lose the

ability to bind and kill cancer cells.

A measure of NK cell binding to cancer cells is avidity.

The higher the avidity, the greater the

bond between the NK cell to cancer cell and thus the greater NK killing of cancer cells.

INKmune increases NK avidity and further improves

mitochondrial function and upregulates nutrient receptors.

These metabolic changes may help the INKmune primed NK cell to function in

the hostile tumor microenvironment and persist much longer in the patient.

These mechanisms improve the ability of INKmune primed NK cells

to overcome the immune evasion of the patient’s cancer cells.

We believe INKmune is best used to eliminate residual disease after

the patient has completed other cancer therapies.

Both the DN-TNF platform and the INKmune platform can be used to treat multiple diseases.

The DN-TNF platform will be used as an immunotherapy for the treatment of cancer and neurodegenerative disease.

INKmune is being developed

to treat NK sensitive hematologic malignancies and solid tumors.

We believe our DN-TNF platform can be used as a cancer therapy to reduce

resistance in immunotherapy and as a CNS (“central nervous system”) therapy to target glial activation to prevent progression

of Alzheimer’s disease (“AD”), and to target neuroinflammation in treatment resistant depression (“TRD”)

and as a drug to prevent muscle degeneration, prevent fibrosis and promote muscle regeneration in Duchene muscular dystrophy (“DMD”).

The mechanism by which INKmune may improve the ability of the patient’s NK

cells to kill their cancer is complex.

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

A measure of NK

cell binding to cancer cells is avidity.

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

greater NK killing of cancer cells.

INKmune increases NK avidity and further improves mitochondrial function and upregulates nutrient

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

much longer in the patient.

These mechanisms thus may improve the ability of INKmune primed NK cells to overcome the immune evasion of

the patient’s cancer cells.

We believe INKmune would best be used to eliminate residual disease after the patient has completed

other cancer therapies.

Both the DN-TNF platform and the INKmune platform have the potential to be used to treat multiple diseases.

DN-TNF platform is being developed to be used as an immunotherapy for the treatment of cancer and neurodegenerative disease.

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

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”), 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

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

or XPro™, respectively, but it is the same drug product.

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

developing 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 may change

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 shown the combination of INB03 with trastuzumab-deruxtecan (Enhertu), decreases tumor growth in the multi-resistant JIMT-1

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 planned Phase II trial by demonstrating that INB03 was safe and

well tolerated, defining the dose of INB03 to carry into Phase II trials, and demonstrating a pharmacodynamic endpoint – a decrease

in inflammatory cytokines in the blood.

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

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

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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

White matter free water is a validated measure of neuroinflammation in

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 decreased 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

of 84%, 46% and 91% respectively were observed 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 of 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 trial in

patients with early ADi.

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

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

cognitive decline.

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

respectively).

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

with XPro will affect cognitive decline.

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

Two hundred and ten patients are being enrolled in a 2:1

ratio (XPro vs placebo).

Two hundred and ten patients will

be enrolled in a 2:1 ratio (XPro vs placebo).

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

An enrichment strategy identical

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

Patients will need to have

one or more enrichment criteria:

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

and/or at least one allele of ApoE4.

An enrichment

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

will need to have one or more enrichment criteria:

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

sedimentation and/or at least one allele of ApoE4.

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.

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

All patients will be offered

to stay on therapy for at least 12 months in an extension trial.

Clinical and biomarker data will be collected during the extension trial.

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

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

Clinical and biomarker data will be collected

during the extension trial.

therapy for TRD is a large unmet need.

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was explored in a small open label clinical trial by Prof.

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

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

Andrew Miller, MD of Emory University.

This study involved patients with elevated

TNF levels who were treated with infliximab for their depression (Miller, 2011).

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

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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.

The data shows DN-TNF decreased muscle fiber inflammation and

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

Cardiac function was studied using echocardiography after

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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

without corticosteroid associated metabolic toxicity such as 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

NK cells to convert them from inert resting NK cells into memory-like NK cells that kill the patient’s cancer cells.

a replication incompetent proprietary cell line that is given to the patient after determining that i) the patient has adequate NK cells

in their circulation and ii) those NK cells are functional when exposed to INKmune in vitro.

INKmune is designed to be given to patients

after their immune system has recovered after cytotoxic chemotherapy to target the residual disease the remains after treatment with cytotoxic

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

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.

NK cells to convert them from inert resting NK cells into memory-like NK cells that attack the patient’s cancer cells.

is a replication incompetent proprietary cell line that is given to the patient after determining that i) the patient has adequate NK

cells in their circulation and ii) those NK cells are functional when exposed to INKmune in vitro.

INKmune is designed to be given to

patients after their immune system has recovered after cytotoxic chemotherapy to target the residual disease the remains after treatment

with cytotoxic therapy.

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

multiple myeloma, lymphoma, lung, ovary, breast, renal, 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 showed a favorable safety profile,

produced memory-like NK cells that killed cancer in vitro, and promoted development of cancer killing memory-like NK cells that were

found in the patient’s circulation after 4 months.

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

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 filed in May 2023.

The trial will treat up to 30 patients with

mCRPC in an 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

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.

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 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

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

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

business is highly uncertain and difficult to predict.

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

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

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.

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

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

The severity of the impact

of the COVID-19 pandemic on the Company’s business will depend on several factors, including, but not limited to, the duration and

severity of the pandemic and the extent and severity of the impact on the Company’s service providers, suppliers, contract research

organizations (“CROs”) and the Company’s clinical trials, all of which are uncertain and cannot be predicted.

the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may materially impact the Company’s

financial condition, liquidity or results of operations is uncertain.

We classify our operating

expenses into two categories:

We have incurred net losses in each

year since our inception and, as of September 30, 2023, we had an accumulated deficit of approximately $112.6 million.

Our net losses

were $21,600,000 and $21,466,000 for the nine months ended September 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 substantial losses for the

foreseeable future.

may be significant uncertainty resulting from the impact of other geopolitical and macroeconomic factors, including the ongoing COVID-19

(coronavirus) pandemic, inflation, supply chain issues, rising interest rates, future bank failures, a potential US government shutdown,

and the impact of the conflicts in Russia/Ukraine and Israel, in addition to geopolitical, trade and investment tensions between the

United States and China.

Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited

to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance

with government regulations and the need to obtain additional financing to fund operations.

Product candidates currently under development

will require significant additional research and development efforts, including extensive preclinical studies, clinical trials and regulatory

approval prior to commercialization.

These efforts require significant amounts of additional resources, adequate personnel, infrastructure

and extensive compliance and reporting.

Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved

can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the

Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory

approval or that any approved products will be commercially viable.

Even if the Company’s product development efforts are successful,

it is uncertain when, if ever, the Company will generate any revenue from any of its products.

The Company operates in an environment

of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies.

Company relies and expects to continue to rely on a small number of vendors to manufacture supplies and materials for its use in the

clinical trial programs.

These programs could be adversely affected by a significant interruption in these manufacturing services.

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

We qualify as an “emerging

growth company” under the JOBS Act.

As an emerging growth company, we may take advantage of specified reduced disclosure and other

requirements that are otherwise applicable generally to public companies.

Personnel costs

including salaries, benefits and stock-based compensation expense comprise a significant component of our research and development and

general and administrative expense categories.

qualify as an “emerging growth company” under the JOBS Act.

As an emerging growth company, we may take advantage of specified

reduced disclosure and other requirements that are otherwise applicable generally to public companies.

These provisions include:

only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

reduced disclosure about our executive compensation arrangements;

no non-binding advisory votes on executive compensation or golden parachute arrangements;

exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting;

delaying the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

We have elected to take advantage

of the above-referenced exemptions and we may take advantage of these exemptions for up to five years or such earlier time that we are

no longer an emerging growth company.

We would cease to be an emerging growth company if we have more than $1.235 billion in annual revenues,

we have more than $700 million in market value of our stock held by non-affiliates, or we issue more than $1 billion of non-convertible

debt over a three-year period.

We may choose to take advantage of some but not all of these reduced burdens.

Research and Development

Research and development expense

consists of expenses incurred while performing research and development activities to discover and develop our product candidates.

includes conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings

for product candidates.

only two years of audited

financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

reduced disclosure about

our executive compensation arrangements;

no non-binding advisory

votes on executive compensation or golden parachute arrangements;

exemption from the auditor

attestation requirement in the assessment of our internal control over financial reporting;

delaying the adoption of

new or revised accounting standards that have different effective dates for public and private companies until those standards apply

to private companies.

have elected to take advantage of the above-referenced exemptions and we may take advantage of these exemptions for up to five years

or such earlier time that we are no longer an emerging growth company.

We would cease to be an emerging growth company if we have more

than $1.235 billion in annual revenues, we have more than $700 million in market value of our stock held by non-affiliates, or we issue

more than $1 billion of non-convertible debt over a three-year period.

We may choose to take advantage of some but not all of these reduced

and Development

and development expense consists of expenses incurred while performing research and development activities to discover and develop our

product candidates.

This includes conducting preclinical studies and clinical trials, manufacturing development efforts and activities

related to regulatory filings for product candidates.

We recognize research and development expenses as they are incurred.

Our research and development expense primarily

clinical trial and regulatory-related costs;

expenses incurred under agreements with investigative sites and consultants that conduct our clinical trials;

manufacturing and testing costs and related supplies and materials;

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):

Three Months Ended

Six Months Ended

and development expense primarily consist of:

clinical trial and regulatory-related

expenses incurred under

agreements with investigative sites and consultants that conduct our clinical trials;

manufacturing and testing

costs and related supplies and materials;

employee-related expenses,

including salaries, benefits, travel and stock-based compensation.

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

External Costs

DN-TNF - Alzheimer’s disease

INKmune - High Risk MDS/AML & Prostate cancer

DN-TNF - Alzheimer’s

INKmune - High Risk MDS/AML

& Prostate cancer

Preclinical and other programs

Accrued research and development rebate

research and development rebate

Total external costs

Internal costs

We typically use our employee

resources across our development programs.

We track outsourced development costs by product candidate or development program, but we do

not allocate internal costs personnel costs including salaries and stock-based compensation to specific product candidates or development

typically use our employee resources across our development programs.

We track outsourced development costs by product candidate or development

program, but we do not allocate internal costs personnel costs including salaries and stock-based compensation to specific product candidates

or development programs.

participate, through our wholly owned subsidiary in Australia, in the Australian research and development tax incentive program, such

2 unchanged sentences

The Australian research and development tax incentive is recognized

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

consideration can be reliably measured.

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

the consideration can be reliably measured.

participate, through our wholly owned subsidiary in the United Kingdom, in the research and development program provided by the United

4 unchanged sentences

has been incurred and the amount of the consideration can be reliably measured.

Substantially all our research

and development expenses to date have been incurred in connection with our current and future product candidates.

We expect our research

and development expenses to increase significantly for the foreseeable future as we advance an increased number of our product candidates

through clinical development, including the conduct of our planned clinical trials and manufacturing drug to be used in those clinical

Substantially

all our research and development expenses to date have been incurred in connection with our current and future product candidates.

expect our research and development expenses to increase significantly for the foreseeable future as we advance an increased number of

our product candidates through clinical development, including the conduct of our planned clinical trials and manufacturing drug to be

used in those clinical trials.

The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming.

The successful

development of product candidates is highly uncertain.

At this time, we cannot reasonably estimate the nature, timing or costs required

to complete the remaining development of any product candidates.

This is due to the numerous risks and uncertainties associated with the

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 successful development of product candidates is highly uncertain.

At this time, we cannot reasonably estimate the nature, timing

or costs required to complete the remaining development of any product candidates.

This is due to the numerous risks and uncertainties

associated with the development of product candidates.

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;

the number of sites included in the clinical trials;

the countries in which the clinical trials are conducted;

the length of time required to enroll eligible patients;

the number of patients that participate in the clinical trials;

the number of doses that patients receive;

the cost of comparative agents used in clinical trials;

the drop-out or discontinuation rates of patients;

potential additional safety monitoring or other studies requested by regulatory agencies;

the duration of patient follow-up;

the efficacy and safety profile of the product candidate;

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.

the number of sites included

in the clinical trials;

the countries in which

the clinical trials are conducted;

the length of time required

to enroll eligible patients;

the number of patients

that participate in the clinical trials;

the number of doses that

patients receive;

the cost of comparative

agents used in clinical trials;

the drop-out or discontinuation

rates of patients;

potential additional safety

monitoring or other studies requested by regulatory agencies;

the duration of patient

the efficacy and safety

profile of the product candidate;

the cost of manufacturing,

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

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:

continue research and development, including preclinical and clinical development of our existing product candidates;

potentially seek regulatory approval for our product candidates;

seek to discover and develop additional product candidates;

establish a commercialization infrastructure and scale up our manufacturing and distribution capabilities to commercialize any of our product candidates for which we may obtain regulatory approval;

seek to comply with regulatory standards and laws;

maintain, leverage and expand our intellectual property portfolio;

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

add operational, financial and management information systems and personnel;

incur additional legal, accounting and other expenses in operating as a public company.

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;

continue research and development,

including preclinical and clinical development of our existing product candidates;

potentially seek regulatory

approval for our product candidates;

seek to discover and develop

additional product candidates;

establish a commercialization

infrastructure and scale up our manufacturing and distribution capabilities to commercialize any of our product candidates for which

we may obtain regulatory approval;

seek to comply with regulatory

standards and laws;

maintain, leverage and

expand our intellectual property portfolio;

hire clinical, manufacturing,

scientific and other personnel to support our product candidates development and future commercialization efforts;

add operational, financial

and management information systems and personnel;

incur additional legal,

accounting and other expenses in operating as a public company.

and Administrative Expenses

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.

Other income (expense)

and other general operating expenses not

otherwise classified as research and development expenses.

income (expense)

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 June

30, 2023 and 2022

The following table summarizes

our results of operations for the periods indicated:

Three Months Ended

of Operations

of the Three Months Ended September 30, 2023 and 2022

following table summarizes our results of operations for the periods indicated:

September 30,

(in thousands)

5 unchanged sentences

Other expense, net

During the three months ended

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 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 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 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)

the three months ended September 30, 2023 and 2022, the Company sold MSC’s to one third-party and recognized $43,000 and $98,000,

respectively, of revenues.

and Administrative

and administrative expenses were approximately $2.6 and $2.4 million during the three months ended September 30, 2023 and 2022, respectively.

The $0.2 million increase in general and administrative expenses was due to higher consulting expense in 2023.

and Development

and development expenses were approximately $6.0 million during the three months ended September 30, 2023, compared to approximately

$5.2 million during the three months ended September 30, 2022.

The change in research and development expenses during the three months

ending September 30, 2023 compared to the three months ending September 30, 2022 is largely due to incurring $0.5 million of additional

expenses related to our Alzheimer’s clinical program, $0.4 million of additional expenses on our INKmune clinical program, $0.1

million of additional other clinical program expenses and $0.1 million of higher employee compensation costs, partially offset by an

increase of $0.4 million of accrued rebate.

Company’s other expense, net is lower during the three months ended September 30, 2023, due to the Company earning higher interest

income on its money market accounts, which partially offsets the interest expense incurred on our debt.

of the Nine Months Ended September 30, 2023 and 2022

following table summarizes our results of operations for the periods indicated:

September 30,

Operating expenses:

Research and development

General and administrative

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

the nine months ended September 30, 2023, and 2022, the Company sold MSC’s to one third-party and recognized $127,000 and $277,000,

respectively, of revenues.

and Administrative

General and administrative expenses were approximately $7.2 million

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

and $6.9 million during the nine months ended September 30, 2023 and 2022, respectively.

The $0.3 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

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 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.

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

as well as the Australian dollar could adversely affect our financial results, including our expenses as well as assets and liabilities.

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

and Development

and development expenses were approximately $14.3 million and $13.7 million during the nine months ended September 30, 2023 and

2022, respectively.

The increase in research and development expenses during the nine months ending September 30, 2023 compared to the

nine months ending September 30, 2022 is largely due to incurring $0.9 million of additional expenses related to our INKmune clinical

program, incurring $0.2 million of additional expenses with our Alzheimer’s clinical program and $0.5 million of additional employee

compensation, partially offset by incurring $0.7 million less expenses associated with other clinical programs and $0.2 million of additional

accrued rebate.

Company’s other expense, net is lower during the nine months ended September 30, 2023, due to the Company earning higher interest

income on its money market accounts, which partially offsets the interest expense incurred on our debt.

and Capital Resources

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.

incurred a net loss of $21.6 million and $21.5 million for the nine months ended September 30, 2023 and 2022, respectively.

used in operating activities was $8.6 million and $17.0 million for the nine months ended September 30, 2023 and 2022, respectively.

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

As of September 30, 2023,

we had cash and cash equivalents of approximately $41.8 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.

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.

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

well as assets and liabilities.

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

As of June 30, 2023, the

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

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

As a publicly traded company,

we incur significant legal, accounting and other expenses.

In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted

by the SEC and The Nasdaq Stock Market, require public companies to implement specified corporate governance practices that were inapplicable

to us as a private company.

We expect these rules and regulations will increase our legal and financial compliance costs and will

make some activities more time-consuming and costly.

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:

Six Months Ended

As of September 30, 2023, the cash balance held by our foreign subsidiaries with currencies other than the United States dollar was less

than $0.1 million.

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

a publicly traded company, we incur significant legal, accounting and other expenses.

In addition, the Sarbanes-Oxley Act of 2002,

as well as rules adopted by the SEC and The Nasdaq Stock Market, require public companies to implement specified corporate governance

practices that were inapplicable to us as a private company.

We expect these rules and regulations will increase our legal and financial

compliance costs and will make some activities more time-consuming and costly.

of September 30, 2023, the Company had an accumulated deficit of $112.6 million and working capital of $31.3 million.

Losses have principally

occurred as a result of stock-based compensation expense as well as the substantial resources required for research and development of

the Company’s products which included the general and administrative expenses associated with its organization and product development,

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

As of September 30, 2023,

we had cash and cash equivalents of approximately $41.8 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 September 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 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.

following table summarizes our cash flows for the periods indicated:

September 30,

(in thousands)

Net cash and cash equivalents (used in) provided by:

Net cash and cash equivalents (used in)

Operating activities

2 unchanged sentences

Impact on cash from foreign currency translation

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Operating Activities

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 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 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).

Cash and cash equivalents,

beginning of period

Cash and cash equivalents,

end of period

cash used in operating activities was primarily driven by our net loss.

activities used approximately $8.6 million of cash during the nine months ended September 30, 2023, resulting from our loss of $21.6

million, partially offset by changes in our net operating assets and liabilities of $7.4 million and non-cash stock-based compensation

of $5.5 million.

The change in our net operating assets and liabilities was mainly due to a decrease in research and development tax

credit receivable of $6.0 million and a decrease in prepaid expenses of $2.5 million, partially offset by a decrease in accounts payable

and accrued liabilities of $1.5 million.

activities used approximately $17.0 million of cash during the nine months ended September 30, 2022, resulting from our loss of $21.5

million and changes in our net operating assets and liabilities of $1.1 million, partially offset by non-cash stock-based compensation

of $5.4 million.

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

$2.3 million, partially offset by a decrease in other tax receivable of $0.5 million and a decrease in research and development tax credit

receivable of $0.5 million.

During the nine months ended September 30, 2023, the Company sold 75,697

shares of its common stock for net proceeds of $775,000 under the Company’s ATM program with BTIG.

The Company suspended its Sales

Agreement with BTIG during September 2023.

the nine months ended September 30, 2023, the Company repaid $2,500,000 of its debt.

the nine months ended September 30, 2022, the Company sold 82,900 shares of its common stock to certain officers and directors for approximately

$0.7 million.

Accounting Policies

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 nine months ended September

Quantitative and Qualitative Disclosures About Market Risk

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