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Item 7. Management’s Discussion and Analysis

2024-03-28 compared with 2023-03-02 · 465 added, 472 removed, 64 unchanged (94% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following

discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and notes thereto

appearing elsewhere in this Annual Report.

In addition to historical financial information, the following discussion and analysis contains

forward-looking statements that involve risks, uncertainties, and assumptions.

Our actual results could differ materially from those anticipated

by these forward-looking statements as a result of many factors.

We discuss factors that we believe could cause or contribute to these

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

We are a clinical-stage immunology

company focused on developing drugs that may reprogram the patient’s innate immune system to treat disease.

We believe this may

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

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial

statements and notes thereto appearing elsewhere in this Annual Report.

In addition to historical financial information, the following

discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions.

Our actual results could

differ materially from those anticipated by these forward-looking statements as a result of many factors.

We discuss factors that we

believe could cause or contribute to these differences below and elsewhere in this Form 10-K, including those set forth under “Risk

Factors” and “Forward-Looking Statements.”

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.

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

Currently approved non-selective TNF inhibitors treat autoimmune disease, but are contraindicated

in patients with infection, cancer and neurologic diseases because they increase the risk of infection, cancer and demyelinating neurologic

diseases, respectively;

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

The NK platform targets the dysfunctional

natural killer cells in patients with cancer.

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

to prevent cancer and in preventing relapse by eliminating residual disease.

Residual disease is the cancer left behind after therapy

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 finished.

Residual disease can grow to cause relapse.

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

cells to kill their cancer is complex.

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

A measure of NK

cell binding to cancer cells is avidity.

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

greater NK killing of cancer cells.

INKmune increase NK avidity and further improves mitochondrial function and upregulates nutrient receptors.

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

These mechanisms improve the ability of INKmune primed NK cells to overcome the immune evasion of the patient’s cancer cells.

believe INKmune is best used to eliminate residual disease after the patient has completed other cancer therapies.

Both the DN-TNF platform

and the INKmune platform can be used to treat multiple diseases.

The DN-TNF platform will be used as an immunotherapy for the treatment

of cancer and neurodegenerative disease.

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

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.

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

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

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

We believe our DN-TNF platform

can be used as a cancer therapy to reduce resistance in immunotherapy and as a CNS (“central nervous system”) therapy to target

glial activation to prevent progression of Alzheimer’s disease (“AD”), and to target neuroinflammation in treatment

resistant depression (“TRD”) and as a drug to prevent muscle degeneration, prevent fibrosis and promote muscle regeneration

in Duchene muscular dystrophy (DMD).

The drug is named differently for the oncology and CNS indications;

INB03™ or XPro™,

respectively, but it is the same drug product.

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

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

In each case, we believe neutralizing sTNF is

a cornerstone to the treatment of these diseases.

As an immunotherapy for cancer, we are using INB03 to neutralize sTNF produced by HER2+

trastuzumab resistant breast cancers to reverse resistance to targeted therapy.

sTNF produced by the tumor causes an up-regulation of

MUC4 express causing steric hindrance of trastuzumab binding to the HER receptor on HER2+ breast cancer cells.

Without binding, trastuzumab

based therapies are not effective.

Neutralizing sTNF reverses MUC4 expression converting a trastuzumab resistant breast cancer cell into

a trastuzumab sensitive breast cancer cell.

In addition, INB03 changes the immunobiology of the tumor microenvironment by decreasing the

number of immunosuppressive myeloid cells, both myeloid derived suppressor cells and tumor active macrophages, and increasing the number

of cytotoxic lymphocytes and phagocytic macrophages in the TME.

The Company has completed an open label dose escalation trial in cancer

patients with metastatic solid tumors that have failed multiple lines of therapy.

The trial informs the design of the Phase II trial by

demonstrating that INB03 was safe and well tolerated, defined the dose of INB03 to carry into Phase II trials, and demonstrated a pharmacodynamic

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

can be used 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”);

as a drug to prevent muscle

degeneration, prevent fibrosis and promote muscle regeneration in Duchene muscular dystrophy (“DMD”);

and as a cancer therapy

to reduce resistance in immunotherapy.

The primary focus of the company’s development efforts for XPro is AD.

The next indication

to be developed with XPro will be TRD.

Treatment of DMD and cancer will occur when partners for the programs are found.

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 that is 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

sTNF produced by the tumor causes an up-regulation of MUC4 express causing steric hindrance of trastuzumab binding to the HER

receptor on HER2+ breast cancer cells.

Without binding, trastuzumab based therapies are not effective.

Neutralizing sTNF reverses MUC4

expression converting a trastuzumab resistant breast cancer cell into a trastuzumab sensitive breast cancer cell.

In addition, INB03 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 completed an open label dose escalation trial in cancer patients with metastatic solid tumors that have failed multiple

lines of therapy.

The pre-clinical data in MUC4+ expressing tumors and the clinical trial informs the design of a future 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

The company does not plan to commence a Phase II trial in patients with advanced MUC4+ expressing cancer until a partner can

Likewise, we believe the DN-TNF

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associated with Alzheimer’s disease (“AD”).

XPro completed a Phase I trial treating patients with Alzheimer’s disease that was

partially funded by a Part-the-Clouds Award from the Alzheimer’s Association.

We believe XPro targets activated microglia and astrocytes

of the brain that produce sTNF that promotes nerve cell loss and synaptic dysfunction, key elements in the development of dementia.

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

The Phase I trial in patients with biomarkers

of inflammation with AD has been completed.

The open label, dose escalation trial was designed to demonstrate that XPro can safely decrease

neuroinflammation in patients with ADi.

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

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

White matter free water;

a validated measure of neuroinflammation in the brain.

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

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

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

in novel white matter MRI biomarkers.

XPro significantly decreases biomarkers of neurodegeneration as measured by changes in the

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

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

Three months of XPro therapy improved measures of synaptic function, as measured in the CSF proteome including a 222% increase

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

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, synaptic dysfunction and prevents myelin repair

- key elements in the development of dementia.

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

pruning and promotes myelin repair.

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

label, dose escalation trial was designed to demonstrate that XPro can safely decrease neuroinflammation in patients with ADi.

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

The endpoints of the trial were 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 brain microstructural changes.

XPro, at the 1mg/kg/week dose, decreased inflammatory cytokines in the CSF in the brain demonstrating

that XPro can decrease neuroinflammation in patients with AD.

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.

The successful completion

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

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

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

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

(XPro vs placebo).

Two hundred and one patients are being enrolled in a 2:1 ratio (XPro

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

An enrichment strategy identical

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

Patients will need to have

one or more enrichment criteria:

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

and at least one allele of ApoE4.

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

a validated cognitive measure that is more sensitive than traditional end-points used in many studies of patients with early AD.

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

All patients will be

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

An enrichment strategy identical to the

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

Patients will need to have one or

more enrichment criteria:

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

least one allele of ApoE4.

The primary end-point will be Early/mild Alzheimer’s Cognitive Composite (“EMACC”), a validated

cognitive measure that is more sensitive than traditional end-points used in many studies of patients with early AD.

The AD program is

open in the United States, Australia, Canada, the United Kingdom, France, Germany, Spain, Czech Republic and Slovakia.

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

There are at least 4 clinical

milestones associated with the Phase II trial in AD.

Enrollment of 201 patients in the Phase II AD trial should be complete by mid-year.

Six months after the last patient is enrolled, top line cognition data with EMACC will be available.

Secondary end-points which include

blood biomarker, neuroimaging and additional neuropsychiatric end-points will be available after data base lock 2-3 months after top line

Finally, several months after all the data are analyzed, the Company plans an end-of-phase II meeting with the FDA to finalize plans

for the pivotal Phase III trial.

The Company plans to apply for an accelerated pathway during 2024.

XPro for treatment of AD may be eligible

for one or both accelerated approval pathways.

The Company plans to submit of Fast Track status in 2024.

We expect to be eligible for

Break Through status after completion of the Phase II in 2025.

Effective therapy for TRD

16 unchanged sentences

The final trial design is ongoing and discussions with the FDA are not complete.

The Company anticipates receiving

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

We believe that INKmune improves

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

INKmune interacts with the patient’s NK cells to convert

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

INKmune is a replication incompetent

proprietary cell line that is given to the patient after determining that i) the patient has adequate NK cells in their circulation and

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

INKmune is designed to be given to patients after their immune system

has recovered after cytotoxic chemotherapy to target the residual disease the remains after treatment with cytotoxic therapy.

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

ovary, breast, renal and prostate cancer.

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

a form of leukemia.

One patient has been treated in the Phase I trial for MDS and three patients have been treated compassionately in

In the four patients, INKmune therapy is safe, produces memory-like NK cells that kill cancer in vitro, promotes development of cancer

killing memory-like NK cells that can be found in the patient’s circulation of 4 months.

The Company will continue to enroll patients

in the Phase I trial.

The Company intends to initiate a separate Phase I/2 trial of INKmune in a solid tumor during 2023.

The Company received authorization

to initiate a clinical trial in AD in the US during January 2024.

The TRD trial is expected to start enrollment after the AD Phase II

trial finishes patient enrollment.

We believe that INKmune improves

6 unchanged sentences

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.

has recovered after cytotoxic chemotherapy to target the residual disease that remains after treatment with cytotoxic therapy.

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

ovary, breast, renal and prostate cancer.

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

a form of leukemia.

One patient has been treated in the Phase I trial for MDS and three patients have been treated compassionately in

In the four patients, INKmune therapy is safe, produces memory-like NK cells that kill cancer in vitro, promotes development of cancer

The Company had a Phase I trial using INKmune to treat patients with high risk MDS/AML, a form

Two patients were treated in the Phase I trial for MDS, three patients have been treated compassionately in AML and another

MDS patient is expected to be treated shortly.

During March 2024, the Company decided to terminate further enrollment in the MDS/AML trial.

In the patients, INKmune therapy is safe, produces memory-like NK cells that kill cancer in vitro, and promotes development of cancer

killing memory-like NK cells that can be found in the patient’s circulation of 4 months.

The Company will continue to enroll patients

in the Phase I trial.

our inception in 2015, we have devoted substantially all of our resources to the discovery and development of our product candidates,

including clinical trials and preclinical studies as well as general and administrative support for these operations.

To date, we have

generated no significant revenue.

We have incurred net losses in each year since our inception and, as of December 31, 2022, we had an

accumulated deficit of approximately $91.0 million.

Our net losses were $27,299,000 and $30,340,000 for the years ended December 31,

2022 and 2021, respectively.

Substantially all of our net losses resulted from costs incurred in connection with our research and development

programs and from general and administrative costs associated with our operations, including stock-based compensation.

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

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 as a whole.

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.

severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of 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.

As of 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.

As a company with less than $1.07 billion in revenue

during our last fiscal year, 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.

The Company initiated a separate Phase

I/2 trial of INKmune in a metastatic castrate resistant prostate cancer.

The open label trial enrolled the first patient in December 2023.

The Phase I/II trial using

INKmune to treat patients with metastatic castrate resistant prostate cancer (mCPRC) is an open label trial.

Biomarker data from the patients

will be visible as patients are treated.

The Company will report data from each cohort as it becomes available.

In addition to clinical

data, the Company will communicate when the Phase I portion of the trial has completely enrolled.

This is expected in September 2024.

Because of the modified Bayesian design, the Company estimates the trial will be completely enrolled 1H25 with top-line data available

6 months later.

Topline data is divided into immunologic and tumor response variables.

The most important immunologic response variable

is related to memory like NK cell persistence.

This is how long are the number of mlNK cells in patients blood compared to baseline.

are 3 important variables to tumor response:

i) blood PSA changes;

ii) change in PMSA scan and iii) change in circulating tumor DNA (ctDNA).

Ideally, the levels of all three variables decrease with treatment.

We do not expect this 6 month trial to provide survival data.

We continue to incur significant

development and other expenses related to our ongoing operations.

As a result, we are not and have never been profitable and have incurred

losses in each period since our inception, resulting in substantial doubt in our ability to continue as a going concern.

We reported a

net loss of $30.0 million and $27.3 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023 and

2022, we had cash and cash equivalents of $35.8 million and $52.2 million, respectively.

We expect to continue to incur significant losses

for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory

approvals for, our product candidates.

The size of our future net losses will depend, in part, on the rate of future growth of our expenses

and our ability to generate revenues, if any.

Our recurring net losses

and negative cash flows from operations raised substantial doubt regarding our ability to continue as a going concern within one year

after the issuance of our consolidated financial statements for the year ended December 31, 2023.

Until we can generate sufficient revenue

from the commercialization of our product candidates, we expect to finance our operations through the public or private sale of equity,

debt financings or other capital sources, such as government funding, collaborations, strategic alliances, divestment of non-core assets,

or licensing arrangements with third parties.

To date, the Company has relied on equity and debt financing to fund its operations.

a company with less than $1.235 billion in revenue during our last fiscal year, 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.

These provisions include:

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;

disclosure about our executive compensation arrangements;

non-binding advisory votes on executive compensation or golden parachute arrangements;

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

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

We would cease to be an emerging growth company if we have more than $1.07 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

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

Components of Operating Results

Operating Expenses

Research and Development

Research 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.

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

of Operating Results

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 consist of:

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

We typically use our employee, consultant and

infrastructure resources across our development programs.

We track outsourced development costs by product candidate or development program,

but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or development

We participate, through our wholly-owned subsidiary

in Australia, in the Australian research and development tax incentive program, such that a percentage of our qualifying research and

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

development expense.

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.

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

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

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

and development expense.

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

the research and development tax incentive available to the Company.

The United Kingdom research and development tax incentive is recognized

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

consideration can be reliably measured.

Substantially all of our research and development

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 trials.

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

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;

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, labeling 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 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 candidate’s 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;

and development expense primarily consist of:

trial and regulatory-related costs;

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

Preclinical and other programs

Accrued research and development rebate

Total external costs

Internal Costs

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

that a percentage of our qualifying research and development expenditures are reimbursed by the Australian government, and such incentives

are reflected as a reduction of research and development expense.

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.

Substantially

all of 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 trials.

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

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:

patient trial costs;

number of sites included in the clinical trials;

countries in which the clinical trials are conducted;

length of time required to enroll eligible patients;

number of patients that participate in the clinical trials;

number of doses that patients receive;

cost of comparative agents used in clinical trials;

drop-out or discontinuation rates of patients;

additional safety monitoring or other studies requested by regulatory agencies;

duration of patient follow-up;

efficacy and safety profile of the product candidate;

cost of manufacturing, finishing, labeling 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:

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

seek regulatory approval for our product candidates;

to discover and develop additional product candidates;

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;

to comply with regulatory standards and laws;

leverage and expand our intellectual property portfolio;

clinical, manufacturing, scientific and other personnel to support our product candidate’s development and future commercialization

operational, financial and management information systems and personnel;

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;

insurance, overhead, including rent and utilities;

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

Other income, net

Other expense consists primarily of interest expense incurred on debt,

partially offset by interest income from a money market investment.

Critical Accounting Policies and Significant

Judgments and Estimates

This management’s discussion and analysis

of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting

principles generally accepted in the United States.

The preparation of our financial statements requires us to make estimates and assumptions

that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our

financial statements, as well as the reported revenues and expenses during the reported periods.

We evaluate these estimates and judgments

on an ongoing basis.

We base our estimates on historical experience and on various other factors that we believe are reasonable under

the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are

not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

In-Process Research and Development

The Company evaluates the carrying value of indefinite-lived

intangible assets, which consists of in-process research and development (“IPR&D”), on an annual basis or more frequently

when indicators of impairment exist.

An impairment of indefinite-lived intangible assets would occur if the fair value of the intangible

asset is less than the carrying value.

Intangible assets with finite lives are tested for impairment when events or changes in circumstances

indicate that the carrying amount of such assets may not be recoverable.

If these facts and circumstances exist, the Company assesses

for recovery by comparing the carrying values of the assets with their future undiscounted net cash flows.

Significant management judgment

is required in the forecast of future operating results that are used in the preparation of expected undiscounted cash flows.

IPR&D assets are considered to be indefinite-lived

until the completion or abandonment of the associated research and development projects.

During the period the assets are considered indefinite-lived,

they are tested for impairment.

If the related project is terminated or abandoned, the Company may have a full or partial impairment related

to the IPR&D assets, calculated as the excess of their carrying value over fair value.

The valuation process is very complex and requires

significant input and judgment using internal and external sources with respect to the Company’s future revenue and expense growth

rates, changes in working capital use, the selection of an appropriate discount rate, and other assumptions and estimates.

Research and Development (“R&D”)

R&D expenses consist primarily of costs related

to clinical studies and outside services, personnel expenses, and other R&D expenses.

Clinical studies and outside services costs

relate primarily to services performed by clinical research organizations and related clinical or development manufacturing costs, materials

and supplies, filing fees, regulatory support, and other third-party fees.

Personnel expenses relate primarily to salaries, benefits and

share-based compensation.

and other general operating expenses

not otherwise classified as research and development expenses.

expense consists primarily of interest expense incurred on debt, partially offset by interest income from a money market investment.

Accounting Policies and Significant Judgments and Estimates

management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,

which we have prepared in accordance with accounting principles generally accepted in the United States.

The preparation of our financial

statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure

of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the

reported periods.

We evaluate these estimates and judgments on an ongoing basis.

We base our estimates on historical experience and on

various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments

about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these

estimates under different assumptions or conditions.

Research and Development

Company evaluates the carrying value of indefinite-lived intangible assets, which consists of in-process research and development (“IPR&D”),

on an annual basis or more frequently when indicators of impairment exist.

An impairment of indefinite-lived intangible assets would

occur if the fair value of the intangible asset is less than the carrying value.

Intangible assets with finite lives are tested for impairment

when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

If these facts and circumstances

exist, the Company assesses for recovery by comparing the carrying values of the assets with their future undiscounted net cash flows.

Significant management judgment is required in the forecast of future operating results that are used in the preparation of expected

undiscounted cash flows.

assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects.

During the period the assets are considered indefinite-lived, they are tested for impairment.

If the related project is terminated or

abandoned, the Company may have a full or partial impairment related to the IPR&D assets, calculated as the excess of their carrying

value over fair value.

The valuation process is very complex and requires significant input and judgment using internal and external

sources with respect to the Company’s future revenue and expense growth rates, changes in working capital use, the selection of

an appropriate discount rate, and other assumptions and estimates.

and Development (“R&D”)

expenses consist primarily of costs related to clinical studies and outside services, personnel expenses, and other R&D expenses.

Clinical studies and outside services costs relate primarily to services performed by clinical research organizations and related clinical

or development manufacturing costs, materials and supplies, filing fees, regulatory support, and other third-party fees.

Personnel expenses

relate primarily to salaries, benefits and share-based compensation.

R&D expenditures are charged to operations as incurred.

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

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

Stock-Based Compensation

We measure and recognize compensation

expense for all stock-based awards granted to service providers, employees, and directors based on the estimated fair value of the

award on the grant date.

We calculate the estimated fair value of stock options on the date of grant using the Black-Scholes

option-pricing model, which is impacted by the fair value of our common stock, as well as changes in assumptions regarding a number

of highly complex and subjective variables.

These variables include, but are not limited to, the market value of common stock on the

grant date, the expected dividend yield, the expected term of the awards, the risk-free interest rates and the expected common stock

price volatility over the term of the option awards.

The expected volatility is based on the historical volatility of a few

unrelated public companies within our industry over the most recent period commensurate with the estimated expected term of our

stock options as we have insufficient historical information regarding the volatility of the share price of our common stock.

risk-free interest rate for periods within the contractual life of the option is based on the U.S.

Treasury yield in effect at

the time of grant.

We have never declared or paid dividends and have no plans to do so in the foreseeable future.

We recognize the fair value of stock options on

a straight-line basis over the period during which a service provider is required to provide services in exchange for the award (generally

the vesting period).

recognize R&D tax credits receivable from the Australian government for spending on R&D as a reduction of R&D expenses.

measure and recognize compensation expense for all stock-based awards granted to service providers, employees, and directors based on

the estimated fair value of the award on the grant date.

We calculate the estimated fair value of stock options on the date of grant

using the Black-Scholes option-pricing model, which is impacted by the fair value of our common stock, as well as changes in assumptions

regarding a number of highly complex and subjective variables.

These variables include, but are not limited to, the market value of common

stock on the grant date, the expected dividend yield, the expected term of the awards, the risk-free interest rates and the expected

common stock price volatility over the term of the option awards.

The expected volatility is based on the historical volatility of a

few unrelated public companies within our industry over the most recent period commensurate with the estimated expected term of our stock

options as we have insufficient historical information regarding the volatility of the share price of our common stock.

We use the simplified

approach to determine the expected term as we do not have sufficient data related to stock option exercises.

The risk-free interest rate

for periods within the contractual life of the option is based on the U.S.

Treasury yield in effect at the time of grant.

never declared or paid dividends and have no plans to do so in the foreseeable future.

recognize the fair value of stock options on a straight-line basis over the period during which a service provider is required to provide

services in exchange for the award (generally the vesting period).

We account for forfeitures as they occur.

Off-Balance Sheet Arrangements

During the periods presented, we did not have

any off-balance sheet arrangements as defined under SEC rules.

Licensing and Collaboration Agreements

We anticipate that in-licensing, out-licensing

and strategic collaborations will become an integral part of our operations, providing the company with opportunities to leverage our

partners’ expertise and capabilities to further expand the potential of our technologies, product candidates and revenue streams.

In October 2017, we licensed INB03 (also known

as XPro) from Xencor.

This exclusive, global, unrestricted license came with considerable know-how, intellectual property, pre-clinical

data, regulatory documentation and product stocks.

Currently, we are focused on the immune-oncology uses of this unique asset.

future, we may develop the asset in a wide variety of therapeutic areas, with a variety of delivery techniques by ourselves or in conjunction

with partners.

Results of Operations

Comparison of the Years Ended December 31,

2022 and December 31, 2021

Sheet Arrangements

the periods presented, we did not have any off-balance sheet arrangements as defined under SEC rules.

and Collaboration Agreements

anticipate that in-licensing, out-licensing and strategic collaborations will become an integral part of our operations, providing the

company with opportunities to leverage our partners’ expertise and capabilities to further expand the potential of our technologies,

product candidates and revenue streams.

In October 2017, we licensed

INB03 (also known as XPro) from Xencor.

This exclusive, global, unrestricted license came with considerable know-how, intellectual property,

pre-clinical data, regulatory documentation and product stocks.

Currently, we are focused on using this asset in a neurological indication.

In the future, we may develop the asset in a wide variety of therapeutic areas, with a variety of delivery techniques by ourselves or

in conjunction with partners.

of Operations

of the Years Ended December 31, 2023 and December 31, 2022

(in thousands)

2 unchanged sentences

Other Expense, net

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

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

General and Administrative

General and administrative expenses were $9.3 million for the year

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

The increase in general and administrative expenses

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

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

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

Research and Development

Research and development expenses decreased to

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

The decrease in research

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

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

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

was $1.8 million higher in 2022 compared to 2021.

Other Expense, net

Other expense, net increased

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

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

higher interest income from money market investments.

Liquidity and Capital Resources

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

Net cash used in operating activities

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

Since inception, we have funded our

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

As of December 31, 2022, we

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

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

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

Our primary uses of capital are, and we expect

will continue to be, third-party clinical and preclinical research and development services, costs incurred to manufacture our drugs under

development, compensation and related expenses, legal, 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 the majority of its research and development expenses

in Australia and the United Kingdom.

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

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

2023 and 2022, the Company sold MSC’s to one customer and recognized $155,000 and $374,000 of revenues, respectively.

and Administrative

and administrative expenses were $9.6 million for the year ended December 31, 2023, compared to $9.3 million for the year ended December

The increase in general and administrative expenses is due to higher stock-based compensation ($0.1 million higher during the

year ended December 31, 2023), higher travel expense ($0.1 million higher during the year ended December 31, 2023) and higher professional

fees ($0.1 million higher during the year ended December 31, 2023).

and Development

Research and development expenses increased to $20.3 million for the

year ended December 31, 2023 from $17.1 million for the year ended December 31, 2022.

The increase in research and development expenses

during the year ended December 31, 2023 compared to 2022 is mainly due to the Company incurring $1.8 million of higher costs in connection

with our INKmune clinical trials, $1.2 million higher costs with our Alzheimer’s clinical trial, $0.7 million higher internal costs

and $0.5 million lower accrued R&D rebate, partially offset by $1.0 million lower of preclinical and other expenses.

expense, net decreased to $0.3 million during the year ending December 31, 2023, compared to $1.3 million during the year ending December

The decrease in other expense is due to the Company earning higher interest income from money market investments in 2023 ($1.3

million higher) partially offset by higher interest expense on the Company’s debt in 2023 ($0.3 million higher).

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.

We incurred a net loss of $30,008,000 and $27,299,000 for the years

ended December 31, 2023 and 2022, respectively.

Net cash used in operating activities was $11,980,000 and $22,686,000 for the years ended

December 31, 2023 and 2022, respectively.

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

common stock.

As of December 31, 2023, we had cash and cash equivalents of $35,848,000.

We anticipate that operating losses and net cash

used in operating activities will increase over the next few years as we advance our products under development.

primary uses of capital are, and we expect will continue to be, third-party clinical and preclinical research and development services,

costs incurred to manufacture our drugs under development, compensation and related expenses, legal, 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 significant

research and development expenses in Australia and the United Kingdom.

Fluctuations in the rate of exchange between the United States

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

as well as assets and liabilities.

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

As of December 31, 2022,

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

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

$91.0 million and working capital of $53.8 million.

Losses have principally occurred as a result of the substantial resources required

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

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

are commercialized.

As of December 31, 2022, we had cash and cash equivalents of $52.2 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 Annual Report on Form 10-K.

Registered Direct

July 2021, the Company completed a registered direct offering whereby the Company sold 1,818,182 shares of its common stock to investors

for net proceeds of $36.9 million.

ATM Sales Agreements

During the year ended

December 31, 2021, we issued and sold 1,439,480 shares of common stock at an average price of $20.17 per share under the 2020 ATM agreement.

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

As of December

31, 2021, sales of our common stock pursuant to the 2020 ATM have been completed.

During March 2021, the Company entered into the 2021 ATM agreement

with BTIG, as sales agent, to establish an ATM offering of up to $45 million of common stock.

During the year ended December 31, 2021,

the Company sold 713,192 shares at an average price per share of $21.73 for net proceeds of approximately $14.9 million under the 2021

ATM agreement.

As of December 31, 2023, the cash balance held by our foreign subsidiaries with currencies other than the United States dollar was approximately

$0.5 million.

Our recurring net losses and

negative cash flows from operations, as well as forecast of continued losses and negative cash flows from operations, raised substantial

doubt regarding our ability to continue as a going concern within one year after the issuance of our consolidated financial statements

for the year ended December 31, 2023.

Until we can generate sufficient revenue from the commercialization of our product candidates,

we expect to finance our operations through the public or private sale of equity, debt financing or other capital sources, such as government

funding, collaborations, strategic alliances, divestment of non-core assets, or licensing arrangements with third parties.

cash equivalents were $35.8 million and total current assets were $21.5 million at December 31, 2023, which the Company is projecting

will be insufficient to sustain its operations through one year following the date that the financial statements are issued.

Additional capital may not

be available on reasonable terms, if at all.

If we are unable to raise additional capital in sufficient amounts or on terms acceptable

to us, we may have to significantly delay, scale back or discontinue the development of one or more of our product candidates or cease

If we raise additional funds through the issuance of additional debt or equity securities it could result in dilution to our

existing stockholders, increased fixed payment obligations and these securities may have rights senior to those of our common stock and

could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability

to incur additional debt, limitations on our ability to acquire, sell or license our intellectual property rights and other operating

restrictions that could adversely impact our ability to conduct our business.

Any of these events could significantly harm our business,

financial condition and prospects.

Financing strategies we

may pursue include, but are not limited to, the public or private sale of equity, debt financing or funds from other capital sources,

such as government or grant funding, collaborations, strategic alliances, divestment of non-core assets, or licensing arrangements with

third parties.

There can be no assurances additional capital will be available to secure additional financing, or if available, that it

will be sufficient to meet our needs on favorable terms.

If we are unable to raise additional capital in sufficient amounts or on terms

acceptable to us, we may have to significantly delay, scale back or discontinue the development of one or more of our product candidates.

If we raise additional funds through the public or private sale of equity or debt financings, it could result in dilution to our existing

stockholders or increased fixed payment obligations and these securities may have rights senior to those of our common stock and could

contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to

incur additional debt, limitations on our ability to acquire, sell or license our intellectual property rights and other operating restrictions

that could adversely impact our ability to conduct our business.

Any of these events could significantly harm our business, financial

condition and prospects.

Sales Agreement

July 2023, the Company sold 75,697 shares

of its common stock at an average price of $ 10.56 per share under the ATM program.

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

June 10, 2021, we entered into a Loan and Security Agreement with SVB and an affiliate of SVB, providing for a $15.0 million term loan.

The Term Loan also provides for us to request an additional $5.0 million term loan from the Lenders, which may be granted or denied at

the sole discretion of the Lenders.

The Term Loan provides for an annual interest rate equal to the greater of (i) the prime rate then

in effect as reported in The Wall Street Journal plus 4.50% and (ii) 7.75% and also includes a final payment fee equal to 6.5%

of the original principal amount borrowed payable on the earlier of the repayment of the loan in full and the maturity date.

used the proceeds of the term loan to fund the cash consideration for the Option Cancellation Agreement with Xencor.

The following table provides information regarding our cash flows for

the years ended December 31, 2022 and 2021:

The Term Loan provides for an annual interest rate equal to the greater of (i) the prime rate then in effect as reported in The Wall

Street Journal plus 4.50% and (ii) 7.75% and also includes a final payment fee equal to 6.5% of the original principal

amount borrowed payable on the earlier of the repayment of the loan in full and the maturity date.

The Term loan is payable in 2024.

following table provides information regarding our cash flows for the years ended December 31, 2023 and 2022:

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Impact on cash from foreign currency translation

Net(decrease) increase in cash and cash equivalents

Net Cash Used in Operating Activities

Our cash used in operating activities was primarily

driven by our net loss.

Operating activities

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

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

$7.1 million.

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

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

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

Operating activities

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

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

$4.8 million.

Net decrease in cash and cash equivalents

Cash Used in Operating Activities

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

Operating activities used $12.0 million of cash for the year ended

December 31, 2023, primarily resulting from our net loss of $30.0 million, partially offset by a net cash inflow of $10.4 million for

changes in our net operating assets and liabilities, and non-cash stock-based compensation charges of $7.4 million.

The change in our

net operating assets and liabilities was primarily due to a decrease in research and development tax credit receivable of $6.2 million,

a decrease in prepaid expenses and other current assets of $2.5 million and an increase in accounts payable and accrued liabilities of

$2.7 million, partially offset by a decrease in accrued liability – long term of $0.6 million.

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

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

of $7.1 million.

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

1 unchanged sentence

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

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

December 31, 2021.

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

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

and development intangible asset.

Net Cash Provided by Financing Activities

During the year ended December

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

During the year ended

December 31, 2021, the Company sold 1,439,480 shares of its common stock under its 2020 ATM agreement for net proceeds of approximately

$28.4 million.

During the year ended

December 31, 2021, the Company sold 713,192 shares of its common stock under the 2021 ATM agreement for net proceeds of approximately

Cash Provided by Financing Activities

the year ended December 31, 2023, the Company sold 75,697 shares of its common stock for net proceeds of $0.8 million under the Company’s

ATM program with BTIG.

the year ended December 31, 2023, the Company repaid $5 million of its debt.

the year ended December 31, 2022, the Company sold 82,900 shares of its common stock to certain officers and directors for approximately

$0.7 million.

During July 2021, the

Company completed a registered direct offering whereby the Company sold 1,818,182 shares of its common stock to investors for net proceeds

of $36.9 million.

During June 2021, we

entered into a Loan and Security Agreement with SVB and an affiliate of SVB, providing for a $15.0 million term loan.

During the year ended December 31, 2021, the Company received approximately

1.2 million in connection with the exercise of stock options and warrants.

Quantitative and Qualitative Disclosures

about Market Risk

We are exposed to market risk from changes in

foreign currency rates.

Quantitative and Qualitative Disclosures about Market Risk

are exposed to market risk from changes in foreign currency rates.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis