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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-09 · 269 added, 214 removed, 269 unchanged (64% of the section changed)

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Description of Business

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

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;

We are a clinical-stage inflammation

and immunology company focused on developing drugs that modify the patient’s innate immune system to treat disease.

We believe targeting

cells of the innate immune system that cause chronic inflammation and are involved in immune dysfunction such as cancer and neurodegenerative

diseases may make a therapeutic impact on many 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™”, “INB03”, or “pegipanermin”) and a Natural Killer (“NK”, or “INKmune™”)

The DN-TNF platform neutralizes soluble TNF (“sTNF”) without affecting trans-membrane TNF (“tmTNF”)

or TNF receptors.

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 and many other potent anti-inflammatory drugs.

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;

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.

The NK platform targets the

dysfunctional natural killer cells in patients with cancer.

NK cells are part of the normal immune 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.

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

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

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

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.

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™ may be 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 (INB03) and neurodegenerative disease.

INKmune™ is being developed to treat NK-resistant hematologic malignancies and solid

We believe our DN-TNF platform

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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.

as a drug to treat many

chronic inflammatory diseases;

and as a cancer therapy to reduce resistance in immunotherapy.

The primary focus of the company’s

development efforts for XPro™ is AD which is currently in a Phase 2 trial to determine if reduction of chronic inflammation without

immunosuppression makes a difference in cognition.

The next indication to be developed with XPro™ will be TRD.

The drug is named

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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.

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 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

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

In a nude mouse model, 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 phagocytic macrophages in the TME.

In the TME of

immunocompetent mice, INB03 increases the number of cytotoxic lymphocytes modifies the TME by downregulating immune exhaustion markers

– PDL-1, TIGIT, LAG3, CTLA4, CD47 and SIRPꭤ.

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 endpoint.

The company does not plan to commence a Phase II trial in

patients with advanced MUC4+ expressing cancer until a partner can be found or extra-mural funding is secured.

Likewise, we believe the DN-TNF

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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 trial in patients with early

changes in the CSF proteome and quantifying changes in novel white and gray 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 trial in patients with early ADi.

Early ADi includes patients with AD and MCI who have at least one biomarker of inflammation (ADi and MCI2 respectively).

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

cognitive decline.

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 and one 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.

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 trial.

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.

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 data.

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.

for treatment of AD may be eligible for one or both accelerated approval pathways.

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 or at

least one allele of ApoE4.

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

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

Although EMACC is

a primary endpoint, CDR-SB, a well recognized cognitive test is being used as a secondary endpoint as well.

The AD program is open in

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

Because of resource constraints,

a planned open-label extension has been stopped.

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 is expected to be complete by mid-year.

Six months after the last

patient is enrolled, top line cognition data with EMACC will be available.

Secondary endpoints which include CDR-SB, blood biomarker,

neuroimaging and additional neuropsychiatric endpoints will be available after data-base lock 2-3 months after top line data.

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.

XPro for treatment of AD may be eligible for one or both accelerated approval pathways The Company plans to apply for

an accelerated pathway during 2024.

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.

We expect to be eligible for Break Through

status after completion of the Phase II trial in 2025.

therapy for TRD is a large unmet need.

Twenty percent of patients with a Major Depressive Disorder have TRD.

Twenty percent of patients with Major Depressive Disorder have TRD.

Once third of TRD patients

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

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.

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

The Company expects

to receive authorization to initiate a clinical trial in TRD in the 2H24.

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

II trial finishes patient enrollment.

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

INKmune interacts with the patient’s

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INKmune is designed to be given to patients

after their immune system has recovered after cytotoxic chemotherapy to target the residual disease that 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 and prostate cancer.

The Company had a Phase I trial using INKmune to treat patients with

high risk MDS/AML, a form of leukemia.

after their immune system has recovered after cytotoxic chemotherapy to target the residual disease that remains after conventional treatment.

We have in vitro data suggesting that 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 had a Phase I trial using INKmune to treat patients

with high risk MDS/AML, a form of leukemia.

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

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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 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.

in the MDS/AML trial due to recruitment difficulties in the European trial sites.

However, in the patients who were treated, INKmune therapy

was shown to be safe, and induced development of cancer killing memory-like NK cells that were found in the patient’s circulation

for up to 4 months.

The Company initiated a separate Phase I/2 trial of INKmune in a metastatic castrate resistant prostate cancer in

8 trials sites across the US.

The open label trial enrolled the first patient in December 2023, opened the second cohort in June and is

on track with recruitment.

Phase I/II trial using INKmune™ to treat patients with metastatic castrate resistant prostate cancer (mCPRC) is an open label trial.

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.

Biomarker data from the patients will be visible as patients are treated.

The Company will report data from each cohort as it becomes

In addition to clinical data, the Company will communicate when the Phase I portion of the trial has completed follow-up.

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 are 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.

There are 3 important variables to tumor response:

i) blood PSA changes;

ii) change in PMSA scan and iii) change in circulating tumor

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

We do not expect this 6 month trial to provide survival

ii) change in PMSA scan and iii)

change in circulating tumor DNA (ctDNA).

Ideally, the levels of all three variables decrease with treatment, but, in this patient group

with advanced disease, absence of progression will be a notable achievement.

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

We continue to incur significant

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We reported a

net loss of $11.0 million for the three months ended March 31, 2024.

As of March 31, 2024 and December 31, 2023, we had cash and cash

equivalents of $26.0 million and $35.8 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

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.

net loss of $20.8 million for the six months ended June 30, 2024.

As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents

of $31.1 million and $35.8 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,

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 unaudited condensed consolidated financial statements for the three months ended March 31, 2024.

the issuance of our unaudited condensed consolidated financial statements for the six months ended June 30, 2024.

Until we can generate

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Three Months Ended

Six Months Ended

External Costs

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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;

overhead, including rent and utilities;

and other general operating expenses not otherwise classified as

research and development expenses.

Other 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 March

Comparison of the Three Months Ended June

30, 2024 and 2023

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Loss from operations

Other expense, net

During the three months ended

March 31, 2024 and 2023, the Company sold MSC’s to one third-party and recognized $14,000 and $38,000, respectively, of revenues.

Other income (expense), net

The Company had no sales during

the three months ended June 30, 2024.

During the three months ended June 30, 2023, the Company sold MSC’s to one third-party and

recognized $46,000 of revenues.

Research and Development

Research and development expenses

were approximately $7.1 million during the three months ended June 30, 2024, compared to approximately $4.1 million during the three

months ended June 30, 2023.

The change in research and development expenses during the three months ending June 30, 2024 compared to the

three months ending June 30, 2023 is largely due to incurring $2.6 million more expenses with our Alzheimer’s clinical program,

$0.6 million higher expenses with our INKmune clinical programs and 0.6 million higher salaries and stock-based compensation, partially

offset by a $0.8 million increase in our accrued research and development rebate accrual.

General and Administrative

General and administrative

expenses were approximately $2.3 million during each of the three months ended March 31, 2024 and 2023, respectively.

expenses were approximately $2.8 and $2.3 million during the three months ended June 30, 2024 and 2023, respectively.

The increase in

general and administrative expenses was mainly due to a $0.4 million increase in compensation expense (including stock-based compensation)

Other Income (Expense), net

The Company’s other income,

net is higher during the three months ended June 30, 2024, due to the Company earning interest income on its money market accounts and

incurring less interest expense compared to 2023 due to a reduction in the amount of debt owed.

Comparison of the Six Months Ended June

30, 2024 and 2023

The following table summarizes

our results of operations for the periods indicated:

Six Months Ended

(in thousands)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense), net

During the six months ended

June 30, 2024, and 2023, the Company sold MSC’s to one third-party and recognized $14,000 and $84,000, respectively, of revenues.

Research and Development

Research and development expenses

were approximately $8.7 million during the three months ended March 31, 2024, compared to approximately $4.1 million during the three

months ended March 31, 2023.

The change in research and development expenses during the three months ending March 31, 2024 compared to

the three months ending March 31, 2023 is largely due to incurring $4.0 million of additional expenses related to our Alzheimer’s

clinical program, $0.7 million of additional expenses on our INKmune clinical program, and $0.1 million of higher employee compensation

costs, partially offset by an increase of $0.2 million of accrued rebate.

Other Expense, net

were approximately $15.7 million and $8.3 million during the six months ended June 30, 2024 and 2023, respectively.

The change in

research and development expenses during the six months ending June 30, 2024 compared to the six months ending June 30, 2023 is largely

due to incurring $6.5 million more expenses with our Alzheimer’s clinical program, $1.4 million of higher expenses with our INKmune

clinical programs and 0.7 million higher salaries and stock-based compensation, partially offset by a $1.0 million increase in our accrued

research and development rebate accrual.

General and Administrative

administrative expenses were approximately $5.2 million and $4.6 million during the six months ended June 30, 2024 and 2023,

respectively.

The $0.5 million increase in general and administrative expenses was mainly due to higher compensation (including

stock-based compensation) of $0.3 million and $0.3 million higher consulting fees, partially offset by $0.1 million lower travel expenses.

Other Income (Expense), net

The Company’s other

expense, net is lower during the three months ended March 31, 2024, mainly due to the Company incurring lower interest expense on our

debt due to having less debt outstanding.

income, net is higher during the six months ended June 30, 2024, due to the Company earning interest income on its money market accounts

and incurring less interest expense compared to 2023 due to a reduction in the amount of debt owed.

Liquidity and Capital Resources

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on an ongoing basis.

incurred a net loss of $11.0 million and $6.5 million for the three months ended March 31, 2024 and 2023, respectively.

Net cash used

in operating activities was $7,476,000 and $1,141,000 for the three months ended March 31, 2024 and 2023, respectively.

Since inception,

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

As of March 31, 2024, we had cash and cash equivalents

incurred a net loss of $20.8 million and $13.0 million for the six months ended June 30, 2024 and 2023, respectively.

Net cash used in

operating activities was $15,362,000 and $4,315,000 for the six months ended June 30, 2024 and 2023, respectively.

Since inception, we

have funded our operations primarily with proceeds from the sales of our common stock.

As of June 30, 2024, we had cash and cash equivalents

of $31,069,000.

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we advance our products under development.

During the period from April

4, 2024 through May 6, 2024, the Company sold 198,364 shares of common stock at an average price of $10.56 for gross proceeds of approximately

During the six months ending

June 30, 2024, the Company sold 198,364 shares of common stock at an average price of $10.56 for gross proceeds of approximately $2,095,000

under the ATM offering.

April 19, 2024, the Company entered into securities purchase agreements with purchasers in which the Company sold 571,592 shares of common

stock and warrants to purchase 571,592 shares of common stock for aggregate gross proceeds of approximately $4,771,000.

price of the warrants is $9.152, and the term is the earlier of two years from the issuance of the warrants and thirty trading days following

the release of top line data in the Phase 2 Alzheimer’s program, provided that directors and officers of the Company that are subject

to a blackout with respect to trading in the Company’s stock will have an additional 60 days from the termination of the blackout

date to exercise the warrant.

Directors and officers that participated in the offering paid

a combined offering price of $8.445 per share and warrant, and other investors paid $8.32 per share and warrant.

On April 19, 2024, the Company

entered into securities purchase agreements with purchasers in which the Company sold 571,592 shares of common stock and warrants to purchase

571,592 shares of common stock for aggregate gross proceeds of approximately $4,771,000.

The exercise price of the warrants is $9.152,

and the term is the earlier of two years from the issuance of the warrants and thirty trading days following the release of top line data

in the Phase 2 Alzheimer’s program, provided that directors and officers of the Company that are subject to a blackout with respect

to trading in the Company’s stock will have an additional 60 days from the termination of the blackout date to exercise the warrant.

Directors and officers that participated in the offering paid a combined offering price of

$8.445 per share and warrant, and other investors paid $8.32 per share and warrant.

On April 24, 2024, the Company

entered into a securities purchase agreement with an investor in which the Company sold 986,000 shares of common stock and warrants to

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that strategy is appropriate.

As of March 31, 2024, the cash balance held by our foreign subsidiaries with currencies other than the United

As of June 30, 2024, the cash balance held by our foreign subsidiaries with currencies other than the United

States dollar was approximately $0.3 million.

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raised substantial doubt regarding our ability to continue as a going concern within one year after the issuance of our unaudited condensed

consolidated financial statements for the year ended March 31, 2024.

consolidated financial statements for the year ended June 30, 2024.

Until we can generate sufficient revenue from the commercialization

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third parties.

Our cash and cash equivalents were $26.0 million and total current assets were $29.8 million at March 31, 2024, which the

Our cash and cash equivalents were $31.1 million and total current assets were $35.5 million at June 30, 2024, which the

Company is projecting will be insufficient to sustain its operations through one year following the date that the financial statements

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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.

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

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.

The following table summarizes

our cash flows for the periods indicated:

Three Months Ended

Six Months Ended

(in thousands)

Net cash and cash equivalents used in:

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

Operating activities

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Operating Activities

Our cash used in operating

activities was primarily driven by our net loss.

Operating activities used

approximately $7.5 million of cash during the three months ended March 31, 2024, resulting from our loss of $11.0 million, partially offset

by changes in our net operating assets and liabilities of $1.7 million and non-cash stock-based compensation of $1.8 million.

in our net operating assets and liabilities was mainly due to an increase in accounts payable and accrued liabilities of $1.4 million

and a decrease in prepaid expenses of $0.4 million.

Operating activities used

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

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

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

$6.3 million and an increase in prepaid expenses of $0.4 million, partially offset by a decrease in accounts payable and accrued liabilities

of $3.1 million.

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

activities used approximately $15.4 million of cash during the six months ended June 30, 2024, resulting from our loss of $20.8 million,

partially offset by changes in our net operating assets and liabilities of $1.2 million and non-cash stock-based compensation of $4.1

The change in our net operating assets and liabilities was mainly due to an increase in accounts payable and accrued liabilities

of $1.4 million, a decrease in prepaid expenses of $0.5 million and a decrease in other tax receivable of $0.3 million, partially offset

by an increase in research and development tax receivable of $1.2 million.

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.

Financing Activities

During the three months ended March 31, 2024, the Company repaid $2.5

million of its debt.

the six months ended June 30, 2024, the Company sold 198,364 shares of its common stock under its ATM program for net proceeds of approximately

$2.0 million.

the six months ended June 30, 2024, the Company sold 1,557,692 shares of its common stock and 1,557,592 warrants to purchase its common

stock for net proceeds of approximately $13.5 million.

the six months ended June 30, 2024, the Company repaid $5.0 million of its debt.

Critical Accounting Policies and Estimates

Our discussion and analysis

of our financial condition and results of operations is based upon our unaudited condensed 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, 2023, and there have been no material changes during the three months ended March 31, 2024.

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, 2023, and there have been no material changes during the six months ended June 30, 2024.

Quantitative and Qualitative Disclosures

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What changed 10-Q

Item 2. Management’s Discussion and Analysis