Attached files
| file | filename |
|---|---|
| EX-32.1 - Immune Therapeutics, Inc. | ex32-1.htm |
| EX-31.2 - Immune Therapeutics, Inc. | ex31-2.htm |
| EX-31.1 - Immune Therapeutics, Inc. | ex31-1.htm |
| EX-21.1 - Immune Therapeutics, Inc. | ex21-1.htm |
| EX-10.59 - Immune Therapeutics, Inc. | ex10-59.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2020
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 [X]
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 [X]
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 [X] 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 [X] 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 | [X] |
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. [X]
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 [X]
The aggregate market value of voting stock held by non-affiliates of the registrant on June 30, 2020, the last business day of the registrant’s most recently completed second quarter, was $11,826,000, based on the last reported sale price of the registrant’s Common Stock on the OTC Markets on that date.
As of April 15, 2021, the registrant had outstanding 481,906 shares of common stock, $0.0001 par value per share.
IMMUNE THERAPEUTICS, INC.
2020 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 a number of 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; | |
| ● | our reliance on key personnel, including our ability to attract and retain scientists; | |
| ● | 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 |
Company Overview
Immune Therapeutics, Inc. (the “Company”) 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 July 2012, the Company’s focus turned to acquiring patents that would protect and advance the development of new uses of opioid-related immune- therapies,
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, and (iv) confidential and proprietary information, including, trade secrets and know-how.
| 4 |
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 as provided by the Original Agreement. The Restated Agreement grants the Company distribution and marketing rights for Lodonal™ and MENK for humans in certain Emerging Markets. In addition, the Company has been granted the rights to distribute and market Lodonal™ and MENK for animal use in the United States. The royalty due to Cytocom has been 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, Cato Research Ltd and Penn State University, both vendors of the Company, did not consent to assign the payables to Cytocom.
On June 4, 2018, the Company and Cytocom entered into a Stock Purchase Agreement (the “Stock Agreement”). Pursuant to the Stock Agreement, 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 common shares issued and outstanding on that date. The Company agreed to assume the obligation 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 obligation 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.
Original Restructuring Strategy
In October 2019, the Board of Immune Therapeutics, Inc. (“Immune”) approved the restructuring of Immune (“Original Restructuring Strategy”), which included a conversion of Immune promissory notes (the “Convertible Notes”) into a proposed new class of Series D Preferred equity. However, Immune was unable to obtain the requisite shareholder approval to issue the Series D Preferred equity, so that the plan to convert the debt into a Series D could not be completed. At the same time, the Shareholders did approve a 1- for 1000 reverse stock split (“Reverse Stock Split”).
Due to its inability to move forward on the proposed plan the Company has been forced to pursue alternatives to the Original Restructuring Strategy. In an effort to realize the potential value of its technology positions, the Board directed management to pursue possible sublicensing options with Forte and with Cytocom (with which it holds an equity interest.)
In the first quarter 2020 the Reverse Stock Split was submitted and approved by the State of Florida. In June 2020, the Company received notification that its application with the Financial Industry Regulatory Agency (“FINRA”) had been denied due to a deficiency cited in the Company’s capitalization. In March 2021, the Company refiled its application with FINRA for approval of its 1 for 1000 Reverse Stock Split. To date no action has been taken by FINRA. Management believes it has resolved the deficiency as reflected in the re-application to FINRA.
On February 27, 2020, the Company approved and entered into a license agreement (the “License Agreement”) with Forte Biotechnology International Corp. (“Forte”). As of April 15, 2021, this license agreement has not been executed as Forte has failed to fund the consideration defined in the agreement. Under the 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 totals includes the assumption of Company defaulted Notes and certain other liabilities. Forte will assume defaulted debt and certain accounts payable and accrued liabilities of the Company. The note holders and vendors associated with the assigned liabilities have not yet assigned their rights to Forte.
| 5 |
Negotiated Consideration for February 28, 2020 License to Forte
| Consideration Assumption of: | ||||
| Notes in Default. | $ | 1,787,706 | ||
| Accounts payable and accruals | 261,706 | |||
| Past Due Employee Obligations | 990,201 | |||
| Total Consideration to be Recognize Upon Execution | $ | 3,039,613 | ||
The documentation associated with the Forte license has yet to be signed and the individual lenders need to provide their 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.
On May 13, 2020, the Company and Cytocom entered into 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. 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. The Company agreed to transfer all their rights, title, and interest to Cytocom in technology licensed from Penn State Research Foundation in exchange for Cytocom assuming all past due and future obligations under the Penn State license.
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.
As of April 4, 2021, the accounts payable, accruals and employee obligations transfers 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.
Consideration for May 13, 2020 License to Cytocom
| Consideration Assumption of: | ||||
| Notes in Default. | $ | 3,038,107 | ||
| Accounts payable and accruals | 105,123 | |||
| Past Due Employee Obligations | 1,110,567 | |||
| Total anticipated Consideration | $ | 5,200,797 | ||
| Recognized through December31, 2020 | (3,314,333 | ) | ||
| To Be Recognized upon Execution | $ | 1,888,464 | ||
At December 31, 2020, the Company has an equity interest of 13.5% in Cytocom.
| 6 |
Assuming that the sublicensing transactions with Cytocom and Forte are completed as described herein, the Company has no operating assets which it intends to commercialize. Therefore, as described below, the Company will continue to explore opportunities to restructure its capital position and, if successful, resume its focus on commercializing pharmaceutical products.
Current Restructuring Strategy
Management recognizes that the Company cannot move forward without adequate capital resources. The transactions with Cytocom and Forte do not provide any new working capital to the Company.
As a result, Management is currently pursuing a strategy to re-capitalize the Company and position it for future growth. Key steps in the process include:
| ● | Re-apply to secure FINRA approval for the previously approved reverse stock split. | |
| ● | Improve the condition of the Company’s financial position and balance sheet: |
| ○ | License, where practical technologies which the Company will otherwise not be able to commercialize. | |
| ○ | Seek additional capital to continue to maintain operations and compliance with OTC reporting requirements. | |
| ○ | Seek funding from current Note Holders with exercisable warrants to convert such warrants as a means of raising capital and reducing outstanding debt. |
| ● | Identify and seek to acquire late-stage assets for future commercialization. | |
| ● | Build out an appropriate operational infrastructure, generate new opportunities and grow shareholder value. |
If the Company is unable to secure new working capital, other alternatives strategies will be required.
Rationale for Current Restructuring Strategy
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 drug development. Management believes that this strategy can continue to be successful.
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. 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 | ||||
| Licensed | ||||||
| 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
Our 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.
Not required for Smaller Reporting Companies
Item 1B. Unresolved Staff Comments
Not applicable.
We maintain our office headquarters at 2431 Aloma Ave., Suite 124, Winter Park, Florida 32792. The monthly lease cost is approximately $350. The lease is cancelable upon one month’s notice.
None.
Item 4. Mine Safety Disclosures
Not applicable.
| 11 |
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 (presented based on a 1:1,000 reverse stock split) for the periods indicated as reported by the OTC Markets Group, Inc.
Period
| Price Range | ||||||||
| High | Low | |||||||
| Quarter Ended: | ||||||||
| December 31, 2020 | $ | 49 | $ | 11 | ||||
| September 30, 2020 | $ | 50 | $ | 13 | ||||
| June 30, 2020 | $ | 29 | $ | 10 | ||||
| March 31, 2020 | $ | 15 | $ | 5 | ||||
| Quarter Ended: | ||||||||
| December 31, 2019 | $ | 10 | $ | 4 | ||||
| September 30, 2019 | $ | 10 | $ | 4 | ||||
| June 30, 2019 | $ | 9 | $ | 4 | ||||
| March 31, 2019 | $ | 20 | $ | 4 | ||||
Record Holders
As of March 31, 2021, we have approximately 621 active stockholders of record of our common stock.
Dividends
The Company paid no dividends in 2020 or 2019. 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 its common stock other than those generally imposed by applicable state law.
Securities Authorized for Issuance under Equity Compensation Plans
On September 4, 2014, the Company’s shareholders approved the Company’s 2014 Stock Incentive Plan (“2014 Plan). The 2014 Plan is an important incentive for our employees and is critical to the Company’s ongoing effort to build shareholder value and align the interests of employees and directors with those of the Company’s shareholders. Equity awards are a significant 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.
Item 6. Selected Financial Data
Not required for smaller reporting companies.
Off-Balance Sheet Arrangements
During the years ended December 31, 2020 and 2019, we did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.
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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.
Overview
Revenue, Direct Expenses and Gross Margin
The Company had no revenue and incurred no direct expenses during the years ended December 31, 2020 and 2019.
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 derivative liabilities. During the twelve-month period ended December 31, 2020, the Company recognized a non-cash gain upon the assignment of certain debt agreements with 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.
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.
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. At December 31, 2020 and 2019 the Company had no leases to which the standard applies.
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At December 31, 2020, the Company was a party to an agreement to a short-term operating lease for office space in Orlando, Florida. This agreement allows for cancellation with thirty days’ notice. Rental expense for the years ended December 31, 2020 and 2019 was $3,000 and $12,661, respectively.
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. At December 31, 2020, the Company has no cash balances in excess of insured limits.
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, accounts payable, and accrued liabilities are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of notes payable also 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.
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.
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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. At the date of adoption, and as of December 31, 2020 and 2019, the Company does 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, 2020, and 2019, 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 505-50, “Equity-Based Payments to Non-Employees.” 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, 2020 and 2019.
Net Income (Loss) per Share
Basic net income (loss) per share is calculated by dividing the net loss 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 warrants and potential common shares issuable under certain convertible notes, have been included in the computation of diluted net income per share for the twelve-month period ended December 31, 2020. Net income per share, for the year ended December 31, 2020, was calculated by dividing the net loss by the weighted-average number of common share outstanding for the period determined using the treasury-stock method and the if-converted method.
For the twelve-month period ended December 31, 2019, the potentially dilutive securities were excluded from the computation of diluted loss per share as the effect would be to reduce the net loss per common share. Therefore, the weighted-average common stock outstanding used to calculate both basic and diluted net loss per share for the year ended December 31, 2019.
Results of Operations
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Revenues (dollar amounts in thousands):
We had no revenues from operations for the years ended December 31, 2020 and 2019.
Operating Expenses
Selling, general and administrative (dollar amounts in thousands):
Selling, general and administrative expense for the years ended December 31, 2020 and 2019 were as follows (dollar amounts in thousands):
| 2020 | 2019 | |||||||
| Selling, general and administrative | $ | 760 | $ | 2,368 | ||||
| Decrease from prior year | $ | (1,608 | ) | $ | (864 | ) | ||
| Percent decrease from prior year | (68 | )% | (27 | )% | ||||
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In 2020, selling, general and administrative expense was $760, compared to $2,368 for 2019, a decrease of $1,608 or 68%. For the years ended December 31, 2020 and 2019, selling, general and administrative expenses were made up as follows (dollar amounts in thousands):
| 2020 | 2019 | |||||||
| Stock listing and investor relations expenses | $ | 33 | $ | 50 | ||||
| Professional fees and consulting | 530 | 632 | ||||||
| Payroll | 177 | 1,543 | ||||||
| Other expenses | 20 | 143 | ||||||
| $ | 760 | $ | 2,368 | |||||
The decrease in selling, general and administrative expense was attributable primarily to the reduction in payroll costs and on cost of legal and board fees as the Company has effected a realignment of its corporate strategy in 2020.
Research and development
R&D expenses for the years ended December 31, 2020 and 2019 were as follows (dollar amounts in thousands):
| 2020 | 2019 | |||||||
| Research and development | $ | 126 | $ | 336 | ||||
| Decrease from prior year | $ | 210 | $ | 192 | ||||
| Percent decrease from prior year | (63 | )% | 133 | % | ||||
R&D is overseen and managed internally, working with individuals, and universities in order to utilize patents that we have sub-licensed or acquired since our inception. We continue to seek to expand our pipeline of patents by reviewing other compounds, technologies, or capabilities. We also seek out promising compounds and innovative technologies developed by third parties to incorporate into our discovery and development processes or projects.
For the years ended December 31, 2020 and 2019, research and development expenses were made up as follows (dollar amounts in thousands):
| 2020 | 2019 | |||||||
| Patent expenses | $ | 33 | $ | 318 | ||||
| Professional fees | 93 | 18 | ||||||
| $ | 126 | $ | 336 | |||||
Expenses for research and development decreased by 63% compared to expenses in the same period 2019. The change was primarily due to higher professional fees incurred in 2020 offset by reduced patent related expenses in the current year.
Stock issued for services
The cost of stock issued for services was zero in 2020 and $131 in 2019. The decrease in expense reflects that no such professional services were paid by the issuance of common stock in 2020. The number of shares issued for consulting services in 2019 was 3,300.
Warrant valuation expense
The Company did not issue any warrants in 2020. In 2019, the Company issued 14,600 warrants as part of notes payable at an exercise price of $5, for which it recorded a $0 warrant expense.
When the Company sells its stock to stockholders for cash, it periodically issues common stock warrants to certain stockholders to acquire additional stock 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. This expense is reported in the Consolidated Statements of Operations above as the Warrant valuation expense.
Depreciation and amortization
All Fixed Assets of the Company were fully depreciated at December 31, 2020. The Company amortizes the costs incurred to acquire capitalized assets over the estimated useful life of the associated asset.
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Interest Expense
Interest expense for the years ended December 31, 2020 and 2019 were as follows (dollar amounts in thousands):
| 2020 | 2019 | |||||||
| Interest expense | $ | 480 | $ | 894 | ||||
| Increase/(decrease) from prior year | $ | (414 | ) | $ | (289 | ) | ||
| Percentage increase/(decrease) from prior year | (46 | )% | (24 | )% | ||||
Interest expense is comprised of loan origination fees and interest owed by the Company. The decrease year over year was attributable to the lower level of debt in the Company. During the third quarter of 2020, the Company assigned notes payable aggregating $2,728,731 to Cytocom.
Gain/(Loss) on assignment of certain debt and liabilities (dollar amounts in thousands):
The Company recorded $3,502,280 in 2020 recognizing a non-cash gain on the settlement of certain debt and liabilities with the assignment of these to Cytocom. The Company recorded no gain or loss in 2019 on such assignments.
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 $9,971 at December 31, 2020 compared to $4,925 at December 31, 2019.
For the years ended December 31, 2020 and 2019, cash used in operating activities was $191,954 and $934, respectively. The Company had no cash inflows or outflows for investing activities for the years ended December 31, 2020 and 2019. During 2020 the Company received proceeds of $197,000 from notes issuances. In 2019, the Company was able to cover its operating and investing cash-flow requirements through its existing cash balances and without the need to issue notes payable or to sell equity.
The Company cannot be certain that it will generate sufficient cash flows for the next 12 months to pay for operating expenses and to pay off current and past-due obligations. The Company expects to fund operations through sales of equity and notes payable, and conversions of exiting obligations into equity. 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.
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.
Off-Balance Sheet Arrangements
During the years ended December 31, 2020 and 2019, 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, 2020 and 2019 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-21 of this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
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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, 2020, 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.
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, 2020 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, 2020, management concluded that, as of December 31, 2020, 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
During the fourth quarter of 2020, the Company’s Chief Financial Officer resigned and as of the filing of this report on Form 10-K, this position has not been filled. There were no other changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934) during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
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Item 10. Directors, Executive Officers and Corporate Governance
Directors
As of May 14, 2021, the number of voting members of our Board of Directors was 3. The members of our Board of Directors as of May 14, 2020 are as follows:
| Name | Age | Director Since | Position | |||
| Kevin Phelps | 66 | November 2018 | Chief Executive Officer and Director | |||
| Dr. Roscoe Moore | 66 | 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, 66, is a General Partner in Trillium Group, LLC, a Rochester, New York based venture capital firm and a Founder of Cashel Rock Advisors and FinanciaLink Strategic Alliances, two private wealth management firms specializing in strategies for corporations and high net-worth individuals. On April 30, 2020, Mr. Phelps was appointed interim Chief Executive Officer following the resignation of Mr. Handley,
His professional experience began as a CPA with Price Waterhouse (now PwC), where he consulted with over 20 companies 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. . In addition, Mr. Phelps has served as Chief Financial Officer of Vaccinex, Inc. (Nasdaq “VCNX”), and is currently Director/Chairman of OyaGen, Inc., a pre-clinical drug development company and Director for Arev Nanotek Brands (CSE “AVER”), a plant extraction and phyto-medicinal development company.
Dr. Roscoe Moore — Dr. Moore, 66, 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.
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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, 2020, we had not yet established an audit committee, compensation committee, or nominating committee. In April 2020, the full Board resolved to constitute itself as the Company’s audit committee until such time as an audit committee is appointed. During 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, 2020, 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, 2020, 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, 2020. “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 2020, 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 2020; 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 2020.
| Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | All Other Compensation | Total($) | ||||||||||||||||||||
| Kevin Phelps (1) | |||||||||||||||||||||||||||
| Chief Executive Officer | 2020 | $ | 160,000 | $ | - | $ | - | $ | - | $ | - | $ | 160,000 | ||||||||||||||
| Peter Aronstam (2) | 2020 | $ | 52,500 | - | - | - | - | $ | 52,500 | ||||||||||||||||||
| Former Chief Financial Officer | 2019 | $ | 60,000 | - | - | - | - | $ | 60,000 | ||||||||||||||||||
(1) Mr. Phelps became Chief Executive Officer on April 29, 2020. In 2020, Mr. Phelps agreed to defer payment of his of salary until the Company had sufficient income to pay the compensation in cash. At December 31, 2020, the salary deferred for Mr. Phelps was $160,000. In 2020, no stock compensation awards were issued to Mr. Phelps.
(2) Mr. Aronstam resigned as the Company’s Chief Financial Officer on November 16, 2020.
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Summary Director Compensation Table
The following table shows information regarding the compensation earned or paid during 2020 to Non-Employee Directors who served on the Board during the year.
| Name
and Principal Position |
Year | Fees
Paid or Earned in Cash ($) |
Stock Awards ($) |
Option Awards ($) |
Non-equity incentive plan compensation |
Non-qualified incentive plan compensation |
All
Other Compensation ($) |
Total ($) | ||||||||||||||||||||||
| Dr. Roscoe Moore, | 2020 | 60,000 | (1) | - | (1) | - | - | - | - | 60,000 | ||||||||||||||||||||
| Director, Chairman of the Board | 2019 | 60,000 | (1) | - | (1) | - | - | - | - | 60,000 | ||||||||||||||||||||
| Kevin Phelps, | 2020 | 60,000 | (2) | 1,340 | - | - | - | - | 61,340 | |||||||||||||||||||||
| Director | 2019 | 60,000 | (2) | 1,340 | - | - | - | - | 61,340 | |||||||||||||||||||||
| Michael Sander, | 2020 | 60,000 | (3) | - | - | - | - | - | 60,000 | |||||||||||||||||||||
| Director | 2019 | 10,000 | (3) | - | - | - | - | - | 5,000 | |||||||||||||||||||||
For 2020, 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 2020.
In addition, 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. No stock compensation awards were issued in 2020. 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.
(1) For services as a director in 2020, Dr. Moore was entitled to receive payment of $60,000 ($60,000 in 2019). Dr. Moore has agreed to defer his fees. 300 shares of common stock were issued to Dr. Moore in 2019 for services as director in 2019. Dr. Moore also served as a senior advisor to the Company between November 2017 and November 2019. As compensation for his services in that role, Dr. Moore was to be paid a monthly fee of $1,500. Dr. Moore has agreed to defer such fees.
(2) For services as a director in 2020, Mr. Phelps was entitled to receive payment of $60,000 ($60,000 in 2019). Mr. Phelps has agreed to defer his fees. until 2020. 200 shares of common stock were issued to Mr. Phelps in 2019 for services as director in 2019 for which the Company recorded an expense of $1,340.
(3) Mr. Sander resigned as a director on January 21, 2021. For services as a director in 2020 and 2019, Mr. Sander was entitled to receive payment of $60,000 and $10,000, respectively. Mr. Sander agreed to defer his fees. In accordance with his director’s agreement with the Company, Mr. Sander is entitled to receive each quarter either 5,000 restricted shares of Company stock or warrants to purchase 5,000 shares of Company stock, at his election. Mr. Sander did not make an election in 2019; accordingly, no shares of common stock or warrants were issued to Mr. Sander in 2019 for services as director in 2019 and no expense was accrued.
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 31, 2021 (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.
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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 481,906 shares of common stock outstanding as of March 31, 2021. 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.
| Name and Address | Amount of Beneficial Ownership* | Percentage of Class % | ||||||
| Dr. Roscoe Moore, Director and Chairman of the Board | 2,175 | <1% | ||||||
| Kevin Phelps, Director and Chief Executive Officer | 200 | <1% | ||||||
| All directors and officers as a group (2 persons) | 2,375 | <1% | ||||||
| Noreen Griffin, Investor (1) | 61,010 | 11.3% | ||||||
| * | The percentages are calculated using 481,906 outstanding shares of the Company’s common stock on March 24, 2021, 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, 2020, which includes, but is not limited to, (i) shares subject to exercisable options or options exercisable within 60 days of March 31, 2021 and (ii) shares subject to RSUs or performance share awards that will vest within 60 days of March 31, 2021. |
| (1) | Ms. Griffin served as the Company’s CEO until September 2019. Represents 704 shares held in the name of Griffin Enterprises Group, Inc. which is 50% owned and managed by Robert Wilson, Ms. Griffin’s son; 2,685 shares held by Griffin Family Trust, an irrevocable trust that is not managed by Ms. Griffin; 429 shares held by Ms. Griffin, individually. In addition, 49,772 shares associated with a convertible note held Global Reverb Corp., an entity owned 100$ by Ms. Griffin; and 7,420 common stock warrants which have been issued to Ms. Griffin. |
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, 2020 and December 31, 2019 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, 2020 | December 31, 2019 |
|||||||
| Audit Fees | $ | 57,000 | $ | 48,000 | ||||
| Audited Related Fees | $ | — | $ | — | ||||
| Tax Fees | $ | — | $ | — | ||||
| All Other Fees | $ | — | $ | — | ||||
| 22 |
Item 15. Exhibits, Financial Statement Schedules.
Exhibits Schedule
The following exhibits are filed with this Annual Report:
| 23 |
| 24 |
| * | 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, 2019. |
| 25 |
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. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019 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, 2020 and 2019, 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.
/s/ Turner, Stone & Company, L.L.P.
Dallas, Texas
April 15, 2021
We have served as the Company’s auditor since 2012.
| F-1 |
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2020 AND 2019
| December 31, 2020 | December 31, 2019 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 9,971 | $ | 4,925 | ||||
| Total current assets | 9,971 | 4,925 | ||||||
| Fixed Assets: | ||||||||
| Computer equipment, net | - | 691 | ||||||
| Deposits | 200 | 200 | ||||||
| Total assets | $ | 10,171 | $ | 5,816 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 2,562,515 | $ | 2,655,952 | ||||
| Accrued payroll | 3,627,648 | 3,610,810 | ||||||
| Accrued interest | 635,217 | 899,904 | ||||||
| Accrued liabilities | 221,057 | 136,057 | ||||||
| Net due to related parties | 531,420 | 48,217 | ||||||
| Notes payable, net of debt discount | 2,844,851 | 5,545,371 | ||||||
| Derivative liability | 1,254,444 | 798,126 | ||||||
| Total current liabilities | 11,677,152 | 13,694,437 | ||||||
| Total liabilities | 11,677,152 | 13,694,437 | ||||||
| Commitments and Contingencies | - | - | ||||||
| Stockholders’ Deficit: | ||||||||
| Common stock – par value $0.0001; 750,000,000 and 500,000,000 shares authorized, respectively; 476,504 and 457,578 shares issued and outstanding respectively | 48 | 46 | ||||||
| Additional paid in capital | 371,341,120 | 370,908,099 | ||||||
| Stock issuances due | 10,303 | 10,303 | ||||||
| Accumulated deficit | (383,018,452 | ) | (384,607,069 | ) | ||||
| Total stockholders’ deficit | (11,666,981 | ) | (13,688,621 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 10,171 | $ | 5,816 | ||||
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, 2020 AND 2019
| 2020 | 2019 | |||||||
| Revenues, net | $ | - | $ | - | ||||
| Cost of products sold | - | - | ||||||
| Gross profit | - | - | ||||||
| Operating expenses: | ||||||||
| Selling, general and administrative | 760,132 | 2,368,474 | ||||||
| Research and development expense | 126,259 | 336,110 | ||||||
| Stock issued for services general and administrative | - | 131,390 | ||||||
| Depreciation and amortization expense | 639 | 2,074 | ||||||
| Total operating expenses | 887,030 | 2,838,048 | ||||||
| Loss from operations | (887,030 | ) | (2,838,048 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (479,931 | ) | (894,173 | ) | ||||
| Finance charges | (173,118 | ) | - | |||||
| Loss on valuation of derivative | (373,584 | ) | (46,745 | ) | ||||
| Gain (loss) on settlement of debt and liabilities assigned | 3,502,280 | - | ||||||
| Recovery of amount due from Cytocom | - | 382,308 | ||||||
| Total other income (expense) | 2,475,647 | (558,610 | ) | |||||
| Net income (loss) attributable to common stockholders | $ | 1,588,617 | $ | (3,396,658 | ) | |||
| Basic earnings (loss) per share attributed to common stockholders | $ | 3.44 | $ | (7.59 | ) | |||
| Diluted earnings (loss) per share attributed to common stockholders | $ | 0.11 | $ | (7.59 | ) | |||
| Weighted average number of shares outstanding | 16,016,427 | 447,530 | ||||||
Basic weighted average number of shares outstanding | 461,190 | 447,530 | ||||||
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, 2020 AND 2019
| Common Stock | Additional Paid-in | Stock
To Be | Accumulated | |||||||||||||||||||||
| Shares | Amount | Capital | Issued | Deficit | Total | |||||||||||||||||||
| Balance December 31, 2018 | 434,323 | 44 | $ | 369,924,426 | $ | 35,303 | $ | (381,210,411 | ) | $ | (11,250,638 | ) | ||||||||||||
| Issuance of common stock for services | 3,000 | - | 145,000 | (25,000 | ) | - | 120,000 | |||||||||||||||||
| Extinguishment of debt assumed by related party | - | - | 691,850 | - | - | 691,850 | ||||||||||||||||||
| Issuance of common stock in exchange for debt | 18,255 | 2 | 62,433 | - | - | 62,435 | ||||||||||||||||||
| Issuance of common stock to board members | 2,000 | - | 11,390 | - | - | 11,390 | ||||||||||||||||||
| Issuance common stock warrants in connection with debt agreement | - | - | 73,000 | - | - | 73,000 | ||||||||||||||||||
| Net loss | - | - | - | - | (3,396,658 | ) | (3,396,658 | ) | ||||||||||||||||
| 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 | ) | |||||||||||
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, 2020 AND 2019
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) including non-controlling interest | $ | 1,588,617 | $ | (3,396,658 | ) | |||
| Adjustments to reconcile net loss to net cash flows used in operating activities: | ||||||||
| Gain on assignment of certain debt and liabilities | (3,502,280 | ) | - | |||||
| Non-cash finance charge | 173,118 | - | ||||||
| Amortization of debt discount | 162,210 | 222,257 | ||||||
| Change in value of derivative liability | 373,584 | 46,745 | ||||||
| Depreciation | 639 | 2,074 | ||||||
| Recovery of amount due from Cytocom | - | (382,308 | ) | |||||
| Stock issued for services | - | 131,390 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Inventory | - | 82,801 | ||||||
| Accounts payable | 99,234 | 894,951 | ||||||
| Accrued payroll | 16,838 | 1,600,240 | ||||||
| Accrued interest | 327,883 | 645,201 | ||||||
| Accrued liabilities | 85,000 | 32,705 | ||||||
| Due to related parties | 483,203 | 119,668 | ||||||
| Net cash used in operating activities | (191,954 | ) | (934 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of notes (net) | 197,000 | - | ||||||
| Net cash provided by financing activities | 192,000 | - | ||||||
| Decrease in cash | 5,046 | (934 | ) | |||||
| Cash and cash equivalents, beginning of year | 4,925 | 5,859 | ||||||
| Cash and cash equivalents, end of year | $ | 9,971 | $ | 4,925 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| F-5 |
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019
| 2020 | 2019 | |||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | - | $ | 16,000 | ||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Conversion of notes, accrued liabilities and accounts payable to common stock | $ | 152,640 | $ | 27,110 | ||||
| Debt settled and reclassed to accrued expenses | $ | - | $ | 35,325 | ||||
| Reclassification from accounts payable to notes payable | $ | - | $ | 304,478 | ||||
| Notes Payable, interest, and liabilities assigned | $ | 3,502,280 | $ | 691,850 | ||||
| Debt discounts on notes payable and warrants | $ | 197,000 | $ | 73,000 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| F-6 |
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
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
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 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 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.
Based on the Company’s operating plan, working capital at December 31, 2020 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 recognizes that the Company cannot move forward without adequate capital resources. The transactions with Cytocom and Forte do not provide any new working capital to the Company.
Management is currently pursuing a strategy to re-capitalize the Company and position it for future growth. Key steps in the process include:
| ● | Re-apply to secure FINRA approval of the reverse stock split. | |
| ● | Improve the condition of the Company’s financial position and balance sheet: |
| ○ | License, where practical technologies which the Company will otherwise not be able to commercialize. | |
| ○ | Seek additional capital to continue to maintain operations and compliance with OTC reporting requirements. | |
| ○ | Seek funding from current noteholders with exercisable warrants to convert such warrants as a means of raising capital and reducing outstanding debt. |
| ● | Identify and seek to acquire late-stage assets for future commercialization. | |
| ● | Build out an appropriate operational infrastructure, generate new opportunities and grow shareholder value. |
If the Company is unable to secure new working capital, other alternatives strategies will be required. For the twelve months ended December 31, 2020, the Company reported net income attributable to common shareholders of $1,588,617 which included a non-cash gain of $3,502,280 during the period. As of December 31, 2020, the Company has a stockholders’ deficit of $11,666,981.
| F-7 |
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”) 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 of 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 July 2012, the Company’s focus turned to acquiring patents that would protect and advance the development of new uses of opioid-related immune- therapies,
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, and (iv) confidential and proprietary information, including, trade secrets and know-how.
| F-8 |
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 as provided by the Original Agreement. The Restated Agreement grants the Company distribution and marketing rights for Lodonal™ and MENK for humans in certain Emerging Markets. In addition, the Company has been granted the rights to distribute and market Lodonal™ and MENK for animal use in the United States. The royalty due to Cytocom has been 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, Cato Research Ltd and Penn State University, both vendors of the Company, did not consent to assign the payables to Cytocom.
On June 4, 2018, the Company and Cytocom entered into a Stock Purchase Agreement (the “Stock Agreement. Pursuant to the Stock Agreement, 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 common shares issued and outstanding on that date. The Company agreed to assume the obligation 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 obligation 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 October 2019, the Board of Immune Therapeutics, Inc. (“Immune”) approved the restructuring of Immune (“Original Restructuring Strategy”), which included a conversion of Immune promissory notes (the “Convertible Notes”) into a proposed new class of Series D Preferred equity. However, Immune was unable to obtain the requisite shareholder approval to issue the Series D Preferred equity, so that the plan to convert the debt into a Series D could not be completed. At the same time, the Shareholders did approve a 1- for 1000 reverse stock split (“Reverse Stock Split”).
Due to its inability to move forward on the proposed plan the Company has been forced to pursue alternatives to the Original Restructuring Strategy. To realize the potential value of its technology positions, the Board approved Management to pursue possible sublicensing options to Forte and Cytocom.
| F-9 |
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.
Equity investment in Cytocom, Inc.
Prior to May 1, 2018, the Company consolidated Cytocom. On May 1, 2018, the Company entered into an amended and restated licensing agreement (the “Restated Agreement”) with Cytocom, Inc., in accordance with which the Company no longer has any ongoing obligations to pay for costs in connection with the assets of Cytocom. The Company deconsolidated Cytocom as of May 1, 2018, and accounts for its retained interest in Cytocom under the equity method of accounting, with the Company’s share of Cytocom’s earnings recorded in “loss from equity method investment” in the consolidated statements of operations. As the balance of the Company’s investment in Cytocom has been zero since December 31, 2018, no losses have been recognized during the year ended December 31, 2019.
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. At December 31, 2020 and 2019 the Company had no leases to which the standard applies.
At December 31, 2020, the Company was a party to an agreement to a short-term operating lease for office space in Orlando, Florida. This agreement allows for cancellation with thirty days’ notice. Rental expense for the years ended December 31, 2020 and 2019 was $3,000 and $12,661 respectively.
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. At December 31, 2020, the Company has no cash balances in excess of insured limits.
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.
| F-10 |
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, accounts payable, and accrued liabilities are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of notes payable also 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.
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. At the date of adoption, and as of December 31, 2020 and 2019, the Company does 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, 2020, and 2019, 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.
| F-11 |
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 505-50, “Equity-Based Payments to Non-Employees.” 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, 2020 and 2019.
Net Income (Loss) per Share
Basic net income (loss) per share is calculated by dividing the net loss 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 warrants and potential common shares issuable under certain convertible notes, have been included in the computation of diluted net income per share for the twelve-month period ended December 31, 2020. Net income per share, for the year ended December 31, 2020, was calculated by dividing the net loss by the weighted-average number of common share outstanding for the period determined using the treasury-stock method and the if-converted method.
For the twelve-month period ended December 31, 2019, the potentially dilutive securities were excluded from the computation of diluted loss per share as the effect would be to reduce the net loss per common share. Therefore, the weighted-average common stock outstanding used to calculate both basic and diluted net loss per share for the year ended December 31, 2019.
A reconciliation of the weighted average shares outstanding used in basic and diluted earnings per share computation is as follows:
| Net Income (Numerator) | Weighted Average Common Shares (Denominator) | Per Share Amount | ||||||||||
| Basic EPS | ||||||||||||
| Income available to common stockholders | $ | 1,588,617 | 461,190 | $ | 3.44 | |||||||
| Diluted EPS | ||||||||||||
| Effect of warrants convertible into common stock | 20,012,082 | |||||||||||
| Potential shares purchasable using proceeds of warrants | (4,629,476 | ) | ||||||||||
| Effect of convertible debt | 142,247 | 103,677 | ||||||||||
| Income available to common stockholders | $ | 1,730,864 | 15,947,473 | $ | 0.11 | |||||||
Recent Accounting Standards
During the year ended December 31, 2020, 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.
3. Fixed Assets
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Fixed assets: | ||||||||
| Computer equipment | $ | 13,213 | $ | 13,213 | ||||
| Less accumulated depreciation | (13,213 | ) | (12,522 | ) | ||||
| Fixed assets, net | $ | - | $ | 691 | ||||
The Company utilizes the straight-line method for depreciation, using three to five-year depreciable asset lives. Depreciation expense was not material for all periods presented.
| F-12 |
4. Notes payable
During the twelve months ended December 31, 2020, the Company issued $197,000, in new promissory notes. As of December 31, 2020, the Company had $1,639,275 in notes payable to shareholders of record.
On August 16, 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 notes payable aggregating $2,728,731 to Cytocom. The owner of each assigned note provided their written consent to assignment, assumption, and amendment of the promissory notes.
Redstart Holdings Corp.
On March 30, 2020, the Company issued a Convertible Promissory Note (the “Note”) to Redstart Holdings Corp. (“Redstart”) in the principal amount of $53,000. The Note matures on March 30, 2021, and bears interest at the rate of 12% per annum. Any amount of the Note not repaid at maturity, will bear interest at the rate of 22% per annum. Redstart has the right, at any time during the period beginning 180 days following the date of the Note and ending the later of the maturity date or the date of payment of the default amount, to convert all or any part of the outstanding and unpaid amount of the Note into shares of the Company’s common stock. The conversion price will be equal to 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.
Redstart converted the Note and related accrued interest in the amount of $3,180 in October 2020. The Company issued 6,893 shares of common stock at an average price per share of $8.15 in connection with this conversion.
Geneva Roth Remark Holdings, Inc.
During the second and third quarters of 2020, the Company issued three Convertible Promissory Notes (the “Notes”) aggregating $144,000 to Geneva Roth Remark Holdings Corp. (“GRRH”). The Notes matures one year from the date of issuance, and bear interest at the rate of 12% per annum. Any amount of the Notes not repaid at maturity, will bear interest at the rate of 22% per annum. GRRH has the right, at any time during the period beginning 180 days following the date of the Notes and ending the later of the maturity date or the date of payment of the default amount, to convert all or any part of the outstanding and unpaid amount of the Notes into shares of the Company’s common stock. The conversion price will be equal to 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 12,034 shares of common stock at an average price per share of $8.02 in connection with this conversion.
As of December 31, 2020, the Company has $53,000 in principal outstanding in notes due to GRRH with a maturity date of August 13, 2021. GRRH converted this note and associated accrued interest during the first quarter of 2021.
The Company has agreed to reserve from its authorized and unissued common stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of common stock upon the full conversion of the outstanding $53,000 Note. The Company is also required to have authorized and reserved six times the number of shares that would be issuable upon full conversion of the Note. As of December 31, 2020, the Company had reserved 5,401,923 shares for this instrument.
Gain on Settlement of Debt
On August 16, 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 notes payable aggregating principal amount of $2,728,731 and related accrued interest of $495,409 to Cytocom.
| F-13 |
Notes Payable at December 31, 2020 and 2019:
| December 31, | ||||||||
| 2020 | 2019 | |||||||
| Promissory notes issued between December 2014 and January 2015. Lender earns interest at 10%, plus a pro-rata share of two percent of the Company’s gross receipts for sales of IRT-103-LDN in perpetuity. Notes were to be repaid in 36 monthly installments of principal and interest commencing no later than October 15, 2015. These notes are in default at. In connection with an August 16, 2020 agreement with Cytocom, $216,000 of the notes were assumed by Cytocom. | $ | 70,000 | $ | 286,000 | ||||
| Promissory notes issued between May 2015 and June 2016 and maturing between February 2017 and November 2018. Lenders earn interest at rates between 2% and 10%. In connection with an August 16, 2020 agreement with Cytocom, $476,494 of the notes were assumed by Cytocom. These notes are in default. | $ | 149,500 | 625,994 | |||||
| Promissory notes issued to a former officer of the Company in 2015 with a maturity of November 3, 2016 in settlement of accrued payroll, bearing interest at 10% and including a stock conversion feature. These notes were assumed by Cytocom in connection with the August 16, 2020 agreement. | $ | - | 97,737 | |||||
| Promissory notes issued between July 2016 and December 2016. Lenders earn interest at 2%. The notes matured on December 31, 2017. These notes were assumed by Cytocom in connection with the August 16, 2020 agreement. | $ | - | 206,000 | |||||
| Promissory notes aggregating $1,350,000 issued in 2016. The notes accrue interest at 2% and mature between November 2017 and December 2017. In connection with an August 16, 2020 agreement with Cytocom, $747,500 of the notes were assumed by Cytocom. These notes are in default. | $ | 606,500 | 1,354,000 | |||||
| Promissory notes aggregating $500,000 issued in 2017 accrue interest at 2% and mature between January 2018 and September 2018 In connection with an August 16, 2020 agreement with Cytocom, $295,000 of the notes outstanding at June 30, 2020 were assumed by Cytocom. These notes are in default. | $ | 205,000 | 500,000 | |||||
| Promissory notes aggregating $300,000 issued in 2017 accrue interest at 2% and mature in May 2018. In connection with an August 16, 2020 agreement with Cytocom, $150,000 of the notes were assumed by Cytocom. These notes are in default. | $ | 150,000 | 300,000 | |||||
| Promissory notes aggregating $191,800 issued in 2017 accrue interest at 2% and mature between August 2018 and September 2018. In connection with an August 16, 2020 agreement with Cytocom, $75,000 of the notes were assumed by Cytocom. These notes are in default. | $ | 116,800 | 191,800 | |||||
| Promissory note for $425,000 issued in October 2017 with an original issue discount of $70,000. The note is in default, giving the holder an option to convert the note to stock using the lowest value of the Company’s common stock 25 days prior to the conversion. In 2018, the defaults also resulted in certain penalties, as a result of which the principal amount of the note outstanding had increased to $454,032. $49,943 of accrued interest owed on the note has been converted to stock. The Company recognized a $1,200,129 derivative liability for remaining conversion right. On November 10, 2020, the noteholder entered into an agreement to sell all rights to the note to Global Reverb Corp., an entity wholly owned by the Company’s former Chief Executive Officer and director, Noreen Griffin. | $ | 454,032 | 454,032 | |||||
| Promissory notes aggregating $105,500 issued in 2017 accrue interest at 2%. At September 30, 2020, the notes were in default. | $ | 105,500 | 105,500 | |||||
| Promissory notes aggregating $47,975 issued in the 2018 accrue interest at 2% and mature between May 2018 and January 2019. These notes are in default. | $ | 47,975 | 47,975 | |||||
| Promissory notes aggregating $125,000 issued in 2018 accrue interest between 2% and 12% and mature between April 2018 and June 2018. These notes include warrants between 500,000 and 2,000,000 shares with an exercise price of $0.05. In connection with an August 16, 2020 agreement with Cytocom, these notes were assumed by Cytocom (the warrants remained with the Company). | $ | - | 125,000 |
| F-14 |
| Promissory notes aggregating $65,000 issued in 2018 accrue interest at 2% and mature 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 | |||||
| Promissory notes aggregating $208,000 were issued in 2018, of which $3,000 were issued to a related party. The notes accrue interest at 2% and mature between August 2019 and January 2019. These notes include warrants between 60,000 and 500,000 shares with an exercise price of $0.05. In connection with an August 16, 2020 agreement with Cytocom, $80,000 of the notes outstanding were assumed by Cytocom. These notes are in default. | $ | 118,000 | 198,000 | |||||
| Promissory notes aggregating $533,855 were issued in 2018, of which $210,000 is to a related party. The notes accrue interest at 2% and mature between January 2019 and November 2019. These notes include warrants between 200 and 39,500 shares with an exercise price of $5 to $40. In connection with an August 16, 2020 agreement with Cytocom, $210,000 of the notes were assumed by Cytocom. These notes are in default. | $ | 323,855 | 533,855 |
| Promissory note for $23,000 issued to a related party in the first quarter of 2019. The note accrues interest at 2% and matured during July 2019. The note includes warrants for 4,600 shares with an exercise price of $5. The note is in default. | $ | 23,000 | 23,000 | |||||
| Promissory note for $231,478 issued in the first quarter of 2019. The note accrues interest at 6% and matured in February 2020. The note is in default. | $ | 231,478 | 231,478 | |||||
| Promissory notes for $50,000 issued in the second quarter of 2019 accrues interest at 2% and matured in July 2019. The notes include warrants for 10,000 shares with an exercise price of $5. In connection with an August 16, 2020 agreement with Cytocom, $40,000 of the notes were assumed by Cytocom. The note is in default. | $ | 10,000 | 50,000 |
| Promissory note in the amount of $150,000 issued on October 2019 for the settlement of outstanding debt in the same amount. The note accrues interest at 15% per annum, with $1,875 due in monthly interest payments, and matures on April 30, 2021. | $ | 150,000 | 150,000 | |||||
| Promissory note in the amount of $53,000 issued in the third quarter of 2020 accrues interest at 12% and matures in August 2021. The Company recognized a $54,312 derivative liability for the conversion rights attached to the note as of December 31, 2020. | $ | 53,000 | - | |||||
| 2,879,640 | 5,545,371 | |||||||
| Less: Original issue discount on notes payable and warrants issued with notes. | (34,789 | ) | - | |||||
| Total | $ | 2,844,851 | $ | 5,545,371 |
As of December 31, 2020, the Company had accrued $635,217 in unpaid interest and default penalties.
As of December 31, 2019, the Company had accrued $899,904 in unpaid interest and default penalties. During the twelve-month period ended December 31, 2019 the Company issued 18,255 shares with a fair value of $78,500 in settlement of $62,435 in promissory notes. Also, during the twelve-month period ended December 31, 2019, the Company settled a $100,000 note with accrued interest and penalties in the aggregate amount of $596,850, by assigning such amounts to a related party. In accordance with ASC 470-50-40-2, the extinguishment transactions between related entities may be in essence capital transactions. When related parties are involved, recognition of the difference between the retired debt’s reacquisition price and carrying amount as a gain is not appropriate. As such, no gain on the extinguishment of the transaction was recorded.
| F-15 |
5. Derivative Liability
As of December 31, 2020, and December 31, 2019, the fair value of the outstanding derivative liability was $1,254,444 and $798,126, respectively. The Company estimated the fair value of the derivative liability using the binomial option pricing model on December 31, 2020. The Black-Scholes option pricing model was used to determine the fair market value of the liability as of December 31, 2019.
| Year End December 31, 2020 | Year Ended December 31, 2019 | |||||||
| Volatility | 178.65 | % | 165.62 | % | ||||
| Risk-free interest rate | 1.0 | % | 1.96 | % | ||||
| Expected dividends | na | na | ||||||
| Expected term (years) | .25 - 1.00 | 1 | ||||||
The Company determines the fair market 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, 2020:
| Fair Value Measurements as of December 31, 2020 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Total assets | - | - | - | |||||||||
| Liabilities | ||||||||||||
| Conversion option derivative liability | - | - | 1,254,444 | |||||||||
| Total liabilities | $ | - | $ | - | $ | 1,254,444 | ||||||
The following schedule summarizes the valuation of financial instruments at fair value in the balance sheets as of December 31, 2019:
| Fair Value Measurements as of December 31, 2019 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Total assets | - | - | - | |||||||||
| Liabilities | ||||||||||||
| Conversion option derivative liability | - | - | 798,126 | |||||||||
| Total liabilities | $ | - | $ | - | $ | 798,126 | ||||||
The following table sets forth a reconciliation of changes in the fair value of derivative liabilities classified as Level 3 in the fair value hierarchy:
| Significant Unobservable Inputs (Level 3) | ||||
| Balance January 1, 2019 | $ | 786,706 | ||
| Change in fair value | 46,745 | |||
| Partial settlement of liability | (35,325 | ) | ||
| Balance December 31, 2019 | 798,126 | |||
| Additions | 361,116 | |||
| Change in fair value | 375,584 | |||
| Conversion of notes to common stock | (280,382 | ) | ||
| Ending balance | $ | 1,254,444 | ||
| F-16 |
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, 2020, and 2019, the Company was authorized to issue 750,000,000 and 500,000,000 common shares, respectively, at a par value of $0.0001 per share. As of December 31, 2020, and 2019, the Company had 476,505 and 457,758 shares of common stock outstanding, respectively.
Reverse Stock Split FINRA approval
On October 25, 2019, the Company closed voting by written consent as detailed in its Proxy Statement on form 14A, filed September 5, 2019 pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended (“Proxy Statement”). The Proxy Statement disclosed actions for which the Company was soliciting written consent, including consent to effect a reverse stock split of the Company’s issued and outstanding, but not authorized, common stock (the “Reverse Split”) at a ratio of 1,000-to-1.
A 1 for 1,000 reverse stock split (“Reverse”) was approved by over 55% of the shareholders in 2019. An application for approval was filed with both the State of Florida and with the Financial Industry Regulatory Authority (“FINRA”). The request was approved by the State of Florida in March 2020. In June 2020, FINRA informed the Company that it would not approve the request citing a deficiency in the Company’s capital structure. Management believes it has resolved the deficiency and a re-application to FINRA is in process. Assuming approval is received, it is the Company’s intent to proceed with the Reverse and the restructuring of the company.
The financial statements accompanying this Form 10-K are presented based on the implementation of the shareholder consent.
Common Stock Warrants
The Company did not issue or modify any warrants in the twelve-month periods ended December 31, 2020.
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, 2020 follows:
| Expiration Date | Number of Shares | Exercise Price | Remaining Life (years) | |||||||||
| First Quarter 2021 | 12,600 | $ | 200 | .25 | ||||||||
| Second Quarter 2021 | 5,812 | $ 14-200 | .50 | |||||||||
| Third Quarter 2021 | 5,167 | $ 30-200 | .75 | |||||||||
| Fourth Quarter 2021 | 300 | $ | 100 | 1.00 | ||||||||
| First Quarter 2022 | 150 | $ | 200 | 1.25 | ||||||||
| Second Quarter 2022 | 1,750 | $ | 150 | 1.50 | ||||||||
| Third Quarter 2022 | 1,650 | $ 50-100 | 1.75 | |||||||||
| Fourth Quarter 2022 | 9,811 | $ 80-290 | 2.00 | |||||||||
| First Quarter 2023 | 1,204,000 | $ 0.05-40 | 2.25 | |||||||||
| Second Quarter 2023 | 802,000 | $ 0.05-200 | 2.50 | |||||||||
| Third Quarter 2023 | 7,521,500 | $ 0.05-100 | 2.75 | |||||||||
| Fourth Quarter 2023 | 6,024,300 | $ 0.05-0.20 | 3.00 | |||||||||
| First Quarter 2024 | 3,660,000 | $ | 0.05 | 3.25 | ||||||||
| Second Quarter 2024 | 800,000 | $ | 5.00 | 3.50 | ||||||||
| Third Quarter 2028 | 3,000 | $ | 70 | 8.00 | ||||||||
| Second Quarter 2032 | 28,995 | $ 10-70 | 11.75 | |||||||||
| 20,081,035 | $ 0.05-200 | |||||||||||
Following is a summary of outstanding stock warrants activity for the twelve months ended December 31, 2020:
| Number
of Shares | Exercise Price Per Share | Weighted Average Price | ||||||||||
| Warrants as of December 31, 2018 | 20,083,348 | $ | .05-3740 | $ | 0.09 | |||||||
| Issued | 15 | $ | 5 | $ | 0.005 | |||||||
| Expired and forfeited | (28 | ) | $ | 50-3740 | $ | 0.54 | ||||||
| Exercised | $ | - | $ | |||||||||
| Warrants as of December 31, 2019 | 20,083,335 | $ | 0.05-500 | $ | 4.21 | |||||||
| Issued | - | $ | $ | |||||||||
| Expired and forfeited | (2,300 | ) | $ | 100-500 | $ | 195.65 | ||||||
| Exercised | - | $ | $ | |||||||||
| Warrants as of December 31, 2020 | 20,081,035 | $ | 0.05-200 | $ | 4.22 | |||||||
| F-17 |
7. Income Taxes
There was no income tax expense reflected in the results of operations for the years ended December 31, 2020 and 2019. As of December 31, 2020, the Company had federal and state net operating loss carryforwards of $99,724,000 which may be used to offset future taxable income.
Approximately $70,497,000 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:
| 2020 | 2019 | |||||||
| Net operating losses | $ | 19,892,000 | $ | 20,346,000 | ||||
| Stock based compensation | 39,284,000 | 39,284,000 | ||||||
| Amortization, depreciation, and impairment | 4,178,000 | 4,178,000 | ||||||
| Capitalization of start-up costs for tax purposes | 1,145,000 | 1,145,000 | ||||||
| Gain/(loss) on conversion of debt | 713,000 | 713,000 | ||||||
| Total deferred tax assets | 65,212,000 | 65,666,000 | ||||||
| Valuation allowance | (65,212,000 | ) | (65,666,000 | ) | ||||
| 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, | ||||||||
| 2020 | 2019 | |||||||
| Statutory federal tax rate | 21.00 | % | 21.00 | % | ||||
| Permanent differences | 4.94 | % | - | |||||
| Prior period adjustment | 2.63 | % | - | |||||
| Valuation allowance | (28.57 | )% | (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, 2020, and 2019, the Company had no unrecognized tax benefits. There were no changes in the Company’s unrecognized tax benefits during the years ended December 31, 2020 and 2019. The Company did not recognize any interest or penalties during fiscal 2020 or 2019 related to unrecognized tax benefits.
All tax years remain open to examination for federal income tax purposes and by other taxing jurisdictions to which the Company is subject.
8. Licenses and Supply Agreements
Forte Biotechnology International Corp.
On February 27, 2020, the Company approved and entered into a license agreement (the “License Agreement”) with Forte Biotechnology International Corp. (“Forte”). As of April 15, 2021, this license agreement has not been executed as Forte has failed to fund the consideration defined in the agreement.
Under the 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 totals $3,039,599 comprised of the assumption of certain Company defaulted Notes and other liabilities. Forte will assume a minimum of IMUN defaulted debt and to assume certain additional $ obligations of the Company. The note holders and vendors associated with the assigned liabilities have not yet assigned their rights to Forte.
Consideration for February 28, 2020 License to Forte
| Consideration Assumption of: | ||||
| Notes in Default. | $ | 1,787,706 | ||
| Accounts payable and accruals | 261,706 | |||
| Past Due Employee Obligations | 990,201 | |||
| Total Consideration to be Recognize Upon Execution | $ | 3,039,613 | ||
The documentation and sign off of this agreement related to the Forte license has yet to be signed and the individual lenders need to provide their 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 of $3,740,746 by May 16, 2020 upon the assignment of certain Company Notes Payable. | |
| ● | Development Milestone Payments upon the occurrence of the identified events, the following one-time, non-creditable, non-refundable milestone payments: |
| Event | Milestone Payment* | |||
| Successful MUMS Designation | $ | 100,000 | ||
| Successful Conditional Approval | $ | 100,000 | ||
| F-18 |
| ● | 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% | |||
Cytocom
In December 2014, the Company transferred to Cytocom certain of its rights, title and interest in or relating to intellectual property. Cytocom licensed back to the Company a perpetual, non-exclusive, royalty-free right and license to use the assigned intellectual property for veterinary indications and for the marketing rights to emerging markets, access to all clinical data, use of the formulation for LDN and MENK.
The Original Agreement also granted the Company rights to market Lodonal™ and Met-Enkephalin (“MENK”) in “Emerging Markets,” which included all countries excluding Canada, Italy, Japan, France, Germany, United Kingdom, European Community, and the United States. Pursuant to the Original Agreement, the Company was required to pay Cytocom a 5% royalty on all sales all ongoing drug development and fees due in connection with the underlying patents until such time as Cytocom was funded.
On May 1, 2018, the Company entered into an amended and restated licensing agreement (the “Restated Agreement”) with Cytocom. The Restated Agreement grants the Company distribution and marketing rights for Lodonal™ and MENK for humans in Emerging Markets. In addition, the Company has been 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 the cost in connection with the assets of Cytocom.
On May 13, 2020, the Company and Cytocom entered into Amendment to The Second Amendment to The License Agreement (“Third Amendment”) The License Agreement that was effective December 31, 2018. The sublicense provides Cytocom with the Company’s previously licensed rights for LDN and Menk in Emerging Markets.
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. The Company agreed to transfer all the rights, title, and interest to Cytocom in technology licensed from Penn State Research Foundation in exchange for Cytocom assuming all past due and future obligations under the Penn State license. While the Company formalized the agreement to deconsolidate on May 1, 2018, Cato Research Ltd and Penn State University, both vendors of the Company, did not consent to assign the payables to Cytocom. As of December 31, 2020, the Company had outstanding accounts payable balances of $330,552 and $400,065 due to Cato Research Ltd and Penn State University, respectively.
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.
As of April 4, 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.
Consideration for May 13, 2020 License to Cytocom
| Consideration Assumption of: | ||||
| Notes in Default. | $ | 3,038,107 | ||
| Accounts payable and accruals | 105,123 | |||
| Past Due Employee Obligations | 1,110,567 | |||
| Total anticipated Consideration | $ | 5,200,797 | ||
| Recognized through December31, 2020 | (3,314,333 | ) | ||
| To Be Recognized upon Execution | $ | 1,888,464 | ||
At December 31, 2020, the Company has an equity interest of 13.5% in Cytocom. In connection with the May 1, 2018 “Restated Agreement” with Cytocom, the Company no longer has ongoing obligations to pay for costs in connection with the assets of Cytocom. Accordingly, effective May 1, 2018, the Company deconsolidated Cytocom. The Company uses the equity method to account for its retained interest in Cytocom.
On December 31, 2019, the Company reached a settlement with Cytocom to recover the net payable balance outstanding of $382,308. The Company recorded a gain on the settlement of that amount.
| F-19 |
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 Officer, and a member of the board of directors, is earned board compensation of $5,000 a month during 2020. Mr. Phelps has unpaid board fees of $125,000 and $65,000 at December 31, 2020 and 2019, respectively, which is included in amounts due to related parties. Mr. Phelps serves as the Company’s Chief Executive Officer with an annual salary of $240,000. As of December 31, 2020, Mr. Phelps had $160,000 in earned and unpaid compensation included in amounts due to related parties.
| F-20 |
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 $155,250 and $95,250 at December 31, 2020 and 2019, respectively, which is included in amounts due to related parties. Dr. Moore had a note payable with a balance of $3,000 at December 31, 2020.
Noreen Griffin, the Company’s former Chief Executive Officer, has unpaid cash compensation of $1,962,464 at December 31, 2020 and 2019, respectively, which is included in accrued payroll expenses. There was an additional $55,500 due to Mrs. Griffin at December 31, 2020 and 2019 related to certain benefits. During the fourth quarter of 2020, Ms. Griffin acquired a convertible note with a face amount of $454,032 and accrued unpaid interest of $243,569 from an existing noteholder of the Company. As of December 31, 2020, the principal and interest in this note was convertible into 96,889 commons shares. Subsequent to December 31, 2020, Ms. Griffin assigned 50% of the principal and unpaid interest to another investor of the Company.
11. Subsequent Events
Subsequent to December 31, 2020, the Company received a notice of conversion of the May 4, 2020 convertible promissory note with a face value of $53,000 and $3,180 in accrued interest. In connection with this notice, the Company issued 5,402 in common stock on February 26, 2021 reflecting a conversion price of $10.40 per share.
| F-21 |
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: April 15, 2021 | 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 | April 15, 2021 | ||
| Roscoe Moore |
| 26 |