UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
OR
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
For the Transition Period From ____________ to ____________
Commission File Number: 000-54933
IMMUNE THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
| Florida | 59-3226705 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
2431 Aloma Ave., Suite 124,
Winter Park, Florida 32792
(Address of principal executive offices)
(888) 613-8802
Registrant’s telephone number, including area code:
None
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of Exchange on which registered | ||
| Common stock | IMUN | OTC Markets |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
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 that 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of voting stock held by non-affiliates of the registrant on June 30, 2021, the last business day of the registrant’s most recently completed second quarter, was $2,387,600 based on the last reported sale price of the registrant’s Common Stock on the OTC Markets on that date.
As of March 18, 2022, the registrant had outstanding shares of common stock, $0.0001 par value per share.
IMMUNE THERAPEUTICS, INC.
2021 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this Annual Report on Form 10-K are considered forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) concerning our business, results of operations, economic performance and/or financial condition, based on management’s current expectations, plans, estimates, assumptions, and projections. Forward-looking statements are included, for example, in the discussions about:
| ● | strategy; | |
| ● | new product discovery and development; | |
| ● | current or pending clinical trials; | |
| ● | our products’ ability to demonstrate efficacy or an acceptable safety profile; | |
| ● | actions by the FDA and other regulatory authorities; | |
| ● | product manufacturing, including our arrangements with third-party suppliers; | |
| ● | product introduction and sales; | |
| ● | royalties and contract revenues; | |
| ● | expenses and net income; | |
| ● | credit and foreign exchange risk management; | |
| ● | liquidity; | |
| ● | asset and liability risk management; | |
| ● | the outcome of litigation and other proceedings; | |
| ● | intellectual property rights and protection; | |
| ● | economic factors; | |
| ● | competition; and | |
| ● | legal risks. |
Any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Forward-looking statements generally are identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “aims,” “plans,” “may,” “could,” “will,” “will continue,” “seeks,” “should,” “predict,” “potential,” “outlook,” “guidance,” “target,” “forecast,” “probable,” “possible” or the negative of such terms and similar expressions. Forward-looking statements are subject to change and may be affected by risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events, except as required by law, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities laws and other applicable laws.
We caution you that several important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements, and therefore you should not place too much reliance on them. These factors include, among others, those described herein, and elsewhere in this Annual Report and in our other public reports filed with the Securities and Exchange Commission. It is not possible to predict or identify all such factors, and therefore the factors that are noted are not intended to be a complete discussion of all potential risks or uncertainties that may affect forward-looking statements. If these or other risks and uncertainties materialize, or if the assumptions underlying any of the forward-looking statements prove incorrect, our actual performance and future actions may be materially different from those expressed in, or implied by, such forward-looking statements. We can offer no assurance that our estimates or expectations will prove accurate or that we will be able to achieve our strategic and operational goals.
Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events and are subject to significant risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.
Important factors that could cause such differences include, but are not limited to:
| ● | our lack of operating history; | |
| ● | our current and future capital requirements and our ability to satisfy our capital needs; | |
| ● | our inability to keep up with industry competition; | |
| ● | interpretations of current laws and the passages of future laws; | |
| ● | acceptance of our business model by investors and our ability to raise capital; | |
| ● | our drug discovery and development activities may not result in products that are approved by the applicable regulatory authorities. Even if our drug candidates do obtain regulatory approval, they may never achieve market acceptance or commercial success; | |
| ● | our reliance on key personnel and collaborative partners, including our ability to attract and retain scientists; | |
| ● | our reliance on third party manufacturing to supply drugs for clinical trials and sales; | |
| ● | our limited distribution organization with no sales and marketing staff; | |
| ● | our being subject to product liability claims; | |
| ● | legislation or regulation that may increase the cost of our business or limit our service and product offerings; | |
| ● | risks related to our intellectual property, including our ability to adequately protect intellectual property rights; | |
| ● | risks related to government regulation, including our ability to obtain approvals for the commercialization of some or all of our drug candidates, and ongoing regulatory obligations and continued regulatory review which may result in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements; and | |
| ● | our ability to obtain regulatory approvals to allow us to market our products internationally. |
Moreover, new risks regularly emerge, and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this prospectus are based on information available to us on the date of this Annual Report. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether because of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this Annual Report.
| 3 |
PART I
Item 1. Business
Company Overview
Immune Therapeutics, Inc. (“the Company”, “Immune”) was initially incorporated in Florida on December 2, 1993, as Resort Clubs International, Inc. (“Resort Clubs”). It was formed to manage and market golf course properties in resort markets throughout the United States. Galliano International Ltd. (“Galliano”) was incorporated in Delaware on May 27, 1998 and began trading in November 1999 through the filing of a 15C-211. On November 10, 2004, Galliano merged with Resort Clubs. Resort Clubs was the surviving corporation. On August 23, 2010, Resort Clubs changed its name to pH Environmental Inc. (“pH Environmental”). On April 23, 2012, pH Environmental completed a name change to TNI BioTech, Inc., and on April 24, 2012, we executed a share exchange agreement for the acquisition of all the outstanding shares of TNI BioTech IP, Inc.
On September 4, 2014, a majority of our shareholders approved an amendment to our Amended and Restated Articles of Incorporation, as amended, to change our name to Immune Therapeutics, Inc. We filed our name change amendment with the Secretary of State of Florida on October 27, 2014, changing our name to Immune Therapeutics, Inc.
In December 2013, the Company formed a subsidiary, Cytocom Inc. (“Cytocom”), to focus on conducting LDN and MENK clinical trials in the United States. In December 2014, the Company finalized the distribution of common stock of Cytocom to its shareholders. As part of the transaction (“Original Agreement”), the Company transferred to Cytocom certain of its rights, title, and interest in or relating to intellectual property:
| (i) | Patents, patent applications, and all divisional, continuations and continuations-in-part thereof, together with all reissues, reexaminations, renewals, and extensions thereof and all rights to obtain such divisionals, continuations and continuations-in-part, reissues, reexaminations, renewals and extensions, and all utility models and statutory invention registrations and any other such analogous rights. | |
| (ii) | Trademarks, service marks, Internet domain names, trade dress, trade styles, logos, trade names, services names, brand names, corporate names, assumed business names and general intangibles and other source identifiers of a like nature, together with the goodwill associated with any of the foregoing, and all registrations and applications for registrations thereof, together with all renewals and extensions thereof and all rights to obtain such renewals and extensions. | |
| (iii) | Copyrights, mask work rights, database and design rights, moral rights and rights in Internet websites, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof and all applications in connection therewith, together with all renewals, continuations, reversions and extensions thereof and all rights to obtain such renewals, continuations, reversions and extensions. | |
| (iv) | Confidential and proprietary information, including, trade secrets and know-how. |
On May 1, 2018, the Company entered into an amended and restated licensing agreement (the “Restated Agreement”) with Cytocom. The Restated Agreement restates the licensing arrangement between the Company and Cytocom and grants the Company distribution and marketing rights for Lodonal™ and MENK for humans in certain Emerging Markets. In addition, the Company was granted the rights to distribute and market Lodonal™ and MENK for animal use in the United States. The royalty due to Cytocom was reduced from 5% to 1% of sales and the Company no longer has any ongoing obligations to pay for costs in connection with the assets of Cytocom. While the Company formalized the agreement to deconsolidate on May 1, 2018, Penn State University, a vendor of the Company, did not consent to assign the payables to Cytocom at the time of the Restated Agreement.
On June 4, 2018, the Company and Cytocom entered into a Stock Purchase Agreement (the “Stock Agreement”). Pursuant to which, the Company cancelled approximately $4,000,000 of debt owed to it by Cytocom in exchange for ten percent (10%) of the issued and outstanding common stock of Cytocom, as calculated on a fully diluted basis. The Restated Agreement was a condition of the Stock Agreement.
On April 8, 2019, the Company signed a second amendment to its licensing agreement (the “Second Amendment”) with Cytocom. The Second Amendment confirmed that, (as of its effective date December 31, 2018) the Company owned 15.57% of the Cytocom common shares issued and outstanding on that date. The Company agreed to assume responsibility to repay all accounts payable obligations and accrued liabilities owed by Cytocom as of the effective date, except those accounts’ payable obligations and accrued liabilities as specified in the Second Amendment. The Company also assumed the responsibility to repay all notes payable, together with any interest or fees payable thereon, owed by Cytocom as of the effective date, except those notes’ payable obligations, together with any interest or fees payable thereon, as specified by the Second Amendment. The parties further agreed that in the event of a change of control of Cytocom, and at the option of Cytocom, the Company would have the right to purchase outright the Company’s licensing rights to Emerging Markets for humans under the License Agreement at a price equal to value of those licensing rights as determined by and independent valuator acceptable to the Company and Cytocom.
In the third quarter of 2021, Cytocom announced the completion of its merger with Cleveland BioLabs, Inc. (“CBLI”) which resulted in the Company’s receipt of 1,150,000 common shares of CBLI, reflecting the Company’s retained minority interest in Cytocom. The merger was completed in July 2021. Subsequent to the merger, CBLI adopted a new corporate name, Statera BioPharma, Inc., with the ticker symbol “STAB” effective September 1, 2021. Cytocom emerged as a publicly traded entity following the merger with CBLI.
| 4 |
Forte Animal Health, Inc.
On July 8, 2021, the Company amended the license agreement (the “Amended License Agreement”) with Forte Animal Health Inc. (“Forte”) dated February 27, 2020.
Under the Amended License Agreement, the Company granted Forte an exclusive license to develop and commercialize pharmaceutical products consisting of Lodonal and MENK for use in veterinary applications for all indications world-wide. Milestone payments and royalties are defined in the agreement based on development and royalties are based on sales during the license period.
The Initial License Fee includes the assumption by Forte of certain Company defaulted Notes and other liabilities. The note holders and vendors associated with the assigned liabilities have not yet assigned their rights to Forte and as a result the Company has not completed the transaction.
Consideration for Amended License Agreement with Forte as of December 31, 2021
| Consideration / Assumption of: | ||||
| Notes and associated accrued interest in default | $ | 2,040,006 | ||
| Accounts payable and accruals | 338,909 | |||
| Past due employee obligations | 786,177 | |||
| Total Consideration to be Recognize Upon Execution | $ | 3,165,092 | ||
The documentation and sign off, of the Forte license, have yet to be executed by the individual lenders that will be required to provide their sign-off and approval for the transfer of these notes. As such the accompanying financial statements do not reflect any gain on sale. Until such time as the transaction is completed Forte does not have clear title and interest to the veterinary rights.
Forte has agreed to make payments to the Company in connection with this agreement as follows:
| ● | Initial License Fee, upon the assignment of certain Company Notes Payable. | |
| ● | Development Milestone Payments upon the occurrence of the identified events, one-time, non-creditable, non-refundable milestone payments of $100,000 will be earned by the Company upon: (1) a successful MUMS designation and (2) upon a successful conditional approval. | |
| ● | Commercial Milestone Payments upon reaching the mutually agreed aggregate net sales. Forte will pay one-time, non-creditable, non-refundable milestone payments to be negotiated and addressed in a separate Amendment later. | |
| ● | Royalties during the royalty term (generally 15 years from the first sale of a product in a country), royalties on annual net sales as follows: |
| Annual Sales of Royalty Qualifying Licensed Products | Royalty Rate | |||
| <$500,000,000 | 2 | % | ||
| 500,000,000 to < $1,000,000,000 | 4 | % | ||
| > $1,000,000,000) | 6 | % | ||
As of December 31, 2021, this license agreement has not been executed as Forte has failed to fund the consideration defined in the agreement. To date the Company has not received any payments under the terms of this agreement.
| 5 |
Cytocom
On May 13, 2020, the Company and Cytocom entered into an Amendment to The Second Amendment to The License Agreement (“Third Amendment”) that was effective December 31, 2018. The sublicense provides Cytocom with the Company’s previously licensed rights for LDN and MENK in Emerging Markets.
Original terms for consideration for the sublicense were not finalized until August 12, 2020, at which time Cytocom and the Company signed a letter agreement in which Cytocom agreed to assume a combination of defaulted notes plus certain other liabilities. Such terms were amended, and the Company agreed to transfer all the rights, title, and interest to Cytocom in technology licensed from Penn State Research Foundation (“PSU”) in exchange for Cytocom assuming all past due and future obligations under the PSU license. While the Company formalized the agreement to assign all outstanding liabilities due to PSU, a vendor of the Company, PSU did not consent to the assignment of the payables to Cytocom. As of December 31, 2021, the Company had no outstanding accounts payable balances due to Penn State University.
On July 20, 2021, Cytocom and the Company agreed to modify the terms of the original sublicense. The renegotiated terms are presented below. The assignment of the Notes and associated accrued interest and penalties in default was fully executed in the third quarter of 2020 with the transfer of the notes upon the creditors’ signoff. The Company recognized a gain upon the assignment of these notes in the third quarter of 2020. Cytocom has not completed the assumption of the remaining liabilities.
Consideration for License to Cytocom as of December 31, 2021
| Consideration / Assumption of: | ||||
| Notes and associated accrued interest in default | $ | 3,302,209 | ||
| Accounts payable and accruals | 230,000 | |||
| Past Due Employee Obligations | 1,110,567 | |||
| Total anticipated Consideration | $ | 4,642,776 | ||
| Recognized through December 31, 2020 | (3,302,209 | ) | ||
| To Be Recognized upon Execution | $ | 1,340,567 | ||
As of December 31, 2021, the Notes transaction has not been fully executed. The Notes in default have been assigned and the transfer signed off by the creditors, but Cytocom still has not completed the assumption of the agreed upon obligations. Until the transaction is completed Cytocom (Statera) does not have clear title and interest to the Immune technology.
Current Restructuring Strategy
Management is developing as a strategy to re-capitalize the Company and position it for future growth. Key steps to this process include:
| ● | Improve the condition of the financial position and balance sheet via license arrangements and capital infusions | |
| ● | Identify and acquire late-stage assets for commercialization through cash and equity sources | |
| ● | Build out operational infrastructure to generate revenue opportunities to grow shareholder value. |
There can be no guaranties that the Company will be successful in securing adequate capital to continue operations and in identifying and acquiring assets for future development.
The Company has incurred significant net losses since inception and has relied on its ability to fund its operations through private equity financings. Management expects operating losses and negative cash flows may continue in the future. As the Company continues to incur losses, transition to profitability is dependent upon the successful development, approval, and commercialization of its product candidates and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources.
| 6 |
Based on the Company’s operating plan, working capital at December 31, 2021 is not sufficient to meet the cash requirements to fund planned operations through the next twelve months without additional sources of cash. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.
If the Company is unable to secure new working capital, other alternatives strategies will be required.
Historically, the Company has been able to acquire and develop assets, spin them out and retain both an equity stake and royalties and milestone payments. In so doing, the Company has acted as an incubator for late-stage drug development. Management believes that this strategy can continue to be successful. At this time, the Company is reviewing several opportunities which it may pursue as soon as funding is available. At present no definitive actions have been taken.
There can be no guaranties that the Company will be successful in:
| ● | Executing its restructuring plan | |
| ● | Securing adequate capital to continue operations. | |
| ● | Identifying and acquiring assets for future development. |
The Company has rights to the following intellectual property, which have been substantially licensed from Forte and Cytocom, as described above. As noted above, neither Cytocom nor Forte have funded the full consideration required under the agreements, therefore neither has full title and interest in the technology none of which have active programs to commercialize at this time:
| Patent Status | Title: | Assigned | ||
| US2014024588 2014/01/23 | Method for Inducing Sustained Immune Response | Nicholas P. Plotnikoff Assigned to TNI Biotech to Cytocom | ||
| AT346605T Federal Republic of Germany | Method for triggering a continuous immune response | See US Patent US2014024588 assigned same as above | ||
| 2313364 Russian Federation | Method for triggering a continuous immune response | See US Patent US2014024588 assigned | ||
| India Patent, Application number 1627/KOLNP/2003 number 220265 | Method for triggering a continuous immune response | See US Patent US2014024588 assigned |
| 7 |
| Ireland EP 1401471 BI | Method for triggering a continuous immune response | See US Patent US2014024588 assigned | ||
| People’s Republic of China, Application No.: 200810165784.8 China Patent CN1015113407 A | Method for triggering a continuous immune response | See US Patent US2014024588 assigned | ||
| United Kingdom Patent Application 02746503.8 “AN ENKEPHALIN PEPTIDE COMPOSITION | Method for triggering a continuous immune response “AN ENKEPHALIN PEPTIDE COMPOSITION | See US Patent US2014024588 assigned | ||
| U.S. Patent number 7,879,870 | Treatment of inflammatory and ulcerative disease of the bowel with opioid antagonists | Exclusive License from Penn State University Foundation to Jill Smith and LDN Research Group LLC from Jill Smith and LDN Research to Cytocom | ||
| Application number 15/437,365 issued 10/30/2018 Patent No 10111870 | Treatment of inflammatory and ulcerative disease of the bowel with opioid antagonists | Exclusive License Jill Smith and LDN Research Group LLC same as above | ||
| U.S. Application Number: 11061932 Claims Priority to US 60648021 Canadian Pending 2,557,504 | Combinatorial therapies for the treatment of neoplasias using the opioid growth factor receptor | Pending / Continuation Licensed Penn State University | ||
| Publication number: 20160256517 Pending | Combinatorial therapies for the treatment of neoplasias using the opioid growth factor receptor | Licensed Penn State University | ||
| Patent number: 9375458 Filed: October 25, 2012 Date of Patent: June 28, 2016 | Combinatorial therapies for the treatment of neoplasias using the opioid growth factor receptor | Licensed Penn State University | ||
| Patent number: 8003630Filed: August 25, 2006 Date of Patent: August 23, 2011 | Combinatorial therapies for the treatment of neoplasias using the opioid growth factor receptor | Exclusive License Penn State University |
| 8 |
| Publication number: 20110123437 Type: Application Filed: February 3, 2011 Publication date: May 26, 2011 | COMBINATORIAL THERAPIES FOR THE TREATMENT OF NEOPLASIAS USING THE OPIOID GROWTH FACTOR RECEPTOR | Licensed Penn State University | ||
| Patent number: 6737397 Type: Grant Filed: August 17, 2000 Date of Patent: May 18, 2004 | Control of cancer growth through the interaction of [MET5]-enkephalin and the zeta receptor | Licensed Penn State University | ||
| Patent number: 6136780 Type: Grant Filed: March 27, 1997 Date of Patent: October 24, 2000 | Control of cancer growth through the interaction of [Met.sup.5 ]-enkephalin and the zeta (.zeta.) receptor | Licensed Penn State University | ||
| US 7,807,368 (US PgPub 2008-0146512 A1) | Cyclin-dependent kinase inhibitors as targets for opioid growth factor treatment. | Licensed Penn State University | ||
| US9375458B2 | Combinatorial therapies for the treatment of neoplasias using the opioid growth factor receptor | Licensed Penn State University Pending | ||
| CN 200910011030 (No related apps) | naloxone and composition thereof in preparing drug for treating cancer. Shan Fengping: August 26, 2009. | Assigned Fingping Shan | ||
| Application: CN20071051586 on 15 Feb 2007 - international: A61K39/00; A61K39/39; A61P37/04 Publication: 15 Feb 2007 PAT: CN101244270 | Application of methionine enkephalin in preparing human or animal vaccination | Assigned Fingping Shan | ||
| CN 200710158742 2017 granted | application of compounds methionine enkephalin for preparing medicine for curing blood medulla hematopoietic system cancer | Assigned Fingping Shan | ||
| CN 200610046249 (No related U.S. applications) | Aerosol containing Met-Enkephalin. Shan Fengping: November 15, 2006. | Assigned Fingping Shan |
| 9 |
| CN 200310120896 2006 | food for regulating human body immune balance. | Assigned Fingping Shan | ||
| CN 200610046249 | Aerosol containing Met-Enkephalin. Shan Fengping: | Assigned Fingping Shan | ||
| WO 2007/067753 (PTC /US2006 /046925 Pending | Methods of reducing side effects in cancer therapy | assigned Fengping Shan | ||
| CN 200510019964 | Use of Methionine Enkephalin in preparation of medicine for reducing toxic side effects of chemical or radioactive | Assigned Fengping Shan | ||
| CA 200810229085 | Use of Methionine Enkephalin in treating intestinal cancer and pancreatic cancer | Assigned Fengping Shan | ||
| China Patent 200810229085 | The invention belongs to the technical field of treating tumors by immunization therapy. In particular, a method for treating intestinal cancer and pancreatic cancer cells by Methionine Enkephalin under conditions of in- vivo injection and in- vitro cell culture so as to achieve the treating | |||
| aim. | 21-Mar-26 | IRT-101 (MENK) |
Competition
The industry for treatment of humans is highly competitive and subject to rapid and significant technological change. While we believe that our technology rights provide our sublicenses with competitive advantages. Our sub-licensees will face potential competition from many different sources including large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions.
Many of our sublicensee’s potential competitors have substantially greater financial, technical, and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, those competitors may be more successful than our sublicensees’ may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Their competitors’ drugs may be more effective, or more effectively marketed and sold, than any drug our sublicensees may commercialize and may render their product candidates obsolete or non-competitive before they can recover the expenses of developing and commercializing any of their product candidates. Further, the development of new treatment methods for the conditions our sub licensees are targeting could render their drugs non-competitive or obsolete. The ability of our sublicensees to overcome competitive factors will materially impact the value of our equity holdings in such licensees.
| 10 |
Available Information
Current Reports on Form 8-K, and Quarterly Reports are electronically filed with or furnished to the Securities and Exchange Commission (SEC), and all such reports and amendments to such reports have been and will be made available, free of charge, through our website (http://www.immunetherapeutics.com) as soon as reasonably practicable after such submission to the SEC. Such reports will remain available on our website for at least 12 months. The contents of our website are not incorporated by reference into this Annual Report on Form 10-K. The public may read and copy any materials filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street, NW, Washington, D.C. 20549.
Item 1A. Risk Factors
Not required for Smaller Reporting Companies
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
We maintain our office headquarters at 2431 Aloma Ave., Suite 124, Winter Park, Florida 32792. The monthly lease cost is approximately $250. The lease is cancellable upon one month’s notice.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
| 11 |
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is listed for quotation on the OTCQB marketplace under the symbol IMUN. Our common stock began trading in November 1999 on OTC under the name Galliano International Ltd. Trading under the name of TNI BioTech, Inc. commenced in March 2012 under the symbol TNIB. The symbol was changed to IMUN on December 11, 2014.
The following table sets forth the high and low sales prices per share of our common stock for the periods indicated as reported by the OTC Markets Group, Inc.
| Price Range | ||||||||
| High | Low | |||||||
| Quarter Ended: | ||||||||
| December 31, 2021 | $ | 4.60 | $ | 1.46 | ||||
| September 30, 2021 | $ | 5.00 | $ | 2.76 | ||||
| June 30, 2021 | $ | 19.90 | $ | 5.00 | ||||
| March 31, 2021 | $ | 27.30 | $ | 15.60 | ||||
| Quarter Ended: | ||||||||
| December 31, 2020 | $ | 48.90 | $ | 11.20 | ||||
| September 30, 2020 | $ | 49.90 | $ | 12.50 | ||||
| June 30, 2020 | $ | 29.00 | $ | 9.60 | ||||
| March 31, 2020 | $ | 14.80 | $ | 4.50 | ||||
Record Holders
As of March 2022, we have 619 active stockholders of record of our common stock.
Dividends
The Company paid no dividends in 2021 or 2020. We do not anticipate paying any cash dividends in the foreseeable future. The payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit our ability to pay dividends on common stock other than those generally imposed by applicable state law.
Securities Authorized for Issuance under Equity Compensation Plans
In 2014, the Company’s shareholders approved the Company’s 2014 Stock Incentive Plan (“2014 Plan). Equity awards are considered an important part of the Company’s ability to attract, retain, and motivate our executives and employees whose skills and performance are critical to our success.
A total of 5,000 shares of the Company’s common stock has been approved, but not yet reserved, for issuance under the 2014 Plan. The Company has not awarded any equity awards under this plan.
Awards under the 2014 Plan may be made to employees, directors, consultants and advisors of the Company and any successor entity that adopts the 2014 Plan. Awards under the 2014 Plan may be made in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards. Vesting of awards will be determined by our Board. No more than 500 shares may be issued to a single participant pursuant to stock options and stock appreciation rights in a calendar year. Re-pricing of outstanding stock awards is not permitted under the 2014 Plan. The 2014 Plan will terminate upon the earlier of the adoption of a resolution of the Board terminating the 2014 Plan, or September 3, 2024.
| 12 |
Item 6. Selected Financial Data
Not required for smaller reporting companies.
Off-Balance Sheet Arrangements
During the years ended December 31, 2021 and 2020, we did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
General
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our discussion of cautionary statements and significant risks to the company’s business under Item 1A. Risk Factors of this Annual report on Form 10-K.
Going Concern
As of December 31, 2021, the Company had $493,885 in cash on hand, negative working capital of $7,948,256 and a stockholders’ deficit of $7,948,256. For the year ended December 31, 2021, the Company reported net income attributable to common shareholders of $3,586,034. Net income for the twelve-month period ended December 31, 2021 includes significant non-cash non-operating gains aggregating $4,535,122 as follows:
| Gain on assignment of debt and liabilities | $ | 711,892 | ||
| Receipt of common shares | 5,761,500 | |||
| Change in market value of investment in STAB common shares | (3,116,500 | ) | ||
| Gain on reversal of derivative liability | 1,178,230 | |||
| $ | 4,535,122 |
For the year ended December 31, 2020, the Company reported net income attributable to common shareholders of $1,588,617. Included in net income for the year ended December 31, 2020 was a non-cash non-operating gain of $3,502,280 resulting from the assignment of debt.
Historically the Company has relied on the funding of operations through private equity financings and management expects operating losses and negative cash flows to continue at more significant levels in the future. As the Company continues to incur losses, transition to profitability is dependent upon the successful development, approval, and commercialization of its current or future product candidates as they become available and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources.
Working capital at December 31, 2021 is not sufficient to meet the cash requirements to fund planned operations through the next twelve months without additional sources of cash. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.
Management is developing as a strategy to re-capitalize the Company and position it for future growth. Key steps to this process include:
| ● | Improve the condition of the financial position and balance sheet via license arrangements and capital infusions. | |
| ● | Identify and acquire late-stage assets for commercialization. | |
| ● | Build out operational infrastructure to generate revenue opportunities to grow shareholder value. |
There can be no guaranties that the Company will be successful in securing adequate capital to continue operations and in identifying and acquiring assets for future development.
| 13 |
If the Company is unable to secure new working capital, other alternatives strategies will be required.
Historically, the Company has been able to acquire and develop assets, spin them out and retain both an equity stake and royalties and milestone payments. In so doing, the Company has acted as an incubator for late-stage drug development. Management believes that this strategy can continue to be successful. At this time, the Company is reviewing several opportunities which it may pursue as soon as funding is available. At present no definitive actions have been taken.
There can be no guaranties that the Company will be successful in:
| ● | Executing its restructuring plan | |
| ● | Securing adequate capital to continue operations. | |
| ● | Identifying and acquiring assets for future development. |
Overview
Revenue, Direct Expenses and Gross Margin
The Company had no revenue and incurred no direct expenses during the years ended December 31, 2021 and 2020.
Direct expenses include the cost of finished product sold from the Company’s contract manufacturers, sales incentives, associated travel, and inventory return charges.
Research and Development
R&D expenses consist of payments made to contractors for services related to research and product development, product development costs, payments made for patents and licenses to which the Company has acquired rights to use. The Company’s spending on R&D has been primarily to maintain patents and licenses.
Operating Expenses
Selling, general and administrative expenses primarily include salary and benefit costs for employees and contractors included in general and administrative functions, professional services, insurance, travel expenses, telecommunications, and office expenses. Professional services consist principally of external legal, audit, tax and other consulting services.
Other income (expense)
Other income (expense) consists of interest expense on borrowings, finance charges reflecting with debt issuance costs and changes in fair market value of certain assets and liabilities. During the twelve-month period ended December 31, 2021, and 2020, the Company recognized non-cash gains upon the assignment of certain debt and other liabilities to Cytocom.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. Note 1, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
| 14 |
We have identified the policies below as critical to our business operations and the understanding of its results of operations. The Company’s senior management has reviewed these critical accounting policies and related disclosures with the Company’s Board of Directors. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results. Our preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates and such differences may be material.
Use of Estimates
The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of a default by the financial institutions holding its cash and cash equivalents to the extent of amounts recorded on the balance sheets. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000.
Segment and Geographic Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment and does not segment the business for internal reporting or decision making.
Fair Value of Financial Instruments
In accordance with the reporting requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 825, “Financial Instruments”, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.
Cash, cash equivalents and accounts payable are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of the Company’s investment in the common stock of Statera BioPharma (“STAB”) is measured based on the quoted per share price as reported on NASDAQ. The carrying value of notes payable approximate fair value since they bear market rates of interest and other terms. None of these instruments are held for trading purposes.
Derivative Financial Instruments
FASB ASC 815, Fair Value Measurements requires bifurcation of certain embedded derivative instruments in certain debt or equity instruments, and measurement at their fair value for accounting purposes. A holder redemption feature embedded in the Company’s note payable requires bifurcation from its host instrument and is accounted for as a freestanding derivative. The Company held no derivative financial instruments at December 31, 2021.
Research and Development Costs
Research and development costs are charged to expense as incurred and are comprised of fees paid to consultants and patent related costs.
Income Taxes
The Company follows ASC Topic 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
| 15 |
The standard addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC Topic 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
As of December 31, 2021 and 2020, and at the date of adoption, the Company did not have a liability for unrecognized tax uncertainties. The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of December 31, 2021 and 2020, the Company has not accrued any interest or penalties related to uncertain tax positions.
Stock-Based Compensation and Issuance of Stock for Non-Cash Consideration
The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors based on estimated fair values equaling either the market value of the shares issued, or the value of consideration received, whichever is more readily determinable. Generally, the non-cash consideration pertains to services rendered by consultants and others and has been valued at the fair value of the Company’s common stock at the date of the agreement.
The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC Topic 718, “Compensation – Stock Compensation.” The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete.
The Company did not grant any stock-based compensation awards during the years ended December 31, 2021 and 2020.
Net Income per Share
Basic net income per share is calculated by dividing the net income attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.
The Company’s potentially dilutive securities which include primarily warrants, have been included in the computation of diluted net income per share for the twelve-month periods ended December 31, 2021 and 2020.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2021 COMPARED TO YEAR ENDED DECEMBER 31, 2020
Revenues (dollar amounts in thousands):
We had no revenues from operations for the years ended December 31, 2021 and 2020.
Operating Expenses
Selling, general and administrative (dollar amounts in thousands):
Selling, general and administrative expense for the years ended December 31, 2021 and 2020 were as follows (dollar amounts in thousands):
| 2021 | 2020 | |||||||
| Selling, general and administrative | $ | 585 | $ | 760 | ||||
| Decrease from prior year | $ | (175 | ) | $ | (1,608 | ) | ||
| Percent decrease from prior year | (23 | )% | (68 | )% | ||||
| 16 |
In 2021, selling, general and administrative expense was $585, compared to $760 for 2020, a decrease of $175 or 23%. For the years ended December 31, 2021 and 2020, selling, general and administrative expenses were made up as follows (dollar amounts in thousands):
| 2021 | 2020 | |||||||
| Stock listing and investor relations | $ | 20 | $ | 33 | ||||
| Board fees | 120 | 200 | ||||||
| Professional fees and consulting | 119 | 330 | ||||||
| Payroll and benefits | 312 | 177 | ||||||
| Other | 14 | 20 | ||||||
| $ | 585 | $ | 760 | |||||
During the year ended December 31, 2021, the Company has focused on business development activities and the negotiation and finalization of certain licensing transactions described further in Note 8 Licensing Agreements in the notes to the financial statements.
The decrease in selling, general and administrative expense reflects the reduction of board fees and professional fees offset by an increase in payroll costs. Professional fees and consulting costs are incurred for legal, tax and accounting services. Legal fees incurred reflect the Company’s financial reorganization efforts and licensing strategies underway with Cytocom and Forte as described in Note 8 to the financial statements.
The 2020 professional fees include legal costs incurred in connection with the assignment of certain notes and other liabilities completed in the third quarter of 2020. The decrease in board fees recognized the reduction in board members during the reporting periods. The Company had 4 board members in the first quarter of 2020 and subsequently reduced the board to two members thereafter through December 31, 2021. Payroll and benefits reflect accrued wages payable to the Company’s Chief Executive Officer and wages paid to a part time financial analyst.
Research and development
R&D expenses for the years ended December 31, 2021 and 2020 were as follows (dollar amounts in thousands):
| 2021 | 2020 | |||||||
| Research and development | $ | 152 | $ | 126 | ||||
| Increase from prior year | $ | 26 | $ | 210 | ||||
| Percent increase from prior year | 21 | % | (63 | )% | ||||
The Company recorded $152 of research and development costs during the year ended December 31, 2021 reflecting fees payable to Penn State University related to license maintenance fees, minimum royalties and various patent evaluation and filing expenses. These liabilities were assigned to Cytocom in connection with the August 12, 2020 letter agreement as described in Note 8 to the financial statements. As Penn State did not consent to the assignment of these fees, the Company retained the liability for them until subsequently paid by Cytocom; at which time, the Company recognized a gain on the settlement of debt.
The Company recognized $481 in gains on the settlement of liabilities during the year ended December 31, 2021 upon Cytocom’s settlement of these Penn State liabilities.
Research and development programs are managed internally and have historically focused working with individuals and universities to identify and utilize patents we have sub-licensed or acquired since our inception. We continue to seek to expand our pipeline of intellectual property by reviewing other compounds, technologies, or capabilities. The Company continues to seek and identify innovative technologies to incorporate into our intellectual property assets.
For the years ended December 31, 2021 and 2020, research and development expenses were made up as follows (dollar amounts in thousands):
| 2021 | 2020 | |||||||
| Patent expenses | $ | 152 | $ | 33 | ||||
| Professional fees | - | 93 | ||||||
| $ | 152 | $ | 126 | |||||
| 17 |
Interest Expense
Interest expense for the years ended December 31, 2021 and 2020 were as follows (dollar amounts in thousands):
| 2021 | 2020 | |||||||
| Interest expense | $ | 211 | $ | 480 | ||||
| Decrease from prior year | $ | (269 | ) | $ | (414 | ) | ||
| Percentage decrease from prior year | (56 | )% | (46 | )% | ||||
Interest expense is comprised of interest expense and amortization of loan origination fees owed by the Company. The decrease year over year reflects the reduction in outstanding notes payable. During the third quarter of 2020, the Company assigned outstanding notes with principal amounts aggregating $2,728,731 to Cytocom.
Gain on assignment of certain debt and liabilities:
During the year ended December 31, 2021, the Company recognized a non-cash gain of $711,893 upon the settlement of certain liabilities. During the year ended December 31, 2020, the Company recognized a non-cash gain of $3,502,280 in 2020 upon the settlement of certain debt and liabilities upon the assignment to Cytocom.
Liquidity:
Liquidity is measured by the Company’s ability to secure enough cash to meet its contractual and operating needs as they arise. The Company had cash of $493,885 at December 31, 2021 compared to $9,971 at December 31, 2020.
For the years ended December 31, 2021 and 2020, cash used in operating activities was $231,717 and $191,954, respectively. The Company had no cash inflows or outflows for investing activities for the two years ended December 31, 2021. During 2021, the Company received proceeds of $715,631 from several investors for which the documentation had not been completed as of December 31, 2021. During 2020 the Company received proceeds of $197,000 from notes issuances.
The Company does not expect to generate revenues in the coming twelve months. Management continues to pursue new financing sources to support the business. We may be unable to raise additional working capital to meet operating obligations and expenditures and as such may be required to modify it business plan. If the Company is unable to generate sufficient cash flows from sales, or if it does not raise additional working capital to meet all its operating obligations and expenditures, the Company may have to modify its business plan. Over the next 12 months, the Company believes it will require between $500,000 and $1,000,000 to meet its ongoing expenses and obligations.
Off-Balance Sheet Arrangements
During the years ended December 31, 2021 and 2020, we did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
Our Consolidated Financial Statements and Notes thereto, for the fiscal years ended December 31, 2021 and 2020 and the report of Turner, Stone & Company, L.L.P. (“Turner”), our independent registered public accounting firm, are set forth on pages F-1 through F-17 of this Annual Report. The PCAOB ID for Turner, Stone & Company, L.L.P. is #76.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the has concluded that our disclosure controls and procedures are ineffective to ensure that information 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 Securities and Exchange Commission rules and forms. This determination was based on the limited accounting staff, the lack of segregation of duties and the lack of an audit committee at December 31, 2021, which creates a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness means there is a risk that our financial reports or other filings may contain an error or inaccuracy or not submitted timely.
| 18 |
Management Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Any internal control system, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our Chief Executive Officer has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, because of the Company’s limited resources and limited number of employees, and the absence of an audit committee at December 31, 2021, management concluded that, as of December 31, 2021, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to permanent rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
Changes in Internal Control over Financial Reporting
None.
Item 9B. Other Information
None.
| 19 |
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Directors
As of March 15, 2022, the number of voting members of our Board of Directors was 2; the members of our Board of Directors are as follows:
| Name | Age | Director Since | Position | |||
| Kevin Phelps | 67 | November 2018 | Chief Executive Officer, Chief Financial Officer and Director | |||
| Dr. Roscoe Moore | 77 | August 2018 | Director and Chairman of the Board |
The biographies of each director below contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, and information regarding involvement in certain legal or administrative proceedings, if applicable.
Kevin Phelps — Mr. Phelps is a General Partner in Trillium Group, LLC, a Rochester, New York based venture capital firm. Mr. Phelps joined the Board in November 2018. On April 30, 2020, Mr. Phelps was appointed Chief Executive Officer.
His professional experience began as a CPA with Price Waterhouse (now PwC), with a principal focus on emerging growth opportunities. In 1987, he was recruited to head financial planning for Eastman Kodak’s Bioproducts Division. He assisted in the spinoff of the business into an international joint venture and became the Chief Financial Officer and later Executive VP of Business Development of the new entity, Genencor International, Inc. Following Genencor, Mr. Phelps joined Trillium Group, LLC a regional private equity firm. As a partner, Mr. Phelps represented the firm as Chief Financial Officer of Vaccinex, Inc. (Nasdaq “VCNX”), and is currently Director/Chairman of OyaGen, Inc., a pre-clinical drug development company. Mr. Phelps is a director of Arev Nanotek Life Sciences Global (CSE “AVER”), a plant extraction and phyto-medicinal development company.
Mr. Phelps is a graduate of the University of Notre Dame with a degree in accounting. He has served as guest lecturer at the University of Rochester Simon School and the Saunders School of Business at the Rochester Institute of Technology.
Dr. Roscoe Moore — Dr. Moore was a career officer within the Commissioned Corps of the United States Public Health Service (USPHS) and Assistant United States Surgeon General (Rear Admiral, USPHS) within the Immediate Office of the Secretary, Department of Health and Human Services (HHS). He operated as Principal Liaison between the HHS and the ministries of health of African countries for the development of infrastructure for preventive health needs and was integrally involved in the formation of the President’s Emergency Program for AIDS Relief (PEPFAR) program under President George W. Bush, a program which is credited with turning the tide of the global AIDS pandemic. He was selected as Chief Veterinary Medical Officer, USPHS, by Surgeon General C. Everett Koop, and was the Chief Epidemiologist with the Center for Devices and Radiological Health for the FDA. Dr. Moore served as an Epidemic Intelligence Service Officer with the U.S. Centers for Disease Control and Prevention (CDC) and as the ranking veterinarian across all uniformed services, including the armed forces. Dr. Moore has conducted clinical research on infectious diseases including Venezuelan equine encephalitis, tuberculosis, listeriosis, psittacosis, malaria, and HIV/AIDS. He has also been involved in the development of a sustainable infrastructure for the surveillance of emerging and re-emerging diseases worldwide. He has written or co-authored over 100 publications covering a broad range of public health issues.
Dr. Moore has international experience with North Africa (Morocco), North West Africa Sub-Saharan Africa, West Africa (Senegal, Nigeria, and Mali), Central Africa (Central African Republic, Republic of Congo, Rwanda, and Uganda), East Africa and Southern Africa and the countries of the Southern African Development Community (SADC).
Dr. Moore received his Bachelor of Science and Doctor of Veterinary Medicine degrees from the Tuskegee Institute; his Master of Public Health degree in Epidemiology from the University of Michigan; and his Doctor of Philosophy degree in Epidemiology from the Johns Hopkins University. He was awarded the Doctor of Science degree (Honoris Causa) by Tuskegee University in recognition of his distinguished career in public health. Dr. Moore also served as an Assistant Professor of Oncology within the Howard University College of Medicine Cancer Center.
Executive Officers
Biographical information concerning our Chief Executive Officer is set forth above.
| 20 |
Board Committees
In February of 2015, the Board authorized the formation of and adopted charters for an audit committee, compensation committee and nominating committee.
At December 31, 2021, we had not yet established an audit committee, compensation committee, or nominating committee. In 2020, the full Board resolved to constitute itself as the Company’s audit committee until such time as an audit committee is appointed. Since 2020 the functions ordinarily handled by these committees were handled by our entire Board. As of the date of filing this annual report, no members were appointed to the audit committee, compensation committee or nominating committee. The compensation committee and nominating committee have not yet held any meetings.
Family Relationships
There are no familial relationships between any of our officers and directors.
Director or Officer Involvement in Certain Legal Proceedings
Our directors and executive officers were not involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.
Director Independence
The Company is not currently listed on any national securities exchange that has a requirement that the board of directors be independent. At December 31, 2021, Dr. Moore, is deemed an “independent director” as that term is defined under the rules of the NASDAQ Capital Market.
Code of Ethics
We have adopted a Code of Ethics that applies to all our employees and officers, and the members of our Board of Directors. The Code of Ethics is available on our corporate website at www.immunetherapeutics.com. You can access the Code of Ethics on our website by first clicking “About Us” and then “Corporate Governance.” Any amendment to or waiver of the Code of Ethics will be disclosed on our website promptly following the date of such amendment or waiver.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based on our review of the reports filed by Reporting Persons, we believe that, during the year ended December 31, 2021, the Reporting Persons met all applicable Section 16(a) filing requirements.
Item 11. Executive Compensation
The following table summarizes the annual compensation of our Named Executive Officers (defined below), as of December 31, 2021. “Named Executive Officers,” consistent with Item 402(m) of Regulation S-K promulgated under the Exchange Act, include: (i) the Company’s Principal Executive Officer and individuals acting in a similar capacity during fiscal year 2021, regardless of compensation level; (ii) the Company’s two most highly compensated executive officers other than the Principal Executive Officer who were serving as executive officers at the end of fiscal year 2021; and (iii) up to two additional individuals who would have been included under (ii) above but for the fact that the applicable individual was not serving as an executive officer of the Company at the end of fiscal year 2021.
| 21 |
| Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | All Other Compensation | Total($) | ||||||||||||||||||||
| Kevin Phelps (1) | |||||||||||||||||||||||||||
| Chief Executive & Financial Officer | 2021 | $ | 240,000 | $ | - | $ | - | $ | - | $ | - | $ | 240,000 | ||||||||||||||
| 2020 | 160,000 | - | - | - | - | 160,000 | |||||||||||||||||||||
(1) Mr. Phelps became Chief Executive Officer on April 29, 2020 at which time he agreed to defer payment of his of salary until the Company had sufficient income to pay the compensation in cash. At December 31, 2021, the salary deferred for Mr. Phelps was $400,000. In 2021 and 2020, no stock compensation awards were issued to Mr. Phelps.
(2) Mr. Aronstam resigned as the Company’s Chief Financial Officer on November 16, 2020.
Summary Director Compensation Table
The following table shows information regarding the compensation earned or paid during 2021 to Non-Employee Directors who served on the Board during the year.
| Name and Principal Position | Year | Fees Paid or Earned in Cash ($) | Stock Awards ($) | Option Awards ($) | Non-equity incentive plan compensation | Non- qualified incentive plan compensation | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
| Dr. Roscoe Moore, | 2021 | 60,000 | - | - | - | - | - | 60,000 | ||||||||||||||||||||||||
| Director, Chairman of the Board | 2020 | 60,000 | - | - | - | - | - | 60,000 | ||||||||||||||||||||||||
| Kevin Phelps, | 2021 | 60,000 | - | - | - | - | - | 61,000 | ||||||||||||||||||||||||
| Director | 2020 | 60,000 | - | - | - | - | - | 61,000 | ||||||||||||||||||||||||
All members of the Board of Directors who are not our employees, or Non-Employee Directors, currently earn an annual retainer of $60,000 per year, payable monthly in arrears. No payments were made on these retainers in 2021 or in 2020.
Non-Employee Directors are eligible to receive stock or warrants upon their appointment to the Board. Certain members of the Board of Directors are also entitled to receive quarterly or annual payment of Company shares or warrants to acquire shares for their services. We do not currently have minimum stock ownership guidelines for Non-Employee Directors.
We reimburse Non-Employee Directors for actual out-of-pocket costs incurred to attend board meetings. No additional compensation is paid for attendance in person or by telephone at board meetings.
| 22 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information regarding the ownership of our common stock as of March 15, 2022 (the “Determination Date”) by:
| (i) | each current director of our company; | |
| (ii) | each of our named executive officers; | |
| (iii) | all current executive officers and directors of our company as a group; and | |
| (iv) | all those known by us to be beneficial owners of more than five percent (5%) of our common stock. |
Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC. Under these rules, beneficial ownership generally includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes any shares that an individual or entity has the right to acquire beneficial ownership of within 60 days of the Determination Date, through the exercise of any option, warrant or similar right (such instruments being deemed to be “presently exercisable”). In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of our common stock that could be issued upon the exercise of presently exercisable options and warrants are considered to be outstanding. These shares, however, are not considered outstanding as of the Determination Date when computing the percentage ownership of each other person.
To our knowledge, except as indicated in the footnotes to the following table, and subject to state community property laws where applicable, all beneficial owners named in the following table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Percentage of ownership is based on 483,714 shares of common stock outstanding as of March 15, 2022. Unless otherwise indicated, the business address of each person in the table below is c/o Immune Therapeutics, Inc., 2431 Aloma Ave., Suite 124, Winter Park, Florida 32792.
| Title of Class | Name and Address | Amount and Nature of Beneficial Ownership* | Percent of Class (%) | ||||||
| Common Stock | Dr. Roscoe Moore, Director and Chairman of the Board | 2,175 | <1 | % | |||||
| Common Stock | Kevin Phelps, Director and Chief Executive Officer | 200 | <1 | % | |||||
| All directors and officers as a group (2 persons) | 2,375 | <1 | % | ||||||
*
|
The percentages are calculated using 483,714 outstanding shares of the Company’s common stock on March 15, 2022, as adjusted pursuant to Rule 13d-3(d)(1)(i). Pursuant to Rule 13d-3(d)(1) of the Exchange Act, shares beneficially owned by a person or group includes shares of common stock that such person or group has the right to acquire within 60 days after March 31, 2022, which includes, but is not limited to, (i) shares subject to exercisable options or options exercisable within 60 days of March 31, 2022 and (ii) shares subject to RSUs or performance share awards that will vest within 60 days of March 31, 2022. |
Securities Authorized for Issuance under Equity Compensation Plans
In 2014, the Company’s shareholders approved the Company’s 2014 Stock Incentive Plan (“2014 Plan). Equity awards are considered an important part of the Company’s ability to attract, retain, and motivate our executives and employees whose skills and performance are critical to our success.
A total of 5,000 shares of the Company’s common stock has been approved, but not yet reserved, for issuance under the 2014 Plan. Awards under the 2014 Plan may be made to employees, directors, consultants and advisors of the Company and any successor entity that adopts the 2014 Plan. Awards under the 2014 Plan may be made in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards. Vesting of awards will be determined by our Board. No more than 500 shares may be issued to a single participant pursuant to stock options and stock appreciation rights in a calendar year. Re-pricing of outstanding stock awards is not permitted under the 2014 Plan. The 2014 Plan will terminate upon the earlier of the adoption of a resolution of the Board terminating the 2014 Plan, or September 3, 2024.
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | ___ | ___ | ___ | |||||||||
| Equity compensation plans not approved by security holders | n/a | n/a | n/a | |||||||||
| Total | ___ | ___ | ___ |
Item 13. Certain Relationships and Related Party Transactions
None
Item 14. Principal Accounting Fees and Services
The following table sets forth fees billed to us by Turner, Stone & Company, L.L.P., our independent registered public accounting firm, during the fiscal years ended December 31, 2021 and December 31, 2020 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as audit fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.
| December 31, 2021 | December 31, 2020 | |||||||
| Audit Fees | $ | 48,500 | $ | 57,000 | ||||
| Audited Related Fees | $ | — | $ | — | ||||
| Tax Fees | $ | — | $ | — | ||||
| All Other Fees | $ | — | $ | — | ||||
| 23 |
PART IV
Item 15. Exhibits, Financial Statement Schedules.
Exhibits Schedule
The following exhibits are filed with this Annual Report:
| 24 |
| 25 |
| * | filed with the Form 10 Registration Statement filed with the SEC on April 22, 2013 and the Amendment No. 1 to the Form 10 Registration Statement filed with the SEC on June 7, 2013 and incorporated herein by reference. |
| # | filed with the Amendment No. 1 to the Form 10 Registration Statement filed with the SEC on June 7, 2013 and incorporated herein by reference. |
| + | filed with the Amendment No. 2 to the Form 10 Registration Statement filed with the SEC on July 18, 2013 and incorporated herein by reference. |
| ^ | filed with the Amendment No. 3 to the Form 10 Registration Statement filed with the SEC on August 23, 2013 and incorporated herein by reference. |
| ? | filed with the Amendment No. 4 to the Form 10 Registration Statement filed with the SEC on September 25, 2013 and incorporated herein by reference. |
| Î | filed with the Amendment No. 5 to the Form 10 Registration Statement filed with the SEC on October 11, 2013 and incorporated herein by reference. |
| † | Portions of this exhibit have been redacted pursuant to a confidential treatment order granted by the Securities and Exchange Commission. |
| > | Filed with the Amendment No. 6 to the Form 10 Registration Statement filed with the SEC on November 21, 2013 and incorporated hereby by reference. |
| R | Filed with the Amendment No. 7 to the Form 10 Registration Statement filed with the SEC on January 22, 2015 and incorporated hereby by reference. |
| ∞ | Filed with Form 10-K for the year ended December 31, 2020. |
| 26 |
Your Vision Our Focus
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Immune Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Immune Therapeutics, Inc., (the “Company”) as of December 31, 2021 and 2020 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the results of its consolidated operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations since inception and expects to continue to generate operating losses and negative cash flows for the foreseeable future. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Turner, Stone & Company, L.L.P.
Dallas, Texas
March 18, 2022
We have served as the Company’s auditor since 2012.
Turner, Stone & Company, L.L.P. Accountants and Consultants 12700 Park Central Drive, Suite 1400 Dallas, Texas 75251 Telephone: 972-239-1660 ⁄ Facsimile: 972-239-1665 Toll Free: 877-853-4195 |
 | |
| Web site: turnerstone.com | INTERNATIONAL ASSOCIATION OF ACCOUNTANTS AND AUDITORS |
| F-1 |
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2021 AND 2020
| December 31, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 493,885 | $ | 9,971 | ||||
Equity securities at fair value | 2,645,000 | - | ||||||
| Total current assets | 3,138,885 | 9,971 | ||||||
| Deposits | - | 200 | ||||||
| Total Assets | $ | 3,138,885 | $ | 10,171 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 2,184,848 | $ | 2,562,515 | ||||
| Accrued payroll | 3,421,176 | 3,627,648 | ||||||
| Notes payable, net of debt discount | 3,070,208 | 2,844,851 | ||||||
| Net due to related parties | 891,420 | 531,420 | ||||||
| Undocumented investor advances | 715,631 | - | ||||||
| Accrued interest | 564,300 | 635,217 | ||||||
| Accrued liabilities | 239,558 | 221,057 | ||||||
| Derivative liability | - | 1,254,444 | ||||||
| Total current liabilities | 11,087,141 | 11,677,152 | ||||||
| Total Liabilities | 11,087,141 | 11,677,152 | ||||||
| Commitments and Contingencies | - | - | ||||||
| Stockholders’ Deficit: | ||||||||
| Common stock – par value $; and shares authorized, respectively; and shares issued and outstanding respectively | 49 | 48 | ||||||
| Additional paid in capital | 371,473,810 | 371,341,120 | ||||||
| Stock issuances due | 10,303 | 10,303 | ||||||
| Accumulated deficit | (379,432,418 | ) | (383,018,452 | ) | ||||
| Total stockholders’ deficit | (7,948,256 | ) | (11,666,981 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 3,138,885 | $ | 10,171 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
| 2021 | 2020 | |||||||
| Revenues, net | $ | $ | ||||||
| Cost of products sold | - | - | ||||||
| Gross profit | - | - | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | 585,502 | 760,132 | ||||||
| Research and development expense | 152,667 | 126,259 | ||||||
| Depreciation and amortization expense | - | 639 | ||||||
| Total operating expenses | 738,169 | 887,030 | ||||||
| Loss from operations | (738,169 | ) | (887,030 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (210,919 | ) | (479,931 | ) | ||||
| Receipt of common shares | 5,761,500 | - | ||||||
| Change in market value of common shares | (3,116,500 | ) | - | |||||
| Gain on settlement of debt and liabilities | 711,892 | 3,502,280 | ||||||
| Gain (loss) on valuation of derivative | 1,178,230 | (373,584 | ) | |||||
| Finance charges | - | (173,118 | ) | |||||
| Total other income | 4,324,203 | 2,475,647 | ||||||
| Net income | $ | 3,586,034 | $ | 1,588,617 | ||||
| Basic earnings per share attributed to common stockholders | $ | 7.43 | $ | 3.44 | ||||
| Diluted earnings per share attributed to common stockholders | $ | 0.38 | $ | 0.11 | ||||
| Weighted average number of shares outstanding | 9,394,164 | 16,016,427 | ||||||
| Basic weighted average number of shares outstanding | 482,826 | 461,190 | ||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| F-3 |
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
| Common Stock | Additional Paid-in | Stock To Be | Accumulated | |||||||||||||||||||||
| Shares | Amount | Capital | Issued | Deficit | Total | |||||||||||||||||||
| Balance December 31, 2019 | 457,578 | 46 | $ | 370,908,099 | $ | 10,303 | $ | (384,607,069 | ) | $ | (13,688,621 | ) | ||||||||||||
| Issuance of common stock upon conversion of debt | 18,926 | 2 | 152,638 | - | - | 152,640 | ||||||||||||||||||
| Extinguishment of derivative liability upon conversion of debt | - | - | 280,383 | - | - | 280,383 | ||||||||||||||||||
| Net income | - | - | - | - | 1,588,617 | 1,588,617 | ||||||||||||||||||
| Balance December 31, 2020 | 476,504 | $ | 48 | $ | 371,341,120 | $ | 10,303 | $ | (383,018,452 | ) | $ | (11,666,981 | ) | |||||||||||
| Issuance of common stock upon conversion of debt | 5,402 | 1 | 56,479 | - | - | 56,480 | ||||||||||||||||||
| Extinguishment of derivative liability upon conversion of debt | - | - | 76,211 | - | - | 76,211 | ||||||||||||||||||
| Effect of fractional shares upon reverse stock split | 1,808 | - | - | - | - | - | ||||||||||||||||||
| Net income | - | - | - | - | 3,586,034 | 3,586,034 | ||||||||||||||||||
| Balance, December 31, 2021 | 483,714 | $ | 49 | $ | 371,473,810 | $ | 10,303 | $ | (379,432,418 | ) | $ | (7,948,256 | ) | |||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| F-4 |
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 3,586,034 | $ | 1,588,617 | ||||
| Adjustments to reconcile net loss to net cash flows used in operating activities: | ||||||||
| Gain recognized upon receipt of equity securities | (5,761,500 | ) | - | |||||
| Change in market value of equity securities | 3,116,500 | - | ||||||
| Gain on settlement of debt and liabilities | (711,892 | ) | (3,502,280 | ) | ||||
| Change in value of derivative liability | (1,178,230 | ) | 373,584 | |||||
| Amortization of debt discount | 34,790 | 162,210 | ||||||
| Non-cash finance charge | - | 173,118 | ||||||
| Depreciation | - | 639 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Deposits | 200 | - | ||||||
| Accounts payable | 103,752 | 99,233 | ||||||
| Accrued payroll | 24,000 | 16,838 | ||||||
| Accrued interest | 176,131 | 327,883 | ||||||
| Accrued liabilities | 18,498 | 85,000 | ||||||
| Due to related parties | 360,000 | 483,203 | ||||||
| Net cash used in operating activities | (231,717 | ) | (191,955 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | - | - | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from undocumented investor advances | 715,631 | - | ||||||
| Proceeds from issuance of notes (net) | - | 197,000 | ||||||
| Net cash provided by financing activities | 715,631 | 197,000 | ||||||
| Increase in cash | 483,914 | 5,045 | ||||||
| Cash and cash equivalents, beginning of year | 9,971 | 4,926 | ||||||
| Cash and cash equivalents, end of year | $ | 493,885 | $ | 9,971 | ||||
| 2021 | 2020 | |||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Reclassification of accrued interest to notes payable | $ | 243,568 | $ | |||||
| Conversion of notes and accrued interest to common stock | $ | 56,480 | $ | 152,640 | ||||
| Debt discounts on notes payable and warrants | $ | $ | 197,000 | |||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| F-5 |
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
1. Organization and Description of Business
Company Overview
Immune Therapeutics Inc. (the “Company” or “IMUN”) is a Florida Public Company trading on the OTC-Pink. The Company has been inactive for the last year due to a lack of funding, and with the Company’s current structure, it is impossible to move forward until a restructuring of the Company is completed.
Going Concern
As of December 31, 2021, the Company had $493,885 in cash on hand, negative working capital of $7,948,256 and a stockholders’ deficit of $7,948,256. For the year ended December 31, 2021, the Company reported net income attributable to common shareholders of $3,586,034. Net income for the twelve-month period ended December 31, 2021 includes significant non-cash non-operating gains and (losses) aggregating $4,535,122 as follows:
| Gain on settlement of debt and liabilities | $ | 711,892 | ||
| Receipt of common shares | 5,761,500 | |||
| Change in market value of common shares | (3,116,500 | ) | ||
| Gain on reversal of derivative liability | 1,178,230 | |||
| $ | 4,535,122 |
For the year ended December 31, 2020, the Company reported net income attributable to common shareholders of $1,588,617. Included in net income for the year ended December 31, 2020 was a non-cash non-operating gain of $3,502,280 resulting from the assignment of debt.
Historically the Company has relied on the funding of operations through private equity financings and management expects operating losses and negative cash flows to continue at more significant levels in the future. As the Company continues to incur losses, transition to profitability is dependent upon the successful development, approval, and commercialization of product candidates as they become available and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources.
Working capital at December 31, 2021 is not sufficient to meet the cash requirements to fund planned operations through the next twelve months without additional sources of cash. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.
Management is developing as a strategy to re-capitalize the Company and position it for future growth. Key steps to this process include:
| ● | Improve the condition of the balance sheet via license arrangements and capital infusions | |
| ● | Identify and acquire late-stage assets for commercialization | |
| ● | Build out operational infrastructure to generate revenue opportunities to grow shareholder value. |
There can be no guaranties that the Company will be successful in securing adequate capital to continue operations and in identifying and acquiring assets for future development.
| F-6 |
If the Company is unable to secure new working capital, other alternatives strategies will be required.
Historically, the Company has been able to acquire and develop assets, spin them out and retain both an equity stake and royalties and milestone payments. In so doing, the Company has acted as an incubator for late-stage drug development. Management believes that this strategy can continue to be successful. At this time, the Company is reviewing several opportunities which it may pursue as soon as funding is available. At present no definitive actions have been taken.
There can be no guaranties that the Company will be successful in:
| ● | Executing its restructuring plan | |
| ● | Securing adequate capital to continue operations. | |
| ● | Identifying and acquiring assets for future development. |
Company History
Immune Therapeutics, Inc. (“the Company”, “Immune”) was initially incorporated in Florida on December 2, 1993, as Resort Clubs International, Inc. (“Resort Clubs”). It was formed to manage and market golf course properties in resort markets throughout the United States. Galliano International Ltd. (“Galliano”) was incorporated in Delaware on May 27, 1998 and began trading in November 1999 through the filing of a 15C-211. On November 10, 2004, Galliano merged with Resort Clubs. Resort Clubs was the surviving corporation. On August 23, 2010, Resort Clubs changed its name to pH Environmental Inc. (“pH Environmental”). On April 23, 2012, pH Environmental completed a name change to TNI BioTech, Inc., and on April 24, 2012, we executed a share exchange agreement for the acquisition of all the outstanding shares of TNI BioTech IP, Inc. On September 4, 2014, a majority of our shareholders approved an amendment to our Amended and Restated Articles of Incorporation, as amended, to change our name to Immune Therapeutics, Inc. We filed our name change amendment with the Secretary of State of Florida on October 27, 2014, changing our name to Immune Therapeutics, Inc.
The consolidated financial statements of the Company include the following inactive subsidiaries: (1) TNI BioTech, Ltd., a BVI company in Tortola, British Virgin Islands incorporated in October 2012 which was set up to market and sell Naltrexone outside the United States, (2) TNI BioTech, LTD, United Kingdom incorporated in August 2013 which was set up as a micro, small or medium-sized enterprise to be able to sell administrative and financial assistance programs offered by European Medicines Agency, (3) Airmed Biopharma Limited, Dublin Ireland incorporated in March 2014 which was set up to qualify for tax incentives for Irish holding/headquartered companies to benefit from the network of double tax treaties that reduce withholding taxes and (4) Airmed Holdings Limited an Irish company domiciled in Bermuda incorporated in March 2014 set up to manage international distribution.
2. Summary of Significant Accounting Policies
Basis of Presentation
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
We have identified the policies below as critical to our business operations and the understanding of its results of operations. The Company’s management has reviewed these critical accounting policies and related disclosures with the Company’s Board of Directors. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results.
| F-7 |
Use of Estimates
The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of a default by the financial institutions holding its cash and cash equivalents to the extent of amounts recorded on the balance sheets. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000.
Segment and Geographic Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment and does not segment the business for internal reporting or decision making.
Fair Value of Financial Instruments
In accordance with the reporting requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 825, “Financial Instruments”, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.
Cash, cash equivalents and accounts payable are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of the Company’s investment in the common stock of Statera BioPharma (“STAB”) is measured based on the quoted per share price as reported on NASDAQ and is a level 1 asset. The carrying value of notes payable approximate fair value since they bear market rates of interest and other terms. None of these instruments are held for trading purposes.
Derivative Financial Instruments
FASB ASC 815, Fair Value Measurements requires bifurcation of certain embedded derivative instruments in certain debt or equity instruments, and measurement at their fair value for accounting purposes. A holder redemption feature embedded in the Company’s note payable requires bifurcation from its host instrument and is accounted for as a freestanding derivative. The Company held no derivative financial instruments at December 31, 2021.
Research and Development Costs
Research and development costs are charged to expense as incurred and are comprised of fees paid to consultants and patent related costs.
Income Taxes
The Company follows ASC Topic 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The standard addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC Topic 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC Topic 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
As of December 31, 2021 and 2020, and at the date of adoption, the Company did not have a liability for unrecognized tax uncertainties. The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of December 31, 2021 and 2020, the Company has not accrued any interest or penalties related to uncertain tax positions.
| F-8 |
The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors based on estimated fair values equaling either the market value of the shares issued, or the value of consideration received, whichever is more readily determinable. Generally, the non-cash consideration pertains to services rendered by consultants and others and has been valued at the fair value of the Company’s common stock at the date of the agreement.
The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC Topic 718, “Compensation – Stock Compensation.” The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete.
Basic net income per share is calculated by dividing the net income attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.
The Company’s potentially dilutive securities which include primarily warrants, have been included in the computation of diluted net income per share for the twelve-month periods ended December 31, 2021 and 2020.
| Net Income (Numerator) | Weighted Average Common Shares (Denominator) | Per Share Amount | ||||||||||
| Basic EPS | ||||||||||||
| Income available to common stockholders | $ | 3,586,034 | 482,826 | $ | 7.43 | |||||||
| Diluted EPS | ||||||||||||
| Effect of warrants convertible into common stock | $ | 3,586,034 | $ | 9,394,164 | $ | 0.38 | ||||||
Recent Accounting Standards
During the year ended December 31, 2021, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.
Note 3. Investment in Common Stock
In the third quarter of 2021, Cytocom announced the completion of its merger with Cleveland BioLabs, Inc. (“CBLI”) which resulted in the Company’s receipt of common shares of CBLI, reflecting the Company’s retained minority interest in Cytocom. The merger was completed in July 2021. Subsequent to the merger, CBLI adopted a new corporate name, Statera BioPharma, Inc., with the ticker symbol “STAB” effective September 1, 2021. Cytocom emerged as a publicly traded entity following the merger with CBLI.
The Company recorded the fair value of the common shares of STAB at $5,761,500 upon the announcement of the merger between Cytocom and CBLI. At of December 31, 2021 and through the date the financial statements were issued, the Company had not yet converted the original Cytocom shares to STAB shares.
The Company recognized non-operating income upon the receipt of the STAB common shares in the Statement of Operations during the third quarter of 2021. In accordance with the reporting requirements of FASB ASC Topic 321, “Investments Equity Securities”, the Company re-measured the fair value of the STAB common shares at $per share and recognized a change in market value of $3,116,500 as of December 31, 2021. At December 31, 2021 the fair value of the STAB common shares measured at $2,645,000 and is reflected as a current asset in the Balance Sheet.
| F-9 |
4. Notes payable
As of December 31, 2021, the Company had $in notes payable to shareholders of record. During the twelve months ended December 31, 2021 and December 31, 2020, the Company issued zero and $197,000, respectively in new promissory notes.
Notes Payable at December 31, 2021 and 2020:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Promissory notes issued between December 2014 and January 2015. Lender earns interest at 10%. Notes were to be repaid in 36 monthly instalments of principal and interest commencing no later than October 15, 2015. These notes are in default. | $ | 70,000 | $ | 70,000 | ||||
| Promissory notes issued between May 2015 and June 2016 and matured between February 2017 and November 2018. Lenders earn interest at rates between 2% and 10%. These notes are in default. | $ | 149,500 | 149,500 | |||||
| Promissory notes were issued in 2016. The notes accrue interest at 2% and matured between November 2017 and December 2017. These notes are in default. | $ | 606,500 | 606,500 | |||||
| Promissory notes were issued in 2017 accrue interest at 2% and matured between January 2018 and September 2018. These notes are in default. | $ | 205,000 | 205,000 | |||||
| Promissory notes were issued in 2017 accrue interest at 2% and matured in May 2018. These notes are in default. | $ | 150,000 | 150,000 | |||||
| Promissory notes were issued in 2017 accrue interest at 2% and matured between August 2018 and September 2018. These notes are in default. | $ | 116,800 | 116,800 | |||||
| A promissory note for $425,000 was issued in October 2017 with an original issue discount of $70,000 and an annual interest rate of 22% on all outstanding balances. The note was in default, which triggered certain penalties, resulting in an outstanding balance of $454,032. The original noteholder entered into a Note Purchase Agreement in November 2020, in the amount of $697,600, reflecting the total principal, interest and penalties, and transferred the note to Global Reverb Corp., an entity wholly owned by the Company’s former Chief Executive Officer and former director, Noreen Griffin. During the first quarter of 2021, Global Reverb Corp. sold 50% of the value of the note to another investor. | - | 454,032 | ||||||
| Promissory notes were issued in 2017 accrue interest at 2%. The notes are in default. | $ | 105,500 | 105,500 | |||||
| Promissory notes were issued in the 2018 accrue interest at 2% and matured between May 2018 and January 2019. These notes are in default. | $ | 47,975 | 47,975 | |||||
| Promissory notes were issued in 2018 accrue interest at 2% and matured between July 2018 and October 2018. These notes include warrants between 1,000 and 5,000 shares with an exercise price of $5. These notes are in default. | $ | 65,000 | 65,000 | |||||
| F-10 |
As of December 31, 2021 and 2020, the Company had accrued $564,300 and $635,217, respectively, in unpaid interest and default penalties.
Redstart Holdings Corp.
In the first quarter 2020, the Company issued a Convertible Promissory Note to Redstart Holdings Corp. (“Redstart”) in the principal amount of $53,000. The note matured on March 30, 2021 and had an interest rate of 12% per annum. Redstart converted the note and related accrued interest in the amount of $3,180 in October 2020. The Company issued shares of common stock at an average price per share of $8.15 in connection with this conversion. The conversion price as defined in the original note agreement equaled 61% multiplied by the lowest trading price for the common stock during the 20-trading day period ending on the latest complete trading day prior to the conversion date.
| F-11 |
Geneva Roth Remark Holdings, Inc.
During the second and third quarters of 2020, the Company issued three Convertible Promissory Notes aggregating $144,000 to Geneva Roth Remark Holdings Corp. (“GRRH”). The notes matured one year from the date of issuance and had an interest rate of 12% per annum. The conversion price as defined in the original note agreement equaled 61% multiplied by the lowest trading price for the common stock during the 20-trading day period ending on the latest complete trading day prior to the conversion date.
During the fourth quarter of 2020, GRRH converted $91,000 in principal and $5,460 in accrued interest on their outstanding notes. The Company issued shares of common stock at an average price per share of $ in connection with this conversion.
During the first quarter of 2021, GRRH converted the balance of the notes and the Company issued common shares, at a price of $ per share, upon the conversion of $53,000 in principal and $3,480 in accrued interest.
2020 Gain on Settlement of Debt
In 2020 the Company and Cytocom entered into an agreement for the Company to sublicense LDN and MENK for emerging markets to Cytocom. Pursuant to the agreement, effective September 30, 2020 the Company assigned certain notes payable aggregating principal amount of $2,728,731 and accrued interest of $495,409 to Cytocom. The Company reported a non-operating non-cash gain upon the assignment of these notes in the third quarter of 2020. The owner of each assigned note provided their written consent to assignment, assumption, and amendment of the promissory notes.
5. Derivative Liability
As of December 31, 2020 the fair value of the outstanding derivative liability was $1,254,444. The Company estimated the fair value of the derivative liability using the binomial option pricing model on December 31, 2020. This derivative liability was reversed in the first quarter of 2021 in connection with the repayment of the underlying debt instrument, as described in Note 4.
Year ended December 31, 2020 | ||||
| Volatility | 178.65% | |||
| Risk-free interest rate | 1.0% | |||
| Expected dividends | na | |||
| Expected term (years) | .25 - 1.00 | |||
The Company determined the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs may be used to measure fair value:
| Level 1 | Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
| Level 2 | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The Company uses Level 3 inputs to estimate the fair value of its derivative liabilities.
The following schedule summarizes the valuation of financial instruments at fair value in the balance sheets as of December 31, 2021:
| Fair Value Measurements as of December 31, 2021 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Fair value of common stock | $ | 2,645,000 | ||||||||||
| Liabilities | ||||||||||||
| F-12 |
6. Common Stock and Common Stock Warrants
Each holder of common stock is entitled to vote on all shareholder matters and is entitled to one vote for each share held. No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock or any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.
As of December 31, 2021, and 2020, the Company was authorized to issue and common shares, respectively, at a par value of $ per share. As of December 31, 2021, and 2020, the Company had and shares of common stock outstanding, respectively.
Common Stock Warrants
The Company did not issue or modify any warrants in the twelve-month period ended December 31, 2021.
When the Company sells its stock to stockholders for cash, it periodically issues common stock warrants to the investors at prices agreed at the date of the original sale. The Company incurs a cost for the rights attached to the warrants, which is calculated using the Black-Scholes Model and is reported in the Statements of Operations in the period of issuance.
A summary of outstanding warrants as of December 31, 2021 follows:
| Expiration Date | Number of Shares | Exercise Price | Remaining Life (years) | |||||||||
| First Quarter 2022 | 150 | $ | 200 | .25 | ||||||||
| Second Quarter 2022 | 1,750 | $ | 150 | .50 | ||||||||
| Third Quarter 2022 | 1,650 | $ | 50-100 | .75 | ||||||||
| Fourth Quarter 2022 | 9,811 | $ | 80-290 | 1.00 | ||||||||
| First Quarter 2023 | 1,204,000 | $ | 5-40 | 1.25 | ||||||||
| Second Quarter 2023 | 802,000 | $ | 5-200 | 1.50 | ||||||||
| Third Quarter 2023 | 7,521,500 | $ | 5-100 | 1.75 | ||||||||
| Fourth Quarter 2023 | 6,024,300 | $ | 2-5 | 2.00 | ||||||||
| First Quarter 2024 | 3,660,000 | $ | 5 | 2.25 | ||||||||
| Second Quarter 2024 | 800,000 | $ | 5 | 2.50 | ||||||||
| Third Quarter 2028 | 3,000 | $ | 70 | 7.00 | ||||||||
| Second Quarter 2032 | 28,995 | $ | 10-70 | 10.75 | ||||||||
| 20,057,156 | $ | 2-290 | ||||||||||
Following is a summary of outstanding stock warrants activity for the twelve months ended December 31, 2021 and 2020:
| Number
of Shares | Exercise Price Per Share | Weighted Average Price | ||||||||||
| Warrants as of December 31, 2019 | 20,083,335 | $ | - | $ | 4.21 | |||||||
| Issued | ||||||||||||
| Expired and forfeited | (2,300 | ) | $ | - | $ | |||||||
| Exercised | ||||||||||||
| Warrants as of December 31, 2020 | 20,081,035 | $ | - | $ | 4.22 | |||||||
| Issued | ||||||||||||
| Expired and forfeited | (23,873 | ) | $ | - | $ | |||||||
| Exercised | ||||||||||||
| Warrants as of December 31, 2021 | 20,057,162 | $ | - | $ | 5.21 | |||||||
| F-13 |
7. Income Taxes
There was no income tax expense reflected in the results of operations for the years ended December 31, 2021 and 2020. As of December 31, 2021, the Company had federal and state net operating loss carryforwards of $91,856,000 which may be used to offset future taxable income.
Approximately $64,629,000 will expire in 2033 while $27,227,000 will be limited to 80% of taxable income but will not expire.
The tax effects of temporary differences which give rise to deferred tax assets (liabilities) are summarized as follows:
Deferred tax assets:
| 2021 | 2020 | |||||||
| Net operating losses | $ | 23,281,000 | $ | 19,892,000 | ||||
| Accrued expenses | 21,000 | - | ||||||
| Stock based compensation | - | 39,284,000 | ||||||
| Amortization, depreciation, and impairment | - | 4,178,000 | ||||||
| Capitalization of start-up costs for tax purposes | - | 1,145,000 | ||||||
| Gain/(loss) on conversion of debt | 713,000 | |||||||
| Total deferred tax assets | 23,302,000 | 65,212,000 | ||||||
| Valuation allowance | (23,302,000 | ) | (65,212,000 | ) | ||||
| Total deferred tax assets, net | $ | $ | ||||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the realization of future taxable income during the periods in which those temporary differences become deductible. Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding realizability.
| For the year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Statutory federal tax rate | 21.00 | % | 21.00 | % | ||||
| State rate net of federal | 6.69 | % | 0.00 | % | ||||
| Permanent differences | 11.35 | % | 4.94 | % | ||||
| Prior period adjustment | 1,142.33 | % | 2.63 | % | ||||
| Valuation allowance | (1,181,38 | )% | (21.00 | )% | ||||
| Provision for income taxes | ||||||||
The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of December 31, 2021, and 2020, the Company had no unrecognized tax benefits. There were no changes in the Company’s unrecognized tax benefits during the years ended December 31, 2021 and 2020. The Company did not recognize any interest or penalties during fiscal 2021 or 2020 related to unrecognized tax benefits.
Tax years 2018-2021 remain open to examination for federal income tax purposes and by other taxing jurisdictions to which the Company is subject.
| F-14 |
8. Licenses and Supply Agreements
Forte Animal Health, Inc.
On July 8, 2021, the Company amended the license agreement (the “Amended License Agreement”) with Forte Animal Health Inc. (“Forte”) dated February 27, 2020.
Under the Amended License Agreement, the Company granted Forte an exclusive license to develop and commercialize pharmaceutical products consisting of Lodonal and MENK for use in veterinary applications for all indications world-wide. Milestone payments and royalties are defined in the agreement based on development and royalties are based on sales during the license period.
The Initial License Fee includes the assumption of certain Company defaulted Notes and other liabilities. The note holders and vendors associated with the assigned liabilities have not yet assigned their rights to Forte.
Consideration for Amended License Agreement with Forte at December 31, 2021
| Consideration / Assumption of: | ||||
| Notes in Default | $ | 2,040,006 | ||
| Accounts payable and accruals | 338,909 | |||
| Past Due Employee Obligations | 786,177 | |||
| Total Consideration to be Recognize Upon Execution | $ | 3,165,092 |
The documentation and sign off, of the Forte license, have yet to be executed by the individual lenders that will be required to provide their sign-off and approval for the transfer of these notes. As such the accompanying financial statements do not reflect any gain on sale. Until such time as the transaction is completed Forte does not have clear title and interest to the veterinary rights.
Forte has agreed to make payments to the Company in connection with this agreement as follows:
| ● | Initial License Fee, upon the assignment of certain Company Notes Payable. | |
| ● | Development Milestone Payments upon the occurrence of the identified events, one-time, non-creditable, non-refundable milestone payments of $100,000 will be earned by the Company upon: (1) a successful MUMS designation and (2) upon a successful conditional approval. | |
| ● | Commercial Milestone Payments upon reaching the mutually agreed aggregate net sales. Forte will pay one-time, non-creditable, non-refundable milestone payments to be negotiated and addressed in a separate Amendment later. | |
| ● | Royalties during the royalty term (generally 15 years from the first sale of a product in a country), royalties on annual net sales as follows: |
| Annual Sales of Royalty Qualifying Licensed Products | Royalty Rate | |||
| <$500,000,000 | 2 | % | ||
| 500,000,000 to < $1,000,000,000 | 4 | % | ||
| > $1,000,000,000) | 6 | % | ||
As of December 31, 2021, this license agreement has not been executed as Forte has failed to fund the consideration defined in the agreement. To date the Company has not received any payments under the terms of this agreement.
Cytocom
On May 13, 2020, the Company and Cytocom entered into an Amendment to The Second Amendment to The License Agreement (“Third Amendment”) that was effective December 31, 2018. The sublicense provides Cytocom with the Company’s previously licensed rights for LDN and MENK in Emerging Markets.
Original terms for consideration for the sublicense were not finalized until August 12, 2020, at which time Cytocom and the Company signed a letter agreement in which Cytocom agreed to assume a combination of defaulted notes plus certain other liabilities. Such terms were amended, and the Company agreed to transfer all the rights, title, and interest to Cytocom in technology licensed from Penn State Research Foundation (“PSU”) in exchange for Cytocom assuming all past due and future obligations under the PSU license. While the Company formalized the agreement to assign all outstanding liabilities due to PSU, a vendor of the Company, PSU did not consent to the assignment of the payables to Cytocom. As of December 31, 2021, the Company had no outstanding accounts payable balances due to Penn State University.
| F-15 |
In the third quarter of 2020, the Company received a Notice of Default (“Notice”) from Cytocom relating to the sublicensing transaction. The Company disputes the validity of the Notice on the basis that Cytocom has failed to execute on their consideration for the license. On July 20, 2021 the Notice of Default was rescinded.
On July 20, 2021, Cytocom and the Company agreed to modify the terms of the original sublicense. The renegotiated terms are presented below. The assignment of the Notes in Default was fully executed in the third quarter of 2020 with the transfer of the notes upon the creditors’ signoff. The Company recognized a gain upon the assignment of these notes in the third quarter of 2020. Cytocom has not completed the assumption of the remaining liabilities.
Consideration for May 13, 2020 License to Cytocom at December 31, 2021
| Consideration / Assumption of: | ||||
| Notes in Default | $ | 3,302,209 | ||
| Accounts payable and accruals | 230,000 | |||
| Past Due Employee Obligations | 1,110,567 | |||
| Total anticipated Consideration | $ | 4,642,776 | ||
| Recognized through December 31, 2020 | (3,302,209 | ) | ||
| To Be Recognized upon Execution | $ | 1,340,567 | ||
As of December 31, 2021, the Notes transaction has not been fully executed. The Notes in default have been assigned and the transfer signed off by the creditors, but Cytocom still has not completed the assumption of the agreed upon obligations.
9. Commitments and Contingencies
Distribution Agreements in Nigeria
In October 2013, the Company announced the signing of a Distribution Agreement with AHAR Pharma, a Nigerian company, to market Lodonal™, in Nigeria for the treatment of autoimmune diseases and cancer. AHAR intends to distribute Lodonal™ through a local distributor network, an Internet client base and directly to hospitals, pharmacists and doctors in Nigeria. The first deliveries under the agreement took place in February 2018. Under the original agreement, the Company is obligated to provide delivery of an initial supply of between 1 million and 1.5 million doses of Lodonal™ product to cover AHAR Pharma’s first-year purchase commitment. Due to the fact that AHAR Pharma failed to meet its contractual purchase obligations, the Company formally issued notice of default under the agreement.
On April 18, 2018, AHAR Pharma transferred its rights under the Distribution Agreement to Fidson Healthcare Plc (“Fidson”), and Fidson signed an exclusive distribution agreement with the Company to distribute Lodonal™. There were no shipments under this agreement during the years ended December 31, 2020 and 2019. There were also no discussions with Fidson regarding the Distribution Agreement in 2020 or 2019.
Contract Manufacturing Agreements
On October 25, 2016, the Company and Acromax Dominicana, SA (“Acromax”), which is based in the Dominican Republic, entered into a contract for manufacturing of LDN tablets, capsules and/or creams (“Agreement”). Subject to the terms and conditions of the Agreement, Acromax will obtain all necessary licenses and permits to carry out the manufacturing and packaging of LDN in exchange for a fixed fee per tablet plus an additional fee for packaging, shipping and customs clearance. The Agreement has an initial term of five years unless terminated by either party in accordance with the terms.
10. Related Party Transactions
Board and Officer Transactions
Kevin Phelps, the Company’s Chief Executive & Financial Officer, and a member of the board of directors, has earned board compensation of $5,000 a month during 2021 and 2020. Mr. Phelps has unpaid board fees of $185,000 and $125,000 at December 31, 2021 and 2020, respectively, which is included in amounts due to related parties. Mr. Phelps serves as the Company’s Chief Executive & Financial Officer with an annual salary of $240,000. As of December 31, 2021, Mr. Phelps had $400,000 in earned and unpaid compensation included in amounts due to related parties.
Dr. Roscoe Moore, the chairman of the board of directors, is entitled to receive compensation of $5,000 a month for board fees. Dr. Moore has unpaid board fees of $215,250 and $155,250 at December 31, 2021 and 2020, respectively, which is included in amounts due to related parties.
11. Subsequent Events
On January 27, 2022, the Company was named as defendant in a lawsuit filed in the Superior Court of the State of Arizona for the County of Maricopa by Mr. Ira Gaines. The lawsuit is based on claims for breach of contract alleging the failure by the Company to make required payments of principal and interest arising out of the secured promissory note dated October 1, 2019 made by the Company in favor of Mr. Gaines in the original principal amount of $150,000. The relief sought by the plaintiff includes payment by the Company of the full principal balance, accrued and unpaid interest, continuing interest through the date of entry of judgment, late fees, post-judgment interest, and attorneys’ fees. The Company has retained counsel to respond to the complaint.
| F-16 |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Immune Therapeutics, Inc. | ||
| Date: March 18, 2022 | By: | /s/ Kevin Phelps |
| Name: | Kevin Phelps | |
| Title: | Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive and Accounting Officer) | ||
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Person | Capacity | Date | ||
| /s/ Dr. Roscoe Moore | Director | March 18, 2022 | ||
| Roscoe Moore |
| 27 |
