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Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-10-30 · 148 added, 484 removed, 157 unchanged (80% of the section changed)

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Forward-Looking Statements

This Quarterly Report on Form

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

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

forward-looking statements.

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

“believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended

to identify forward-looking statements.

These statements by their nature involve substantial risks and uncertainties, and actual results

may differ materially depending on a variety of factors, many of which are not within our control.

These factors include but are not limited

to economic conditions generally and in the industries in which we may participate;

competition within our chosen industry, including

competition from much larger competitors;

This Form 10-Q contains certain

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

For this purpose, any statements

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

Without limiting

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

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

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

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

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

the industries in which we may participate;

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

technological advances and failure to successfully develop business relationships.

Description of Business

Our objective is to develop

and commercialize our product candidates to treat diseases where inflammation and immunology cause a dysfunctional immune system contributing

Immune dysfunction can occur for a variety of reasons including genetics, lifestyle, and other factors.

However, age plays

a significant role in the development of immune dysfunction.

Immune dysfunction can be seen in cancer where Natural Killer (“NK”)

cells are impaired and facilitate a tumor’s evasion of the immune system and subsequent disease progression.

Chronic inflammation

is implicated in various diseases, where it impairs the immune system.

Our primary focus continues to be treatment of Alzheimer’s

Disease (“AD”) with XPro1595 (“XPro™ and DN-TNF) and treatment of recessive dystrophic epidermolysis bullosa (“RDEB”)

with CORDStrom, a proprietary, pooled, human umbilical cord mesenchymal stromal cell platform.

RDEB is a pediatric orphan disease caused

by mutations in the COL7A1 gene which results in highly debilitating skin blistering, dysphagia and failure to thrive with chronic wound

problems that often result in fatal squamous cell carcinoma.

XPro for AD has completed

Phase I and Phase II trials with enrollment of patients at clinical sites in the United Kingdom, EU, Australia and Canada.

program has nearly completed an open label Phase II trial in metastatic castrate resistant prostate cancer (“mCRPC”).

for the treatment of children with RDEB has completed a pivotal blinded randomized cross-over trial.

The data will be submitted for marketing

authorization by filing a Marketing Authorization Application (MAA) in the United Kingdom followed by a Biologics License Application

(“BLA”) with the FDA in the US which is anticipated in 2026.

We believe our XPro™

platform can be used as a CNS (“central nervous system”) therapy to target glial activation to prevent progression of AD along

with other inflammatory diseases.

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

In each case, we believe

neutralizing sTNF is a cornerstone to the treatment of neuroinflammation and immune dysfunction in these diseases.

We believe the DN-TNF platform

can be used to treat selected neurodegenerative diseases by reducing neuroinflammation without immunosuppression.

The Company believes

the core pathology of cognitive decline is a combination of neurodegeneration and synaptic dysfunction.

Neurodegeneration is nerve cell

death that may include demyelination.

Synaptic dysfunction means the connections between nerve cells cease to work efficiently and may

decrease in number.

The combination of neurodegeneration and synaptic dysfunction causes cognitive decline and behavioral changes associated

XPro completed a Phase I trial treating patients with Alzheimer’s disease that was partially funded by a Part-the-Clouds

Award from the Alzheimer’s Association.

We believe XPro targets activated microglia and astrocytes of the brain that produce sTNF

that promotes nerve cell loss, synaptic dysfunction and prevents myelin repair - key elements in the development of dementia.

models, elimination of sTNF prevents nerve cell dysfunction, reverses synaptic pruning and promotes myelin repair.

The Phase I trial in

patients with biomarkers of inflammation with AD has been completed.

The open label, dose escalation trial was designed to demonstrate

that XPro can safely decrease neuroinflammation in patients with AD and biomarkers of inflammation (ADi).

The goal of the Phase 1 trial

was to demonstrate safety in the target population (patients with AD), demonstrate target engagement by showing XPro got into the brain

in therapeutically relevant concentrations and reduced neuroinflammation) and identify the best dose for phase 2.

XPro got into the brain

( Figure 1a ) and dose dependently decreased biomarker of neuroinflammation in the CSF ( Figure 1b ) with patients treated with

the highest dose (1mg/kg/week dose) having the greatest reduction in neuroinflammation.

A broad analysis of proteomic changes following

treatment of XPro revealed significant changes in CSF proteins related to CNS neuronal function, immune/inflammatory response, Cytoskeletal,

metabolic processes, and dendritic spine morphogenesis and synaptic plasticity.

Of note, XPro reduced neuronal injury markers Visinin-like

protein-1 (91%) and Neurofilament light (84%), improved measures of synaptic function as evinced by a 222% increase in Contactin 2 and

a 56% decrease neurogranin.

Finally, XPro significantly reduced CSL levels of p-Tau217 (43%) and pTau181 (2%) after 3 months of therapy

( Figure 1c ).

(A) XPro gets into the brain

at therapeutically relevant concentrations.

XPro neutralizes 99.9% of soluble TNF when drug levels exceed two logs.

(B) XPro dose dependently

reduces CSF inflammation in the brain.

CSF composite – a composite score of change of all cytokines measured in the OLINK Target

48 Cytokine panel.

The Phase II study, also known

as AD-02 and MINDFuL, was a multicenter, randomized, double-blind, placebo-controlled clinical trial evaluating the safety, tolerability,

and efficacy of XPro1595 in individuals with early Alzheimer’s disease with biomarkers of inflammation (ADi).

The primary goal of

AD02 was to determine if XPro could affect cognition following 6 months of treatment.

Participants with a diagnosis of early AD (mild

cognitive impairment or mild AD) were randomized in a 2:1 (XPro:Placebo) ratio to receive either 1.0 mg/kg of XPro1595 or placebo via

weekly subcutaneous injections for 6 months.

An enrichment strategy mirroring to the successful strategy used in the Phase I trial was

used to align the mechanism of the drug with the patients AD pathology.

Eligibility required the

presence of at least one inflammatory biomarker—either high-sensitivity C-reactive protein (hsCRP > 1.5 mg/L), erythrocyte sedimentation

rate (ESR > 10 mm/h), hemoglobin A1c (HbA1c > 6.0% DCCT), or at least one APOE4 allele.

The primary endpoint was the Early

and Mild Alzheimer’s Cognitive Composite (EMACC), with secondary endpoints of Clinical Dementia Rating Scale – Sum of Boxes

(CDR-SB), Everyday Cognition Scale (E-Cog), Neuropsychiatric Inventory (NPI-12), ADCS-ADL, and biomarkers such as pTau-217 and GFAP.

neuroinflammation and brain volumetrics are also evaluated.

The AD program had sites in Australia, Canada, the United Kingdom, France,

Germany, Spain, Czech Republic and Slovakia.

Full enrollment in the Phase

II AD trial occurred in late 2024 with 208 patients enrolled and top-line data was received during June 2025.

In the Phase 2 MINDFuL trial

of XPro™ in patients with early Alzheimer’s Disease (AD) with biomarkers of inflammation, the modified intent-to-treat

(mITT) population (n=200) did not meet the primary and key secondary endpoints ( figure 1 ).

Efficacy, Demographics and Safety data

are shown below.

Phase 2 Study Results – mITT population Primary

and Key Secondary Endpoints, Change From Baseline

As these graphs depict, the primary

and secondary endpoints in this trial were not met as no decline in the placebo groups were observed.

A trend was observed in NPI that

favored XPro1595 over placebo.

For reference, A higher EMACC score =better, A lower CDR and NPI score is better.

LS Mean Diff (SE):

-0.018 (0.0414), 90% CI:

-0.0860, 0.0509, p-value:

LS Mean Diff (SE):

-0.11 (0.185), 90% CI:

-0.417, 0.195, p-value:

LS Mean Diff (SE):

-0.9 (0.78), 90% CI:

-2.18, 0.39, p-value:

Prespecified subgroups analyses

suggested a signal that favored XPro in a predetermined population of patients that were both amyloid positive and had a higher burden

of inflammation defined by 2 or more biomarkers of inflammation (from hereon referred to as enriched group).

As shown in figure 2, the

mITT placebo group did not decline whereas patients in the enriched group did decline.

Decline in the placebo group is required to test

the ability of a treatment to prevent or slow decline.

Phase 2 Study Results – Placebo group decline in

the mITT and enriched population

Placebo patients in the mITT

did not show decline on the EMACC over the 24 week study.

In the enriched group, placebo patients did decline over 24 weeks.

To evaluate a subgroup after

missing the primary endpoint, we used effect size as the primary metric due to the smaller sample size (n=100).

Effect size, measured

by Cohen’s D, is well-suited for small samples and allows comparisons across different measures (e.g., cognitive tests and biomarkers).

Unlike p-values, which indicate the likelihood of results being due to chance, effect size reflects clinical relevance and is commonly

used for signal detection in Phase 2 studies.

We defined a promising signal

as a minimum effect size of 0.2, where XPro outperformed placebo on multiple endpoints aligned with our hypothesis and the drug’s

mechanism of action.

Results must also be appropriate for the trial’s parameters, meaning the observed effects should align with

the trial’s duration and endpoints.

For example, if a clinical measure typically requires a longer time to show meaningful change

than the trial’s 6-month timeframe, an observed effect on that endpoint would not be considered supportive.

Signal detection was

based on the effect size difference in LS mean change from baseline (MMRM model) between XPro and placebo at 6 months, ensuring results

were meaningful, relevant, and appropriate for the trial’s design and objectives.

Using this method, the enriched

population (50% of the total sample, n=100) showed trends toward improvement with XPro on the primary endpoint (EMACC) and a key secondary

endpoint (NPI) ( Figure 3a ).

With the placebo group showing the expected decline on EMACC over six months, a beneficial effect of

XPro became evident.

EMACC, which measures cognition (higher scores are better), showed an effect size of 0.27, exceeding the company’s

threshold of 0.2, though the p-value of 0.16 fell short of the <0.1 target.

For neuropsychiatric symptoms (NPI), the enriched population

showed a stronger beneficial effect compared to the overall population, with an effect size of -0.23 and a p-value of 0.2.

effect on CDR-SB, which measures cognition and function (lower scores are better).

Within the dose compliant group of patients, there

was an increased benefit seen corresponding to the amount of XPro received during the trial (Figure 3b).

We also evaluated the effect

size of additional endpoints ( Figure 4 ).

Across most endpoints, XPro showed favorable trends, with effect sizes approaching the

0.2 threshold for clinical relevance.

Phase 2 Study Results – Enriched population primary

and key secondary endpoints, change from baseline

The enriched population show

effect size >0.2 favoring XPro1595 on the EMACC and NPI.

, A higher EMACC score =better, A lower CDR and NPI score is better.

LS Mean Diff (SE):

0.086 (0.0603), 90% CI:

-0.0146, 0.1857, p-value:

LS Mean Diff (SE):

-0.08 (0.307), 90% CI:

0.426, p-value:

LS Mean Diff (SE):

-1.6 (1.25), 90% CI:

-3.71, 0.47, p-value:

Phase 2 Study Results – XPro had greater impact

on dose compliant patients

Effect size of XPro across multiple endpoints described

as absolute effect sizes (cohen’s D).

Treatment Emergent Adverse Events (TEAEs):

Safety Analyses Set

Placebo (n=67)

XPro1595 (n=139)

Any TEAE by Maximum Severity

Any Serious TEAE

Any Treatment-Related Serious TEAE

Any TEAE Leading to Treatment Discontinuation

Any TEAE Leading to Study Withdrawal

Any TEAE with Fatal Outcome

The Company believes these

findings from the Phase 2 results indicate that XPro may offer benefits to a readily identified subgroup of Alzheimer’s patients

across all ages with biomarker-defined neuroinflammation, regardless of comorbidities or ApoE4 status and potentially lays the foundation

for advancing XPro as a promising treatment for AD.

The Company is planning an end-of-phase 2 meeting with the FDA, which is expected

to occur towards the end of 2025 or early 2026, to determine next steps and expects to be eligible for one of the accelerated pathways.

developed by INmune Bio circa 2020, represents a breakthrough in mesenchymal stromal cell technology.

The CORDStrom platform leverages,

among other things, proprietary screening, pooling and expansion techniques to create off-the-shelf, allogeneic, pooled human umbilical

cord -derived mesenchymal stromal cells (HucMSCs) as medicines to treat complex inflammatory diseases.

CORDStrom products are designed

to provide high-quality, off-the-shelf, batch-to-batch consistent, scalable, cGMP manufactured, potent cellular medicines that can be

produced at low cost and with repeatable specification.

Initially developed at the INKmune manufacturing facilities utilizing United Kingdom

academic grant funding, CORDStrom is a product platform that shows promise as a therapy for RDEB and many other debilitating conditions.

While the first generation CORDStrom product is agnostic to indication, the platform enables creation of indication-specific products,

which can be tuned for optimization of anti-inflammatory, immunomodulatory, wound healing, and other characteristics.

CORDStrom product platform shares many similarities, including raw materials, equipment, and procedures, with the Company’s INKmune

oncology product, enabling the Company to leverage economies of scale, experienced staff, and other resources to strategically manufacture

both products in a rotational campaign with resource and environmental efficiencies.

with RDEB have skin that is damaged by even the smallest amount of friction which causes severe blistering, deep wounds, and scars.

is caused by a fault in a gene that makes collagen, a protein that holds the skin layers together.

There are limited options available

for treatment, none that adequately meet the needs of patients, and the condition gets worse over time with most children reliant on a

wheelchair as they move into their teenage years.

Many of those with an RDEB diagnosis will also go on to develop aggressive life-threatening

skin cancer in adulthood caused by the accumulated damage to their skin.

The Company estimates roughly 2,000 people suffer from RDEB

in the US, United Kingdom and EU representing a large unmet opportunity to potentially provide routine clinical care to these children.

2020, the Company has supplied CORDStrom HucMSCs as an investigational medical product to the Great Ormond Street Hospital (“GOSH”),

London, in connection with the MissionEB study, which was primarily funded by a grant from the National Institute for Health and

Care Research (“NIHR”) in the United Kingdom.

INmune Bio was compensated for CORDStrom used in the trial and was not a sponsor

of the Mission EB study.

Investigators recently concluded a double blinded, placebo-controlled arm of the study, which evaluated the safety

and efficacy of CORDStrom in 30 pediatric patients (less than 16 years old) in the United Kingdom with intermediate and severe RDEB using

a novel cross-over clinical trial design.

Patients were randomized to CORDStrom or placebo arms and received 2, intravenous infusions

two weeks apart and then followed for 9 months.

Each child then crossed over to the other arm and received two doses of placebo or CORDStrom

two weeks apart with a further 9-month follow-up.

patients were treated as day-cases and no CORDStrom related serious adverse events were reported through the study.

Top-line results showed

the treatment was easily administered, well tolerated and there were beneficial effects across all types of patients receiving CORDStrom

with respect to Itch Man Scale, iscorEB clinician score and iscorEB skin involvement.

Most notably, CORDStrom significantly reduced

itch scores as measured by the Itch Man Scale.

In patients with the most severe disease activity, CORDStrom reduced itch at 3 months and

led to a sustained reduction of over 27% at 6 months.

These results demonstrate a clinically meaningful reduction in itch severity sustained

Intermediate group patients showed a broader range of improvements, including reduced skin involvement and less pain as well

as large reduction in itch.

The younger patients (less than 10 years old) showed improvements in skin score, indicating better skin

integrity and reduced disease activity.

Interviews with patients and caregivers on completing follow up strongly support the clinical

benefits of the therapy;

both caregivers and patients were able to correctly identify which treatment had been CORDStrom and which had

been placebo.

Those who completed the study are asking to continue on therapy, which the Company intends to pursue as an open-label study.

Mission EB data form the basis of a license that was entered into between INmune Bio and GOSH, whereby the Company gains exclusive access

to the clinical study data for commercial uses in exchange for payment of an initiation milestone of approximately $0.3 million which

the Company paid during July 2025 and a single development milestone of approximately £6 million (approximately $8.1 million at

September 30, 2025) due on receipt of first marketing authorization from the FDA, EMA, or MHRA, which has not occurred yet, and an ongoing

commitment to supply CORDStrom to patients enrolled in an open label arm of the Mission EB trial, subject to certain limitations.

reviewing results of the Mission EB study, the Company initiated a Type C meeting with the FDA to obtain CMC and regulatory feedback and

submitted information, data and requests for Rare Pediatric Disease and Orphan Drug Designations (RPDD/ODD).

FDA granted RPDD to the Company’s CORDStrom product on December 13, 2024, ahead of the sunset period under Section 529(b)(5) of

the Federal Food, Drug, and Cosmetic Act.

As such, CORDStrom remains eligible to receive a Priority Review Voucher (PRV) if approved by

the FDA on or prior to September 30, 2026, assuming the PRV program is not extended.

If granted, a PRV can be redeemed to receive priority

review for a different product.

Alternatively, a PRV may be transferred or sold to another organization.

FDA granted ODD to the Company’s CORDStrom product on January 6, 2025.

Benefits of ODD include certain tax credits and eligibility

for select grants, waiver of FDA user fees, including the BLA application fees, access to frequent meetings with the FDA for efficient

drug development, and eligibility for seven (7) years of market exclusivity post approval.

Company plans to prepare for and hold a pre-BLA meeting to discuss particulars of its planned BLA submission, with intent to submit a

BLA this year seeking approval of CORDStrom for treatment of RDEB.

Concurrently, the Company will also seek to submit MAAs to the EU and

United Kingdom in 2026.

We have demonstrated that

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

INKmune interacts with the patient’s NK

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

INKmune is 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 sponsored a Phase I trial using INKmune

to treat patients with high risk MDS/AML, a form of leukemia in the UK.

Due to Covid restrictions only one patient completed treatment

and follow-up in the Phase I trial for MDS;

a further three AML patients were treated compassionately.

Due to the post-Covid recruitment

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

Nonetheless, from the four patients

treated and completing follow-up it was determined that INKmune therapy is safe and promotes development of cancer killing memory-like

NK cells that are activated and can kill NK-resistant cancer cells which can be found in the patient’s circulation for up to 4 months

after completion of treatment.

The Company initiated a separate multicenter Phase I/II trial of INKmune in a metastatic castrate resistant

prostate cancer in the US.

The open label trial enrolled the first patient in December 2023 and is currently in Phase II across 6 US sites.

The Phase I/II trial using

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

Biomarker data from the patients

will be visible as patients are treated.

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

Because of the modified

Bayesian design, the Company estimates the trial will be completely enrolled during the fourth quarter of 2025 with top-line data anticipated

approximately 6 months thereafter.

Topline data are divided into immunologic and tumor response variables.

The most important immunologic

response variable is related to memory-like NK cell persistence.

There are 3 important variables to tumor response:

i) blood PSA changes;

ii) change in PSMA-PET scan and iii) change in circulating tumor DNA (ctDNA).

INKmune is not a hormone-targeting treatment and will not

directly reduce PSA levels but tumor load measured by PSMA-PET and/or ctDNA are expected to decrease with treatment.

We do not expect

this 6-month trial to provide survival data.

Bio is a clinical-stage biotechnology company dedicated to developing and commercializing a pipeline of product candidates designed to

reprogram the innate immune system.

Our mission is to address a broad range of diseases where chronic inflammation and immune dysfunction

are primary drivers of pathology.

CORDStrom™ for RDEB Our primary focus is the treatment of Recessive Dystrophic Epidermolysis Bullosa (“RDEB”)

using CORDStrom, our proprietary, pooled, human umbilical cord-derived mesenchymal stromal cell platform.

RDEB is a devastating pediatric

orphan disease caused by mutations in the COL7A1 gene.

This genetic deficiency leads to systemic complications, including

highly debilitating skin blistering, chronic non-healing wounds, dysphagia, and failure to thrive.

Over time, the chronic inflammatory

environment associated with RDEB often progresses to fatal squamous cell carcinoma.

RDEB is a systemic disease with no approved systemic

The only approved products to date are topical and do not address the systemic issues of the disease, which is the focus of

has recently completed a pivotal, blinded, randomized cross-over trial.

Based on these data, the Company is transitioning toward regulatory

submission and commercialization.

We intend to file a Marketing Authorization Application (“MAA”) in the United Kingdom and

the European Union, followed by a Biologics License Application (“BLA”) with the U.S.

Food and Drug Administration (“FDA”)

targeted for 2026.

Neuroinflammation

and Oncology Pipelines In addition to our lead rare disease program, the Company has two other clinical-stage platforms:

● XPro1595 (XPro) :

A next-generation protein therapeutic

that targets neuroinflammation by selectively neutralizing soluble TNF.

XPro has completed Phase I and Phase II clinical trials for the

treatment of Alzheimer’s Disease (“AD”).

The Company intends to pursue strategic partnership opportunities to support

the further development of XPro in neurodegenerative and/or other indications.

The Company does not currently plan to independently advance

XPro into later-stage development.

A novel natural killer (NK) cell-priming

platform designed to harness the patient’s own innate immune system to eliminate cancer cells.

The INKmune program is currently

nearing the completion of an open-label Phase II trial for the treatment of metastatic castrate-resistant prostate cancer (“mCRPC”).

targeting the innate immune system across these distinct therapeutic areas, INmune Bio aims to deliver disease-modifying treatments for

patients with high unmet medical needs.

We continue to incur significant

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We reported a

net loss of $40.7 million for the nine months ended September 30, 2025.

As of September 30, 2025 and December 31, 2024, we had cash and

cash equivalents of $27.7 million and $20.9 million, respectively.

We expect to continue to incur significant losses for the foreseeable

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

product candidates.

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

to generate revenues, if any.

net loss of $5.4 million for the three months ended March 31, 2026.

As of March 31, 2026 and December 31, 2025, we had cash and cash equivalents

of $21.4 million and $24.8 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 nine months ended September 30, 2025.

the issuance of our unaudited condensed consolidated financial statements for the three months ended March 31, 2026.

Until we can generate

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its operations.

Other Developments

administration

has announced or imposed a series of tariffs on U.S.

trading partners.

In response, several countries have threatened or imposed retaliatory

At this time, we do not anticipate the tariffs and changes in trade policies in place as of the filing of this Quarterly Report

on Form 10-Q to have a significant adverse effect on our business or operations.

Following recent changes more

broadly within the NIH and FDA, we have not noticed any disruption of communications with the NIH and FDA to date and continue to maintain

productive interactions.

To date, there has been no impact to the Company’s operations due to any changes at the NIH or FDA.

Amendment to Anthony Nolan License Agreement

On April 29, 2026, the Company

entered into an amended and restated material transfer and license agreement with Anthony Nolan, a UK-based organization, which amends

and restates a prior agreement originally entered into in 2017 by the Company’s wholly owned subsidiary.

In connection with the

amended agreement, the Company became a direct party and agreed to be jointly and severally liable for certain payment obligations thereunder.

The amended agreement expands the Company’s collaboration with Anthony Nolan and is intended to secure a long-term supply of umbilical

cord tissue to support the development of CORDStrom, which the Company expects will be the initial application of such materials, with

potential use in additional product candidates in the future.

Under the amended agreement,

the Company has obtained exclusive rights, with the ability to sublicense, to use specified donor materials for research, development

and commercialization purposes.

The Company is obligated to pay per-sample processing fees and, upon commercialization, royalties on net

sales, each subject to certain adjustments and caps, and such fees may be subject to periodic increases tied to inflation indices.

agreement continues until terminated in accordance with its terms or for a period extending beyond the first commercial sale of applicable

The Company does not expect the amended agreement to have a material

impact on its near-term results of operations or liquidity;

however, it may result in future payment obligations and become material in

the event of successful development and commercialization of product candidates utilizing such materials.

The Company believes this agreement

is consistent with its strategy to advance its product candidates through collaborations, strategic relationships and licensing arrangements.

Research and Development

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Our research and development expense primarily

clinical trial and regulatory-related costs;

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

manufacturing and testing costs and related supplies and materials;

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

trial and regulatory-related costs;

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

● manufacturing

and testing costs and related supplies and materials;

● employee-related

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

The following table summarizes

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Three Months Ended

Nine Months Ended

September 30,

External Costs

DN-TNF - Alzheimer’s disease

INKmune - High Risk MDS/AML & Prostate cancer and CORDStrom

INKmune and CORDStrom

Preclinical and other programs

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resources across our development programs.

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

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

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

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

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

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

per patient trial costs;

the number of sites included in the clinical trials;

the countries in which the clinical trials are conducted;

the length of time required to enroll eligible patients;

the number of patients that participate in the clinical trials;

the number of doses that patients receive;

the cost of comparative agents used in clinical trials;

the drop-out or discontinuation rates of patients;

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

the duration of patient follow-up;

the efficacy and safety profile of the product candidate;

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

patient trial costs;

number of sites included in the clinical trials;

countries in which the clinical trials are conducted;

length of time required to enroll eligible patients;

number of patients that participate in the clinical trials;

number of doses that patients receive;

cost of comparative agents used in clinical trials;

drop-out or discontinuation rates of patients;

additional safety monitoring or other studies requested by regulatory agencies;

duration of patient follow-up;

efficacy and safety profile of the product candidate;

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

We do not expect any of our

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Results of Operations

Comparison of the Three Months Ended September

Comparison of the Three Months Ended March

31, 2026 and 2025

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Three Months Ended

September 30,

(in thousands)

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Loss from operations

Other income, net

Research and Development

Research and development expenses

were approximately $4.9 million during the three months ended September 30, 2025, compared to approximately $10.1 million during

the three months ended September 30, 2024.

The change in research and development expenses during the three months ending September 30,

2025 compared to the three months ending September 30, 2024 is mainly due to the Company incurring $6.4 million less expenses related

to our Alzheimer’s clinical program due to the Company completing the Phase 2 clinical trial, partially offset by incurring additional

compensation expense of $1.3 million mainly due to costs associated with the termination of employees.

General and Administrative

General and administrative

expenses were approximately $2.5 million during the three months ended September 30, 2025, compared to $2.2 million during the three months

ended September 30, 2024.

The increase in general and administrative expenses was mainly due to the Company incurring $0.6 million higher

stock-based compensation during 2025, partially offset by $0.2 million lower professional fees.

Other expense, net

During the three months ended

September 30, 2025, the Company recorded $1.0 million of other income, of which approximately $0.6 million was gain on forgiveness of

payables from two vendors and approximately $0.4 million was due to interest income.

During the three months ended

September 30, 2024, the Company’s other income consisted of interest income partially offset by interest expense.

Comparison of the Nine Months Ended September

30, 2025 and 2024

The following table summarizes

our results of operations for the periods indicated:

Nine Months Ended

September 30,

(in thousands)

Operating expenses:

Research and development

General and administrative

Impairment of acquired in-process research and development intangible assets

Total operating expenses

Loss from operations

Other income, net

During the nine months ended

September 30, 2025, the Company recognized revenue from a license agreement that was terminated during 2025.

During the nine months ended

September 30, 2024, the Company recognized revenue from the sale of MSC’s.

March 31, 2025 the Company recognized $50,000 of revenues from a license agreement.

Research and Development

Research and development expenses were approximately $18.3 million

and $25.8 million during the nine months ended September 30, 2025 and 2024, respectively.

The change in research and development

expenses during the nine months ending September 30, 2025 compared to the nine months ending September 30, 2024 is mainly due to

the Company incurring $9.5 million less Alzheimer’s clinical program expenses due to the trial being completed in 2025, partially

offset by the Company incurring $1.3 million of additional compensation expense primarily in connection with the termination of employees

and recording $1.0 million less accrued rebate during the nine months ended September 30, 2025.

Research and development expenses were approximately $3.6 million during the three months ended March 31, 2026, compared to approximately

$7.6 million during the three months ended March 31, 2025.

The decrease in research and development expenses during the three months ending

March 31, 2026 compared to the three months ending March 31, 2025 is largely due to the Company incurring $4.5 million less expenses related

to our Alzheimer’s clinical program due to the Company completing its Phase 2 trial during 2025 and $0.5 million lower expenses

due to the Company incurring lower compensation expense, partially offset by the Company incurring $1.0 million of higher CORDStrom/INKmune

costs related to preparations to submit CORDStrom for marketing authorization in the United Kingdom, Europe and the United States.

General and Administrative

General and administrative expenses were approximately $7.1 million

and $7.4 million during the nine months ended September 30, 2025 and 2024, respectively.

The decrease in general and administrative expenses

during the nine months ended September 30, 2025 was mainly due to the Company incurring $0.3 million lower investor relations expense

and $0.1 million lower professional fees, partially offset by $0.3 million higher stock-based compensation.

Impairment of acquired in-process research

and development intangible assets

During the nine months ended

September 30, 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

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 $16.5 million during the second quarter of 2025.

Other Income, net

During the nine months ended

September 30, 2025, the Company recorded $1.2 million of other income, of which $0.6 million was due to the Company earning interest income

on its cash investments and $0.6 million was gain on forgiveness of payables.

During the nine months ended September 30, 2024, the Company

earned $0.3 million of other income consisting of interest income partially offset by interest expense.

General and administrative expenses were approximately $2.2 million and $2.3 million during the three months ended March 31, 2026 and

2025, respectively.

This decrease is due to the Company incurring lower stock-based compensation expense.

Other Expense, net

During the three months ended

March 31, 2026 and March 31, 2025, the Company recorded $0.4 million and $0.2 million of other income, respectively.

The increase in other

income is mainly due to a gain on the settlement of a vendor payable during March 2026.

Liquidity and Capital Resources

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We incurred a net loss of

$40.7 million and $32.9 million for the nine months ended September 30, 2025 and 2024, respectively.

$5.4 million and $9.7 million for the three months ended March 31, 2026 and 2025, respectively.

Net cash used in operating activities

was $19.6 million and $22.3 million for the nine months ended September 30, 2025 and 2024, respectively.

Since inception, we have funded

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

As of September 30, 2025, we had cash and cash equivalents

of $27.7 million.

We anticipate that operating losses and net cash used in operating activities will increase over the next few years

as we advance our products under development.

During the nine months ending

September 30, 2025, the Company sold 1,304,707 shares of common stock at an average price of $8.01 for gross proceeds of approximately

$10.4 million under the ATM offering.

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).

was $3.4 million and $6.8 million for the three months ended March 31, 2026 and 2025, respectively.

Since inception, we have funded our

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

As of March 31, 2026, we had cash and cash equivalents of $21.4

We anticipate that operating losses and net cash used in operating activities will increase over the next few years as we advance

our products under development.

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

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that strategy is appropriate.

As of September 30, 2025, the cash balance held by our foreign subsidiaries with currencies other than the

United States dollar was approximately $0.2 million.

As of March 31, 2026, the cash balance held by our foreign subsidiaries with currencies other than the United

States dollar was approximately $0.4 million.

recurring net losses and negative cash flows from operations, as well as forecast of continued losses and negative cash flows from operations,

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

consolidated financial statements for the nine months ended September 30, 2025.

consolidated financial statements for the year ended March 31, 2026.

Until we can generate sufficient revenue from the commercialization

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third parties.

Our cash and cash equivalents were $27.7 million and total current assets were $30.7 million at September 30, 2025, which

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

Our cash and cash equivalents were $21.4 million and total current assets were $22.8 million at March 31, 2026, which the

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

capital may not be available on reasonable terms, if at all.

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our cash flows for the periods indicated:

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

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Operating activities

Investing activities

Financing activities

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Operating activities used

approximately $19.6 million of cash during the nine months ended September 30, 2025, resulting mainly from our loss of $40.7 million,

changes in our net operating assets and liabilities of $1.5 million, and gain on forgiveness of accounts payable of $0.6 million, partially

offset by an intangibles impairment expense of $16.5 million and non-cash stock-based compensation of $6.6 million.

The change in our

net operating assets and liabilities was mainly due to an increase in other assets of $0.7 million, an increase in research and development

tax credit receivable of $0.5 million, an increase in other tax receivable of $0.5 million and a decrease in deferred liabilities of $0.5

million, partially offset by a decrease in accounts payable and accrued liabilities of $1.0 million.

approximately $3.4 million of cash during the three months ended March 31, 2026, and was primarily due to our net loss of $5.4 million,

partially offset by non-cash stock-based compensation of $1.5 million and changes in our net operating assets and liabilities of $0.5

million which is primarily due to an decrease in research and development tax credit receivable of $3.8 million partially offset by a

decrease in accounts payable and accrued liabilities of $3.0 million.

Operating activities used

approximately $22.3 million of cash during the nine months ended September 30, 2024, resulting from our loss of $32.9 million, partially

offset by changes in our net operating assets and liabilities of $4.6 million and non-cash stock-based compensation of $5.8 million.

change in our net operating assets and liabilities was mainly due to an increase in accounts payable and accrued liabilities of $2.7 million,

a decrease in research and development tax receivable of $0.8 million, a decrease in prepaid expenses of $0.6 million and a decrease in

other tax receivable of $0.2 million.

Investing Activities

During the nine months ended

September 30, 2025, the Company acquired $0.9 million of equipment to be used in its CORDStrom clinical program.

approximately $6.8 million of cash during the three months ended March 31, 2025, and was primarily due to our loss of $9.7 million, partially

offset by non-cash stock-based compensation of $2.1 million and changes in our net operating assets and liabilities of $0.8 million which

is mainly due to an increase in accounts payable and accrued liabilities of $0.7 million.

Financing Activities

During the nine months ended

September 30, 2025, the Company sold 1,304,707 shares of common stock under its ATM program for net proceeds of $10.1 million.

During June 2025, the Company

sold 3,000,000 shares of its common stock in a registered direct offering in exchange for gross proceeds of $18.9 million (net proceeds

of $17.4 million).

During the nine months ended

September 30, 2024, the Company sold 247,126 shares of its common stock under its ATM programs for net proceeds of approximately $2.4

During the nine months ended

September 30, 2024, the Company sold 3,898,852 shares of its common stock and 3,898,852 warrants to purchase its common stock in registered

direct offerings for net proceeds of approximately $25.4 million.

During the nine months ended

September 30, 2024, the Company repaid $7.5 million of its debt.

Critical Accounting Estimates

During the three months ended

March 31, 2025, the Company sold 649,860 shares of common stock in exchange for net proceeds of $5.3 million.

Critical Accounting Policies and Estimates

Our discussion and analysis

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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 estimates are discussed in our Annual Report on Form 10-K for the fiscal year

ended December 31, 2024, and there have been no material changes during the nine months ended September 30, 2025.

Quantitative and Qualitative Disclosures About Market Risk

The preparation of these condensed

consolidated 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, 2025, and there have been no material changes during the three months ended

March 31, 2026.

Quantitative and

Qualitative Disclosures About Market Risk

Pursuant to Item 305(e) of

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis