UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2023~~MARCH 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-38793

INMUNE BIO INC.

(Exact name of registrant as specified in its charter)

Nevada		47-5205835
(State of incorporation)		(I.R.S. Employer Identification No.)

~~David Moss~~

225 NE Mizner Blvd., Suite 640

Boca Raton, FL 33432

(Address of principal executive office) (Zip code)

(858) 964-3720

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		INMB		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 1, 2023,~~May 9, 2024, there were ~~18,021,692~~19,782,429 shares of our common stock, par value $0.001 per share, outstanding.

INMUNE BIO INC.

FORM 10-Q

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30, 2023~~MARCH 31, 2024

INDEX

PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	2726

Item 4.	Controls and Procedures	2726

PART II – OTHER INFORMATION		2827

Item 1.	Legal Proceedings	2827

Item 1A.	Risk Factors	2827

Item 2.	Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities	2827

Item 3.	Defaults Upon Senior Securities	2827

Item 4.	Mine Safety Disclosures	2827

Item 5.	Other Information	2827

Item 6.	Exhibits	2927

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

INMUNE BIO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

	March 31, 2024			December 31, 2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	26,002		$	35,848
Research and development tax credit receivable		2,133			1,905
Other tax receivable		557			537
Prepaid expenses and other current assets		1,109			1,510
Prepaid expenses – related party		23			142
TOTAL CURRENT ASSETS		29,824			39,942

Operating lease – right of use asset		389			414
Other assets		106			131
Acquired in-process research and development intangible assets		16,514			16,514

TOTAL ASSETS	$	46,833		$	57,001

LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	9,294		$	7,901
Accounts payable and accrued liabilities – related parties		56			35
Deferred liabilities		520			489
Current portion of long-term debt		7,455			9,921
Operating lease, current liabilities		125			119
TOTAL CURRENT LIABILITIES		17,450			18,465

Long-term operating lease liability		360			397
TOTAL LIABILITIES		17,810			18,862

COMMITMENTS AND CONTINGENCIES

Redeemable common stock, $0.001 par value; 75,697 issued and outstanding, respectively (Note 9)		799			799

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, 17,950,776 shares issued and outstanding, respectively		18			18
Additional paid-in capital		160,922			159,143
Accumulated other comprehensive loss		(669	)		(799	)
Accumulated deficit		(132,047	)		(121,022	)
TOTAL STOCKHOLDERS’ EQUITY		28,224			37,340

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY	$	46,833		$	57,001

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

September 30,
2023 December 31,
2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 41,813 $ 52,153
Research and development tax credit receivable 2,087 8,099
Other tax receivable 176 362
Prepaid expenses and other current assets 1,535 4,027
Prepaid expenses – related party - 34
TOTAL CURRENT ASSETS 45,611 64,675

Operating lease – right of use asset 444 507
Other assets 129 99
Acquired in-process research and development intangible assets 16,514 16,514

TOTAL ASSETS $ 62,698 $ 81,795

LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 3,675 $ 5,206
Accounts payable and accrued liabilities – related parties 79 9
Deferred liabilities 496 616
Current portion of long-term debt 10,000 5,000
Operating lease, current liabilities 106 87
TOTAL CURRENT LIABILITIES 14,356 10,918

Long-term debt, net 2,376 9,697
Long-term operating lease liabilities 430 526
Accrued liability – long-term 804 550
TOTAL LIABILITIES 17,966 21,691

COMMITMENTS AND CONTINGENCIES

Redeemable common stock, $0.001 par value; 75,697 and 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively (Note 9) 799 -

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, 17,945,995 shares issued and outstanding 18 18
Additional paid-in capital 157,264 151,799
Accumulated other comprehensive loss (735 ) (699 )
Accumulated deficit (112,614 ) (91,014 )
TOTAL STOCKHOLDERS’ EQUITY 43,933 60,104

TOTAL LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY $ 62,698 $ 81,795

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 March 31,
	2024			2023
REVENUE	$	14		$	38

OPERATING EXPENSES
General and administrative		2,338			2,328
Research and development		8,693			4,133
Total operating expenses		11,031			6,461

LOSS FROM OPERATIONS		(11,017	)		(6,423	)

OTHER EXPENSE, NET		(8	)		(113	)

NET LOSS	$	(11,025	)	$	(6,536	)

Net loss per common share – basic and diluted	$	(0.61	)	$	(0.36	)

Weighted average common shares outstanding – basic and diluted		18,026,473			17,945,995

COMPREHENSIVE LOSS
Net loss	$	(11,025	)	$	(6,536	)
Other comprehensive income (loss) – foreign currency translation		130			(9	)
Total comprehensive loss	$	(10,895	)	$	(6,545	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~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,
2023 2022 2023 2022
REVENUE $ 43 $ 98 $ 127 $ 277

OPERATING EXPENSES
General and administrative 2,586 2,382 7,223 6,929
Research and development 5,985 5,159 14,266 13,657
Total operating expenses 8,571 7,541 21,489 20,586

LOSS FROM OPERATIONS (8,528 ) �� (7,443 ) (21,362 ) (20,309 )

OTHER EXPENSE, NET (35 ) (282 ) (238 ) (1,157 )

NET LOSS $ (8,563 ) $ (7,725 ) $ (21,600 ) $ (21,466 )

Net loss per common share – basic and diluted $ (0.48 ) $ (0.43 ) $ (1.20 ) $ (1.20 )

Weighted average common shares outstanding – basic and diluted 18,008,295 17,945,995 17,966,990 17,921,036

COMPREHENSIVE LOSS
Net loss $ (8,563 ) $ (7,725 ) $ (21,600 ) $ (21,466 )
Other comprehensive loss – foreign currency translation (23 ) (441 ) (36 ) (1,143 )
Total comprehensive loss $ (8,586 ) $ (8,166 ) $ (21,636 ) $ (22,609 )

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

INMUNE BIO INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2023~~MARCH 31, 2024

(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, 2022 17,945,995 $ 18 $ 151,799 $ (699 ) $ (91,014 ) $ 60,104
Stock-based compensation - - 1,737 - - 1,737
Loss on foreign currency translation - - - (9 ) - (9 )
Net loss - - - - (6,536 ) (6,536 )
Balance as of March 31, 2023 17,945,995 18 153,536 (708 ) (97,550 ) 55,296
Stock-based compensation - - 1,863 - - 1,863
Loss on foreign currency translation - - - (4 ) - (4 )
Net loss - - - - (6,501 ) (6,501 )
Balance as of June 30, 2023 17,945,995 18 155,399 (712 ) (104,051 ) 50,654
Issuance of common stock for cash, net 75,697 - 775 - - 775
Reclassification to redeemable common stock
(75,697
)
(799
)
(799
)
Stock-based compensation - - 1,889 - - 1,889
Loss on foreign currency translation - - - (23 ) - (23 )
Net loss - - - - (8,563 ) (8,563 )
Balance as of September 30, 2023 17,945,995 $ 18 $
157,264
$ (735 ) $ (112,614 ) $
43,933

							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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INMUNE BIO INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2023

(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, 2022		17,945,995	$	18	$	151,799	$	(699	)	$	(91,014	)	$	60,104
Stock-based compensation		-		-		1,737		-			-			1,737
Loss on foreign currency translation		-		-		-		(9	)		-			(9	)
Net loss		-		-		-		-			(6,536	)		(6,536	)
Balance as of March 31, 2023		17,945,995	$	18	$	153,536	$	(708	)	$	(97,550	)	$	55,296

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INMUNE BIO INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY~~CASH FLOWS

~~FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022~~(In thousands)

~~(In thousands, except share amounts)~~(Unaudited)

~~(Unaudited)~~

	For the Three Months Ended March 31,
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(11,025	)	$	(6,536	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		1,779			1,737
Accretion of debt discount		34			67
Changes in operating assets and liabilities:
Research and development tax credit receivable		(228	)		6,285
Other tax receivable		(20	)		(34	)
Prepaid expenses		401			394
Prepaid expenses – related party		119			(1	)
Other assets		25			-
Accounts payable and accrued liabilities		1,393			(3,129	)
Accounts payable and accrued liabilities – related parties		21			-
Deferred liabilities		31			(25	)
Accrued liability – long-term		-			88
Operating lease liabilities		(6	)		13
Net cash used in operating activities		(7,476	)		(1,141	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt		(2,500	)		-
Net used in financing activities		(2,500	)		-

Impact on cash from foreign currency translation		130			(9	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(9,846	)		(1,150	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		35,848			52,153
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	26,002		$	51,003

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes	$	-		$	-
Cash paid for interest expense	$	302		$	450

Accumulated
Additional Other Total
Common Stock Paid-In Comprehensive Accumulated Stockholders’
Shares Amount Capital Income (Loss) Deficit Equity
Balance as of December 31, 2021 17,843,303 $ 18 $ 143,921 $ 1 $ (63,715 ) $ 80,225
Issuance of common stock for cash 82,900 - 699 - - 699
Exercise of warrants for cash 19,792 - 30 - - 30
Stock-based compensation - - 1,536 - - 1,536
Gain on foreign currency translation - - - 55 - 55
Net loss - - - - (6,903 ) (6,903 )
Balance as of March 31, 2022 17,945,995 18 146,186 56 (70,618 ) 75,642
Stock-based compensation - - 1,886 - - 1,886
Loss on foreign currency translation - - - (757 ) - (757 )
Net loss - - - - (6,838 ) (6,838 )
Balance as of June 30, 2022 17,945,995 18 148,072 (701 ) (77,456 ) 69,933
Stock-based compensation - - 1,939 - - 1,939
Loss on foreign currency translation - - - (441 ) - (441 )
Net loss - - - - (7,725 ) (7,725 )
Balance as of September 30, 2022 17,945,995 $ 18 $ 150,011 $ (1,142 ) $ (85,181 ) $ 63,706

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INMUNE BIO INC.

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands)~~

~~(Unaudited)~~

For the Nine Months Ended
September 30,
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (21,600 ) $ (21,466 )
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation 5,489 5,361
Accretion of debt discount 179 171
Impairment of operating lease – right of use asset - 89
Changes in operating assets and liabilities:
Research and development tax credit receivable 6,012 496
Other tax receivable 186 477
Prepaid expenses 2,492 (2,321 )
Prepaid expenses – related party 34 (109 )
Other assets (30 ) -
Accounts payable and accrued liabilities (1,531 ) (268 )
Accounts payable and accrued liabilities – related parties 70 (72 )
Deferred liabilities (120 ) 304
Accrued liability – long-term 254 264
Operating lease liabilities (14 ) 83
Net cash used in operating activities (8,579 ) (16,991 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock 775 699
Repayments of debt (2,500 ) -
Net proceeds from the exercise of warrants - 30
Net cash (used in) provided by financing activities (1,725 ) 729

Impact on cash from foreign currency translation (36 ) (1,143 )

NET DECREASE IN CASH AND CASH EQUIVALENTS (10,340 ) (17,405 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 52,153 74,810
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,813 $ 57,405

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes $ - $ -
Cash paid for interest expense $ 1,394 $ 962

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~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 the innate immune system is not functioning normally and contributing to the patient’s disease. INmune Bio has two 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. DN-TNF is currently being developed for Alzheimer’s and treatment resistant depression (“XPro”) and cancer (“INB03”) and an out-licensing ~~strategy for Duchenne’s Muscular Dystrophy (“DMD”).~~strategy. 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 – ~~LIQUIDITY~~GOING CONCERN

AsThese 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 ~~September 30, 2023,~~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 three months ended March 31, 2024, the Company incurred a net loss of $11.0 million and had ~~an accumulated deficit~~net cash flows used in operating activities of ~~$112,614,000~~$7.5 million. Given the Company’s projected operating requirements and ~~experienced losses since~~ its ~~inception. The Company had~~existing cash and cash equivalents, ~~of $41,813,000 as of September 30, 2023, and has not generated positive cash flows from operations. To date,~~ the Company ~~has funded~~is projecting insufficient liquidity to sustain its operations ~~primarily~~ 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 ~~its common stock. Although it is difficult to predict the Company’s liquidity requirements,~~equity, debt financings or funds from other capital sources, such as government funding, collaborations, strategic alliances, divestment of September 30, 2023, and based upon the Company’s current operating plan, the Company believes that it will have sufficient cash to meet its projected operating requirements for at least the next 12 months following the filing date of this Quarterly Report on Form 10-Q based on the balance of cash available as of September 30, 2023.

~~Management expects operating losses to continue for the foreseeable future.~~non-core assets, or licensing arrangements with third parties. There can be no ~~assurance~~assurances that the Company will ~~ever earn revenues or achieve profitability, or if achieved, that they will~~ be sustained on a continuing basis. In addition, the manufacturing, clinical and preclinical development activities as well as the commercialization of the Company’s products, if approved, will require significant additional financing. The Company may be unableable to secure ~~such~~additional financing, ~~when needed,~~ 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 ~~financings may~~plans cannot be ~~under terms~~considered probable. As a result, the Company has concluded that ~~are unfavorable~~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 ~~Company~~recoverability and classification of recorded asset amounts or the ~~current stockholders. If~~amounts and classification of liabilities that might result from the ~~Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope~~outcome of ~~or eliminate development programs, which may adversely affect its business and operations.~~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, ~~2022,~~2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, filed with the SEC on March ~~2, 2023.~~28, 2024.

~~Impact of Geopolitical and Macroeconomic Factors~~

There may be significant uncertainty resulting from the impact of other geopolitical and macroeconomic factors, including the ongoing COVID-19 (coronavirus) pandemic, inflation, supply chain issues, rising interest rates, future bank failures, a potential US government shutdown, the impact of the conflicts in Russia/Ukraine and Israel, in addition to geopolitical, trade and investment tensions between the United States and China.

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.

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.

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.

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,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company had potentially issuable shares as follows:

	September 30,				March 31,
	2023		2022		2024		2023
Stock options		5,501,000		4,851,000		5,496,000		5,441,000
Warrants		74,074		74,074		45,386		74,074
Total		5,575,074		4,925,074		5,541,386		5,515,074

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.

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).

~~Recently Adopted~~Recent Accounting Pronouncements

In ~~June 2016,~~December 2023, the FASB issued ASU No. ~~2016-13, Financial Instruments—Credit Losses~~2023-09, Income Taxes (Topic ~~326), Measurement~~740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The guidance in ASU 2023-09 improves the transparency of Credit Losses on Financial Instruments, as clarified in subsequent amendments. ASU 2016-13 changes the impairment model for certain financial instruments. The new model is a forward-looking expected loss model and will apply to financial assets subject to credit losses and measured at amortized cost and certain off-balance sheet credit exposures. This includes loans, held-to-maturity debt securities, loan commitments, financial guarantees and net investments in leases, as well as trade receivables. For available-for-sale debt securities with unrealized losses, credit losses will be measured in a manner similar to today, except that the losses will be recognized as allowances rather than reductionsincome tax disclosures by greater disaggregation of information in the ~~amortized cost of the securities. In October 2019, the FASB voted to delay the effective date of this standard. Topic 326 became~~rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard is effective for ~~the Company on January 1, 2023. Adoption of the ASU is on a modified retrospective basis.~~public companies for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company ~~adopted ASU 2013-13 on January 1, 2023, and~~is currently evaluating the impact that the adoption of ~~the~~ ASU ~~did not impact the Company’s~~2023-09 may have on its consolidated financial ~~position, results of operations, cash flows or net loss per share.~~statements.

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date of ~~September 30, 2023,~~March 31, 2024, through the date which the financial statements are issued.

NOTE 4 – RESEARCH AND DEVELOPMENT ACTIVITY

According to UK tax law, the Company is allowed an R&D tax credit that reduces a company’s tax bill in the UK for expenses incurred in R&D subject to certain requirements. The Company’s UK subsidiary submits R&D tax credit requests annually for research and development expenses incurred. At September 30, 2023 and December 31, 2022, the Company recorded a research and development tax credit receivable in the amount of $0 and $2,690,000, respectively. During the nine months ended September 30, 2023 and 2022, the Company received $2,710,000 and $0, respectively, of R&D tax credit reimbursements from the UK.

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, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the Company recorded a research and development tax credit receivable of ~~$2,087,000~~$2,133,000 and ~~$5,409,000,~~$1,905,000, respectively, for R&D expenses incurred in Australia. During the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company received ~~$3,763,000~~$0 and ~~$0,~~$3,763,000, respectively, of R&D tax credit reimbursements from Australia.

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.

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

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. RJ Tesi, the Company’s President and a member of our Board of Directors, David Moss, its Chief Financial Officer and Treasurer and Mark Lowdell, its Chief Scientific Officer, 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 and has recorded a $25,000 payable to Immune Ventures as of March 31, 2024 and December 31, 2023.

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.

Annual maintenance fees under the PITT Agreement include the following:

(in thousands)
June 26 of each year 2021-2022	$	5
June 26 of each year 2023-2024	$	10
June 26 of each year 2025 until first commercial sale	$	25

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 Company had no amounts owed pursuant to the PITT Agreement as of ~~September 30, 2023.~~March 31, 2024.

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.

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)		Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2023:
March 31, 2024:
Cash equivalents
Money market funds	$	41,567	$	41,567	$	-	$	-	$	25,706	$	25,706	$	-	$	-
Total cash equivalents	$	41,567	$	41,567	$	-	$	-	$	25,706	$	25,706	$	-	$	-

(in thousands)	Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2022:
December 31, 2023:
Cash equivalents
Money market fund	$	51,058	$	51,058	$	-	$	-	$	35,162	$	35,162	$	-	$	-
Total cash equivalents	$	51,058	$	51,058	$	-	$	-	$	35,162	$	35,162	$	-	$	-

NOTE 6 – LEASE

The Company leases office space in Florida from a third party. The lease agreement has a 64-month term and commenced during the fourth quarter of 2021.

Below is a summary of the Company’s right-of-use assets and liabilities:

(in thousands, except years and rate)	September 30, 2023			December 31, 2022			March 31, 2024			December 31, 2023
Right-of-use asset	$	444		$	507		$	389		$	414

Operating lease, current liability	$	106		$	87		$	125		$	119
Long-term operating lease liability	$	430		$	526		$	360		$	397
Total lease liability	$	536		$	613		$	485		$	516

Weighted-average remaining lease term		3.5 years			4.3 years			3.0 years			3.3 years

Weighted-average discount rate		12.0	%		12.0	%		12.0	%		12.0	%

NOTE 7 – RELATED PARTY TRANSACTIONS

UCL

At ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022, the Company owed UCL Consultants Limited (“UCL”) $9,000~~ ~~in connection with medical research performed on behalf of the Company. During the nine months ended September 30,~~ 2023, ~~and 2022, the Company paid UCL $334,000 and $486,000, respectively, for medical research performed on behalf of the Company. At September 30, 2023 and December 31, 2022,~~ the Company recorded $0 $23,000 and ~~$34,000,~~$112,000, respectively, of prepaid expenses – related party for payments made to UCL in advance of services to be provided. During the three months ended March 31, 2024 and 2023, the Company paid UCL $0 and $104,000, 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, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, the Company owed AmplifyBio ~~$70,000~~$31,000 and ~~$0,~~$10,000, respectively, in connection with medical research performed on behalf of the Company. The CEO of AmplifyBio is on the Board of Directors of the Company. During the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company paid AmplifyBio ~~$7,000~~$142,000 and ~~$145,000,~~$6,000, respectively, for ~~pre-clinical research~~services performed on behalf of the Company.

NOTE 8 – DEBT

On June 10, 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. The Term Loan provided for a $15.0 million term loan, of which the Company borrowed the entire amount on June 10, 2021, and is secured by the Company’s assets. ~~On June 7, 2023, the Company entered into an amendment to the Term Loan pursuant to which, among other things, certain covenants to the Term Loan were amended.~~

The term loan and debt discount are as follows as of ~~September 30, 2023:~~March 31, 2024:

(in thousands)
Term Loan	$	12,500		$	7,500
Less: debt discount and financing costs, net		(124	)		(45	)
Less: current portion		(10,000	)
Long-term debt	$	2,376
Current portion of debt				$	7,455

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, the Company recognized interest expense of ~~$568,000~~$357,000 and ~~$1,811,000, respectively, related to the Term Loan. For the three and nine months ended September 30, 2022, the Company recognized interest expense of $525,000 and $1,424,000,~~$612,000, respectively, related to the Term Loan.

The Company is required to make interest and principal payments monthly through the maturity date of January 1, 2025. All outstanding principal and accrued and unpaid interest will be due and payable on the maturity date. The Term Loan provides for an annual interest rate equal to the greater of (i) the prime rate then in effect as reported in The Wall Street Journal plus 4.50% and (ii) 7.75%. At ~~September 30, 2023,~~March 31, 2024, the interest rate was 13.0%.

The Term Loan includes a final payment fee equal to 6.5% of the original principal amount borrowed payable on the earlier of the repayment of the loan in full and the maturity date. The Company has the option to prepay the outstanding balance of the term loan in full, subject to a prepayment premium of 1% of the original principal amount borrowed for any prepayment before the maturity date.

~~The expected repayment of the Term loan principal is as follows as of September 30, 2023:~~

(in thousands, except years)
2023 $ 2,500
2024 10,000
Total debt $ 12,500

Upon the occurrence of certain events, including but not limited to the Company’s failure to satisfy its payment obligations under the Term Loan, the breach of certain of its other covenants under the Term Loan, or the occurrence of a material adverse change, the Lenders will have the right, among other remedies, to declare all principal and interest immediately due and payable, and will have the right to receive the final payment fee and, if the payment of principal and interest is due prior to maturity, the applicable prepayment fee. The Company violated certain non-financial debt covenants as of December 31, 2022 and received a waiver from the Lenders waiving these debt covenant violations during the nine months ended September 30, 2023. The Company was in compliance with its debt covenants at September 30, 2023 and the filing date of these financial statements.

NOTE 9 – STOCKHOLDERS’ EQUITY

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 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. Consequently, the Company may be subject to claims for rescission by purchasers who purchased shares of common stock under the ATM program. Under Section 12(a)(1) of the Securities Act, a purchaser of security in a transaction made in violation of Section 5 of the Securities Act may obtain recovery of the consideration paid in connection with its purchase, plus statutory interest, or, if it had already sold the shares, recover damages resulting from its purchase. While the Company believes, it is unlikely that a successful claim will be asserted against the Company by any purchasers who purchased shares of common stock under the ATM Agreement in July 2023, the Company cannot guarantee that no such legal claims will be asserted against the Company by any purchasers. In addition, the Company could become subject to enforcement actions and/or penalties and fines by federal authorities, and the Company is unable to predict the likelihood of any such enforcement actions being brought, or the amount of any such potential penalties or fines. As of ~~September 30, 2023,~~March 31, 2024, there have been no claims or demands to exercise such rights. As a result of these potential rescission rights, 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. The reclassification of these shares shall remain for a period of one year from transaction date. These shares have been treated as issued and outstanding for financial reporting purposes.

At ~~September 30, 2023,~~March 31, 2024, the Company ~~has~~had $28.7 million of common stock available under the ATM program.~~During September 2023, the Company and BTIG suspended the Sales Agreement.~~

~~Common Stock – Issuance to Directors and Officers~~

~~During the nine months ended September 30, 2022, directors and officers of the Company purchased 82,900 shares of the Company’s common stock from the Company~~ ~~at $8.43 per share (which was the closing price of the Company’s common stock on March 22, 2022)~~ ~~for gross proceeds of $699,000.~~

Stock options

On June 1, 2023, the Company’s shareholders approved an amendment to the 2021 Incentive Stock Plan (“2021 Amended and Restated Incentive Stock Plan”) to increase the shares of the Company’s common stock available for issuance thereunder to 4,000,000 shares.

During the nine months ended September 30, 2023, the Company granted certain employees and directors options to purchase 665,000 shares of its common stock pursuant to the 2017 and 2019 Incentive Stock Plans and 2021 Amended and Restated Incentive Stock Plan. The stock options had a fair value of approximately $4.9 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 3.84% – 3.99% based on the applicable US Treasury bill rate (2) expected life of 6.0 – 6.25 years, (3) expected volatility of approximately 91% based on the trading history of similar companies, and (4) zero expected dividends.

The following table summarizes stock option activity during the ~~nine~~three months ended ~~September 30, 2023:~~March 31, 2024:

(in thousands, except share and per share amounts)	Number of Shares			Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (years)		Aggregate Intrinsic Value		Number of Shares		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2023		4,841,417		$	8.60		6.28	$	4,155
Outstanding at January 1, 2024											5,496,000	$	8.73		6.18	$	21,509
Options granted		665,000		$	9.69		-		-		-	$	-		-		-
Options exercised		-		$	-		-		-		-	$	-		-		-
Options cancelled		(5,417	)	$	15.48		-		-		-	$	-		-		-
Outstanding at September 30, 2023		5,501,000		$	8.73		6.53	$	4,891
Exercisable at September 30, 2023		4,190,104		$	7.99		5.86	$	4,880
Outstanding at March 31, 2024											5,496,000	$	8.73		6.03	$	23,813
Exercisable at March 31, 2024											4,664,038	$	8.40		5.64	$	21,857

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, the Company recognized stock-based compensation expense of approximately ~~$1.9~~$1.8 million and $5.5 million, respectively, related to the vesting of stock options. During the three and nine months ended September 30, 2022, the Company recognized stock-based compensation expense of approximately $1.9 million and $5.4$1.7 million, respectively, related to the vesting of stock options. As of ~~September 30, 2023,~~March 31, 2024, there was approximately ~~$10.5~~$7.0 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period of ~~1.98~~1.31 years.

Warrants

The Company issued warrants to the Company’s lenders upon obtaining its loan in June 2021. The warrants have a 10-year term and an exercise price of $14.05. At ~~September 30, 2023,~~March 31, 2024, 45,386 of these warrants are outstanding and the intrinsic value of these warrants is $0.

The Company issued warrants to its placement agents in connection with its February 2019 initial public offering. The warrants are exercisable until December 19, 2023, and have an exercise price of $9.60. At September 30, 2023, 28,688 of these warrants are outstanding and the intrinsic value is $0.

~~During the nine months ended September 30, 2022, a third party exercised 19,792 warrants for cash proceeds of approximately $30,000.~~

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~~three months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ respectively:

(in thousands)	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022		Three Months Ended March 31, 2024		Three Months Ended March 31, 2023
Research and development	$	705	$	725	$	2,043	$	1,971	$	702,000	$	649,000
General and administrative		1,184		1,214		3,446		3,390		1,077,000		1,088,000
Total	$	1,889	$	1,939	$	5,489	$	5,361	$	1,779,000	$	1,737,000

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. ~~On December 20, 2021, the Company entered into Amendment No. 1 to the~~The Rights Agreement ~~(“Amendment No. 1”)~~was amended in 2021, 2022 and 2023 to extend the expiration ~~of the Rights Agreement to~~date and shall expire on December 30, 2022. On December 9, 2022, the Company and VStock Transfer, LLC entered into Amendment No. 2 to Rights Agreement (“Amendment No. 2”). Pursuant to Amendment No. 2, the Rights Agreement extended the expiration of the Rights Agreement to December 30, 2023. The Rights are in all respects subject to and governed by the provisions of the Rights Agreement, as amended by the Amendment No.1 and Amendment No. 2.2024.

NOTE 10 – COLLABORATIVE AGREEMENTS

During September 2020, the Company was awarded a grant of up to $2.9 million from the National Institutes of Health (“NIH”). The grant will support a Phase 2 study of XPro1595 in patients with treatment resistant depression. As of ~~September 30, 2023,~~March 31, 2024, the Company has not received any proceeds pursuant to this grant.

NOTE 11 – COMMITMENTS

Lease

During September 2021, the Company signed a lease agreement with a third party for office space in Boca Raton, Florida. The lease agreement has a 64-month term and commenced during the fourth quarter of 2021.

Future minimum payments pursuant to the leases are as follows:

(in thousands, except years)
2023	$	31
2024		187		$	140
2025		192			192
2026		198			198
2027		51			51
Total lease payments		659			581
Less: imputed interest		(123	)		(96	)
Present value of future lease payments		536			485
Less: operating lease, current liabilities		(106	)		(125	)
Long-term operating lease liabilities	$	430		$	360

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, the Company recognized ~~$41,000~~$39,000 and ~~$123,000,~~$43,000, respectively, in operating lease expense, which is included in general and administrative expenses in the Company’s consolidated statement of operations.

During the three and nine months ended September 30, 2022, the Company recognized $45,000 and $162,000, respectively, in operating lease expense, which is included in general and administrative expenses in the Company’s consolidated statement of operations

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.

NOTE 12 – SUBSEQUENT EVENTS

During the period from April 4, 2024 through May 6, 2024, the Company sold 198,364 shares of common stock at an average price of $10.56 for gross proceeds of approximately $2,095,000 under the ATM offering.

On April 19, 2024, the Company entered into securities purchase agreements with purchasers in which the Company sold 571,592 shares of common stock and warrants to purchase 571,592 shares of common stock for aggregate gross proceeds of approximately $4,771,000. The exercise price of the warrants is $9.152 and the term is the earlier of two years from the issuance of the warrants and thirty trading days following the release of top line data in the Phase 2 Alzheimer’s program, provided that directors and officers of the Company that are subject to a blackout with respect to trading in the Company’s stock will have an additional 60 days from the termination of the blackout date to exercise the warrant. Directors and officers that participated in the offering paid a combined offering price of $8.445 per share and warrant, and other investors paid $8.32 per share and warrant.

On April 24, 2024, the Company entered into a securities purchase agreement with an investor in which the Company sold 986,000 shares of common stock and warrants to purchase 986,000 shares of common stock for aggregate gross proceeds of approximately $9,702,000. The exercise price of the warrants is $9.84 and the term is the earlier of two years from the issuance of the warrants and thirty trading days following the release of top line data in the Phase 2 Alzheimer’s program.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate” or “continue” or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. These factors include but are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.

Description of Business

Overview

We are a clinical-stage immunology company focused on developing drugs that may reprogram the patient’s innate immune system to treat disease. We believe this may be done by targeting cells of the innate immune system that cause acute and chronic inflammation and are involved in immune dysfunction associated with chronic diseases such as cancer and neurodegenerative diseases. The Company’s drugs are ~~still~~ in ~~the~~ clinical ~~trial stage~~trials and have not been approved by a regulatory authority. The Company has two therapeutic platforms – a dominant-negative TNF platform (“DN-TNF”, “XPro™”, “XPro1595™” or “~~pegipanermin and pSar DN-TNF”~~“pegipanermin”) and a Natural Killer (“NK”, or “INKmune™”) platform. The DN-TNF platform neutralizes soluble ~~tumor necrosis factor~~TNF (“sTNF”) without affecting trans-membrane TNF (“tmTNF”) or TNF receptors -TNFR1 and TNFR2. This unique biologic mechanism differentiates the DN-TNF drugs from currently approved non-selective TNF inhibitors that inhibit both sTNF and tmTNF. Protecting the function of tmTNF and TNF receptors while neutralizing the function of sTNF is a ~~potentially~~ potent anti-inflammatory strategy that does not cause immunosuppression or demyelination which occur in the currently approved non-selective TNF inhibitors. Currently approved non-selective TNF inhibitors treat autoimmune disease, but are contraindicated in patients with infection, cancer and neurologic diseases because they increase the risk of infection, cancer and demyelinating neurologic diseases, respectively; these safety problems are due to off-target effects on inhibiting tmTNF. The NK platform targets the dysfunctional natural killer cells in patients with cancer. NK cells are part of the normal immunologic response to cancer with important roles in immunosurveillance to prevent cancer and in preventing relapse by eliminating residual disease. Residual disease is the cancer left behind after therapy is finished. Residual disease can grow to cause relapse. The mechanism by which INKmune ~~may improve~~improves the ability of the patient’s NK cells to kill their cancer is complex. The NK cells of cancer patients lose the ability to bind and kill cancer cells. A measure of NK cell binding to cancer cells is avidity. The higher the avidity, the greater the bond between the NK cell to cancer cell and thus the greater NK killing of cancer cells. INKmune increases NK avidity and further improves mitochondrial function and upregulates nutrient receptors. These metabolic changes may help the INKmune primed NK cell to function in the hostile tumor microenvironment and persist much ~~longer in the patient.~~longer. These mechanisms ~~thus may~~ improve the ability of INKmune primed NK cells to overcome the immune evasion of the patient’s cancer cells. We believe INKmune ~~would~~is best be used to eliminate residual disease after the patient has completed other cancer therapies. Both the DN-TNF platform and the INKmune platform ~~have the potential to~~can be used to treat multiple diseases. The DN-TNF platform ~~is being developed to~~will be used as an immunotherapy for the treatment of cancer and neurodegenerative disease. INKmune is being developed to treat NK sensitive hematologic malignancies and solid tumors.

We believe our DN-TNF platform can be used ~~as a cancer therapy to reduce resistance in immunotherapy and~~ as a CNS (“central nervous system”) therapy to target glial activation to prevent progression of Alzheimer’s disease (“AD”),; to target neuroinflammation in treatment resistant depression (“TRD”)~~, and~~; as a drug to prevent muscle degeneration, prevent fibrosis and promote muscle regeneration in Duchene muscular dystrophy (“DMD”).; and as a cancer therapy to reduce resistance in immunotherapy. The primary focus of the company’s development efforts for XPro is AD. The next indication to be developed with XPro will be TRD. Treatment of DMD and cancer will occur when partners for the programs are found. The drug is named differently for the oncology and CNS indications; INB03™ or ~~XPro™,~~XPro, respectively, but it is the same drug product. For DMD, the company is exploring ~~pSar~~ DN-TNF compounds that is optimized for the treatment of DMD. ~~The pSar DN-TNF~~This novel compound has the same mechanism of action ~~a different half-life extender and~~but has novel IP protection. In each case, we believe neutralizing sTNF is a cornerstone to the treatment of these diseases. As an immunotherapy for cancer, we are ~~developing~~using INB03 to neutralize sTNF produced by HER2+ trastuzumab resistant breast cancers to reverse resistance to targeted therapy. sTNF produced by the tumor causes an up-regulation of MUC4 ~~expression~~express causing steric hindrance of trastuzumab binding to the HER receptor on HER2+ breast cancer cells. Without binding, trastuzumab based therapies are not effective. Neutralizing sTNF reverses MUC4 expression converting a trastuzumab resistant breast cancer cell into a trastuzumab sensitive breast cancer cell. In addition, INB03 may change the immunobiology of the tumor microenvironment by decreasing the number of immunosuppressive myeloid cells, both myeloid derived suppressor cells and tumor active macrophages, and increasing the number of cytotoxic lymphocytes and phagocytic macrophages in the TME. ~~Recently, the Company has shown the combination of INB03 with trastuzumab-deruxtecan (Enhertu), decreases tumor growth in the multi-resistant JIMT-1 tumor model.~~ The Company has completed an open label dose escalation trial in cancer patients with metastatic solid tumors that have failed multiple lines of therapy. The pre-clinical data in MUC4+ expressing tumors and the clinical trial informs the design of ~~the planned~~a future Phase II trial by demonstrating that INB03 was safe and well tolerated, ~~defining~~defined the dose of INB03 to carry into Phase II trials, and ~~demonstrating~~demonstrated a pharmacodynamic ~~endpoint –~~end-point. The company does not plan to commence a ~~decrease in inflammatory cytokines in the blood. A~~ Phase II trial ~~is planned~~ in patients with advanced MUC4+ expressing ~~cancer.~~cancer until a partner can be found.

Likewise, we believe the DN-TNF platform can be used to treat selected neurodegenerative diseases by modifying the brain microenvironment (“BME”). 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 stop working efficiently and may decrease in ~~number or become disconnected.~~number. The combination of neurodegeneration and synaptic dysfunction causes cognitive decline and behavioral changes associated with Alzheimer’s disease (“AD”). XPro completed a Phase I trial treating patients with Alzheimer’s disease that was partially funded by a Part-the-Clouds Award from the Alzheimer’s Association. We believe XPro targets activated microglia and astrocytes of the brain that produce sTNF that promotes nerve cell loss, ~~and~~ synaptic dysfunction and prevents myelin repair - key elements in the development of dementia. In animal models, elimination of sTNF prevents nerve cell dysfunction, ~~and~~ reverses synaptic ~~pruning.~~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 ADi. ADi is the term used to delineate patients with AD with biomarkers of inflammation. ~~This appears to be more than 40% of patients with AD.~~ The endpoints of the trial ~~are~~were measures of neuroinflammation and neurodegeneration in blood and cerebral spinal fluid by measuring changes in inflammatory cytokine levels in the CNS and using MRI-DTI to measure ~~white matter free water. White matter free water is a validated measure of neuroinflammation in the brain.~~brain microstructural changes. XPro, at the 1mg/kg/week dose, decreased inflammatory cytokines in the CSF ~~and decreased white matter free water~~ in the brain demonstrating that XPro can decrease neuroinflammation in patients with ~~ADi.~~AD. We also studied downstream benefits of decreasing neuroinflammation by measuring changes in the CSF proteome and quantifying changes in novel white matter MRI biomarkers. XPro significantly ~~decreased~~decreases biomarkers of neurodegeneration as measured by changes in the CSF proteome including neurofilament light chain, phospho Tau 217 and VILIP-1; decreases of 84%, 46% and 91% respectively ~~were observed~~ after 3 months of therapy. Three months of XPro therapy improved measures of synaptic function, as measured in the CSF proteome including a 222% increase in ~~contactin~~Contactin 2 and a 56% decrease of neurogranin, changes that contribute to improved synaptic function.

The successful completion of the Phase I trial in AD has informed the design of a blinded randomized, placebo-controlled Phase II trial in patients with early ADi. Early ADi includes patients with AD and MCI who have at least one biomarker of inflammation (ADi and ~~MCI~~²MCI2 respectively). The early ADi trial is a blinded randomized trial to test if treatment of early AD patients with neuroinflammation with XPro will affect cognitive decline. The Phase II trial in early ADi has six important elements. Two hundred and ~~ten~~one patients ~~will be~~are being enrolled in a 2:1 ratio (XPro vs placebo). The patients will receive 1mg/kg/week as a subcutaneous injection for six months. An enrichment strategy identical to the successful strategy used in the Phase I trial will be used to ensure patients have neuroinflammation. Patients will need to have one or more enrichment criteria: elevated blood level of at least one of C-reactive protein, hemoglobin A1c, erythrocyte sedimentation ~~and/or~~and at least one allele of ApoE4. The primary ~~endpoint~~end-point will be Early/~~ild~~mild Alzheimer’s Cognitive Composite (“EMACC”), a validated cognitive measure that is more sensitive than traditional end-points used in many studies of patients with early AD. The ~~trial~~AD program is open in the United States, Australia, Canada, ~~and~~ the United Kingdom, France, Germany, Spain, Czech Republic and ~~will open in the US pending the lift of a clinical hold by the FDA.~~Slovakia. All patients will be offered to stay on therapy for at least 12 months in an extension trial. Clinical and biomarker data will be collected during the extension trial.

There are at least 4 clinical milestones associated with the Phase II trial in AD. Enrollment of 201 patients in the Phase II AD trial should be complete by mid-year. Six months after the last patient is enrolled, top line cognition data with EMACC will be available. Secondary end-points which include blood biomarker, neuroimaging and additional neuropsychiatric end-points will be available after data base lock 2-3 months after top line data. Finally, several months after all the data are analyzed, the Company plans an end-of-phase II meeting with the FDA to finalize plans for the pivotal Phase III trial. The Company plans to apply for an accelerated pathway during 2024. XPro for treatment of AD may be eligible for one or both accelerated approval pathways. The Company plans to submit of Fast Track status in 2024. We expect to be eligible for Break Through status after completion of the Phase II in 2025.

Effective therapy for TRD is a large unmet need. Twenty percent of patients with a Major Depressive Disorder have TRD. Once third of TRD patients have peripheral biomarkers to inflammation (elevated CRP). This is a large patient population. The role of TNF and anti-TNF therapeutics was explored in a small open label clinical trial by Prof. Andrew Miller, MD of Emory ~~University. This study involved~~University demonstrated the patients ~~with~~have elevated TNF levels ~~who were treated~~and treatment with infliximab ~~for~~treated their depression (Miller, 2011). The Company received a $2.9M USD award from the National Institute of Mental Health (“NIMH”) to treat TRD with XPro. The blinded, randomized Phase II trial will use biomarkers of peripheral inflammation to select patients with TRD for enrollment. Patients will be treated for 6 weeks. Primary ~~endpoints~~end-points include both clinical and neuroimaging measures. The final trial design is ongoing and discussions with the FDA are not complete. The Company ~~anticipates receiving~~received authorization to initiate ~~the~~a clinical trial ~~once~~in AD in the ~~pending clinical hold~~US during January 2024. The TRD trial is ~~lifted.~~expected to start enrollment after the AD Phase II trial finishes patient enrollment.

The Company completed an extensive series of studies in murine models of DMD. The data shows DN-TNF decreased muscle fiber inflammation and degeneration, and increased muscle fiber regeneration in an acute model of DMD. Cardiac function was studied using echocardiography after 30 weeks of treatment. Cardiac function did not change compared to placebo treated or prednisone treated animals. These data strongly suggest DN-TNF may be a therapy for treatment of patients with DMD that may have unique biologic attributes, muscle fiber regeneration, without corticosteroid associated metabolic toxicity such as insulin resistance, diabetes, obesity, hirsutism, short stature and muscle weakness.

We believe that INKmune improves the ability of the patient’s own NK cells to attack their tumor. INKmune interacts with the patient’s NK cells to convert them from inert resting NK cells into memory-like NK cells that ~~attack~~kill the patient’s cancer cells. INKmune is a replication incompetent proprietary cell line that is given to the patient after determining that i) the patient has adequate NK cells in their circulation and ii) those NK cells are functional when exposed to INKmune in vitro. INKmune is designed to be given to patients after their immune system has recovered after cytotoxic chemotherapy to target the residual disease ~~the~~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 ~~nasopharyngeal~~ and prostate cancer. The Company ~~has initiated~~had a Phase I trial using INKmune to treat patients with high risk MDS/AML, a form of leukemia. Two patients ~~have been~~were treated in the Phase I trial for MDS, ~~and~~ three patients have been treated compassionately in ~~AML.~~AML and another MDS patient is expected to be treated shortly. During March 2024, the Company decided to terminate further enrollment in the MDS/AML trial. In the ~~five~~ patients, INKmune therapy ~~showed a favorable safety profile, produced~~is safe, produces memory-like NK cells that ~~killed~~kill cancer in vitro, and ~~promoted~~promotes development of cancer killing memory-like NK cells that ~~were~~can be found in the patient’s circulation ~~after~~of 4 months. The Company ~~will continue to enroll patients in the Phase I trial. The Company intends to initiate~~initiated a separate Phase I/II2 trial of INKmune in a metastatic ~~castration~~castrate resistant prostate cancer. The open label trial enrolled the first patient in December 2023.

The Phase I/II trial using INKmune to treat patients with metastatic castrate resistant prostate cancer ~~(“mCRPC”) tumor during 2024. An IND for a Phase I/II trial in men with mCRPC was filed in May 2023. The trial will treat up to 30 patients with mCRPC in~~(mCPRC) is an open label trial. Biomarker data from the patients will be visible as patients are treated. The Company will report data from each cohort as it becomes available. In addition to clinical data, the Company will communicate when the Phase I portion of the trial has ~~four goals: i) demonstrate safety~~completely enrolled. This is expected in September 2024. Because of ~~INKmune in men~~the modified Bayesian design, the Company estimates the trial will be completely enrolled 1H25 with ~~mCRPC; ii) determine what dose of INKmune should be used in a blinded randomized Phase II trial on men with mCRPC; iii) determine~~top-line data available 6 months later. Topline data is divided into immunologic and tumor response ~~using traditional biomarkers~~variables. The most important immunologic response variable is related to memory like NK cell persistence. This is how long are the number of ~~mCRPC including~~mlNK cells in patients’ blood compared to baseline. There are 3 important variables to tumor response: i) blood PSA ~~level~~changes; ii) change in PMSA scan and ~~iv) use exploratory biomarkers of tumor response including~~iii) change in circulating tumor DNA (ctDNA). Ideally, the levels of all three variables decrease with treatment. We do not expect this 6 month trial to provide survival data.

We continue to incur significant development and ~~PET PMSA imaging studies.~~other expenses related to our ongoing operations. As a result, we are not and have never been profitable and have incurred losses in each period since our inception, resulting in substantial doubt in our ability to continue as a going concern. We reported a net loss of $11.0 million for the three months ended March 31, 2024. As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $26.0 million and $35.8 million, respectively. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates. The ~~first patients should be treated 9 months~~size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues, if any.

Our recurring net losses and negative cash flows from operations raised substantial doubt regarding our ability to continue as a going concern within one year after the ~~IND is open.~~

~~Since~~issuance of our ~~inception in 2015,~~unaudited condensed consolidated financial statements for the three months ended March 31, 2024. Until we ~~have devoted substantially all our resources to~~can generate sufficient revenue from the ~~discovery and development~~commercialization of our product candidates, ~~including clinical trials and preclinical studies~~we expect to finance our operations through the public or private sale of equity, debt financings or other capital sources, such as ~~well as general and administrative support for these operations.~~government funding, collaborations, strategic alliances, divestment of non-core assets, or licensing arrangements with third parties. To date, ~~we have generated no significant revenue. We have incurred net losses in each year since our inception~~the Company has relied on equity and as of September 30, 2023, we had an accumulated deficit of approximately $112.6 million. Our net losses were $21,600,000 and $21,466,000 for the nine months ended September 30, 2023 and 2022, respectively. Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations, including stock-based compensation. We anticipate that we will continue to generate substantial losses for the foreseeable future.

There may be significant uncertainty resulting from the impact of other geopolitical and macroeconomic factors, including the ongoing COVID-19 (coronavirus) pandemic, inflation, supply chain issues, rising interest rates, future bank failures, a potential US government shutdown, and the impact of the conflicts in Russia/Ukraine and Israel, in addition to geopolitical, trade and investment tensions between the United States and China.

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 additionaldebt financing to fund its 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~~As a company with less than $1.235 billion 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.~~

~~We classify~~during our operating expenses into two categories: research and development; and general and administrative expenses. Personnel costs including salaries, benefits and stock-based compensation expense comprise a significant component of our research and development and general and administrative expense categories.

Welast fiscal year, we qualify as an “emerging growth company” under the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

●

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


	●	reduced disclosure about our executive compensation arrangements;


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


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


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

We have elected to take advantage of the above-referenced exemptions and we may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.235 billion in annual revenues, we have more than $700 million in market value of our stock held by non-affiliates, or we issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens.

Research and Development

Research and development expense consists of expenses incurred while performing research and development activities to discover and develop our product candidates. This includes conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred. Our research and development expense primarily consist of:

●

clinical trial and regulatory-related costs;

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

	●	manufacturing and testing costs and related supplies and materials; and

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

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

	Three Months Ended					Nine Months Ended						Three Months Ended
	September 30,					September 30,						March 31,
	2023			2022		2023			2022			2024			2023
External Costs
DN-TNF - Alzheimer’s disease	$	3,823		$	3,319	$	8,498		$	8,328		$	6,354		$	2,464
INKmune - High Risk MDS/AML & Prostate cancer		840			413		1,697			790			1,187			414
Preclinical and other programs		214			94		632			1,379			113			144
Accrued research and development rebate		(224	)		132		(493	)		(316	)		(309	)		(137	)
Total external costs		4,653			3,958		10,334			10,181			7,345			2,885
Internal costs		1,332			1,201		3,932			3,476			1,348			1,248
Total	$	5,985		$	5,159	$	14,266		$	13,657		$	8,693		$	4,133

We typically use our employee resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate internal costs personnel costs including salaries and stock-based compensation to specific product candidates or development programs.

We participate, through our wholly owned subsidiary in Australia, in the Australian research and development tax incentive program, such that a percentage of our qualifying research and development expenditures are reimbursed by the Australian government, and such incentives are reflected as a reduction of research and development expense. The Australian research and development tax incentive is recognized when there is reasonable assurance that the incentive will be received, the relevant expenditure has been incurred and the amount of the consideration can be reliably measured.

We participate, through our wholly owned subsidiary in the United Kingdom, in the research and development program provided by the United Kingdom tax relief program, such that a percentage of our qualifying research and development expenditures are reimbursed by the United Kingdom government, and such incentives are reflected as a reduction of research and development expense. The United Kingdom research and development tax incentive is recognized when there is reasonable assurance that the incentive will be received, the relevant expenditure has been incurred and the amount of the consideration can be reliably measured.

Substantially all our research and development expenses to date have been incurred in connection with our current and future product candidates. We expect our research and development expenses to increase significantly for the foreseeable future as we advance an increased number of our product candidates through clinical development, including the conduct of our planned clinical trials and manufacturing drug to be used in those clinical trials. The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of any product candidates. This is due to the numerous risks and uncertainties associated with the development of product candidates.

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

	●	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; and

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

We do not expect any of our product candidates to be commercially available for at least the next several years, if ever. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, which may fluctuate significantly from quarter-to-quarter and year-to-year. We anticipate that our expenses will increase substantially as we:

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

	●	potentially seek regulatory approval for our product candidates;

	●	seek to discover and develop additional product candidates;

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

	●	seek to comply with regulatory standards and laws;

	●	maintain, leverage and expand our intellectual property portfolio;

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

	●	add operational, financial and management information systems and personnel; and

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

~~General and Administrative Expenses~~

General and administrative expenses consist principally of payroll and personnel expenses, including stock-based compensation; professional fees for legal, consulting, accounting and tax services; overhead, including rent and utilities; and other general operating expenses not otherwise classified as research and development expenses.

~~Other income (expense)~~

~~Other income (expense consists) primarily of interest expense incurred on debt and interest income on investments in money market accounts.~~

Results of Operations

Comparison of the Three Months Ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~

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

	Three Months Ended September 30,									Three Months Ended March 31,
(in thousands)	2023			2022			Change			2024			2023			Change
Revenues	$	43		$	98		$	(55	)	$	14		$	38		$	(24	)
Operating expenses:
Research and development		5,985			5,159			826			8,693			4,133			4,560
General and administrative		2,586			2,382			204			2,338			2,328			10
Total operating expenses		8,571			7,541			1,030			11,031			6,461			4,570
Loss from operations		(8,528	)		(7,443	)		(1,085	)		(11,017	)		(6,423	)		4,594
Other expense, net		(35	)		(282	)		247			(8	)		(113	)		105
Net loss	$	(8,563	)	$	(7,725	)	$	(838	)	$	(11,025	)	$	(6,536	)	$	4,489

Revenues

During the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company sold MSC’s to one third-party and recognized ~~$43,000~~$14,000 and ~~$98,000,~~$38,000, respectively, of revenues.

General and Administrative

General and administrative expenses were approximately ~~$2.6~~$2.3 million during each of the three months ended March 31, 2024 and ~~$2.4~~2023, respectively.

Research and Development

Research and development expenses were approximately $8.7 million during the three months ended ~~September 30, 2023 and 2022, respectively. The $0.2 million increase in general and administrative expenses was due~~March 31, 2024, compared to ~~higher consulting expense in 2023.~~

~~Research and Development~~

~~Research and development expenses were~~ approximately ~~$6.0~~$4.1 million during the three months ended ~~September 30, 2023, compared to approximately $5.2 million during the three months ended September 30, 2022.~~March 31, 2023. The change in research and development expenses during the three months ending ~~September 30, 2023~~March 31, 2024 compared to the three months ending ~~September 30, 2022~~March 31, 2023 is largely due to incurring ~~$0.5~~$4.0 million of additional expenses related to our Alzheimer’s clinical program, ~~$0.4~~$0.7 million of additional expenses on our INKmune clinical program, ~~$0.1 million of additional other clinical program expenses~~ and $0.1 million of higher employee compensation costs, partially offset by an increase of ~~$0.4~~$0.2 million of accrued rebate.

Other Expense, net

The Company’s other expense, net is lower during the three months ended ~~September 30, 2023,~~March 31, 2024, mainly due to the Company ~~earning higher interest income on its money market accounts, which partially offsets the~~incurring lower interest expense ~~incurred~~ on our ~~debt.~~debt due to having less debt outstanding.

~~Comparison of the Nine Months Ended September 30, 2023 and 2022~~

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

Nine Months Ended
September 30,
(in thousands) 2023 2022 Change
Revenues $ 127 $ 277 $ (150 )
Operating expenses:
Research and development 14,266 13,657 609
General and administrative 7,223 6,929 294
Total operating expenses 21,489 20,586 903
Loss from operations (21,362 ) (20,309 ) (1,053 )
Other expense, net (238 ) (1,157 ) 919
Net loss $ (21,600 ) $ (21,466 ) $ (134 )

~~Revenues~~

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

~~General and Administrative~~

General and administrative expenses were approximately $7.2 million and $6.9 million during the nine months ended September 30, 2023 and 2022, respectively. The $0.3 million increase in general and administrative expenses was due to higher stock-based compensation expense and higher consulting fees in 2023.

~~Research and Development~~

Research and development expenses were approximately $14.3 million and $13.7 million during the nine months ended September 30, 2023 and 2022, respectively. The increase in research and development expenses during the nine months ending September 30, 2023 compared to the nine months ending September 30, 2022 is largely due to incurring $0.9 million of additional expenses related to our INKmune clinical program, incurring $0.2 million of additional expenses with our Alzheimer’s clinical program and $0.5 million of additional employee compensation, partially offset by incurring $0.7 million less expenses associated with other clinical programs and $0.2 million of additional accrued rebate.

~~Other Expense, net~~

The Company’s other expense, net is lower during the nine months ended September 30, 2023, due to the Company earning higher interest income on its money market accounts, which partially offsets the interest expense incurred on our debt.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis.

We incurred a net loss of ~~$21.6~~$11.0 million and ~~$21.5~~$6.5 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. Net cash used in operating activities was ~~$8.6 million~~$7,476,000 and ~~$17.0 million~~$1,141,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. Since inception, we have funded our operations primarily with proceeds from the sales of our common stock. As of ~~September 30, 2023,~~March 31, 2024, we had cash and cash equivalents of ~~approximately $41.8 million.~~$26,002,000. We anticipate that operating losses and net cash used in operating activities will increase over the next few years as we advance our products under development.

On April 19, 2024, the Company entered into securities purchase agreements with purchasers in which the Company sold 571,592 shares of common stock and warrants to purchase 571,592 shares of common stock for aggregate gross proceeds of approximately $4,771,000. The exercise price of the warrants is $9.152, and the term is the earlier of two years from the issuance of the warrants and thirty trading days following the release of top line data in the Phase 2 Alzheimer’s program, provided that directors and officers of the Company that are subject to a blackout with respect to trading in the Company’s stock will have an additional 60 days from the termination of the blackout date to exercise the warrant. Directors and officers that participated in the offering paid a combined offering price of $8.445 per share and warrant, and other investors paid $8.32 per share and warrant.

On April 24, 2024, the Company entered into a securities purchase agreement with an investor in which the Company sold 986,000 shares of common stock and warrants to purchase 986,000 shares of common stock for gross proceeds of approximately $9,702,000. The exercise price of the warrants is $9.84, and the term is the earlier of two years from the issuance of the warrants and thirty trading days following the release of top line data in the Phase 2 Alzheimer’s program.

Our primary uses of capital are, and we expect will continue to be, third-party clinical and preclinical research and development services, costs incurred to manufacture our drugs under development, compensation and related expenses, ~~professional fees,~~legal, patent and other regulatory expenses and general overhead costs. We believe our use of CROs provides us with flexibility in managing our spending.

The Company incurs ~~various~~significant research and development expenses in Australia and the United Kingdom. Fluctuations in the rate of exchange between the United States dollar and the pound sterling as well as the Australian dollar could adversely affect our financial results, including our expenses as well as assets and liabilities. We currently do not hedge foreign currencies but will continue to assess whether that strategy is appropriate. As of ~~September 30, 2023,~~March 31, 2024, the cash balance held by our foreign subsidiaries with currencies other than the United States dollar was ~~less than~~approximately $0.1 million. ~~We do not have any material financial exposure to one customer or one country that would significantly hinder our liquidity.~~

~~As a publicly traded company, we incur significant legal, accounting~~Our recurring net losses and ~~other expenses. In addition, the Sarbanes-Oxley Act of 2002,~~negative cash flows from operations, as well as ~~rules adopted by the SEC~~forecast of continued losses and ~~The Nasdaq Stock Market, require public companies~~negative cash flows from operations, raised substantial doubt regarding our ability to ~~implement specified corporate governance practices that were inapplicable to us~~continue as a going concern within one year after the issuance of our unaudited condensed consolidated financial statements for the year ended March 31, 2024. Until we can generate sufficient revenue from the commercialization of our product candidates, we expect to finance our operations through the public or private ~~company. We expect these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.~~

Assale of ~~September 30, 2023, the Company had an accumulated deficit~~equity, debt financing or other capital sources, such as government funding, collaborations, strategic alliances, divestment of $112.6 million and working capital of $31.3 million. Losses have principally occurred as a result of stock-based compensation expense as well as the substantial resources required for research and development of the Company’s products which included the general and administrative expenses associatednon-core assets, or licensing arrangements with ~~its organization and product development, as well as the lack of sources of revenues until such time as the Company’s products are commercialized. As of September 30, 2023, we had~~third parties. Our cash and cash equivalents ~~of approximately $41.8 million. We believe our cash~~were $26.0 million and ~~cash equivalents~~total current assets were $29.8 million at March 31, 2024, which the Company is projecting will be ~~sufficient~~insufficient to ~~fund our~~sustain its operations ~~for at least the next 12 months~~through one year following the ~~filing~~ date ~~of this Quarterly Report on Form 10-Q based on~~that the ~~balance of cash available as of September 30, 2023.~~ We anticipate, however, that we will continue to generate losses for the foreseeable future, and we expect the losses to increase materially as we continue the development of, and seek regulatory approvals for, our drug candidates, and seek to commercialize any drugs for which we receive regulatory approval. We will need to raise additionalfinancial statements are issued.

Additional capital to fund our operations and complete our ongoing and planned clinical trials. Although we expect to finance future cash needs through public equity or debt offerings, no assurance can be given that any future funding willmay not be available ~~to us, or~~on reasonable terms, if ~~available that such proposed funding will be on terms that are acceptable to us.~~at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may ~~be required~~have to significantly delay, ~~limit, reduce~~scale back or ~~terminate~~discontinue the development of one or more of our ~~drug development~~product candidates or ~~future commercialization efforts~~cease operations. If we raise additional funds through the issuance of additional debt or equity securities it could result in dilution to our existing stockholders, increased fixed payment obligations and these securities may have rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license our intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.

Financing strategies we may pursue include, but are not limited to, the public or private sale of equity, debt financing or funds from other capital sources, such as government or grant funding, collaborations, strategic alliances, divestment of non-core assets, or licensing arrangements with third parties. There can be no assurances additional capital will be available to secure additional financing, or if available, that it will be sufficient to meet our needs on favorable terms. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development of one or more of our product candidates. If we raise additional funds through the public or private sale of equity or debt financings, it could result in dilution to our existing stockholders or increased fixed payment obligations and these securities may have rights senior to ~~develop~~those of our common stock and ~~market drug candidates~~could contain covenants that we would ~~otherwise prefer~~restrict our operations and potentially impair our competitiveness, such as limitations on our ability to ~~develop~~incur additional debt, limitations on our ability to acquire, sell or license our intellectual property rights and ~~market ourselves.~~other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

	Nine Months Ended September 30,						Three Months Ended March 31,
(in thousands)	2023			2022			2024			2023
Net cash and cash equivalents (used in) provided by:
Net cash and cash equivalents used in:
Operating activities	$	(8,579	)	$	(16,991	)	$	(7,476	)	$	(1,141	)
Financing activities		(1,725	)		729			(2,500	)		-
Change in cash and cash equivalents		(10,304	)		(16,262	)		(9,976	)		(1,141	)
Impact on cash from foreign currency translation		(36	)		(1,143	)		130			(9	)
Cash and cash equivalents, beginning of period		52,153			74,810			35,848			52,153
Cash and cash equivalents, end of period	$	41,813		$	57,405		$	26,002		$	51,003

Operating Activities

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

Operating activities used approximately ~~$8.6~~$7.5 million of cash during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, resulting from our loss of ~~$21.6~~$11.0 million, partially offset by changes in our net operating assets and liabilities of ~~$7.4~~$1.7 million and non-cash stock-based compensation of ~~$5.5~~$1.8 million. The change in our net operating assets and liabilities was mainly due to an increase in accounts payable and accrued liabilities of $1.4 million and a decrease in prepaid expenses of $0.4 million.

Operating activities used approximately $1.1 million of cash during the three months ended March 31, 2023, resulting from our loss of $6.5 million, partially offset by changes in our net operating assets and liabilities of $3.6 million and non-cash stock-based compensation of $1.7 million. The change in our net operating assets and liabilities was mainly due to a decrease in research and development tax credit receivable of ~~$6.0~~approximately $6.3 million and ~~a decrease~~an increase in prepaid expenses of ~~$2.5~~$0.4 million, partially offset by a decrease in accounts payable and accrued liabilities of ~~$1.5~~$3.1 million.

Operating activities used approximately $17.0 million of cash during the nine months ended September 30, 2022, resulting from our loss of $21.5 million and changes in our net operating assets and liabilities of $1.1 million, partially offset by non-cash stock-based compensation of $5.4 million. The change in our net operating assets and liabilities was mainly due to an increase in prepaid expenses of approximately $2.3 million, partially offset by a decrease in other tax receivable of $0.5 million and a decrease in research and development tax credit receivable of $0.5 million.Financing Activities

~~Financing Activities~~

During the ~~nine~~three months ended September 30, 2023, the Company sold 75,697 shares of its common stock for net proceeds of $775,000 under the Company’s ATM program with BTIG. The Company suspended its Sales Agreement with BTIG during September 2023.

~~During the nine months ended September 30, 2023,~~March 31, 2024, the Company repaid ~~$2,500,000~~$2.5 million of its debt.

~~During the nine months ended September 30, 2022, the Company sold 82,900 shares of its common stock to certain officers and directors for approximately $0.7 million.~~

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. Actual results may differ from these estimates. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022,~~2023, and there have been no material changes during the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) at the end of the period covered by this quarterly report.

Based on this evaluation, we concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We recognize that any controls system, no matter how well designed and operated, can provide only reasonable assurance of achieving its objectives, and our management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this quarterly report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any pending legal proceedings that we believe will have a material adverse effect on our business or financial conditions. We may, however, be subject to various claims and legal actions arising in the ordinary course of business from time to time.

Item 1A. Risk Factors

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, “Risk Factors,” contained in the Annual Report. Except as described below, our risk factors as of the date of this Report have not changed materially from those described in “Part I, Item 1A. Risk Factors” of our Annual Report. Not required for smaller reporting companies.

Certain shares previously sold under our ATM Sales Agreement may have been sold in violation of federal and state securities laws and may be subject to rescission rights and other penalties, requiring us to repurchase shares sold thereunder.

In connection with our At-the-Market-Sales Agreement, dated March 10, 2021 (the “Sales Agreement”), we recently became aware that our shelf registration statement on Form S-3 (file number 333-237368) (the “Registration Statement”) expired on April 2, 2023. Prior to becoming aware of the expiration, we sold an aggregate of 75,697 shares of our common stock following the expiration of the Registration Statement and through July 17, 2023 at an average price of approximately $10.56 per share for an aggregate of approximately $799,212 under the Registration Statement pursuant to the Sales Agreement (the “Sales”). Because the Registration Statement had already expired, the Sales could be determined to be unregistered sales of securities and, in accordance with Section 5 of the Securities Act, direct purchasers in the Sales may have rescission rights pursuant to which they may be entitled to recover the amount paid for such shares, plus statutory interest, upon returning the shares to us within one year from the transaction date. In addition, we could be subject to enforcement actions or penalties and fines by federal and/or state regulatory authorities. We cannot predict the likelihood of any claims or actions being brought against us or the amount of any penalties or fines in connection with the Sales.

Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Not applicable.~~During the fiscal quarter ended March 31, 2024, none of the Company’s directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement, or a non-Rule 10b5-1 trading arrangement, in each case as defined in Item 408 of Regulation S-K.

Item 6. Exhibits

No.		Description

31.1		Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer*

31.2		Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer*

32.1		Section 1350 Certification of Chief Executive Officer**

32.2		Section 1350 Certification of Chief Financial Officer**

101.INS		Inline XBRL Instance Document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	INmune Bio Inc.

Date: ~~November 1, 2023~~May 9, 2024	By:	/s/ Raymond J. Tesi
		Raymond J. Tesi
		Chief Executive Officer (Principal Executive Officer)

Date: ~~November 1, 2023~~May 9, 2024

By:

/s/ David J. Moss

David J. Moss

Chief Financial Officer, Treasurer, Secretary

(Principal Financial and Accounting Officer)

~~0.43 0.48 1.20 1.20 17921036~~0.36 0.61 17945995 ~~17966990 18008295~~18026473 false --12-31 Q3Q1 0001711754 iso4217:USD xbrli:shares

	For the Three Months Ended September 30,							For the Nine Months Ended September 30,
	2023				2022			2023			2022
REVENUE	$	43			$	98		$	127		$	277

OPERATING EXPENSES
General and administrative		2,586				2,382			7,223			6,929
Research and development		5,985				5,159			14,266			13,657
Total operating expenses		8,571				7,541			21,489			20,586

LOSS FROM OPERATIONS		(8,528	)	��		(7,443	)		(21,362	)		(20,309	)

OTHER EXPENSE, NET		(35	)			(282	)		(238	)		(1,157	)

NET LOSS	$	(8,563	)		$	(7,725	)	$	(21,600	)	$	(21,466	)

Net loss per common share – basic and diluted	$	(0.48	)		$	(0.43	)	$	(1.20	)	$	(1.20	)

Weighted average common shares outstanding – basic and diluted		18,008,295				17,945,995			17,966,990			17,921,036

COMPREHENSIVE LOSS
Net loss	$	(8,563	)		$	(7,725	)	$	(21,600	)	$	(21,466	)
Other comprehensive loss – foreign currency translation		(23	)			(441	)		(36	)		(1,143	)
Total comprehensive loss	$	(8,586	)		$	(8,166	)	$	(21,636	)	$	(22,609	)

(in thousands, except years)
2023	$	2,500
2024		10,000
Total debt	$	12,500