| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
3 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 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
consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the
year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with
the SEC on March 3, 2022. Risks
and Uncertainties The
Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic
on the Company’s business is highly uncertain and difficult to predict. Also, economies worldwide have also been negatively impacted
by the COVID-19 pandemic, however policymakers around the globe have responded with fiscal policy actions to support the healthcare industry
and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain. In
addition, the Company’s clinical trials have been affected by and may continue to be affected by the COVID-19 pandemic. Clinical
site initiation and patient enrollment have and may continue to be delayed due to prioritization of hospital resources toward the COVID-19
pandemic. Some patients have not and others may not be able to comply with clinical trial protocols if quarantines impede patient movement
or interrupt healthcare services. Similarly, the ability to recruit and retain patients and principal investigators and site staff who,
as healthcare providers, may have heightened exposure to COVID-19, may adversely impact the Company’s clinical trial operations. The
severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not
limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s service providers,
suppliers, contract research organizations (“CROs”) and the Company’s clinical trials, all of which are uncertain and
cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may
materially impact the Company’s financial condition, liquidity or results of operations is uncertain. 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 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
June 30, 2022 and 2021, the Company had potentially issuable shares as follows:
June 30,
2022 2021
Stock options 4,851,000 3,892,000
Warrants 74,074 100,013
Total 4,925,074 3,992,013 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 Accounting Pronouncements In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement 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 reductions
in the amortized cost of the securities. In October 2019, the FASB voted to delay the effective date of this standard. Topic 326 will
be effective for the Company on January 1, 2023. Early adoption is permitted. The Company is currently assessing the effect that
this ASU will have on its condensed financial position, results of operations, and disclosures. Subsequent
Events The
Company evaluates events that have occurred after the balance sheet date of June 30, 2022, through the date which the financial statements
are issued. |
