Inmune Bio, Inc.

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organization and Business Overview

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 three product platforms. The DN-TNF product platform utilizes dominant-negative technology to selectively neutralize soluble TNF, a key driver of innate immune dysfunction and mechanistic target of many diseases. DN-TNF is currently being developed for Alzheimer’s and treatment resistant depression (“XPro”) and cancer (“INB03”) and an out-licensing strategy. The CORDStrom product platform is a pooled, human umbilical cord mesenchymal stem cell product currently being developed to treat recessive dystrophic epidermolysis bullosa (“RDEB”). The Natural Killer Cell Priming Platform includes INKmune aimed at priming the patient’s NK cells to eliminate minimal residual disease in patients with cancer. INmune Bio’s product platforms utilize a precision medicine approach for the treatment of a wide variety of hematologic malignancies, solid tumors and chronic inflammation.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements of the Company have been prepared in accordance with Generally Accepted Accounting Principles (“US GAAP”) in the United States of America and the rules of the Securities and Exchange Commission (“SEC”).

The consolidated financial statements herein have been prepared in accordance with US GAAP and include the accounts of INmune Bio, its wholly-owned United Kingdom subsidiary, and its wholly-owned Australia subsidiary (collectively, the “Company”). All significant intercompany accounts and transactions have been eliminated.

NOTE 2 – GOING CONCERN

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has incurred significant losses and negative cash flows from operations since inception and expects to incur additional losses until such time that it can generate significant revenue from the commercialization of its product candidates. The Company had net losses of approximately $42.1 million and $30.0 million and negative cash flows from operating activities of approximately $33.4 million and $12.0 million for the years ended December 31, 2024 and 2023, respectively, and an accumulated deficit of approximately $163.1 million and $121.0 million as of December 31, 2024 and 2023, respectively. Given the Company’s projected operating requirements and its existing cash and cash equivalents, the Company is projecting insufficient liquidity to sustain its operations through one year following the date that the financial statements are issued. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the issuance of these financial statements.

In response to these conditions, management is currently evaluating different strategies to obtain the required funding of future operations. Financing strategies may include, but are not limited to, the public or private sale of equity, debt financings or funds from other capital sources, such as government funding, collaborations, strategic alliances, divestment of non-core assets, or licensing arrangements with third parties. There can be no assurances that the Company will be able to secure additional financing, or if available, that it will be sufficient to meet its needs or on favorable terms. Because management’s plans have not yet been finalized and are not within the Company’s control, the implementation of such plans cannot be considered probable. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials and regulatory approval prior to commercialization. These efforts require significant amounts of additional resources, adequate personnel, infrastructure and extensive compliance and reporting.

The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate any revenue from any of its products. The Company operates in an environment of rapid change in technology and substantial competition from other pharmaceutical and biotechnology companies.

The Company relies and expects to continue to rely on a small number of vendors to manufacture supplies and materials for its use in the clinical trial programs. These programs could be adversely affected by a significant interruption in these manufacturing services.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company holds cash in banks in excess of Federal Deposit Insurance Corporation insurance limits. However, the Company believes risk of loss is minimal as the cash is held by large, highly-rated financial institutions.

Research and Development Tax Incentive Receivable

The Company, through its wholly-owned subsidiary in Australia, 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, 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. During the years ended December 31, 2024 and 2023, the Company performed a qualitative assessment of its in-process research and development and determined that there were no indicators of impairment.

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 December 31, 2024, the Company had 7,203,307 potentially issuable shares of common stock upon the exercise of stock options and 3,944,238 potentially issuable shares of common stock upon the exercise of warrants.

At December 31, 2023, the Company had 5,496,000 potentially issuable shares of common stock upon the exercise of stock options and 45,386 potentially issuable shares of common stock upon the exercise of warrants.

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.

The Company’s 2024 and 2023 revenue was from the sale of mesenchymal stromal cells to one customer in the United Kingdom and was recognized when the MSC’s were delivered to the customer.

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, clinical trials and related clinical manufacturing, costs of drug development, costs of materials and supplies, facilities cost, overhead costs, costs of pre-clinical trials, 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 loss.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07,Segment Reporting (Topic 280):Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements, including those companies with a single operating segment. ASU 2023-07 is effective retrospectively for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 for the year ended December 31, 2024. See Note 13 for segment disclosures.

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The guidance in ASU 2023-09 improves the transparency of income tax disclosures by greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The standard is effective for public companies for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2023-09 may have on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03,Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 may be applied prospectively with the option for retrospective application for all prior periods presented. The Company is currently evaluating the impact of adopting this guidance on the Company’s current financial position, results of operations or financial statement disclosures.

Subsequent Events

The Company has evaluated all transactions through the financial statement issuance date for subsequent disclosure consideration.

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 December 31, 2024 and 2023, the Company had a research and development tax credit receivable of $0 for R&D expenses incurred in the UK. During the years ended December 31, 2024 and 2023, the Company received $0 and $2,710,000 of R&D tax credit reimbursements, respectively, 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 December 31, 2024 and 2023, the Company had a research and development tax credit receivable of $1,181,000 and $1,905,000, respectively, for R&D expenses incurred in Australia. During the years ended December 31, 2024 and 2023, the Company received $2,475,000 and $6,557,000 of R&D tax credit reimbursements, respectively, from Australia.

Xencor, Inc. License Agreement

On October 3, 2017, the Company entered into a license agreement (“Xencor License Agreement”) with Xencor, Inc. (“Xencor”), which discovered and developed a proprietary biological molecule that inhibits soluble tumor necrosis factor. On June 10, 2021, the Company and Xencor entered into a First Amendment to License Agreement pursuant to which, among other things, Section 3.2 of the Xencor License Agreement was amended to change the due diligence milestones. Pursuant to the Xencor License Agreement, Xencor granted the Company an exclusive worldwide, royalty-bearing license in licensed patent rights, licensed know-how and licensed materials (as defined in the license agreement) to make, develop, use, sell and import any pharmaceutical product that comprises, contains, or incorporates Xencor’s proprietary protein known as “XPro” that inhibits soluble tumor necrosis factor (or all modifications, formulations and variants of the licensed protein that specifically bind soluble tumor necrosis factor) alone or in combination with one or more active ingredients, in any dosage or formulation (“Licensed Products”). The Company believes the protein has numerous medical applications. Such additional alternative applications of the technology are available under the Xencor License Agreement.

The Company also agreed to pay Xencor a 5% royalty on Net Sales of all Licensed Products in a given calendar year, which are payable on a country-by- country and licensed product by licensed product basis until the date that is the later of (a) the expiration of the last to expire valid claim covering such Licensed Product in such country or (b) ten years following the first sale to a third party of the licensed product in such country.

INKmune License Agreement

On October 29, 2015, the Company entered into an exclusive license agreement (the “INKmune License Agreement”) with Immune Ventures, LLC (“Immune Ventures”). Pursuant to the INKmune License Agreement, the Company was granted exclusive worldwide rights to the patents, including rights to incorporate any improvements or additions to the patents that may be developed in the future. In consideration for the patent rights, the Company agreed to the following milestone payments:

In addition, the Company agreed to pay the licensor a royalty of 1% of net sales during the life of each patent granted to the Company. The License is owned by Immune Ventures. RJ Tesi, the Company’s President and a member of our Board of Directors, David Moss, its Chief Financial Officer and Treasurer and Mark Lowdell, its Chief Scientific Officer, are the owners of Immune Ventures. No sales have occurred under this license. During December 2023, the Company initiated a Phase I trial with INKmune in patients with metastatic castration-resistant prostate cancer and has recorded a $25,000 payable to Immune Ventures as of December 31, 2024.

The term of the agreement began on October 29, 2015 and ends on a country-by-country basis on the date of the expiration of the last to expire patent rights where patent rights exists, unless terminated earlier in accordance with the agreement. Upon the termination of the agreement, we shall have a fully paid up, perpetual, royalty-free license without further obligation to Immune Ventures. The agreement can be terminated by Immune Ventures if, after 60 days from the Company’s receipt of notice that the Company has not made a payment under the agreement, and the Company still does not make this payment. On July 20, 2018 and October 30, 2020, the parties amended the agreement under which the Company was required achieve milestones pursuant to the agreement.

On April 17, 2023, the parties executed an additional amendment to the agreement under which the Company removed the due diligence requirements to achieve reasonable commercial efforts to bring INKmune to market. This removed all requirements of clinical trial timelines and the filing timelines of an NDA or equivalent. All other provisions in the INKmune License Agreement shall continue in full force and effect.

University of Pittsburg License Agreement

On October 3, 2017, the Company entered into an Assignment and Assumption Agreement with Immune Ventures related to intellectual property licensed from the University of Pittsburgh. Pursuant to the Assignment and Assumption Agreement (“Assignment Agreement”), Immune Ventures assigned all of its rights, obligations and liabilities under an Exclusive License Agreement between the University of Pittsburgh – Of the Commonwealth System of Higher Education (“Licensor”) and Immune Ventures to INmune Bio (“Licensee”), (the “PITT Agreement”).

Consideration under the PITT Agreement includes: (i) annual maintenance fees, (ii) royalty payments based on the sale of products making use of the licensed technology, and (iii) milestone payments.

Annual maintenance fees under the PITT Agreement include $25,000 due on June 26, 2025 and thereafter until first commercial sale. The Company had no amounts owed pursuant to the PITT Agreement as of December 31, 2024.

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. As of December 31, 2024, there have been no commercial sales of product making use of the licensed technology under the PITT Agreement.

Moreover, under the PITT Agreement the Licensee is required to make milestone payments as follows:

The PITT Agreement expires upon the earlier of: (i) expiration of the last claim of the Patent Rights forming the subject matter of the PITT Agreement; or (ii) the date that is 20 years from the effective date of the agreement (June 26, 2037).

The Licensee may terminate the PITT Agreement upon 3 months prior written notice provided all payments under the license are current. The Licensor may terminate the PITT Agreement upon written notice if: (i) Licensee defaults as to performance of material obligations which have not been cured within 60 days after receiving written notice; or (ii) Licensee ceases to carry out its business, becomes bankrupt or insolvent, applies for or consents to the appointment of a trustee, receiver or liquidator of its assets or seeks relief under any law for the aid of debtors.

NOTE 5 – FAIR VALUE MEASUREMENTS

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

NOTE 6 – 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:

NOTE 7 – RELATED PARTY TRANSACTIONS

UCL

At December 31, 2024 and 2023, the Company recorded $0 and $112,000, respectively, of prepaid expenses – related party for payments made to UCL in advance of medical research to be provided. During the years ended December 31, 2024 and 2023, the Company paid UCL $321,000 and $573,000, respectively. 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

During the years ended December 31, 2024 and 2023, the Company paid AmplifyBio $384,000 and $77,000, respectively, to perform certain research and development on behalf of the Company. The CEO of AmplifyBio is on the Board of Directors of the Company.

NOTE 8 – DEBT

During 2021, the Company entered into a Loan and Security Agreement (the “Term Loan”) with Silicon Valley Bank and SVB Innovation Credit Fund VIII, L.P., together (the “Lenders”) in which the Company borrowed $15 million. The Term Loan was secured by the Company’s assets. During December 2024, the Company paid off the Term Loan in full. During February 2025, the Company entered into a letter agreement with the Lenders whereby the Term Loan was terminated.

For the years ended December 31, 2024 and 2023, the Company recognized interest expense of $789,000 and $2,278,000, respectively, related to the Term Loan.

NOTE 9 – STOCKHOLDERS’ EQUITY

Registered Direct Offerings

During September 2024, the Company entered into securities purchase agreements with investors whereby the Company sold 2,341,260 shares of the Company’s common stock and warrants to purchase an additional 2,341,260 shares of the Company’s common stock exercisable six months from the issuance date in a registered direct offering in exchange for gross proceeds of $13.0 million (net proceeds of approximately $12.0 million). Directors and officers that participated in the offering paid a combined offering price of $6.50 per share and warrant, and other investors paid $5.50 per share and warrant. The exercise price of the warrants is $6.40, and are exercisable beginning on March 16, 2025 and will terminate on March 16, 2030 unless accelerated pursuant to the terms of the warrant agreements. The Company determined the warrants were equity classified. The fair value of the warrants was approximately $9.1 million and was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 3.41% based on the applicable US Treasury bill rate (2) expected life of 5.5 years, (3) expected volatility of approximately 92% based on the trading history of the Company, and (4)zero expected dividends.

During April 2024, the Company entered into a securities purchase agreement with an investor whereby the Company sold 986,000 shares of the Company’s common stock and warrants to purchase an additional 986,000 shares of the Company’s common stock in a registered direct offering in exchange for gross proceeds of approximately $9.7 million (net proceeds of approximately $8.9 million). The exercise price of the warrants is $9.84 and the term of the warrants is the earlier of (1) April 29, 2026 or (2) thirty trading days following the reporting of positive top line data in the Phase 2 Alzheimer’s program of XPro1595. The Company determined that the warrants were equity classified. The fair value of the warrants was approximately $5.8 million and was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 4.97% based on the applicable US Treasury bill rate (2) expected life of 2.0 years, (3) expected volatility of approximately 77% based on the trading history of the Company, and (4)zero expected dividends.

During April 2024, the Company entered into securities purchase agreements with investors whereby the Company sold 571,592 shares of the Company’s common stock and warrants to purchase an additional 571,592 shares of the Company’s common stock in a registered direct offering in exchange for gross proceeds of approximately $4.8 million (net proceeds of approximately $4.5 million). Directors and officers that participated in the offering paid a combined offering price of $8.445 per share and warrant, and other investors paid $8.32 per share and warrant. The exercise price of the warrants is $9.152, and the term is the earlier of two years from the issuance of the warrants and thirty trading days following the release of top line data in the Phase 2 Alzheimer’s program, provided that directors and officers of the Company that are subject to a blackout with respect to trading in the Company’s stock will have an additional 60 days from the termination of the blackout date to exercise the warrant. The Company determined the warrants were equity classified. The fair value of the warrants was approximately $3.0 million and was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 4.89% based on the applicable US Treasury bill rate (2) expected life of 2.0 years, (3) expected volatility of approximately 78% based on the trading history of similar companies, and (4)zero expected dividends.

Common Stock – At the Market Offering

During March 2021, the Company entered into a sales agreement (“Sales Agreement”) with BTIG, LLC (“BTIG”), as sales agent, to establish an At-The-Market (“ATM”) offering program of up to $45 million of common stock, which the Company amended in August 2023. The Company was required to pay BTIG a commission of 3% of the gross proceeds from the sale of shares. During the year ended December 31, 2024, the Company issued and sold 198,364 shares of common stock at an average price of $10.56 per share under the ATM program. The aggregate net proceeds were approximately $2.0 million after BTIG’s commission expenses.

During August 2024, the Company entered into an amended and restated at-the-market sales agreement with RBC Capital Markets LLC and BTIG (together, the “Sales Agents”) relating to the offer and sale of shares of our common stock with an aggregate offering price of up to $75.0 million. This amended and restated at-the-market sales agreement replaced the Sales Agreement entered into with BTIG in March 2021, as amended in August 2023. The Company is required to pay the Sales Agents a commission of 3% of the gross proceeds from the sale of shares. During the year ended December 31, 2024, the Company issued and sold 48,762 shares of common stock at an average price of $6.96 per share under the ATM program. The aggregate net proceeds were approximately $0.3 million after commission expenses. At December 31, 2024, the Company had $74.7 million of common stock available under the amended and restated at-the-market agreement.

During July 2023, the Company sold 75,697 shares of its common stock at an average price of $10.56 per share under the ATM program. The aggregate net proceeds were approximately $775,000 after offering expenses. These shares were inadvertently sold under a registration statement filed with the SEC that had in fact expired prior to the time the shares were sold. As of December 31, 2023, the Company reclassified 75,697 shares, with an aggregate purchase price of $799,000 of its common stock as temporary equity presented outside stockholders’ equity as a result of potential rescission rights. There have been no claims or demands to exercise such rights. As of December 31, 2024, the rescission rights for these shares have lapsed and the shares were reclassified to permanent equity.

Stock options

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

During 2024, the Company granted certain employees and directors options to purchase 1,964,307 shares of its common stock pursuant to the 2021 Incentive Stock Plan. The stock options had a fair value of approximately $11.6 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 3.90% -4.46% based on the applicable US Treasury bill rate (2) expected life of 5.5 –10.0 years, (3) expected volatility of approximately 100% -106% based on the trading history of similar companies, and (4)zero expected dividends.

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

At December 31, 2024, the Company had 121,243 shares reserved for issuance pursuant to the 2021 Amended and Restated Incentive Stock Plan and 15,975 shares available pursuant to the 2019 Stock Incentive Plan.

The following table summarizes stock option activity:

During the years ended December 31, 2024 and 2023, the Company recognized stock-based compensation expense of $7,605,000 and $7,368,000, respectively, related to stock options. As of December 31, 2023, there was $12,213,000 of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted-average period of 2.37 years.

Warrants

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

During April 2024, the Company issued 1,557,592 warrants to investors in connection with the sale of common stock. At December 31, 2024,1,557,592 of these warrants are outstanding and are exercisable for cash at a weighted average price of $9.59 per share. The intrinsic value of these warrants was$0 as of December 31, 2024.

During September 2024, the Company issued 2,341,260 warrants to investors in connection with the sale of common stock. At December 31, 2024,2,341,260 of these warrants are outstanding and are exercisable for cash at a weighted average price of $6.40 per share. The intrinsic value of these warrants was$0 as of December 31, 2024.

During the year ended December 31, 2023, a third party exercised 28,688 warrants on a cashless basis in exchange for 4,781 shares of common stock.

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 years ended December 31, 2024 and 2023, respectively:

Shareholder Rights Agreement

On December 30, 2020, the Board of Directors (the “Board”) of the Company approved and adopted a Rights Agreement, dated as of December 30, 2020, by and between the Company and VStock Transfer, LLC, as rights agent, pursuant to which the Board declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share of the Company’s common stock held by stockholders as of the close of business on January 11, 2021. When exercisable, each right initially would represent the right to purchase from the Company one one-thousandth of a share of a newly designated series of preferred stock, Series A Junior Participating Preferred Stock, par value $0.001 per share, of the Company, at an exercise price of $300.00 per one one-thousandth of a Series A Junior Participating Preferred Share, subject to adjustment. Subject to various exceptions, the Rights become exercisable in the event any person (excluding certain exempted or grandfathered persons) becomes the beneficial owner of twenty percent or more of the Company’s common stock without the approval of the Board. The Rights Agreement was amended in 2021, 2022, 2023 and 2024 to extend the expiration date and shall expire on December 30, 2025.

Preferred Stock

In 2020, the Company designated 45,000 shares of its preferred stock with par value of $0.001 per share as Series A Junior Participating Preferred Stock. The remaining 9,955,000 shares of preferred stock with par value of $0.001 remain undesignated. None of the preferred shares were issued and outstanding at December 31, 2024 and 2023.

NOTE 10 – INCOME TAXES

Loss before income taxes summarized by region was as follows:

The provision for income taxes consists of the following components:

A reconciliation of income tax benefit computed using the federal statutory income tax rate to the Company’s tax expense is as follows:

The principal components of deferred tax assets and liabilities consist of the following at December 31, 2024 and 2023, respectively:

We file income tax returns in the United States, the United Kingdom and Australia. The Company is no longer subject to Internal Revenue Service tax examinations by tax authorities for years prior to 2021. The United Kingdom and Australia are no longer subject to income tax examination for years prior to 2023 and 2022, respectively.

As of December 31, 2024, the Company has a federal net operating loss carryforward of approximately $41.4 million, a United Kingdom net operating loss carryforward of $17.4 million and an Australia net operating loss carryforward of $19.7 million. The federal net operating loss carryforwards for 2017 will begin to expire in the year ending December 31, 2037. The remaining federal net operating loss carryforwards generated after 2017 have no expiration. The United Kingdom and Australia net operating losses have no expiration. The Company has net operating loss carryforwards in California and Florida of $14.9 million and $24.2 million, respectively, of which the California net operating losses will begin to expire in the year ending December 31, 2037, and the Florida net operating losses have no expiration.

The Company’s gross deferred tax assets of $25.7 million and $19.6 million at December 31, 2024 and 2023, respectively, primarily consist of net operating loss carryforwards for income tax purposes. A valuation allowance is required to be recorded when it is not more likely than not that some portion or all of the net deferred tax assets will be realized. Since the Company cannot be assured of generating taxable income and thereby realizing the net deferred tax assets, a full valuation allowance has been recorded. The change in the valuation allowance was $6,081,000 during the year ended December 31, 2024.

The Company recognizes uncertain tax positions in accordance with ASC 740 on the basis of evaluating whether it is more likely than not that the tax positions will be sustained upon examination by tax authorities. For those tax positions that meet the more-likely-than not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement. As of December 31, 2024, and 2023, the Company has no significant uncertain tax positions. There are no unrecognized tax benefits included on the balance sheet that would, if recognized, impact the effective tax rate. The Company does not anticipate there will be a significant change in unrecognized tax benefits within the next 12 months.

NOTE 11 – COLLABORATIVE AGREEMENTS

During September 2020, the Company was awarded a grant from the National Institutes of Health (“NIH”). The grant will support a Phase 2 study of XPro in patients with treatment resistant depression. During 2024, the grant was reduced from approximately $2.9 million to approximately $2.0 million. As of December 31, 2024, the Company has not received any proceeds pursuant to this grant.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Lease

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

Future minimum payments pursuant to the leases are as follows:

During the years ended December 31, 2024 and 2023, the Company recognized $161,000 and $163,000, respectively, in operating lease expense, which is included in general and administrative expenses in the Company’s consolidated statement of operations.

Dispute

The Company has an ongoing dispute with a vendor in which the Company believes that the vendor did not properly provide services for which they have invoiced the Company. As of December 31, 2024, the Company has outstanding invoices with the vendor which aggregate approximately $1.6 million, of which the Company has recorded approximately $0.2 million, which is the Company’s estimate of the obligation incurred, and the remaining $1.4 million has not been recorded by the Company as the Company believes the invoices were sent erroneously. The Company and the vendor are still attempting to resolve the dispute and legal proceedings have not been threatened.

Litigation

The Company is subject to claims and suits that arise from time to time in the ordinary course of our business. Although management currently believes that resolving claims against the Company, individually or in aggregate, will not have a material adverse impact in the Company’s consolidated financial statements, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

NOTE 13 – SEGMENT INFORMATION

The Company operates asone operating segment. The Company’s chief operating decision maker (“CODM”) is its Chief Financial Officer, who reviews the financial statements on a consolidated basis. The CODM uses the Company’s long-range plan to allocate resources. The CODM makes decisions on resource allocation, assesses performance of the business, and monitors budget versus actual results using consolidated loss from operations.

Significant expenses within loss from operations, as well as within net loss, include research and development and general and administrative expenses, which are each separately presented on the Company’s Consolidated Statements of Operations and Comprehensive Loss. Other segment items within net loss include other income (expense), net.

The Company’s long-lived assets consist primarily of acquired in-process research and development intangible assets which are located in the United States.

NOTE 14 – SUBSEQUENT EVENTS

Cordstrom License Agreement

On February 6, 2025, the Company and GOSH entered into a license agreement for the exclusive commercial use to clinical trial data associated with the Mission EB study investigating the potential of CORDStrom to treat RDEB in pediatric patients. The Company owns the intellectual property covering CORDStrom, the investigational medicinal product used in the Mission EB study. In addition, the Company owns intellectual property and maintains trade secret protections covering the manufacturing of CORDStrom. With this license to the clinical trial data, the Company intends to prepare applications seeking marketing authorization of CORDStrom for treatment of pediatric RDEB in each of the FDA, EMA, and MHRA. Terms of the license agreement include an upfront payment of £250,000 (approximately $0.3 million at February 6, 2025) and a single milestone payment of up to £6,000,000 (approximately $7.5 million at February 6, 2025) due on the first to occur marketing authorization to be granted by the FDA, EMA or MHRA. In addition to these financial terms, the Company has also agreed to certain patient access obligations, including sponsoring the supply of CORDStrom to UK patients enrolled in an open label continuation of the Mission EB study.

Sales of Common Stock

During the period from January 1, 2025 through March 27, 2025, the Company sold 649,860 shares of its common stock through its ATM program for net proceeds of $5.3 million.