Inmune Bio, Inc. 10-Q

Item 1. Financial Statements INMUNE BIO INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) (Unaudited) September 30, 2025 December 31, 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 27,734 $ 20,922 Research and development tax credit receivable 1,704 1,181 Other tax receivable 760 228 Prepaid expenses and other current assets 472 331 TOTAL CURRENT ASSETS 30,670 22,662 Equipment, net 878 - Operating lease – right of use asset 1,064 307 Other assets 746 79 Acquired in-process research and development intangible assets - 16,514 TOTAL ASSETS $ 33,358 $ 39,562 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 6,875 $ 6,539 Accounts payable and accrued liabilities – related parties 25 25 Deferred liabilities - 517 Operating lease, current liabilities 457 140 TOTAL CURRENT LIABILITIES 7,357 7,221 Long-term operating lease liabilities 623 244 TOTAL LIABILITIES 7,980 7,465 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY Preferred stock, $ 0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding - - Common stock, $ 0.001 par value, 200,000,000 shares authorized, 26,585,258 and 22,280,451 shares issued and outstanding, respectively 27 22 Additional paid-in capital 229,888 195,754 Accumulated other comprehensive loss ( 764 ) ( 575 ) Accumulated deficit ( 203,773 ) ( 163,104 ) TOTAL STOCKHOLDERS’ EQUITY 25,378 32,097 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 33,358 $ 39,562 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 INMUNE BIO INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except share and per share amounts) (Unaudited) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2025 2024 2025 2024 REVENUE $ - $ - $ 50 $ 14 OPERATING EXPENSES General and administrative 2,546 2,219 7,115 7,369 Research and development 4,887 10,067 18,330 25,813 Impairment of acquired in-process research and development intangible assets - - 16,514 - Total operating expenses 7,433 12,286 41,959 33,182 LOSS FROM OPERATIONS ( 7,433 ) ( 12,286 ) ( 41,909 ) ( 33,168 ) OTHER INCOME, NET 961 193 1,240 304 NET LOSS $ ( 6,472 ) $ ( 12,093 ) $ ( 40,669 ) $ ( 32,864 ) Net loss per common share – basic and diluted $ ( 0.24 ) $ ( 0.60 ) $ ( 1.68 ) $ ( 1.71 ) Weighted average common shares outstanding – basic and diluted 26,585,258 20,185,676 24,141,613 19,176,853 COMPREHENSIVE LOSS Net loss $ ( 6,472 ) $ ( 12,093 ) $ ( 40,669 ) $ ( 32,864 ) Other comprehensive loss – foreign currency translation ( 1 ) ( 323 ) ( 189 ) ( 237 ) Total comprehensive loss $ ( 6,473 ) $ ( 12,416 ) $ ( 40,858 ) $ ( 33,101 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 INMUNE BIO INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 (In thousands, except share amounts) (Unaudited) Accumulated Additional Other Total Common Stock Paid-In Comprehensive Accumulated Stockholders’ Shares Amount Capital Loss Deficit Equity Balance as of December 31, 2024 22,280,451 $ 22 $ 195,754 $ ( 575 ) $ ( 163,104 ) $ 32,097 Stock-based compensation - - 2,076 - - 2,076 Sale of common stock for cash 649,860 1 5,272 - - 5,273 Exercise of warrants for cash 100 - 1 - - 1 Loss on foreign currency translation - - - ( 35 ) - ( 35 ) Net loss - - - - ( 9,739 ) ( 9,739 ) Balance as of March 31, 2025 22,930,411 23 203,103 ( 610 ) ( 172,843 ) 29,673 Stock-based compensation - - 1,534 - - 1,534 Sale of common stock for cash 3,654,847 4 22,267 - - 22,271 Loss on foreign currency translation - - - ( 153 ) - ( 153 ) Net loss - - ( 24,458 ) ( 24,458 ) Balance as of June 30, 2025 26,585,258 27 226,904 ( 763 ) ( 197,301 ) 28,867 Stock-based compensation - - 2,984 - - 2,984 Loss on foreign currency translation - - - ( 1 ) - ( 1 ) Net loss - - - - ( 6,472 ) ( 6,472 ) Balance as of September 30, 2025 26,585,258 $ 27 $ 229,888 $ ( 764 ) $ ( 203,773 ) $ 25,378 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 INMUNE BIO INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 (In thousands, except share amounts) (Unaudited) Accumulated Additional Other Total Common Stock Paid-In Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (Loss) Deficit Equity Balance as of December 31, 2023 17,950,776 $ 18 $ 159,143 $ ( 799 ) $ ( 121,022 ) $ 37,340 Stock-based compensation - - 1,779 - - 1,779 Gain on foreign currency translation - - - 130 - 130 Net loss - - - - ( 11,025 ) ( 11,025 ) Balance as of March 31, 2024 17,950,776 18 160,922 ( 669 ) ( 132,047 ) 28,224 Stock-based compensation - - 2,350 - - 2,350 Common stock issued for cash 198,364 - 2,032 - - 2,032 Common stock and warrants issued for cash 1,557,592 2 13,463 - - 13,465 Loss on foreign currency translation - - - ( 44 ) - ( 44 ) Net loss - - - - ( 9,746 ) ( 9,746 ) Balance as of June 30, 2024 19,706,732 $ 20 $ 178,767 $ ( 713 ) $ ( 141,793 ) $ 36,281 Stock-based compensation - - 1,719 - - 1,719 Common stock and warrants issued for cash 2,390,022 2 12,290 - - 12,292 Reclassification from redeemable common stock 75,697 - 799 - - 799 Loss on foreign currency translation - - - ( 323 ) - ( 323 ) Net loss - - - - ( 12,093 ) ( 12,093 ) Balance as of September 30, 2024 22,172,451 22 193,575 ( 1,036 ) ( 153,886 ) 38,675 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 INMUNE BIO INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the Nine Months Ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 40,669 ) $ ( 32,864 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 6,594 5,848 Accretion of debt discount - 73 Gain on settlement of accounts payable ( 626 ) - Depreciation expense 28 - Impairment of acquired in-process research and development intangible assets 16,514 - Changes in operating assets and liabilities: Research and development tax credit receivable ( 523 ) 796 Other tax receivable ( 532 ) 226 Prepaid expenses ( 141 ) 646 Prepaid expenses – related party - 127 Other assets ( 667 ) 49 Accounts payable and accrued liabilities 962 2,689 Accounts payable and accrued liabilities – related parties - 20 Deferred liabilities ( 517 ) 60 Operating lease liabilities ( 61 ) ( 18 ) Net cash used in operating activities ( 19,638 ) ( 22,348 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of equipment ( 899 ) - Net cash used in investing activities ( 899 ) - CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from sale of common stock and warrants 27,544 27,789 Exercise of warrants for cash 1 - Repayments of debt - ( 7,500 ) Net cash provided by financing activities 27,545 20,289 Impact on cash from foreign currency translation ( 196 ) ( 237 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,812 ( 2,296 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,922 35,848 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,734 $ 33,552 SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid for income taxes $ - $ - Cash paid for interest expense $ - $ 661 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Right of use assets obtained in exchange for lease obligations $ 702 $ - The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 INMUNE BIO INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS INmune Bio Inc. (the “Company” or “INmune Bio”) was organized in the State of Nevada on September 25, 2015 and is a clinical stage biotechnology pharmaceutical company focused on developing and commercializing its product candidates to treat diseases where inflammation and immunology cause a dysfunctional immune system contributing to disease. INmune Bio has three product platforms. The DN-TNF product platform utilizes dominant-negative technology to selectively neutralize soluble TNF, a key driver of innate immune dysfunction and mechanistic target of many diseases and was used for its Alzheimer’s clinical trial (“XPro”). The CORDStrom product platform is a pooled, human umbilical cord mesenchymal stem cell product currently being developed to treat recessive dystrophic epidermolysis bullosa (“RDEB”). The Natural Killer Cell Priming Platform includes INKmune aimed at priming the patient’s NK cells to eliminate minimal residual disease in patients with cancer. INmune Bio’s product platforms utilize a precision medicine approach for the treatment of a wide variety of hematologic malignancies, solid tumors and chronic inflammation. NOTE 2 – GOING CONCERN These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant losses and negative cash flows from operations since inception and expects to incur additional losses until such time that it can generate significant revenue from the commercialization of its product candidates. During the nine months ended September 30, 2025, the Company incurred a net loss of $ 40.7 million and had net cash flows used in operating activities of $ 19.6 million. Given the Company’s projected operating requirements and its existing cash and cash equivalents, the Company is projecting insufficient liquidity to sustain its operations through one year following the date that the financial statements are issued. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. In response to these conditions, management is currently evaluating different strategies to obtain the required funding of future operations. Financing strategies may include, but are not limited to, the public or private sale of equity, debt financings or funds from other capital sources, such as government funding, collaborations, strategic alliances, divestment of non-core assets, or licensing arrangements with third parties. There can be no assurances that the Company will be able to secure additional financing, or if available, that it will be sufficient to meet its needs or on favorable terms. Because management’s plans have not yet been finalized and are not within the Company’s control, the implementation of such plans cannot be considered probable. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements include the accounts of INmune Bio Inc. and its subsidiaries. Intercompany transactions and balances have been eliminated. In the opinion of management, the interim financial information includes all normal recurring adjustments necessary for a fair statement of the results for the interim periods. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 27, 2025. 6 Risks and Uncertainties The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials and regulatory approval prior to commercialization. These efforts require significant amounts of additional resources, adequate personnel, infrastructure and extensive compliance and reporting. The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate any revenue from any of its products. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies. The Company relies and expects to continue to rely on a small number of vendors to manufacture supplies and materials for its use in the clinical trial programs. These programs could be adversely affected by a significant interruption in these manufacturing services. Use of Estimates Preparing financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results and outcomes may differ from management’s estimates and assumptions. Fair Value of Financial Instruments The Company measures certain assets and liabilities in accordance with authoritative guidance which requires fair value measurements to be classified and disclosed in one of the following three categories: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain assets or liabilities within the fair value hierarchy. The Company did not have any transfers of assets and liabilities between the levels of the fair value measurement hierarchy during the years presented. The carrying amounts of financial instruments such as cash and cash equivalents, research and development tax credit receivable, other tax receivable, prepaid expenses, and accounts payable and accrued liabilities approximate the related fair values due to the short-term maturities of these instruments. 7 Cash and Cash Equivalents The Company considers all short-term, highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions. Research and Development Tax Incentive Receivable The Company, through its wholly owned subsidiary in Australia (“AUS”), participates 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. At each period end, management estimates the reimbursement available to the Company based on available information at the time. The Company, through its wholly owned subsidiary in the United Kingdom (“UK”), participates 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 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. At each period end, management estimates the reimbursement available to the Company based on available information at the time. Equipment Equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets and consist of scientific equipment with a 5 year life. Repairs and maintenance costs are charged to expense as incurred. Intangible Assets The Company capitalizes costs incurred in connection with in-process research and development purchased from others if the asset has alternative uses and such uses are not restricted under applicable license agreements; patent applications (principally legal fees), patent purchases, and trademarks related to its cell line as intangible assets. Acquired in-process research and development costs that do not have alternative uses are expensed as incurred. When the assets are determined to have a finite life (upon completion of the development of the in-process research and development for its DN-TNF platform), the useful life will be determined and the in-process research and development intangible assets will be amortized. During the fourth quarter and if business factors indicate more frequently, the Company performs an assessment of the qualitative factors affecting the fair value of our in-process research and development. If the qualitative assessment suggests that impairment is more likely than not, a quantitative analysis is performed. The quantitative analysis involves a comparison of the fair value of the in-process research and development with the carrying amount. If the carrying amount of the in-process research and development exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. During the second quarter of 2025, the Company released the Phase 2 clinical trial results for our Alzheimer’s drug candidate, XPro, which failed to meet the primary endpoint, though a subgroup showed potential benefits. Due to insufficient resources to fund further trials, the Company has halted immediate plans to develop XPro for Alzheimer’s or other indications and are instead seeking a partner to continue these studies. As part of preparing its interim unaudited condensed consolidated financial statements, the Company determined that the intangible asset’s fair value was likely below its carrying value. Following a quantitative impairment assessment, the Company estimated the asset’s fair value at $ 0 , resulting in a recorded impairment of $ 16,514,000 which was recorded during the second quarter of 2025. 8 Basic and Diluted Loss per Share Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position. At September 30, 2025 and 2024, the Company had potentially issuable shares as follows: September 30, 2025 2024 Stock options 7,195,342 6,296,807 Warrants 3,944,138 3,944,238 Total 11,139,480 10,241,045 Revenue Recognition The Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC Topic 606: (1) identify contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenues when (or as) the Company satisfies the performance obligations. The Company records the expenses related to revenue in research and development expense, in the periods such expenses were incurred. The Company records deferred revenues when cash payments are received or due in advance of performance, including amounts which are refundable. Stock-Based Compensation The Company utilizes the Black-Scholes option pricing model to estimate the fair value of stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from our historical experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances. The Company accounts for forfeitures of stock options as they occur. Research and Development Research and development (“R&D”) costs are expensed as incurred. Research and development credits are recorded by the Company as a reduction of research and development costs. Major components of research and development costs include cash compensation, stock-based compensation, costs of preclinical studies, clinical trials and related clinical manufacturing, costs of drug development, costs of materials and supplies, facilities cost, overhead costs, regulatory and compliance costs, and fees paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf. The Company recognizes grants as contra research and development expense in the consolidated statement of operations on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. 9 Income Taxes The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Foreign Currency Translation The Company’s financial statements are presented in the U.S. dollar (“$”), which is the Company’s reporting currency, while its functional currencies are the U.S. Dollar for its U.S. based operations, British Pound (“GBP”) for its United Kingdom-based operations and Australian Dollars (“AUD”) for its Australian-based operations. All assets and liabilities are translated at the exchange rate on the balance sheet date, stockholders’ equity is translated at historical rates and statement of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statement of operations and comprehensive income (loss). Segment Information The Company has one primary business activity and operates in one reportable segment. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer who evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis. The measures of profitability and the significant segment expenses reviewed by the CODM are consistent with these financial statements and footnotes. Recent Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The guidance in ASU 2023-09 improves the transparency of income tax disclosures by greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard is effective for public companies for fiscal years beginning after December 15, 2024 and for interim periods for fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2023-09 may have on its consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 may be applied prospectively with the option for retrospective application for all prior periods presented. The Company is currently evaluating the impact of adopting this guidance on the Company’s current financial position, results of operations or financial statement disclosures. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as expensing of U.S. research expenditures and eligible capital expenditures, the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The impacts of the OBBBA are reflected in our results for the quarter ended September 30, 2025, and there was no impact to our income tax expense or effective income tax rate. NOTE 4 – RESEARCH AND DEVELOPMENT ACTIVITY According to AUS tax law, the Company is allowed an R&D tax credit that reduces a company’s tax bill in AUS for expenses incurred in R&D subject to certain requirements. The Company’s Australian subsidiary submits R&D tax credit requests annually for research and development expenses incurred. At September 30, 2025 and December 31, 2024, the Company recorded a research and development tax credit receivable of $ 1,704,000 and $ 1,181,000 , respectively, for R&D expenses incurred in Australia. 10 Xencor, Inc. License Agreement On October 3, 2017, the Company entered into a license agreement (“Xencor License Agreement”) with Xencor, Inc. (“Xencor”), which discovered and developed a proprietary biological molecule that inhibits soluble tumor necrosis factor. On June 10, 2021, the Company and Xencor entered into a First Amendment to License Agreement pursuant to which, among other things, Section 3.2 of the Xencor License Agreement was amended to change the due diligence milestones. Pursuant to the Xencor License Agreement, Xencor granted the Company an exclusive worldwide, royalty-bearing license in licensed patent rights, licensed know-how and licensed materials (as defined in the license agreement) to make, develop, use, sell and import any pharmaceutical product that comprises, contains, or incorporates Xencor’s proprietary protein known as “XPro” that inhibits soluble tumor necrosis factor (or all modifications, formulations and variants of the licensed protein that specifically bind soluble tumor necrosis factor) alone or in combination with one or more active ingredients, in any dosage or formulation (“Licensed Products”). The Company believes the protein has numerous medical applications. Such additional alternative applications of the technology are available under the Xencor License Agreement. The Company also agreed to pay Xencor a 5 % royalty on Net Sales of all Licensed Products in a given calendar year, which are payable on a country-by- country and licensed product by licensed product basis until the date that is the later of (a) the expiration of the last to expire valid claim covering such Licensed Product in such country or (b) ten years following the first sale to a third party of the licensed product in such country. During the second quarter of 2025, the Company released the Phase 2 clinical trial results for our Alzheimer’s drug candidate, XPro, which failed to meet the primary endpoint, though a subgroup showed potential benefits. Due to insufficient resources to fund further trials, the Company has halted immediate plans to develop XPro for Alzheimer’s or other indications and are instead seeking a partner to continue these studies. As part of preparing its interim unaudited condensed consolidated financial statements, the Company determined that the intangible asset’s fair value was likely below its carrying value. Following a quantitative impairment assessment, the Company estimated the asset’s fair value at $ 0 , resulting in a recorded impairment of $ 16,514,000 during the second quarter of 2025. CORDStrom License Agreement On February 6, 2025, the Company and Great Ormond Street Hospital for Children NHS Foundation Trust (“GOSH”) entered into a license agreement for the exclusive commercial use to clinical trial data associated with a GOSH study investigating the potential of CORDStrom to treat RDEB in pediatric patients (the “MissionEB study”). The Company owns the intellectual property covering CORDStrom, the investigational medicinal product used in the Mission EB study. In addition, the Company owns intellectual property and maintains trade secret protections covering the manufacturing of CORDStrom. With this license to the clinical trial data, the Company intends to prepare applications seeking marketing authorization of CORDStrom for treatment of pediatric RDEB in each of the FDA, EMA, and MHRA. Terms of the license agreement include a milestone payment of up to £ 6,000,000 (approximately $ 8.1 million as of September 30, 2025) due on the first to occur marketing authorization to be granted by the FDA, EMA or MHRA, which had not occurred as of September 30, 2025. The Company was also required to make an upfront payment to GOSH of approximately $ 0.3 million, which the Company paid during July 2025 and recorded in research and development expense. Pursuant to the GOSH license agreement, the Company has an obligation to provide CORDStrom to the MissionEB study at no cost. While Part 1 of the study is completed, Part 2 of the MissionEB study is currently uninitiated due to a lack of funding by the National Health Services England (“NHSE”). It is unknown whether funding for the study will be allocated by NHSE or its successor agency in the United Kingdom. The Company has not recorded an estimated obligation for the supply of the MissionEB trial with CORDStrom as it is unknown if the MissionEB trial will resume. INKmune License Agreement On October 29, 2015, the Company entered into an exclusive license agreement (the “INKmune License Agreement”) with Immune Ventures, LLC (“Immune Ventures”). Pursuant to the INKmune License Agreement, the Company was granted exclusive worldwide rights to the patents, including rights to incorporate any improvements or additions to the patents that may be developed in the future. In consideration for the patent rights, the Company agreed to the following milestone payments: (in thousands) Each Phase I initiation $ 25 Each Phase II initiation $ 250 Each Phase III initiation $ 350 Each NDA/EMA filing $ 1,000 Each NDA/EMA awarded $ 9,000 11 In addition, the Company agreed to pay the licensor a royalty of 1 % of net sales during the life of each patent granted to the Company. The License is owned by Immune Ventures. David Moss, the Company’s Chief Executive Officer, Mark Lowdell, its Chief Scientific Officer, and RJ Tesi, former Chief Executive Officer of the Company, are the owners of Immune Ventures. No sales have occurred under this license. During December 2023, the Company initiated a Phase I trial with INKmune in patients with metastatic castration-resistant prostate cancer. At December 31, 2024 and September 30, 2025, the Company recorded $ 25,000 payable to Immune Ventures within accounts payable and accrued liabilities – related parties in the consolidated balance sheet. The term of the agreement began on October 29, 2015 and ends on a country-by-country basis on the date of the expiration of the last to expire patent rights where patent rights exists, unless terminated earlier in accordance with the agreement. Upon the termination of the agreement, we shall have a fully paid up, perpetual, royalty-free license without further obligation to Immune Ventures. The agreement can be terminated by Immune Ventures if, after 60 days from the Company’s receipt of notice that the Company has not made a payment under the agreement, and the Company still does not make this payment. On July 20, 2018 and October 30, 2020, the parties amended the agreement under which the Company was required achieve milestones pursuant to the agreement. On April 17, 2023, the parties executed an additional amendment to the agreement under which the Company removed the due diligence requirements to achieve reasonable commercial efforts to bring INKmune to market. This removed all requirements of clinical trial timelines and the filing timelines of an NDA or equivalent. All other provisions in the INKmune License Agreement shall continue in full force and effect. University of Pittsburg License Agreement On October 3, 2017, the Company entered into an Assignment and Assumption Agreement with Immune Ventures related to intellectual property licensed from the University of Pittsburgh. Pursuant to the Assignment and Assumption Agreement (“Assignment Agreement”), Immune Ventures assigned all of its rights, obligations and liabilities under an Exclusive License Agreement between the University of Pittsburgh – Of the Commonwealth System of Higher Education (“Licensor”) and Immune Ventures to INmune Bio (“Licensee”), (the “PITT Agreement”). Consideration under the PITT Agreement includes: (i) annual maintenance fees, (ii) royalty payments based on the sale of products making use of the licensed technology, and (iii) milestone payments. The Company owes annual maintenance fees under the PITT Agreement in the amount of $ 25,000 payable on June 26 of each year until the first commercial sale. At September 30, 2025, the Company owed the University of Pittsburgh $ 25,000 for annual maintenance fees. Upon first commercial sale of a product making use of the licensed technology under the PITT Agreement, the Licensee is required to pay royalties equal to 2.5 % of Net Sales each calendar quarter. Moreover, under the PITT Agreement the Licensee is required to make milestone payments as follows: (in thousands) Each Phase I initiation $ 50 Each Phase III initiation $ 500 First commercial sale of product making use of licensed technology $ 1,250 The PITT Agreement expires upon the earlier of: (i) expiration of the last claim of the Patent Rights (as defined in the PITT Agreement) forming the subject matter of the PITT Agreement; or (ii) the date that is 20 years from the effective date of the agreement (June 26, 2037). The Licensee may terminate the PITT Agreement upon 3 months prior written notice provided all payments under the license are current. The Licensor may terminate the PITT Agreement upon written notice if: (i) Licensee defaults as to performance of material obligations which have not been cured within 60 days after receiving written notice; or (ii) Licensee ceases to carry out its business, becomes bankrupt or insolvent, applies for or consents to the appointment of a trustee, receiver or liquidator of its assets or seeks relief under any law for the aid of debtors. 12 NOTE 5 – FAIR VALUE MEASUREMENTS The following table presents the hierarchy for assets and liabilities measured at fair value on a recurring basis: (in thousands) Total Quoted Price in Active Market (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) September 30, 2025: Cash equivalents Treasury Bills $ 10,556 $ 10,556 $ - $ - Money market fund 16,682 16,682 - - Total cash equivalents $ 27,238 $ 27,238 $ - $ - (in thousands) Total Quoted Price in Active Market (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2024: Cash equivalents Treasury Bills $ 10,260 $ 10,260 $ - $ - Money market fund 10,328 10,328 - - Total cash equivalents $ 20,588 $ 20,588 $ - $ - NOTE 6 – COMMITMENTS In April 2025, the Company wholly owned subsidiary, INmune Bio International Ltd., entered into an agreement whereby the Company leases manufacturing space from a third party in the United Kingdom for 2 years. The lease requires payments of approximately $ 76,000 each quarter during the first year and $ 152,000 each quarter during the second year. The lease commencement date is August 2025. As of September 30, 2025, the maturities of our lease liabilities are as follows: (in thousands, except years) 2025 $ 68 2026 729 2027 405 Total lease payments 1,202 Less: imputed interest ( 122 ) Present value of future lease payments 1,080 Less: operating lease, current liabilities ( 457 ) Long-term operating lease liabilities $ 623 Weighted-average remaining lease term 1.7 years Weighted-average discount rate 12.0 % During the three and nine months ended September 30, 2025 the Company recognized $ 134,000 and $ 229,000 , respectively, of lease expense. During the three and nine months ended September 30, 2024, the Company recognized $ 40,000 and $ 120,000 , respectively, of lease expense. During April 2025, the Company’s wholly-owned subsidiary, INmune Bio International. Ltd., entered into a 2 -year collaboration agreement with a vendor whereby it makes fixed payments to the vendor in exchange for services pursuant to manufacturing CORDStrom in the United Kingdom. A summary of the commitments payable for these services pursuant to the agreement is as follows as of September 30, 2025: (in thousands, except years) 2026 $ 1,449 2027 1,177 Total $ 2,626 13 NOTE 7 – RELATED PARTY TRANSACTIONS UCL During the nine months ended September 30, 2025 and 2024, the Company made payments to UCL of $ 132,000 and $ 252,000 , respectively, for medical research performed on behalf of the Company. UCL is a wholly owned subsidiary of the University of London. The Company’s Chief Scientific and Manufacturing Officer is a professor at the University of London. AmplifyBio At September 30, 2025 and December 31, 2024, the Company recorded a payable to AmplifyBio of $ 26,000 and $ 0 , respectively, for medical research performed on behalf of the Company. During the nine months ended September 30, 2025 and 2024, the Company paid AmplifyBio $ 41,000 and $ 324,000 , respectively. During 2025, AmplifyBio ceased operations. Amplify Bio’s former CEO is on the board of directors of the Company. NOTE 8 – DEBT During 2021, the Company entered into a Loan and Security Agreement (the “Term Loan”) with Silicon Valley Bank and SVB Innovation Credit Fund VIII, L.P., together (the “Lenders”) in which the Company borrowed $ 15 million. The Term Loan was secured by the Company’s assets. During December 2024, the Company paid off the Term Loan in full. During February 2025, the Company entered into a letter agreement with the Lenders whereby the Term Loan was terminated. For the three and nine months ended September 30, 2024, the Company recognized interest expense of $ 145,000 and $ 752,000 , respectively, related to the Term Loan NOTE 9 – STOCKHOLDERS’ EQUITY Registered Direct Offerings During June 2025, the Company entered into securities purchase agreements with investors whereby the Company sold 3,000,000 shares of the common stock in a registered direct offering in exchange for gross proceeds of $ 18.9 million (net proceeds of approximately $ 17.4 million). During September 2024, the Company entered into securities purchase agreements with investors whereby the Company sold 2,341,260 shares of the Company’s common stock and warrants to purchase an additional 2,341,260 shares of the Company’s common stock in a registered direct offering in exchange for gross proceeds of $ 13.0 million (net proceeds of approximately $ 12.0 million). Directors and officers that participated in the offering paid a combined offering price of $ 6.50 per share and warrant, and other investors paid a combined offering price of $ 5.50 per share and warrant. The warrants are exercisable until March 16, 2030 and the exercise price is $ 6.40 . The Company determined the warrants were equity classified. The fair value of the warrants was approximately $ 9.1 million and was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 3.41 % based on the applicable US Treasury bill rate (2) expected life of 5.5 years, (3) expected volatility of approximately 92 % based on the trading history of the Company, and (4) zero expected dividends. During April 2024, the Company entered into a securities purchase agreement with an investor whereby the Company sold 986,000 shares of the Company’s common stock and warrants to purchase an additional 986,000 shares of the Company’s common stock in a registered direct offering in exchange for gross proceeds of approximately $ 9.7 million (net proceeds of approximately $ 8.9 million). The exercise price of the warrants is $ 9.84 and the warrants are exercisable until April 29, 2026. The Company determined that the warrants were equity classified. The fair value of the warrants was approximately $ 5.8 million and was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 4.97 % based on the applicable US Treasury bill rate (2) expected life of 2.0 years, (3) expected volatility of approximately 77 % based on the trading history of the Company, and (4) zero expected dividends. During April 2024, the Company entered into securities purchase agreements with investors whereby the Company sold 571,592 shares of the Company’s common stock and warrants to purchase an additional 571,592 shares of the Company’s common stock in a registered direct offering in exchange for gross proceeds of approximately $ 4.8 million (net proceeds of approximately $ 4.5 million). 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. The exercise price of the warrants is $ 9.152 , and the warrants are exercisable for two years from the issuance dates. The Company determined the warrants were equity classified. The fair value of the warrants was approximately $ 3.0 million and was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 4.89 % based on the applicable US Treasury bill rate (2) expected life of 2.0 years, (3) expected volatility of approximately 78 % based on the trading history of the Company, and (4) zero expected dividends. 14 Common Stock – At the Market Offering During March 2021, the Company entered into a sales agreement (“Sales Agreement”) with BTIG, LLC (“BTIG”), as sales agent, to establish an At-The-Market (“ATM”) offering program of up to $ 45 million of common stock, subject to certain limitations on the amount of common stock that may be offered and sold by the Company set forth in the sales agreement. During August 2023, the Company and BTIG entered into Amendment No. 1 to the Sales Agreement. The Company is required to pay BTIG a commission of 3 % of the gross proceeds from the sale of shares. During the nine months ended September 30, 2024, the Company issued and sold 198,364 shares of common stock at an average price of $ 10.56 per share under the ATM program. The aggregate net proceeds were approximately $ 2.0 million after commission expenses. During August 2024, the Company entered into an amended and restated at-the-market sales agreement with RBC Capital Markets LLC and BTIG (together, the “Sales Agents”) relating to the offer and sale of shares of our common stock with an aggregate offering price of up to $ 75.0 million. This amended and restated at-the-market sales agreement replaced the Sales Agreement entered into with BTIG in March 2021, as amended in August 2023. The Company is required to pay the Sales Agents a commission of 3 % of the gross proceeds from the sale of shares. During the nine months ended September 30, 2024, the Company issued and sold 48,762 shares of common stock at an average price of $ 6.96 per share under the ATM program. The aggregate net proceeds were approximately $ 0.3 million after commission expenses. During the nine months ended September 30, 2025, the Company issued and sold 1,304,707 shares of common stock at an average price of $ 8.01 per share under the ATM program. The aggregate net proceeds were approximately $ 10.1 million after commission expenses. At September 30, 2025, the Company had $ 64.5 million of common stock available under the amended and restated at-the-market agreement. During 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. These shares were inadvertently sold under a registration statement filed with the SEC that had in fact expired prior to the time the shares were sold. The Company reclassified 75,697 shares, with an aggregate purchase price of $ 799,000 of its common stock as temporary equity presented outside stockholders’ equity as a result of potential rescission rights. As of September 30, 2024, the rescission rights for these shares lapsed and the shares were reclassified to permanent equity. Stock options During August 2025, the Company modified stock option awards held by its former Chief Executive Officer to extend the post-termination exercise period and provide that unvested stock options shall continue to vest pursuant to the severance agreement, which will result in additional stock-based compensation expense of up to $ 2.4 million to be expensed over the remaining original vesting term, if any, of the stock option awards. The following table summarizes stock option activity during the nine months ended September 30, 2025: (in thousands, except share and per share amounts) Number of Shares Weighted- average Exercise Price Weighted- average Remaining Contractual Term (years) Aggregate Intrinsic Value Outstanding at January 1, 2025 7,203,307 $ 8.29 6.49 $ 1,218 Options granted 100,000 $ 7.88 10.0 - Options exercised - $ - - - Options cancelled ( 107,965 ) $ 7.50 - - Outstanding at September 30, 2025 7,195,342 $ 8.29 5.80 $ - Exercisable at September 30, 2025 5,379,014 $ 8.80 4.81 $ - During the three and nine months ended September 30, 2025, the Company recognized stock-based compensation expense of approximately $ 3.0 million and $ 6.6 million, respectively, related to the vesting of stock options. During the three and nine months ended September 30, 2024, the Company recognized stock-based compensation expense of approximately $ 1.7 million and $ 5.8 million, respectively, related to the vesting of stock options. As of September 30, 2025, there was approximately $ 8.0 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period of 2.63 years. 15 Warrants The Company issued warrants to the Company’s lenders upon obtaining a loan in June 2021. The warrants have a 10 -year term and an exercise price of $ 14.05 . At September 30, 2025, 45,386 of these warrants are outstanding and the intrinsic value of these warrants is $ 0 . During April 2024, the Company issued 1,557,592 warrants to investors in connection with the sale of common stock. At September 30, 2025, 1,557,592 of these warrants are outstanding and are exercisable for cash at a weighted average price of $ 9.59 per share. The intrinsic value of these warrants was $ 0 as of September 30, 2025. During September 2024, the Company issued 2,341,260 warrants to investors in connection with the sale of common stock. At September 30, 2025, 2,341,160 of these warrants are outstanding and are exercisable for cash at a weighted average price of $ 6.40 per share. The intrinsic value of these warrants was $ 0 as of September 30, 2025. Stock-based Compensation by Class of Expense The following summarizes the components of stock-based compensation expense in the consolidated statements of operations for the nine months ended September 30, 2025 and 2024 respectively: (in thousands) Three Months Ended September 30, 2025 Three Months Ended September 30, 2024 Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024 Research and development $ 1,363 $ 677 $ 2,820 $ 2,375 General and administrative 1,621 1,042 3,774 3,473 Total $ 2,984 $ 1,719 $ 6,594 $ 5,848 Shareholder Rights Agreement On December 30, 2020, the Board of Directors (the “Board”) of the Company approved and adopted a Rights Agreement, dated as of December 30, 2020, by and between the Company and VStock Transfer, LLC, as rights agent, pursuant to which the Board declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share of the Company’s common stock held by stockholders as of the close of business on January 11, 2021. When exercisable, each right initially would represent the right to purchase from the Company one one-thousandth of a share of a newly designated series of preferred stock, Series A Junior Participating Preferred Stock, par value $ 0.001 per share, of the Company, at an exercise price of $ 300.00 per one one-thousandth of a Series A Junior Participating Preferred Share, subject to adjustment. Subject to various exceptions, the Rights become exercisable in the event any person (excluding certain exempted or grandfathered persons) becomes the beneficial owner of twenty percent or more of the Company’s common stock without the approval of the Board. The Rights Agreement was amended in 2021, 2022, 2023 and 2024 to extend the expiration date and shall expire on December 30, 2025. NOTE 10 – LEGAL Dispute The Company had a dispute with a vendor in which the Company believed that the vendor did not properly provide services for which they have invoiced the Company. The vendor invoiced the Company approximately $ 1.6 million, of which the Company recorded $ 0.2 million. During August 2025, the Company and the vendor settled the obligation for approximately $ 0.2 million. Litigation The Company is subject to claims and suits that arise from time to time in the ordinary course of our business. Although management currently believes that resolving claims against the Company, individually or in aggregate, will not have a material adverse impact in the Company’s consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future. 16