10-Q

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, 2022

OR

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

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)

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 ☒

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

As of November 2, 2022, there were 17,945,995 shares of our common stock, par value $0.001 per share, outstanding.

INMUNE BIO INC.

FORM 10-Q

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

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	17
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	28
Item 4.	Controls and Procedures	28
PART II – OTHER INFORMATION		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	29

i

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements 

INMUNE BIO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

	September 30, 2022			December 31, 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	57,405		$	74,810
Research and development tax credit receivable		4,417			4,913
Other tax receivable		114			591
Prepaid expenses		4,599			2,278
Prepaid expenses – related party		123			14
TOTAL CURRENT ASSETS		66,658			82,606
Operating lease – right of use asset		529			726
Other assets		99			99
Acquired in-process research and development intangible assets		16,514			16,514
TOTAL ASSETS	$	83,800		$	99,945
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	3,465		$	3,733
Accounts payable and accrued liabilities – related parties		8			80
Deferred liabilities		778			474
Current portion of long-term debt		2,500			-
Operating lease, current liabilities		144			72
TOTAL CURRENT LIABILITIES		6,895			4,359
Long-term debt, net		12,129			14,458
Long-term operating lease liabilities		607			704
Accrued liability – long-term		463			199
TOTAL LIABILITIES		20,094			19,720
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding		-			-
Common stock, $0.001 par value, 200,000,000 shares authorized, 17,945,995 and 17,843,303 shares issued and outstanding, respectively		18			18
Additional paid-in capital		150,011			143,921
Accumulated other comprehensive (loss) income		(1,142	)		1
Accumulated deficit		(85,181	)		(63,715	)
TOTAL STOCKHOLDERS’ EQUITY		63,706			80,225
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	83,800		$	99,945

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

1

INMUNE BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
REVENUE	$	98		$	14		$	277		$	18
OPERATING EXPENSES
General and administrative		2,382			2,515			6,929			6,666
Research and development		5,159			6,520			13,657			13,475
Total operating expenses		7,541			9,035			20,586			20,141
LOSS FROM OPERATIONS		(7,443	)		(9,021	)		(20,309	)		(20,123	)
OTHER EXPENSE, NET		(282	)		(437	)		(1,157	)		(546	)
NET LOSS	$	(7,725	)	$	(9,458	)	$	(21,466	)	$	(20,669	)
Net loss per common share – basic and diluted	$	(0.43	)	$	(0.55	)	$	(1.20	)	$	(1.33	)
Weighted average common shares outstanding - basic and diluted		17,945,995			17,329,379			17,921,036			15,553,344
COMPREHENSIVE LOSS
Net loss	$	(7,725	)	$	(9,458	)	$	(21,466	)	$	(20,669	)
Other comprehensive loss - foreign currency translation		(441	)		(68	)		(1,143	)		(129	)
Total comprehensive loss	$	(8,166	)	$	(9,526	)	$	(22,609	)	$	(20,798	)

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

2

INMUNE BIO, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited) 

	Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total 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.

3

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

					Additional			Accumulated Other						Total
	Common Stock				Paid-In			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital			Income (Loss)			Deficit			Equity
Balance as of December 31, 2020		13,481,283	$	13	$	72,105		$	11		$	(33,375	)	$	38,754
Issuance of common stock for cash		1,439,480		2		28,444			-			-			28,446
Exercise of warrants for cash		11,875		-		18			-			-			18
Stock-based compensation		-		-		899			-			-			899
Gain on foreign currency translation		-		-		-			1			-			1
Net loss		-		-		-			-			(4,556	)		(4,556	)
Balance as of March 31, 2021		14,932,638	$	15	$	101,466		$	12		$	(37,931	)	$	63,562
Stock-based compensation		-		-		769			-			-			769
Settlement of Xencor warrant for cash and common stock		192,533		-		(15,000	)		-			-			(15,000	)
Warrants issued to lenders as debt inducement		-		-		619			-			-			619
Loss on foreign currency translation		-		-		-			(62	)		-			(62	)
Net loss		-		-		-			-			(6,655	)		(6,655	)
Balance as of June 30, 2021		15,125,171	$	15	$	87,854		$	(50	)	$	(44,586	)	$	43,233
Issuance of common stock for cash		2,531,374		3		51,804			-			-			51,807
Cashless exercise of warrants		3,758		-		-			-			-			-
Exercise of stock options		183,000		-		1,135			-			-			1,135
Stock-based compensation		-		-		1,606			-			-			1,606
Loss on foreign currency translation		-		-		-			(68	)		-			(68	)
Net loss		-		-		-			-			(9,458	)		(9,458	)
Balance as of September 30, 2021		17,843,303	$	18	$	142,399		$	(118	)	$	(54,044	)	$	88,255

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

4

INMUNE BIO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands)

(Unaudited)

	For the Nine Months Ended September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(21,466	)	$	(20,669	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		5,361			3,274
Accretion of debt discount		171			69
Impairment of operating lease – right of use asset		89			-
Changes in operating assets and liabilities:
Research and development tax credit receivable		496			(3,272	)
Other tax receivable		477			(75	)
Prepaid expenses		(2,321	)		(1,080	)
Prepaid expenses – related party		(109	)		(14	)
Other assets		-			(99	)
Accounts payable and accrued liabilities		(268	)		2,703
Accounts payable and accrued liabilities – related parties		(72	)		(24	)
Deferred liabilities		304			351
Accrued liability – long-term		264			111
Operating lease liabilities		83			1
Net cash used in operating activities		(16,991	)		(18,724	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid to Xencor to settle warrant for acquired research and development intangible assets		-			(15,000	)
Net cash used in investing activities		-			(15,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock		699			80,253
Net proceeds from exercise of stock options		-			1,135
Net proceeds from the exercise of warrants		30			18
Net proceeds from the issuance of debt		-			14,951
Net cash provided by financing activities		729			96,357
Impact on cash from foreign currency translation		(1,143	)		(129	)
NET (DECREASE) INCREASE IN CASH		(17,405	)		62,504
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		74,810			21,967
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	57,405		$	84,471
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes	$	-		$	-
Cash paid for interest expense	$	962		$	265
NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued to Xencor to settle warrant issued for acquired research and development intangible assets	$	-		$	3,300
Warrants issued as debt inducement	$	-		$	619

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

5

INMUNE BIO, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

INmune Bio, Inc. (the “Company” or “INmune Bio”) was organized in the State of Nevada on September 25, 2015, and is a clinical stage biotechnology pharmaceutical company focused on developing and commercializing its product candidates to treat diseases where 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 (XPro1595, XPro™, pegipanermin) 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). 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

As of September 30, 2022, the Company had an accumulated deficit of $85,181,000 and experienced losses since its inception. The Company had cash, cash equivalents of $57,405,000 as of September 30, 2022 and has not generated positive cash flows from operations. To date, the Company has funded its operations primarily through the sale of its common stock. Although it is difficult to predict the Company’s liquidity requirements, as of September 30, 2022, 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, 2022.

Management expects operating losses to continue for the foreseeable future. There can be no assurance 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 unable to secure such financing when needed, or if available, such financings may be under terms that are unfavorable to the Company or the current stockholders. If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations.

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 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.

6

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.

7

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, 2022 and 2021, the Company had potentially issuable shares as follows:

	September 30,
	2022		2021
Stock options		4,851,000		4,082,000
Warrants		74,074		93,866
Total		4,925,074		4,175,866

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.

8

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 September 30, 2022, through the date which the financial statements are issued.

9

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, 2022 and December 31, 2021, the Company recorded a research and development tax credit receivable in the amount of $2,566,000 and $3,319,000, respectively. The reduction in the research and development tax credit receivable is primarily due to a stronger US dollar. During the nine months ended September 30, 2022 and 2021, the Company received $0 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, 2022 and December 31, 2021, the Company recorded a research and development tax credit receivable of $1,851,000 and $1,594,000, respectively, for R&D expenses incurred in Australia. During the nine months ended September 30, 2022 and 2021, the Company received $0 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. As part of the purchase price for entering into the Xencor License Agreement, the Company issued Xencor fully vested warrants to purchase an additional number of shares of common stock equal to 10% of the fully diluted company shares immediately following such purchase. On June 10, 2021, the Company and Xencor entered into an Option Cancellation Agreement whereby Xencor terminated its warrant to purchase 10% of the fully diluted shares of the Company in exchange for a cash payment of $15,000,000 and 192,533 shares of the Company’s common stock. The Company filed a registration statement covering the resale of these shares during September 2021 and agreed to keep the registration statement continuously effective until all such shares cease to be outstanding or otherwise cease to be registrable securities as defined in the Option Cancellation Agreement.

The Company also agreed to pay Xencor a 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. In addition, the Company agreed to pay Xencor a percentage of any sublicensing revenue that it receives.

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

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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.

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, the parties amended the agreement under which the Company was required achieve milestones pursuant to the agreement. On October 30, 2020, the parties executed an additional amendment to the agreement under which the Company is required to achieve the following milestones:

Initiation of Phase II clinical trials or equivalent by October 29, 2023

Initiation of Phase III clinical trials or equivalent by October 29, 2025

Filing of NDA or equivalent by October 29, 2026 or equivalent

If the Company doesn’t achieve the above milestones, it is required to negotiate in good faith with Immune Ventures to determine how it can either remedy the failure or achieve an alternate development. If the Company fails to make any required efforts, or if the efforts do not remedy the situation within 60 days of written notice by Immune Ventures, then Immune Ventures may provide notice to terminate the license or convert it to a non-exclusive license.

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, 2022.

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).

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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)
September 30, 2022:
Cash equivalents
Money market fund	$	56,177	$	56,177	$	-	$	-
Total cash equivalents	$	56,177	$	56,177	$	-	$	-

The Company had no assets and liabilities measured at fair value on a recurring basis as of December 31, 2021.

NOTE 6 – LEASE 

In May 2019, the Company signed a sublease agreement with a related party for office space in La Jolla, California, which served as the former headquarters of the Company. The lease has a 61-month term, which corresponds to the lease term of the lessor. The lessor is CTI Clinical Trial & Consulting Services (“CTI”). CTI is majority-owned by a member of the Company’s Board of Directors. During 2021, the Company moved its corporate headquarters to Boca Raton, Florida. The Company intended to sublease its office space in La Jolla but was unable to find a tenant. The Company recorded a right-of-use asset impairment of $89,000 within general and administrative expenses during the nine months ended September 30, 2022 on its La Jolla lease.

In September 2021, the Company signed a lease 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.

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

(in thousands, except years and rate)	September 30, 2022			December 31, 2021
Right-of-use asset (La Jolla lease)	$	-		$	118
Right-of-use asset (Boca Raton lease)		529			608
Total	$	529		$	726
Operating lease, current liability (La Jolla lease)	$	93		$	52
Operating lease, current liability (Boca Raton lease)		51			20
Total		144			72
Long-term operating lease liability (La Jolla lease)		52			84
Long-term operating lease liability (Boca Raton lease)		555			620
		607			704
Total lease liability	$	751		$	776
Weighted-average remaining lease term		3.9 years			4.6 years
Weighted-average discount rate		11.68	%		11.70	%

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NOTE 7 – RELATED PARTY TRANSACTIONS

UCL

At September 30, 2022 and December 31, 2021, the Company owed UCL Consultants Limited (“UCL”) $8,000 and $10,000, respectively, in connection with medical research performed on behalf of the Company. During the nine months ended September 30, 2022 and 2021, the Company paid UCL $486,000 and $176,000, respectively, for medical research performed on behalf of the Company. At September 30, 2022 and December 31, 2021, the Company recorded $123,000 and $0, respectively, of prepaid expenses – related party for payments made to UCL in advance of services to be provided. 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, 2022 and December 31, 2021, the Company owed AmplifyBio $0 and $70,000, 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 months ended September 30, 2022 and 2021, the Company paid AmplifyBio $145,000 and $0, respectively, for pre-clinical research 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., together (the “Lenders”).  The Term Loan provides 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.  The Term Loan also provides for the Company to request an additional $5.0 million term loan from the Lenders, which may be granted or denied at the sole discretion of the Lenders.

The term loan and debt discount are as follows as of September 30, 2022:

(in thousands)
Term Loan	$	15,000
Less: debt discount and financing costs, net		(371	)
Less: current portion		(2,500	)
Long-term debt	$	12,129

For the nine months ended September 30, 2022, the Company recognized interest expense of $1,424,000 related to the Term Loan. 

The Company is required to make interest only payments monthly until July 1, 2023 at which time the Company shall 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, 2022, the interest rate was 10.75%.

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 loans in full, subject to a prepayment premium of (i) 2% of the original principal amount borrowed for any prepayment after the first anniversary and on or before the second anniversary of the loan or (ii) 1% of the original principal amount borrowed for any prepayment after the second anniversary of the loan but before the maturity date.

The expected repayment of the $15.0 million Term loan principal is as follows as of September 30, 2022:

(in thousands, except years)
2022	$	-
2023		5,833
2024		9,167
Total debt		15,000

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 was in compliance with its debt covenants at September 30, 2022.

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NOTE 9 – STOCKHOLDERS’ EQUITY

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.

Common Stock – At the Market Offering

During the nine months ended September 30, 2021, the Company sold 1,439,480 shares of its common stock at an average price of $20.17 per share under the 2020 ATM program. The aggregate net proceeds were approximately $28.4 million after BTIG’s commission and other offering expenses. 

During the nine months ended September 30, 2021, the Company sold 713,192 shares of its common stock at an average price of $21.73 per share under the 2021 ATM program. The aggregate net proceeds were approximately $14.9 million after BTIG’s commission and other offering expenses. 

Registered Direct Offering

During July 2021, the Company completed a registered direct offering whereby the Company sold 1,818,182 shares of its common stock to investors for net proceeds of $36.9 million.

Issuance of shares to Xencor

On June 10, 2021, the Company and Xencor entered into an Option Cancellation Agreement whereby the Company issued 192,533 shares of its common stock to Xencor (See Note 4).

Stock options

During the nine months ended September 30, 2022, the Company granted certain employees and directors options to purchase 819,000 shares of its common stock pursuant to the 2021 Incentive Stock Plans. The stock options had a fair value of approximately $5.5 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 1.60% - 3.06% based on the applicable US Treasury bill rate (2) expected life of 6.0 – 10.0 years, (3) expected volatility of approximately 105% - 108% based on the trading history of similar companies, and (4) zero expected dividends.

The following table summarizes stock option activity during the nine months ended September 30, 2022:

(in thousands, except share and per share amounts)	Number of  Shares			Weighted- average  Exercise Price		Weighted- average  Remaining Contractual Term (years)		Aggregate  Intrinsic  Value
Outstanding at January 1, 2022		4,097,000		$	8.67		7.21	$	14,414
Options granted		819,000		$	8.01		-		-
Options exercised		-		$	-		-		-
Options cancelled		(65,000	)	$	11.12		-		-
Outstanding at September 30, 2022		4,851,000		$	8.62		7.22	$	3,916
Exercisable at September 30, 2022		3,438,590		$	7.24		6.48	$	3,643

During the nine months ended September 30, 2022 and 2021, the Company recognized stock-based compensation expense of approximately $5.4 million and $3.3 million, respectively, related to the vesting of stock options. As of September 30, 2022, there was approximately $13.0 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period of 2.17 years.

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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, 2022, 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, 2022, 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 which were issued in 2017 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 three and nine months ended September 30, 2022 and 2021 respectively:

(in thousands)	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Research and development	$	725	$	705	$	1,971	$	1,090
General and administrative		1,214		901		3,390		2,184
Total	$	1,939	$	1,606	$	5,361	$	3,274

Shareholder Rights Agreement

On December 30, 2020, the Board of Directors (the “Board”) of the Company approved and adopted a Rights Agreement, dated as of December 30, 2020, by and between the Company and VStock Transfer, LLC, as rights agent, pursuant to which the Board declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share of the Company’s common stock held by stockholders as of the close of business on January 11, 2021. When exercisable, each right initially would represent the right to purchase from the Company one one-thousandth of a share of a newly designated series of preferred stock, Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company, at an exercise price of $300.00 per one one-thousandth of a Series A Junior Participating Preferred Share, subject to adjustment. Subject to various exceptions, the Rights become exercisable in the event any person (excluding certain exempted or grandfathered persons) becomes the beneficial owner of twenty percent or more of the Company’s common stock without the approval of the Board. The Rights Agreement was scheduled to expire on December 30, 2021 but was extended until December 30, 2022 by the Board.

NOTE 10 – COLLABORATIVE AGREEMENTS

During 2020, the Company was awarded a $0.5 million grant from the Amyotrophic Lateral Sclerosis (“ALS”) Association to fund a study of the efficacy of XPro1595 to reverse ALS in vitro and to fund a study of the efficacy of XPro1595 to protect against ALS model phenotypes in vivo. During the nine months ended September 30, 2022 and 2021, the Company received $0.0 million and $0.1 million, respectively, of cash proceeds pursuant to this grant which the Company recorded as deferred liabilities. The Company offsets costs incurred related to this research against the grants. As of September 30, 2022 and December 31, 2021, the Company recorded approximately $0.1 million and $0.3 million, respectively, as deferred liabilities in the consolidated balance sheet related to the ALS grant.

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, 2022, the Company has not received any proceeds pursuant to this grant. 

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NOTE 11 – COMMITMENTS

Lease

In May 2019, the Company signed a sublease agreement with a related party for office space in La Jolla, California. The lease has a 61-month term, which corresponds to the lease term of the lessor. The lessor is CTI.

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)
2022	$	76
2023		221
2024		219
2025		192
2026		198
Thereafter		51
Total lease payments		957
Less: imputed interest		(206	)
Present value of future lease payments		751
Less: operating lease, current liabilities		(144	)
Long-term operating lease liabilities	$	607

During the nine months ended September 30, 2022 and 2021, the Company recognized $162,000 and $45,000, 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.

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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 the immune dysfunction associated with chronic diseases such as cancer and neurodegenerative diseases. The Company’s drugs are in clinical trials and have not been approved by a regulatory authority. The Company has two therapeutic platforms – a dominant-negative TNF platform (“DN-TNF”, “XPro™”, “XPro1595™” or “pegipanermin”) and a Natural Killer (“NK”, or “INKmune™”) platform. The DN-TNF platform neutralizes soluble TNF (“sTNF”) without affecting trans-membrane TNF (“tmTNF”) or TNF receptors -TNFR1 and TNFR2. This unique biologic mechanism differentiates the DN-TNF drugs from currently approved non-selective TNF inhibitors that inhibit both sTNF and tmTNF. Protecting the function of tmTNF and TNF receptors while neutralizing the function of sTNF is a potent anti-inflammatory strategy that does not cause immunosuppression or demyelination which occur in the currently approved non-selective TNF inhibitors. Currently approved non-selective TNF inhibitors treat autoimmune disease, but are contraindicated in patients with infection, cancer and neurologic diseases because they increase the risk of infection, cancer and demyelinating neurologic diseases, respectively; all the 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 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 increase NK avidity and further improves mitochondrial function and upregulates nutrient receptors. These metabolic changes may help the INKmune primed NK cell to function in the hostile tumor microenvironment and persist much longer. These mechanisms improve the ability of INKmune primed NK cells to overcome the immune evasion of the patient’s cancer cells. We believe INKmune is best used to eliminate residual disease after the patient has completed other cancer therapies. Both the DN-TNF platform and the INKmune platform can be used to treat multiple diseases. The DN-TNF platform will be used as an immunotherapy for the treatment of cancer and neurodegenerative disease. INKmune is being developed to treat NK sensitive hematologic malignancies and solid tumors.  

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We believe our DN-TNF platform can be used as a cancer therapy to reverse resistance in immunotherapy and as a CNS (“central nervous system”) therapy to target glial activation to prevent progression of Alzheimer’s disease (“AD”), and to target neuroinflammation in treatment resistant depression (“TRD”). The drug is named differently for the oncology and CNS indications; INB03™ or XPro™, respectively, but it is the same drug product. In each case, we believe neutralizing sTNF is a cornerstone to the treatment of these diseases. As an immunotherapy for cancer, we are using INB03 to neutralize sTNF produced by HER2+ trastuzumab resistant breast cancers to reverse resistance to targeted therapy. sTNF produced by the tumor causes an up-regulation of MUC4 express causing steric hindrance of trastuzumab binding to the HER receptor on HER2+ breast cancer cells. Without binding, trastuzumab is not effective. Neutralizing sTNF reverses MUC4 expression converting a trastuzumab resistant breast cancer cell into a trastuzumab sensitive breast cancer cell. In addition, INB03 changes the immunobiology of the tumor microenvironment by decreasing the number of immunosuppressive myeloid cells, both myeloid derived suppressor cells and tumor active macrophages, and increasing the number of cytotoxic lymphocytes and phagocytic macrophages in the TME. The Company has completed an open label dose escalation trial in cancer patients with metastatic solid tumors that have failed multiple lines of therapy. The trial informs the design of the Phase II trial by demonstrating that INB03 was safe and well tolerated, defined the dose of INB03 to carry into Phase II trials, and demonstrated a pharmacodynamic end-point. A Phase II trial is planned in patients with advanced MUC4+ expressing cancer.

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. 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, key elements in the development of dementia. In animal models, elimination of sTNF prevents nerve cell dysfunction and reverses synaptic pruning. The Phase I trial in patients with biomarkers of inflammation with AD has been completed. The open label, dose escalation trial is designed to demonstrate that XPro can safely decrease neuroinflammation in patients with AD. The endpoints of the trial are measures of neuroinflammation and neurodegeneration in blood and cerebral spinal fluid, measures of neuroinflammation by measuring cytokines in the CSF and MRI by measuring white matter free water. XPro, at the 1mg/kg/week dose decreased inflammatory cytokines in the CSF and white matter free water in the brain demonstrating that XPro can decrease neuroinflammation in patients with 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 decreases biomarkers of neurodegeneration as measured by changes in the CSF proteome including neurofilament light chain, phospho Tau 217 and VILIP-1; decreases of 84%, 46% and 91% respectively after 3 months of therapy. Three months of XPro therapy improved measures of synaptic function, as measured in the CSF proteome including a 222% increase in Contactin 2 and a 56% decrease neurogranin, proteins that contribute to improved synaptic function.

The successful completion of the Phase I trial in AD has informed the design of two Phase II trials in patients with AD; one in mild AD and the other in mild cognitive impairment (MCI). The mild AD trial will be a blinded randomized trial to test if treatment of mild AD patients with neuroinflammation will affect cognitive decline. The Phase II trial has six important elements. Two hundred patients will be 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 C-reactive protein, hemoglobin A1c, erythrocyte sedimentation rated in the blood and at least one allele of ApoE4. The primary end-point will be Early/mild Alzheimer’s Cognitive Composite (“EMACC”), a validated cognitive measure that is more sensitive than traditional end-points used in many studies of patients with early AD. The trial will be performed in North America and Australia and enrolled its first patient in April 2022. 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.

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The second Phase II trial will be a blinded randomized trial in patients with MCI in which the Company plans to enroll 60 patients in two arms in a 2:1 ratio (1mg/kg/week XPro, placebo). Patients will be treated for 3 months. Patients must have at least one of the enrichment criteria used in the mild ADi trial to qualify for the trial. The primary end-point is EMACC, a sensitive cognitive end-point validated for use in patients with early AD. Secondary clinical endpoints include the CDR-SB, Cogstate Battery, E-Cog, NPI, and ADCS-ADL. Imaging endpoints of neuroinflammation (white matter free water) and white matter quality (apparent fiber density and radial diffusivity in Alzheimer’s disease tracts) and gray matter quality (cortical disarray measurement) will be will be assessed via MRI. Changes in brain metabolism will be assessed via FDG-PET. Additional secondary measures of function include EEG, and speech and language. All patients in this trial will be eligible to continue on XPro for at least 12 additional months. Clinical and MRI metrics will be followed during the extension trial.  The Company may amend the clinical trial design from time-to-time to improve the quality of the data or the probability of success. 

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 demonstrated the patients have elevated TNF levels and treatment with infliximab 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 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 authorization to initiate the clinical trial once the pending clinical hold is lifted.

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 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 remains after treatment with cytotoxic therapy. We believe INKmune can be used to treat numerous hematologic malignancies and solid tumors including leukemia, multiple myeloma, lymphoma, lung, ovary, breast, renal and prostate cancer. The Company has initiated a Phase I trial using INKmune to treat patients with high risk MDS/AML, a form of leukemia. One patient has been treated in the Phase I trial for MDS and three patients have been treated compassionately in AML. In the four patients, INKmune therapy is safe, produces memory-like NK cells that kill cancer in vitro, promotes development of cancer killing memory-like NK cells that can be found in the patient’s circulation of 4 months. The Company will continue to enroll patients in the Phase I trial. The Company intends to initiate a separate Phase I/2 trial of INKmune in a solid tumor during the first half of 2023.

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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 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 remains after treatment with cytotoxic therapy. We believe INKmune can be used to treat numerous hematologic malignancies and solid tumors including leukemia, multiple myeloma, lymphoma, lung, ovary, breast, renal and prostate cancer. The Company has initiated a Phase I trial using INKmune to treat patients with high risk MDS/AML, a form of leukemia. One patient has been treated in the Phase I trial for MDS and three patients have been treated compassionately in AML. In the four patients, INKmune therapy is safe, produces memory-like NK cells that kill cancer in vitro, promotes development of cancer killing memory-like NK cells that can be found in the patient’s circulation of 4 months. The Company will continue to enroll patients in the Phase I trial.

Since our inception in 2015, we have devoted substantially all of our resources to the discovery and development of our product candidates, including clinical trials and preclinical studies as well as general and administrative support for these operations. To date, we have generated no significant revenue. We have incurred net losses in each year since our inception and, as of September 30, 2022, we had an accumulated deficit of approximately $85.2 million. Our net losses were $21,466,000 and $20,669,000 for the nine months ended September 30, 2022 and 2021, 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 losses for the foreseeable future.

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.

We classify 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.

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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 $1.07 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.

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We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs, other internal costs or external consultant costs 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. In the future, the Company may elect to cease to perform research and development in Australia at which point the Company may not participate the Australian research and development tax incentive program.

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. The Company expects to receive research and development tax incentives during 2022 for qualifying expenditures incurred prior to December 31, 2021. However, the United Kingdom recently enacted changes to the research and development tax incentive whereby the Company does not expect to be eligible to receive the United Kingdom tax incentives beginning with expenditures incurred during 2022.

Substantially all of 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;

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● 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 expense consists primarily of interest expense incurred on debt.

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Results of Operations

Comparison of the Three Months Ended September 30, 2022 and 2021

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

	Three Months Ended September 30,
(in thousands)	2022			2021			Change
Revenues	$	98		$	14		$	84
Operating expenses:
Research and development		5,159			6,520			(1,361	)
General and administrative		2,382			2,515			(133	)
Total operating expenses		7,541			9,035			(1,494	)
Loss from operations		(7,443	)		(9,021	)		1,578
Other expense, net		(282	)		(437	)		155
Net loss	$	(7,725	)	$	(9,458	)	$	1,733

Revenues

During the nine months ended September 30, 2022 and 2021, the Company sold MSC’s to one third-party and recognized $98,000 and $14,000, respectively, of revenues.

General and Administrative

General and administrative expenses were approximately $2.4 million during the nine months ended September 30, 2022, compared to approximately $2.5 million during the nine months ended September 30, 2021. The decrease in general and administrative expenses is largely due to $0.4 million lower consulting fees, partially offset by $0.3 million higher compensation, including stock-based compensation.

Research and Development

Research and development expenses were approximately $5.2 million during the three months ended September 30, 2022, compared to approximately $6.5 million during the three months ended September 30, 2021. The decrease in research and development expenses during the three months ending September 30, 2022 compared to the three months ending September 30, 2021 is largely due to incurring $1.8 million less expenses associated with our Alzheimer’s and mild cognitive impairment clinical trials.

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Other Expense

The Company’s other expense is lower during the nine months ended September 30, 2022 due to the Company incurring higher interest income on its cash.

Comparison of the Nine Months Ended September 30, 2022 and 2021

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

	Nine Months Ended September 30,
(in thousands)	2022			2021			Change
Revenues	$	277		$	18		$	259
Operating expenses:
Research and development		13,657			13,475			182
General and administrative		6,929			6,666			263
Total operating expenses		20,586			20,141			445
Loss from operations		(20,309	)		(20,123	)		(186	)
Other expense, net		(1,157	)		(546	)		(611	)
Net loss	$	(21,466	)	$	(20,669	)	$	(797	)

Revenues

During the nine months ended September 30, 2022, and 2021, the Company sold MSC’s to one third-party and recognized $277,000 and $18,000, respectively, of revenues.

General and Administrative

General and administrative expenses were approximately $6.9 million during the three months ended September 30, 2022, compared to approximately $6.7 million during the nine months ended September 30, 2021. The increase in general and administrative expenses is largely due to higher compensation, including stock-based compensation ($1.4 million higher during the nine months ended September 30, 2022), partially offset by lower consulting expense ($1.4 million lower during the nine months ended September 30, 2022).

Research and Development

Research and development expenses were approximately $13.7 million during the nine months ended September 30, 2022, compared to approximately $13.5 million during the nine months ended September 30, 2021.   The increase in research and development expenses during the nine months ending September 30, 2022 compared to the nine months ending September 30, 2021 is largely due to additional amounts incurred related to the Company’s Alzheimer’s and mild cognitive impairment clinical trials ($1.2 million higher), higher compensation expense, including stock-based compensation ($1.6 million increase), partially offset by incurring less costs in connection with the Company’s terminated COVID-19 clinical trial ($2.3 million decrease).

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Other Income (Expense)

The Company’s other expense is higher in 2022 due to the Company incurring interest expense from a loan the Company obtained in June 2021.

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 $21.5 million and $20.7 million for the nine months ended September 30, 2022 and 2021, respectively. Net cash used in operating activities was $17.0 million and $18.7 million for the nine months ended September 30, 2022 and 2021, respectively. Since inception, we have funded our operations primarily with proceeds from the sales of our common stock. As of September 30, 2022, we had cash and cash equivalents of approximately $57.4 million. We anticipate that operating losses and net cash used in operating activities will increase over the next few years as we advance our products under development.

Our primary uses of capital are, and we expect will continue to be, third-party clinical and preclinical research and development services, compensation and related expenses, professional fees, 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 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, 2022, the cash balance held by our foreign subsidiaries with currencies other than the United States dollar was approximately $0.3 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 and other expenses. In addition, the Sarbanes-Oxley Act of 2002, as well as rules adopted by the SEC and The Nasdaq Stock Market, require public companies to implement specified corporate governance practices that were inapplicable to us as a 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.

As of September 30, 2022, the Company had an accumulated deficit of $85.2 million and working capital of $59.8 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 associated 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, 2022, we had cash and cash equivalents of approximately $57.4 million. We believe our cash and cash equivalents will be sufficient to fund our operations 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, 2022. 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 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 will be available to us, or if available that such proposed funding will be on terms that are acceptable to us. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.

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Common Stock – Issuance to Directors and Officers

During the nine months ended September 30, 2022, certain directors and officers of the Company purchased 82,900 shares of the Company’s common stock for $0.7 million.

ATM Sales Agreement

During the nine months ended September 30, 2021, we issued and sold 1,439,480 shares of common stock at an average price of $20.17 per share under the 2020 ATM program. The aggregate net proceeds were approximately $28.4 million after BTIG’s commission and other offering expenses.

During March 2021, the Company entered into the 2021 ATM program with BTIG, as sales agent, to establish an ATM offering program of up to $45 million of common stock. The Company had no sales of common stock during the nine months ended September 30, 2021 under the 2021 ATM program. During July 2021, the Company sold 713,192 shares at an average price per share of $21.73 for net proceeds of approximately $15.0 million under the 2021 ATM program.

Cash Flows

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

	Nine Months Ended September 30,
(in thousands)	2022			2021
Net cash and cash equivalents (used in) provided by:
Operating activities	$	(16,991	)	$	(18,724	)
Investing activities		-			(15,000	)
Financing activities		729			96,357
Change in cash and cash equivalents		(16,262	)		62,633
Impact on cash from foreign currency translation		(1,143	)		(129	)
Cash and cash equivalents, beginning of period		74,810			21,967
Cash and cash equivalents, end of period	$	57,405		$	84,471

Operating Activities

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

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.

Operating activities used approximately $18.7 million of cash during the nine months ended September 30, 2021, resulting from our loss of $20.7 million and changes in our net operating assets and liabilities of $1.4 million, partially offset by non-cash stock-based compensation of $3.3 million. The change in our net operating assets and liabilities was mainly due to an increase in prepaid expenses of approximately $1.1 million, and an increase in research and development tax credit receivable of $3.3 million, partially offset by an increase in accounts payable and accrued liabilities of $2.7 million and an increase in deferred liabilities of approximately $0.4 million. 

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Investing Activities

During the nine months ended September 30, 2021, the Company paid Xencor $15.0 million to settle an option to acquire 10% of the Company’s common stock on a fully diluted basis which was issued to acquire the Company’s acquired in-process research and development intangible asset.

Financing Activities

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.

During the nine months ended September 30, 2021, the Company sold 1,439,480 shares of its common stock under its 2020 ATM program for net proceeds of approximately $28.4 million.

During the nine months ended September 30, 2021, the Company sold 713,192 shares of its common stock under the 2021 ATM program for net proceeds of approximately $14.9 million.

During July 2021, the Company completed a registered direct offering whereby the Company sold 1,818,182 shares of its common stock to investors for net proceeds of $36.9 million.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our unaudited consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. Actual results may differ from these estimates. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and there have been no material changes during the nine months ended September 30, 2022.

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).

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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

Not required for smaller reporting companies.

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.

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).

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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 2, 2022	By:	/s/ Raymond J. Tesi
		Raymond J. Tesi
		Chief Executive Officer (Principal Executive Officer)

Date: November 2, 2022	By:	/s/ David J. Moss
		David J. Moss
		Chief Financial Officer, Treasurer, Secretary (Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

Certifications

I, Raymond J. Tesi, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of INmune Bio Inc.
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2022

/s/ Raymond J. Tesi

Raymond J. Tesi

Chief Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certifications

I, David J. Moss, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of INmune Bio Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2022

/s/ David J. Moss

David J. Moss

Chief Financial Officer
(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of INmune Bio Inc.  (the “Company”) on Form 10-Q for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond J. Tesi, Chief Executive Officer of the Company, certify to my knowledge and in my capacity, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. 

Dated: November 2, 2022

/s/ Raymond J. Tesi

Raymond J. Tesi

Chief Executive Officer
(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of INmune Bio Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Moss, Chief Financial Officer of the Company, certify to my knowledge and in my capacity, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. 

Dated: November 2, 2022

/s/ David J. Moss

David J. Moss

Chief Financial Officer
(Principal Financial Officer)

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2022	Nov. 02, 2022
Document Information Line Items
Entity Registrant Name	INMUNE BIO INC.
Trading Symbol	INMB
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		17,945,995
Amendment Flag	false
Entity Central Index Key	0001711754
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Sep. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Shell Company	false
Entity Ex Transition Period	false
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	47-5205835
Entity Address, Address Line One	225 NE Mizner Blvd
Entity Address, Address Line Two	Suite 640
Entity Address, City or Town	Boca Raton
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33432
City Area Code	(858)
Local Phone Number	964-3720
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock, par value $0.001 per share
Security Exchange Name	NASDAQ
Entity File Number	001-38793

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
CURRENT ASSETS
Cash and cash equivalents	$ 57,405	$ 74,810
Research and development tax credit receivable	4,417	4,913
Other tax receivable	114	591
Prepaid expenses	4,599	2,278
Prepaid expenses – related party	123	14
TOTAL CURRENT ASSETS	66,658	82,606
Operating lease – right of use asset	529	726
Other assets	99	99
Acquired in-process research and development intangible assets	16,514	16,514
TOTAL ASSETS	83,800	99,945
CURRENT LIABILITIES
Accounts payable and accrued liabilities	3,465	3,733
Accounts payable and accrued liabilities – related parties	8	80
Deferred liabilities	778	474
Current portion of long-term debt	2,500
Operating lease, current liabilities	144	72
TOTAL CURRENT LIABILITIES	6,895	4,359
Long-term debt, net	12,129	14,458
Long-term operating lease liabilities	607	704
Accrued liability – long-term	463	199
TOTAL LIABILITIES	20,094	19,720
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding
Common stock, $0.001 par value, 200,000,000 shares authorized, 17,945,995 and 17,843,303 shares issued and outstanding, respectively	18	18
Additional paid-in capital	150,011	143,921
Accumulated other comprehensive (loss) income	(1,142)	1
Accumulated deficit	(85,181)	(63,715)
TOTAL STOCKHOLDERS’ EQUITY	63,706	80,225
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 83,800	$ 99,945

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares	Sep. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Preferred stock par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	17,945,995	17,843,303
Common stock, shares outstanding	17,945,995	17,843,303

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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
REVENUE	$ 98	$ 14	$ 277	$ 18
OPERATING EXPENSES
General and administrative	2,382	2,515	6,929	6,666
Research and development	5,159	6,520	13,657	13,475
Total operating expenses	7,541	9,035	20,586	20,141
LOSS FROM OPERATIONS	(7,443)	(9,021)	(20,309)	(20,123)
OTHER EXPENSE, NET	(282)	(437)	(1,157)	(546)
NET LOSS	$ (7,725)	$ (9,458)	$ (21,466)	$ (20,669)
Net loss per common share – basic and diluted (in Dollars per share)	$ (0.43)	$ (0.55)	$ (1.2)	$ (1.33)
Weighted average common shares outstanding - basic and diluted (in Shares)	17,945,995	17,329,379	17,921,036	15,553,344
COMPREHENSIVE LOSS
Net loss	$ (7,725)	$ (9,458)	$ (21,466)	$ (20,669)
Other comprehensive loss - foreign currency translation	(441)	(68)	(1,143)	(129)
Total comprehensive loss	$ (8,166)	$ (9,526)	$ (22,609)	$ (20,798)

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Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parentheticals) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
Net loss per common share – basic and diluted	$ (0.43)	$ (0.55)	$ (1.20)	$ (1.33)
Weighted average common shares outstanding - basic and diluted	17,945,995	17,329,379	17,921,036	15,553,344

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Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total
Balance at Dec. 31, 2020	$ 13	$ 72,105	$ 11	$ (33,375)	$ 38,754
Balance (in Shares) at Dec. 31, 2020	13,481,283
Issuance of common stock for cash	$ 2	28,444			28,446
Issuance of common stock for cash (in Shares)	1,439,480
Exercise of warrants for cash		18			18
Exercise of warrants for cash (in Shares)	11,875
Stock-based compensation		899			899
Gain (loss) on foreign currency translation			1		1
Net loss				(4,556)	(4,556)
Balance at Mar. 31, 2021	$ 15	101,466	12	(37,931)	63,562
Balance (in Shares) at Mar. 31, 2021	14,932,638
Stock-based compensation		769			769
Settlement of Xencor warrant for cash and common stock		(15,000)			(15,000)
Settlement of Xencor warrant for cash and common stock (in Shares)	192,533
Warrants issued to lenders as debt inducement		619			619
Gain (loss) on foreign currency translation			(62)		(62)
Net loss				(6,655)	(6,655)
Balance at Jun. 30, 2021	$ 15	87,854	(50)	(44,586)	43,233
Balance (in Shares) at Jun. 30, 2021	15,125,171
Issuance of common stock for cash	$ 3	51,804			51,807
Issuance of common stock for cash (in Shares)	2,531,374
Cashless exercise of warrants (in Shares)	3,758
Exercise of stock options		1,135			1,135
Exercise of stock options (in Shares)	183,000
Stock-based compensation		1,606			1,606
Gain (loss) on foreign currency translation			(68)		(68)
Net loss				(9,458)	(9,458)
Balance at Sep. 30, 2021	$ 18	142,399	(118)	(54,044)	88,255
Balance (in Shares) at Sep. 30, 2021	17,843,303
Balance at Dec. 31, 2021	$ 18	143,921	1	(63,715)	80,225
Balance (in Shares) at Dec. 31, 2021	17,843,303
Issuance of common stock for cash		699			699
Issuance of common stock for cash (in Shares)	82,900
Exercise of warrants for cash		30			30
Exercise of warrants for cash (in Shares)	19,792
Stock-based compensation		1,536			1,536
Gain (loss) on foreign currency translation			55		55
Net loss				(6,903)	(6,903)
Balance at Mar. 31, 2022	$ 18	146,186	56	(70,618)	75,642
Balance (in Shares) at Mar. 31, 2022	17,945,995
Stock-based compensation		1,886			1,886
Gain (loss) on foreign currency translation			(757)		(757)
Net loss				(6,838)	(6,838)
Balance at Jun. 30, 2022	$ 18	148,072	(701)	(77,456)	69,933
Balance (in Shares) at Jun. 30, 2022	17,945,995
Stock-based compensation		1,939			1,939
Gain (loss) on foreign currency translation			(441)		(441)
Net loss				(7,725)	(7,725)
Balance at Sep. 30, 2022	$ 18	$ 150,011	$ (1,142)	$ (85,181)	$ 63,706
Balance (in Shares) at Sep. 30, 2022	17,945,995

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (21,466)	$ (20,669)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	5,361	3,274
Accretion of debt discount	171	69
Impairment of operating lease – right of use asset	89
Changes in operating assets and liabilities:
Research and development tax credit receivable	496	(3,272)
Other tax receivable	477	(75)
Prepaid expenses	(2,321)	(1,080)
Prepaid expenses – related party	(109)	(14)
Other assets		(99)
Accounts payable and accrued liabilities	(268)	2,703
Accounts payable and accrued liabilities – related parties	(72)	(24)
Deferred liabilities	304	351
Accrued liability – long-term	264	111
Operating lease liabilities	83	1
Net cash used in operating activities	(16,991)	(18,724)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid to Xencor to settle warrant for acquired research and development intangible assets		(15,000)
Net cash used in investing activities		(15,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock	699	80,253
Net proceeds from exercise of stock options		1,135
Net proceeds from the exercise of warrants	30	18
Net proceeds from the issuance of debt		14,951
Net cash provided by financing activities	729	96,357
Impact on cash from foreign currency translation	(1,143)	(129)
NET (DECREASE) INCREASE IN CASH	(17,405)	62,504
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	74,810	21,967
CASH AND CASH EQUIVALENTS AT END OF PERIOD	57,405	84,471
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes
Cash paid for interest expense	962	265
NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued to Xencor to settle warrant issued for acquired research and development intangible assets		3,300
Warrants issued as debt inducement		$ 619

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Organization and Description of Business

9 Months Ended

Sep. 30, 2022

Organization and Basis of Presentation [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

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 (XPro1595, XPro™, pegipanermin) 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). 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.

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Liquidity

9 Months Ended

Sep. 30, 2022

Insurance Loss Reserves [Abstract]

LIQUIDITY

NOTE 2 – LIQUIDITY

As of September 30, 2022, the Company had an accumulated deficit of $85,181,000 and experienced losses since its inception. The Company had cash, cash equivalents of $57,405,000 as of September 30, 2022 and has not generated positive cash flows from operations. To date, the Company has funded its operations primarily through the sale of its common stock. Although it is difficult to predict the Company’s liquidity requirements, as of September 30, 2022, 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, 2022.

Management expects operating losses to continue for the foreseeable future. There can be no assurance 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 unable to secure such financing when needed, or if available, such financings may be under terms that are unfavorable to the Company or the current stockholders. If the Company is unable to raise additional funds when needed, it may be required to delay, reduce the scope of, or eliminate development programs, which may adversely affect its business and operations.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 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 September 30, 2022 and 2021, the Company had potentially issuable shares as follows:

	September 30,
	2022		2021
Stock options		4,851,000		4,082,000
Warrants		74,074		93,866
Total		4,925,074		4,175,866

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 September 30, 2022, through the date which the financial statements are issued.

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Research and Development Activity

9 Months Ended

Sep. 30, 2022

Research and Development [Abstract]

RESEARCH AND DEVELOPMENT ACTIVITY

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, 2022 and December 31, 2021, the Company recorded a research and development tax credit receivable in the amount of $2,566,000 and $3,319,000, respectively. The reduction in the research and development tax credit receivable is primarily due to a stronger US dollar. During the nine months ended September 30, 2022 and 2021, the Company received $0 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, 2022 and December 31, 2021, the Company recorded a research and development tax credit receivable of $1,851,000 and $1,594,000, respectively, for R&D expenses incurred in Australia. During the nine months ended September 30, 2022 and 2021, the Company received $0 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. As part of the purchase price for entering into the Xencor License Agreement, the Company issued Xencor fully vested warrants to purchase an additional number of shares of common stock equal to 10% of the fully diluted company shares immediately following such purchase. On June 10, 2021, the Company and Xencor entered into an Option Cancellation Agreement whereby Xencor terminated its warrant to purchase 10% of the fully diluted shares of the Company in exchange for a cash payment of $15,000,000 and 192,533 shares of the Company’s common stock. The Company filed a registration statement covering the resale of these shares during September 2021 and agreed to keep the registration statement continuously effective until all such shares cease to be outstanding or otherwise cease to be registrable securities as defined in the Option Cancellation Agreement.

The Company also agreed to pay Xencor a 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. In addition, the Company agreed to pay Xencor a percentage of any sublicensing revenue that it receives.

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.

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, the parties amended the agreement under which the Company was required achieve milestones pursuant to the agreement. On October 30, 2020, the parties executed an additional amendment to the agreement under which the Company is required to achieve the following milestones:

Initiation of Phase II clinical trials or equivalent by October 29, 2023

Initiation of Phase III clinical trials or equivalent by October 29, 2025

Filing of NDA or equivalent by October 29, 2026 or equivalent

If the Company doesn’t achieve the above milestones, it is required to negotiate in good faith with Immune Ventures to determine how it can either remedy the failure or achieve an alternate development. If the Company fails to make any required efforts, or if the efforts do not remedy the situation within 60 days of written notice by Immune Ventures, then Immune Ventures may provide notice to terminate the license or convert it to a non-exclusive license.

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, 2022.

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.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 5 – FAIR VALUE MEASUREMENTS

The following table presents the hierarchy for assets and liabilities measured at fair value on a recurring basis:

(in thousands)	Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2022:
Cash equivalents
Money market fund	$	56,177	$	56,177	$	-	$	-
Total cash equivalents	$	56,177	$	56,177	$	-	$	-

The Company had no assets and liabilities measured at fair value on a recurring basis as of December 31, 2021.

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Lease

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

LEASE

NOTE 6 – LEASE 

In May 2019, the Company signed a sublease agreement with a related party for office space in La Jolla, California, which served as the former headquarters of the Company. The lease has a 61-month term, which corresponds to the lease term of the lessor. The lessor is CTI Clinical Trial & Consulting Services (“CTI”). CTI is majority-owned by a member of the Company’s Board of Directors. During 2021, the Company moved its corporate headquarters to Boca Raton, Florida. The Company intended to sublease its office space in La Jolla but was unable to find a tenant. The Company recorded a right-of-use asset impairment of $89,000 within general and administrative expenses during the nine months ended September 30, 2022 on its La Jolla lease.

In September 2021, the Company signed a lease 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.

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

(in thousands, except years and rate)	September 30, 2022			December 31, 2021
Right-of-use asset (La Jolla lease)	$	-		$	118
Right-of-use asset (Boca Raton lease)		529			608
Total	$	529		$	726
Operating lease, current liability (La Jolla lease)	$	93		$	52
Operating lease, current liability (Boca Raton lease)		51			20
Total		144			72
Long-term operating lease liability (La Jolla lease)		52			84
Long-term operating lease liability (Boca Raton lease)		555			620
		607			704
Total lease liability	$	751		$	776
Weighted-average remaining lease term		3.9 years			4.6 years
Weighted-average discount rate		11.68	%		11.70	%

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Related Party Transactions

9 Months Ended

Sep. 30, 2022

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 7 – RELATED PARTY TRANSACTIONS

UCL

At September 30, 2022 and December 31, 2021, the Company owed UCL Consultants Limited (“UCL”) $8,000 and $10,000, respectively, in connection with medical research performed on behalf of the Company. During the nine months ended September 30, 2022 and 2021, the Company paid UCL $486,000 and $176,000, respectively, for medical research performed on behalf of the Company. At September 30, 2022 and December 31, 2021, the Company recorded $123,000 and $0, respectively, of prepaid expenses – related party for payments made to UCL in advance of services to be provided. 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, 2022 and December 31, 2021, the Company owed AmplifyBio $0 and $70,000, 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 months ended September 30, 2022 and 2021, the Company paid AmplifyBio $145,000 and $0, respectively, for pre-clinical research performed on behalf of the Company.

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Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

DEBT

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., together (the “Lenders”).  The Term Loan provides 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.  The Term Loan also provides for the Company to request an additional $5.0 million term loan from the Lenders, which may be granted or denied at the sole discretion of the Lenders.

The term loan and debt discount are as follows as of September 30, 2022:

(in thousands)
Term Loan	$	15,000
Less: debt discount and financing costs, net		(371	)
Less: current portion		(2,500	)
Long-term debt	$	12,129

For the nine months ended September 30, 2022, the Company recognized interest expense of $1,424,000 related to the Term Loan. 

The Company is required to make interest only payments monthly until July 1, 2023 at which time the Company shall 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, 2022, the interest rate was 10.75%.

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 loans in full, subject to a prepayment premium of (i) 2% of the original principal amount borrowed for any prepayment after the first anniversary and on or before the second anniversary of the loan or (ii) 1% of the original principal amount borrowed for any prepayment after the second anniversary of the loan but before the maturity date.

The expected repayment of the $15.0 million Term loan principal is as follows as of September 30, 2022:

(in thousands, except years)
2022	$	-
2023		5,833
2024		9,167
Total debt		15,000

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 was in compliance with its debt covenants at September 30, 2022.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Stockholders' Equity Note [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 9 – STOCKHOLDERS’ EQUITY

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.

Common Stock – At the Market Offering

During the nine months ended September 30, 2021, the Company sold 1,439,480 shares of its common stock at an average price of $20.17 per share under the 2020 ATM program. The aggregate net proceeds were approximately $28.4 million after BTIG’s commission and other offering expenses. 

During the nine months ended September 30, 2021, the Company sold 713,192 shares of its common stock at an average price of $21.73 per share under the 2021 ATM program. The aggregate net proceeds were approximately $14.9 million after BTIG’s commission and other offering expenses. 

Registered Direct Offering

During July 2021, the Company completed a registered direct offering whereby the Company sold 1,818,182 shares of its common stock to investors for net proceeds of $36.9 million.

Issuance of shares to Xencor

On June 10, 2021, the Company and Xencor entered into an Option Cancellation Agreement whereby the Company issued 192,533 shares of its common stock to Xencor (See Note 4).

Stock options

During the nine months ended September 30, 2022, the Company granted certain employees and directors options to purchase 819,000 shares of its common stock pursuant to the 2021 Incentive Stock Plans. The stock options had a fair value of approximately $5.5 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 1.60% - 3.06% based on the applicable US Treasury bill rate (2) expected life of 6.0 – 10.0 years, (3) expected volatility of approximately 105% - 108% based on the trading history of similar companies, and (4) zero expected dividends.

The following table summarizes stock option activity during the nine months ended September 30, 2022:

(in thousands, except share and per share amounts)	Number of  Shares			Weighted- average  Exercise Price		Weighted- average  Remaining Contractual Term (years)		Aggregate  Intrinsic  Value
Outstanding at January 1, 2022		4,097,000		$	8.67		7.21	$	14,414
Options granted		819,000		$	8.01		-		-
Options exercised		-		$	-		-		-
Options cancelled		(65,000	)	$	11.12		-		-
Outstanding at September 30, 2022		4,851,000		$	8.62		7.22	$	3,916
Exercisable at September 30, 2022		3,438,590		$	7.24		6.48	$	3,643

During the nine months ended September 30, 2022 and 2021, the Company recognized stock-based compensation expense of approximately $5.4 million and $3.3 million, respectively, related to the vesting of stock options. As of September 30, 2022, there was approximately $13.0 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period of 2.17 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, 2022, 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, 2022, 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 which were issued in 2017 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 three and nine months ended September 30, 2022 and 2021 respectively:

(in thousands)	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Research and development	$	725	$	705	$	1,971	$	1,090
General and administrative		1,214		901		3,390		2,184
Total	$	1,939	$	1,606	$	5,361	$	3,274

Shareholder Rights Agreement

On December 30, 2020, the Board of Directors (the “Board”) of the Company approved and adopted a Rights Agreement, dated as of December 30, 2020, by and between the Company and VStock Transfer, LLC, as rights agent, pursuant to which the Board declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share of the Company’s common stock held by stockholders as of the close of business on January 11, 2021. When exercisable, each right initially would represent the right to purchase from the Company one one-thousandth of a share of a newly designated series of preferred stock, Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company, at an exercise price of $300.00 per one one-thousandth of a Series A Junior Participating Preferred Share, subject to adjustment. Subject to various exceptions, the Rights become exercisable in the event any person (excluding certain exempted or grandfathered persons) becomes the beneficial owner of twenty percent or more of the Company’s common stock without the approval of the Board. The Rights Agreement was scheduled to expire on December 30, 2021 but was extended until December 30, 2022 by the Board.

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Collaborative Agreements

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

COLLABORATIVE AGREEMENTS

NOTE 10 – COLLABORATIVE AGREEMENTS

During 2020, the Company was awarded a $0.5 million grant from the Amyotrophic Lateral Sclerosis (“ALS”) Association to fund a study of the efficacy of XPro1595 to reverse ALS in vitro and to fund a study of the efficacy of XPro1595 to protect against ALS model phenotypes in vivo. During the nine months ended September 30, 2022 and 2021, the Company received $0.0 million and $0.1 million, respectively, of cash proceeds pursuant to this grant which the Company recorded as deferred liabilities. The Company offsets costs incurred related to this research against the grants. As of September 30, 2022 and December 31, 2021, the Company recorded approximately $0.1 million and $0.3 million, respectively, as deferred liabilities in the consolidated balance sheet related to the ALS grant.

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, 2022, the Company has not received any proceeds pursuant to this grant. 

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Commitments

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS

NOTE 11 – COMMITMENTS

Lease

In May 2019, the Company signed a sublease agreement with a related party for office space in La Jolla, California. The lease has a 61-month term, which corresponds to the lease term of the lessor. The lessor is CTI.

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)
2022	$	76
2023		221
2024		219
2025		192
2026		198
Thereafter		51
Total lease payments		957
Less: imputed interest		(206	)
Present value of future lease payments		751
Less: operating lease, current liabilities		(144	)
Long-term operating lease liabilities	$	607

During the nine months ended September 30, 2022 and 2021, the Company recognized $162,000 and $45,000, 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.

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Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation

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

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

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

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

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

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

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 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, 2022 and 2021, the Company had potentially issuable shares as follows:

	September 30,
	2022		2021
Stock options		4,851,000		4,082,000
Warrants		74,074		93,866
Total		4,925,074		4,175,866

Revenue Recognition

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

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

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

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

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

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

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date of September 30, 2022, through the date which the financial statements are issued.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Schedule of potentially issuable shares

	September 30,
	2022		2021
Stock options		4,851,000		4,082,000
Warrants		74,074		93,866
Total		4,925,074		4,175,866

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Research and Development Activity (Tables)

9 Months Ended

Sep. 30, 2022

Research and Development [Abstract]

Schedule of milestone payments in consideration for the patent rights

(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

Schedule of consideration of annual maintenance fees under the PITT agreement

(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

Schedule of licensee is required to make milestone payments

(in thousands)
Each Phase I initiation	$	50
Each Phase III initiation	$	500
First commercial sale of product making use of licensed technology	$	1,250

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of hierarchy for assets and liabilities measured at fair value

(in thousands)	Total		Quoted Price in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2022:
Cash equivalents
Money market fund	$	56,177	$	56,177	$	-	$	-
Total cash equivalents	$	56,177	$	56,177	$	-	$	-

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Lease (Tables)

9 Months Ended

Sep. 30, 2022

Leases [Abstract]

Schedule of right-of-use assets and liabilities

(in thousands, except years and rate)	September 30, 2022			December 31, 2021
Right-of-use asset (La Jolla lease)	$	-		$	118
Right-of-use asset (Boca Raton lease)		529			608
Total	$	529		$	726
Operating lease, current liability (La Jolla lease)	$	93		$	52
Operating lease, current liability (Boca Raton lease)		51			20
Total		144			72
Long-term operating lease liability (La Jolla lease)		52			84
Long-term operating lease liability (Boca Raton lease)		555			620
		607			704
Total lease liability	$	751		$	776
Weighted-average remaining lease term		3.9 years			4.6 years
Weighted-average discount rate		11.68	%		11.70	%

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Debt (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Schedule of term loan and debt discount

(in thousands)
Term Loan	$	15,000
Less: debt discount and financing costs, net		(371	)
Less: current portion		(2,500	)
Long-term debt	$	12,129

Schedule of repayment term loan principal

(in thousands, except years)
2022	$	-
2023		5,833
2024		9,167
Total debt		15,000

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2022

Stockholders' Equity Note [Abstract]

Schedule of stock option activity

(in thousands, except share and per share amounts)	Number of  Shares			Weighted- average  Exercise Price		Weighted- average  Remaining Contractual Term (years)		Aggregate  Intrinsic  Value
Outstanding at January 1, 2022		4,097,000		$	8.67		7.21	$	14,414
Options granted		819,000		$	8.01		-		-
Options exercised		-		$	-		-		-
Options cancelled		(65,000	)	$	11.12		-		-
Outstanding at September 30, 2022		4,851,000		$	8.62		7.22	$	3,916
Exercisable at September 30, 2022		3,438,590		$	7.24		6.48	$	3,643

Schedule of stock-based compensation expense

(in thousands)	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Research and development	$	725	$	705	$	1,971	$	1,090
General and administrative		1,214		901		3,390		2,184
Total	$	1,939	$	1,606	$	5,361	$	3,274

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Commitments (Tables)

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of future minimum payments pursuant leases

(in thousands, except years)
2022	$	76
2023		221
2024		219
2025		192
2026		198
Thereafter		51
Total lease payments		957
Less: imputed interest		(206	)
Present value of future lease payments		751
Less: operating lease, current liabilities		(144	)
Long-term operating lease liabilities	$	607

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Liquidity (Details)	Sep. 30, 2022 USD ($)
Insurance Loss Reserves [Abstract]
Accumulated deficit	$ 85,181,000
Cash equivalents	$ 57,405,000

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Summary of Significant Accounting Policies (Details)	9 Months Ended
	Sep. 30, 2022
Accounting Policies [Abstract]
Original maturity date	3 months

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Summary of Significant Accounting Policies (Details) - Schedule of potentially issuable shares - shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Summary of Significant Accounting Policies (Details) - Schedule of potentially issuable shares [Line Items]
Total	4,925,074	4,175,866
Warrants [Member]
Summary of Significant Accounting Policies (Details) - Schedule of potentially issuable shares [Line Items]
Total	74,074	93,866
Stock Options [Member]
Summary of Significant Accounting Policies (Details) - Schedule of potentially issuable shares [Line Items]
Total	4,851,000	4,082,000

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Research and Development Activity (Details) - USD ($)		9 Months Ended		12 Months Ended
	Jun. 10, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Research and Development Activity (Details) [Line Items]
Cash payment	$ 15,000,000
Shares issued (in Shares)	192,533
Xencor, Inc. License Agreement [Member]
Research and Development Activity (Details) [Line Items]
Common stock equal to fully diluted shares to purchase with fair value		10.00%
Intangible assets	10.00%
Immune Ventures [Member]
Research and Development Activity (Details) [Line Items]
Percentage of licensor royalty patent grant		1.00%
UNITED KINGDOM [Member] | Research and Development Expense [Member]
Research and Development Activity (Details) [Line Items]
Research and development tax credit receivable		$ 2,566,000		$ 3,319,000
Reimbursements of research and development tax credit		0	$ 0
Australia [Member]
Research and Development Activity (Details) [Line Items]
Reimbursements of research and development tax credit		0	$ 0
Australia [Member] | Research and Development Expense [Member]
Research and Development Activity (Details) [Line Items]
Research and development tax credit receivable		$ 1,851,000		$ 1,594,000
University of Pittsburg License Agreement [Member]
Research and Development Activity (Details) [Line Items]
Percentage of net sales to pay royalties		2.50%
Agreement expiry period, description		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).

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Research and Development Activity (Details) - Schedule of milestone payments in consideration for the patent rights $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Each Phase I initiation [Member]
Research and Development Activity (Details) - Schedule of milestone payments in consideration for the patent rights [Line Items]
Payment method of milestone payments	$ 25
Each Phase II initiation [Member]
Research and Development Activity (Details) - Schedule of milestone payments in consideration for the patent rights [Line Items]
Payment method of milestone payments	250
Each Phase III initiation [Member]
Research and Development Activity (Details) - Schedule of milestone payments in consideration for the patent rights [Line Items]
Payment method of milestone payments	350
Each NDA/EMA filing [Member]
Research and Development Activity (Details) - Schedule of milestone payments in consideration for the patent rights [Line Items]
Payment method of milestone payments	1,000
Each NDA/EMA awarded [Member]
Research and Development Activity (Details) - Schedule of milestone payments in consideration for the patent rights [Line Items]
Payment method of milestone payments	$ 9,000

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Research and Development Activity (Details) - Schedule of consideration of annual maintenance fees under the PITT agreement $ in Thousands	Sep. 30, 2022 USD ($)
June 26 of each year 2021-2022 [Member]
Research and Development Activity (Details) - Schedule of consideration of annual maintenance fees under the PITT agreement [Line Items]
Annual maintenance fees until first commercial sale	$ 5
June 26 of each year 2023-2024 [Member]
Research and Development Activity (Details) - Schedule of consideration of annual maintenance fees under the PITT agreement [Line Items]
Annual maintenance fees until first commercial sale	10
June 26 of each year 2025 until first commercial sale [Member]
Research and Development Activity (Details) - Schedule of consideration of annual maintenance fees under the PITT agreement [Line Items]
Annual maintenance fees until first commercial sale	$ 25

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Research and Development Activity (Details) - Schedule of licensee is required to make milestone payments $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Each Phase I initiation [Member]
Research and Development Activity (Details) - Schedule of licensee is required to make milestone payments [Line Items]
Payment method of milestone payments	$ 50
Each Phase III initiation [Member]
Research and Development Activity (Details) - Schedule of licensee is required to make milestone payments [Line Items]
Payment method of milestone payments	500
First commercial sale of product making use of licensed technology [Member]
Research and Development Activity (Details) - Schedule of licensee is required to make milestone payments [Line Items]
Payment method of milestone payments	$ 1,250

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Fair Value Measurements (Details) - Schedule of hierarchy for assets and liabilities measured at fair value $ in Thousands	Sep. 30, 2022 USD ($)
Cash equivalents
Money market fund	$ 56,177
Total cash equivalents	56,177
Quoted Price in Active Market (Level 1) [Member]
Cash equivalents
Money market fund	56,177
Total cash equivalents	56,177
Significant Other Observable Inputs (Level 2) [Member]
Cash equivalents
Money market fund
Total cash equivalents
Significant Unobservable Inputs (Level 3) [Member]
Cash equivalents
Money market fund
Total cash equivalents

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Lease (Details) - USD ($)	Sep. 30, 2022	Dec. 31, 2021	May 31, 2019
Leases (Details) [Line Items]
Lease term		64 months	61 months
Right-of-use asset impairment (in Dollars)	$ 529,000	$ 726,000
La Jolla lease [Member]
Leases (Details) [Line Items]
Right-of-use asset impairment (in Dollars)	$ 89,000

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Lease (Details) - Schedule of right-of-use assets and liabilities - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Lease (Details) - Schedule of right-of-use assets and liabilities [Line Items]
Right-of-use asset	$ 529	$ 726
Operating lease, current liability	144	72
Long-term operating lease liability	607	704
Total lease liability	$ 751	$ 776
Weighted-average remaining lease term	3 years 10 months 24 days	4 years 7 months 6 days
Weighted-average discount rate	11.68%	11.70%
La Jolla lease [Member]
Lease (Details) - Schedule of right-of-use assets and liabilities [Line Items]
Right-of-use asset		$ 118
Operating lease, current liability	$ 93	52
Long-term operating lease liability	52	84
Boca Raton lease [Member]
Lease (Details) - Schedule of right-of-use assets and liabilities [Line Items]
Right-of-use asset	529	608
Operating lease, current liability	51	20
Long-term operating lease liability	$ 555	$ 620

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Related Party Transactions (Details) - USD ($)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Related Party Transactions (Details) [Line Items]
Prepaid expenses-related party	$ 123,000		$ 0
UCL Consultants Limited [Member]
Related Party Transactions (Details) [Line Items]
Amount owed	8,000		10,000
Payment for medical research performed expense	486,000	$ 176,000
CTI [Member]
Related Party Transactions (Details) [Line Items]
Amount owed	0		$ 70,000
Pre-clinical research performed expense	$ 145,000	$ 0

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Debt (Details) - USD ($)	9 Months Ended
	Sep. 30, 2022	Jun. 10, 2021
Debt (Details) [Line Items]
Recognized interest expense (in Dollars)	$ 1,424,000
Description of loan repayment in terms	The Company is required to make interest only payments monthly until July 1, 2023 at which time the Company shall make interest and principal payments monthly through the maturity date of January 1, 2025.
Interest rate	10.75%
Original principal amount borrowed for prepayment percentage before second loan	2.00%
Original principal amount borrowed for prepayment percentage before maturity date	1.00%
Term loan repayment (in Dollars)	$ 15,000,000
Term loan from lenders (in Dollars)		$ 15,000,000
Term loan additional from lenders (in Dollars)		$ 5,000,000
The Wall Street Journal Plus [Member]
Debt (Details) [Line Items]
Prime rate, percentage	4.50%
Interest rate	7.75%
Amount borrowed, percentage	6.50%

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Debt (Details) - Schedule of term loan and debt discount $ in Thousands	Sep. 30, 2022 USD ($)
Schedule Of Term Loan And Debt Discount Abstract
Term Loan	$ 15,000
Less: debt discount and financing costs, net	(371)
Less: current portion	(2,500)
Long-term debt	$ 12,129

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Debt (Details) - Schedule of repayment term loan principal $ in Thousands	Sep. 30, 2022 USD ($)
Schedule Of Repayment Term Loan Principal Abstract
2022
2023	5,833
2024	9,167
Total debt	$ 15,000

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Stockholders' Equity (Details) - USD ($)		1 Months Ended	9 Months Ended
	Jul. 01, 2021	Dec. 30, 2020	Sep. 30, 2022	Sep. 30, 2021	Jun. 10, 2021
Stockholders' Equity (Details) [Line Items]
Per share price (in Dollars per share)			$ 8.43
Gross proceeds			$ 699,000
Company shares (in Shares)	1,818,182
Net proceeds	$ 36,900,000
Shares issued (in Shares)					192,533
Aggregated fair value of stock options			$ 5,500,000
Expected dividends			0.00%
Stock-based compensation expense			$ 5,400,000	$ 3,300,000
Unrecognized compensation cost			$ 13,000,000
Weighted-average period			2 years 2 months 1 day
Warrants term			10 years
Exercise price (in Dollars per share)			$ 9.6
Intrinsic value of warrants			$ 0
Shareholder rights agreement, description		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.
Common Stock [Member]
Stockholders' Equity (Details) [Line Items]
Shares common stock (in Shares)			82,900
Warrant [Member]
Stockholders' Equity (Details) [Line Items]
Warrants outstanding			$ 45,386
Cash proceeds			$ 30,000
Minimum [Member]
Stockholders' Equity (Details) [Line Items]
Discount rate			1.60%
Expected life			6 years
Expected volatility rate			105.00%
Maximum [Member]
Stockholders' Equity (Details) [Line Items]
Discount rate			3.06%
Expected life			10 years
Expected volatility rate			108.00%
Warrant [Member]
Stockholders' Equity (Details) [Line Items]
Exercise price (in Dollars per share)			$ 14.05
Intrinsic value of warrants			$ 0
Warrants are outstanding (in Shares)			28,688
Warrants exercised (in Shares)			19,792
2020 ATM program [Member]
Stockholders' Equity (Details) [Line Items]
Common stock at market offering, description				the Company sold 1,439,480 shares of its common stock at an average price of $20.17 per share under the 2020 ATM program. The aggregate net proceeds were approximately $28.4 million after BTIG’s commission and other offering expenses.
2021 ATM program [Member]
Stockholders' Equity (Details) [Line Items]
Common stock at market offering, description				the Company sold 713,192 shares of its common stock at an average price of $21.73 per share under the 2021 ATM program. The aggregate net proceeds were approximately $14.9 million after BTIG’s commission and other offering expenses.
Employees and Directors [Member]
Stockholders' Equity (Details) [Line Items]
Purchase of shares (in Shares)			819,000

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Stockholders' Equity (Details) - Schedule of stock option activity $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($) $ / shares shares
Schedule Of Stock Option Activity Abstract
Number of shares, Outstanding, Beginning balance (in Shares) | shares	4,097,000
Weighted- average Exercise Price, Outstanding, Beginning balance	$ 8.67
Weighted-average Remaining Contractual Term (years), Outstanding, Beginning balance	7 years 2 months 15 days
Aggregate Intrinsic Value, Outstanding, Beginning balance (in Dollars) | $	$ 14,414
Number of shares, Options granted (in Shares) | shares	819,000
Weighted- average Exercise Price, Options granted	$ 8.01
Weighted- average Remaining Contractual Term (years), Options granted
Aggregate Intrinsic Value, Options granted
Number of shares, Options exercised (in Shares) | shares
Weighted- average Exercise Price, Options exercised
Weighted- average Remaining Contractual Term (years), Options exercised
Aggregate Intrinsic Value, Options exercised (in Dollars) | $
Number of shares, Options cancelled (in Shares) | shares	(65,000)
Weighted- average Exercise Price, Options cancelled	$ 11.12
Weighted- average Remaining Contractual Term (years), Options cancelled
Aggregate Intrinsic Value, Options cancelled (in Dollars) | $
Number of shares, Outstanding, Ending balance (in Shares) | shares	4,851,000
Weighted- average Exercise Price, Outstanding, Ending balance	$ 8.62
Weighted-average Remaining Contractual Term (years), Outstanding, Ending balance	7 years 2 months 19 days
Aggregate Intrinsic Value, Outstanding, Ending balance (in Dollars) | $	$ 3,916
Number of shares, Exercisable, Ending balance (in Shares) | shares	3,438,590
Weighted- average Exercise Price, Exercisable, Ending balance	$ 7.24
Weighted-average Remaining Contractual Term (years), Exercisable, Ending balance	6 years 5 months 23 days
Aggregate Intrinsic Value, Exercisable, Ending balance (in Dollars) | $	$ 3,643

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Stockholders' Equity (Details) - Schedule of stock-based compensation expense - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Stockholders' Equity (Details) - Schedule of stock-based compensation expense [Line Items]
Total	$ 1,939	$ 1,606	$ 5,361	$ 3,274
Research and development [Member]
Stockholders' Equity (Details) - Schedule of stock-based compensation expense [Line Items]
Total	725	705	1,971	1,090
General and administrative [Member]
Stockholders' Equity (Details) - Schedule of stock-based compensation expense [Line Items]
Total	$ 1,214	$ 901	$ 3,390	$ 2,184

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Collaborative Agreements (Details) - USD ($) $ in Millions	1 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Sep. 30, 2022	Dec. 31, 2021	Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Grand award, description	the Company was awarded a $0.5 million grant from the Amyotrophic Lateral Sclerosis (“ALS”) Association to fund a study of the efficacy of XPro1595 to reverse ALS in vitro and to fund a study of the efficacy of XPro1595 to protect against ALS model phenotypes in vivo.	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, 2022, the Company has not received any proceeds pursuant to this grant.
Grants received			$ 0.0		$ 0.1
Grants recorded approximately			$ 0.1	$ 0.3

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Commitments (Details) - USD ($)	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Commitments and Contingencies Disclosure [Abstract]
Operating lease expense	$ 162,000	$ 45,000

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Commitments (Details) - Schedule of future minimum payments pursuant leases - Commitments [Member] $ in Thousands	Sep. 30, 2022 USD ($)
Commitments (Details) - Schedule of future minimum payments pursuant leases [Line Items]
2022	$ 76
2023	221
2024	219
2025	192
2026	198
Thereafter	51
Total lease payments	957
Less: imputed interest	(206)
Present value of future lease payments	751
Less: operating lease, current liabilities	(144)
Long-term operating lease liabilities	$ 607