10-Q 1 form10-q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2022

 

OR

 

TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

 

From the transition period from ___________ to ____________

 

Commission File Number 000-54933

 

IMMUNE THERAPEUTICS, INC.

(Exact name of small business issuer as specified in its charter)

 

Florida   59-3226705

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

2431 Aloma Ave., Suite 124, Winter Park, FL   32792
(Address of principal executive offices)  

(Zip Code)

 

888-613-8802

(Registrant’s telephone number, including area code)

 

 
(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large Accelerated Filer ☐ Accelerated Filer ☐
     
  Non-Accelerated Filer Smaller Reporting Company
     
    Emerging growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by a check mark whether the company is a shell company (as defined by Rule 12b-2 of the Exchange Act: Yes ☐ No

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of August 24, 2022, there were 71,079,143 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  PART I – FINANCIAL STATEMENTS  
     
Item 1. Financial Statements 5
     
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations 16
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
     
Item 4. Controls and Procedures 21
     
  PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 22
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
     
Item 3. Default upon Senior Securities 22
     
Item 6. Exhibits 23

 

2
 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain statements contained or incorporated by reference in this Quarterly Report on Form 10-Q 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 U.S. Food and Drug Administration 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 protections;
  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 Quarterly 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.

 

3
 

 

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 and 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 Quarterly Report are based on information available to us on the date of this Quarterly 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 Quarterly Report.

 

4
 

 

PART 1 – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

 

           
   June 30, 2022   December 31, 2021 
ASSETS        
         
Current Assets:          
Cash  $271,533   $493,885 
Investment in common stock   -    2,645,000 
Total current assets   271,533    3,138,885 
           
Total assets  $271,533   $3,138,885 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current Liabilities:          
Accounts payable  $1,431,373   $2,184,848 
Notes payable   1,077,202    3,070,208 
Due to related parties   1,180,250    891,420 
Accrued payroll   2,639,619    3,421,176 
Accrued liabilities   307,518    239,558 
Accrued interest   205,201    564,300 
Undocumented investor advances   -    715,631 
Total current liabilities   6,841,163    11,087,141 
           
Total liabilities   6,841,163    11,087,141 
           
Commitments and Contingencies   -    - 
           
Stockholders’ Deficit:          
Common stock – par value $0.0001; 750,000,000 shares authorized; 20,353,893 and 483,714 shares issued and outstanding respectively   2,035    49 
Additional paid in capital   373,614,147    371,473,810 
Stock issuances due   10,303    10,303 
Accumulated deficit   (380,196,115)   (379,432,418)
           
Total stockholders’ deficit   (6,569,630)   (7,948,256)
Total liabilities and stockholders’ deficit  $271,533   $3,138,885 

 

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

 

5
 

 

IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE PERIODS ENDED JUNE 30, 2022 AND 2021

(Unaudited)

 

                                 
  Three Months ended     Six Months ended  
  June 30, 2022     June 30, 2021     June 30, 2022     June 30, 2021  
                                 
Operating expenses                                
Selling, general and administrative   $ 292,117     $ 185,284     $ 473,733     $ 324,016  
Research and development expense     -       3,974       -       152,667  
Total operating expense     292,117       189,258       473,733       476,683  
                                 
Income (loss) from operations     (292,117 )     (189,258 )     (473,733 )     (476,683 )
                                 
Other income (expense):                                
Gain on issuance of license agreement     3,165,151       -       3,165,151       -  
Gain on settlement of obligations     297,579       108,693       297,579       108,693  
Charge resulting from warrant modification and debt settlement     (1,011,625 )     -       (1,011,625 )     -  
Impairment loss investment in common stock     (362,250 )     -       (2,645,000 )     -  
Interest expense     (3,885 )     (32,131 )     (96,069 )     (132,535 )
Gain on derivative liability valuation     -       -       -       1,178,230  
Total other expense     2,084,970       76,562       (289,964 )     1,154,388  
                                 
Net income (loss) income   $ 1,792,853     $ (112,696 )   $ (763,697 )   $ 677,705  
Net income (loss) attributable to common stockholders   $ 1,792,853     $ (112,696 )   $ (763,697 )   $ 677,705  
                                 
Basic income (loss) income per share attributable to common stockholders   $ 2.57     $ (0.23 )   $ (1.29 )   $ 1.41  
Diluted income (loss) earnings per share attributable to common stockholders   $ 0.23     $ (0.23 )   $ (1.29 )   $ 0.05  
                                 
Basic weighted average number of shares outstanding     696,752       481,906       590,822       480,115  
Diluted weighted average number of shares outstanding     7,804,548       481,906       590,822       13,874,667  

 

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

 

6
 

 

IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)

FOR THE PERIODS ENDED JUNE 30, 2022 AND 2021

(Unaudited)

 

                               
   Common Stock   Additional Paid-in   Stock To Be   Accumulated     
   Shares   Amount  

Capital

   Issued  

Deficit

   Total 
                         
Balance December 31, 2020   476,504   $48   $371,341,120   $10,303   $(383,018,452)  $(11,666,981)
Issuance of common stock upon conversion of notes    5,402    1    56,479    -    -    56,480 
Extinguishment of derivative liability upon conversion of debt   -    -    76,211    -    -    76,211 
Net income   -    -    -    -    677,705    677,705 
                               
Balance June 30, 2021   481,906   $49   $371,473,810   $10,303   $(382,340,747)  $(10,856,585)
                               
Balance December 31, 2021   483,714   $49   $371,473,810   $10,303   $(379,432,418)  $(7,948,256)
Issuance of common stock upon conversion of notes and obligations   7,255,660    726    479,174    -    -    479,900 
Issuance of common stock for services   49,500    4    2,470    -    -    2,474 
Issuance of common stock upon warrant exercise   12,565,000    1,256    647,068    -    -    648,324 
Charge resulting from warrant modification   -    -    1,011,625         -    1,011,625 
Net income   -    -    -    -    (763,697)   (763,697)
                               
Balance June 30, 2022   20,353,874   $2,035   $373,614,147   $10,303   $(380,196,115)  $(6,569,630)

 

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

 

7
 

 

IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIODS ENDED JUNE 30, 2022 AND 2021

(Unaudited)

 

           
   Six Months Ended 
   June 30, 2022   June 30, 2021 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net (loss) income  $(763,697)  $677,705 
Adjustments to reconcile net income to net cash flows (used in) operating activities:          
Gain on issuance of license agreement   (3,165,151)   - 
Gain on settlement of obligations   (297,579)   (108,693)
Impairment loss on investment in common stock   2,645,000   - 
Charge resulting from warrant modification   1,011,625    - 
Change in value of derivative   -    (1,178,230)
Amortization of debt discount   -    34,789 
           
Changes in operating assets and liabilities:          
Deposits   -    200 
Accounts payable   (146,811)   130,053 
Accrued payroll   4,620    (24,834)
Net due to related parties   -    231,091 
Accrued interest   83,265    97,746 
Accrued liabilities   

67,960

    13,418 
           
Net cash (used in) operating activities   (560,768)   (126,755)
           
CASH FLOWS FROM INVESTING ACTIVITIES   -    - 
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from undocumented investor advances   6,369    140,000 
Proceeds from related parties   

332,047

      
Net cash provided by financing activities   338,416    140,000 
           
Net increase in cash and cash equivalents   (222,352)   13,245 
Cash and cash equivalents at beginning of period   493,885    9,971 
Cash and cash equivalents at end of period  $271,533   $23,216 
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:          
Conversion of debt and accrued interest to common stock  $1,128,224   $56,480 
Reclassification to notes payable from accrued interest  $-   $243,568 

 

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

 

8
 

 

Immune Therapeutics, Inc.

Notes to the Condensed Consolidated Financial Statements

June 30, 2022

(Unaudited)

 

1. Company Overview

 

Immune Therapeutics Inc. (the “Company” or “IMUN”) is a Florida corporation trading on the OTC-Pink. The Company is a drug development and commercialization company. We identify, evaluate, and seek to acquire technologies in the medical device and drug development sectors with the intent to further develop them and move them to commercialization.

 

Going Concern

 

As of June 30, 2022, the Company had $271,533 in cash and a stockholders’ deficit of $6,569,630. For the six months ended June 30, 2022, the Company reported net loss of $763,697 which included: non-cash gains from the settlement of certain notes and other current obligations upon the issuance of common shares, non-cash charges for the write-off the Company’s investment in common shares of Statera BioPharma, Inc., and the revaluation of the fair market value of certain warrants. For the six months ended June 30, 2021, the Company reported net income of $677,705.

 

Historically, the Company has relied on the funding of operations through private equity financings and management expects operating losses and negative cash flows to continue at more significant levels in the future. As the Company continues to incur losses, transition to profitability is dependent upon the successful development, approval, and commercialization of product candidates as they become available and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources.

 

Working capital on June 30, 2022 is not sufficient to meet the cash requirements to fund planned operations through the next twelve months without additional sources of cash. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.

 

Management is continuing to develop strategies to re-capitalize the Company and position it for future growth. Key steps to this process include:

 

  Improve the condition of the balance sheet via license arrangements and capital infusions.
  Identify and acquire late-stage assets for commercialization.
  Build out operational infrastructure to generate revenue opportunities to grow shareholder value.

 

There can be no guarantees that the Company will be successful in securing adequate capital to continue operations and in identifying and acquiring assets for future development. If the Company is unable to secure new working capital, other alternative strategies will be required.

 

Historically, the Company has been able to acquire and develop assets, spin them out and retain both an equity stake and royalties and milestone payments. In so doing, the Company has acted as an incubator for late-stage drug development. Management believes that this strategy can continue to be successful. At this time, the Company is reviewing several opportunities which it may pursue as soon as funding is available. At present no definitive actions have been taken.

 

There can be no guarantees that the Company will be successful in:

 

  Executing its restructuring plan;
  Securing adequate capital to continue operations; or
  Identifying and acquiring assets for future development.

 

9
 

 

Company History

 

Immune Therapeutics, Inc. (the “Company” or “IMUN”) 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.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. However, in the opinion of management, all adjustments (which include only normal recurring adjustments, unless otherwise indicated) necessary to present fairly the financial position and results of operations for the periods presented have been made. The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2021 (including the notes thereto) set forth in the Company’s Annual Report on Form 10- K for that period.

 

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.

 

Cash, Cash Equivalents, and Short-Term Investments

 

The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value.

 

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 condensed consolidated balance sheets. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000.

 

10
 

 

Segment and Geographic Information

 

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment and does not segment the business for internal reporting or decision making.

 

Fair Value of Financial Instruments

 

In accordance with the reporting requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 825, “Financial Instruments”, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.

 

Cash, cash equivalents and accounts payable are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of the Company’s investment in the common stock of Statera BioPharma, Inc. (“STAB”) has been measured based on the quoted per share price as reported on NASDAQ and reflects an impairment loss as of June 30, 2022. The carrying value of notes payable approximate fair value since they bear market rates of interest and other terms. None of these instruments are held for trading purposes.

 

Research and Development Costs

 

Research and development costs are charged to expense as incurred and are typically comprised of expenses associated with advancing the commercialization of our technologies. The Company did not incur any research and development costs during the six months ended June 30, 2022.

 

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 June 30, 2022 and 2021, 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 June 30, 2022, and 2021, the Company does not have any interest or penalties related to uncertain tax positions.

 

Stock-Based Compensation and Issuance of Stock for Non-Cash Consideration

 

The Company did not grant any stock-based compensation awards during the six months ended June 30, 2022 and 2021.

 

The Company measures and recognizes compensation expense for share-based awards 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.

 

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 718, “Compensation-Stock Compensation.” The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete.

 

Net Income per Share

 

For the six-month period ended June 30, 2022, basic and diluted net 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. For the three-month period ended June 30, 2022, basic net income per share is calculated by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding for the quarter using the treasury-stock method and the if-converted method.

 

A reconciliation for the three- and six-month periods ended June 30, 2022 of the weighted average shares outstanding used in basic and diluted earnings per share computation is as follows:

 

For the three months ended June 30, 2022  Net Income
(Numerator)
   Weighted Average
Common Shares
(Denominator)
   Per Share
Amount
 
Basic EPS               
Income available to common stockholders  $1,792,853    696,752   $2.57 
Diluted EPS               
Assumed exercise of outstanding warrants        6,954,432      
Assumed conversion of convertible notes        153,364      
Income attributed to common stockholders        7,804,548   $0.23 
                
For the six months ended June 30, 2022               
Basic EPS               
Loss attributed to common stockholders  $(763,697)   590,822   $(1.29)
Diluted EPS             (1.29)

 

Recent Accounting Standards

 

The Company has reviewed the accounting pronouncements issued by the Financial Accounting Standards Board during the six months ended June 30, 2022.

 

12
 

 

In August 2020, the FASB issued ASU-2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contract in an Entity’s Own Equity (“ASU 2020-06). ASU 2020-06 simplifies the accounting for convertible debt by eliminating the beneficial conversion and cash conversion accounting models. Upon the adoption of ASU 2020-06, convertible debt proceeds, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components. ASU 2020-06 will reduce the issue discount and result in less non-cash interest in the financial statements. ASU 2020-06 revises the earnings per share calculation and requires entities to assume share settlement when the convertible debt can be settled in cash or shares. The type of contracts primarily affected by ASU 2020-06 are freestanding and embedded features that are accounted for as derivatives under the current guidance due to a failure to meet the settlement conditions of the derivative scope exception. ASU 2020-06 simplifies the related settlement assessment by removing the requirements to (i) consider whether the contract would be settled in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights. ASU 2020-06 is effective for fiscal years beginning after December 23, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and only if adopted as of the beginning of such fiscal year. The Company has adopted ASU 2020-06 effective January 1, 2022. (See Note 4)

 

Management does not believe there are other significant accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

 

Note 3. Investment in Common Stock of Statera BioPharma, Inc.

 

In 2021, Cytocom, Inc., a former subsidiary of the Company (“Cytocom”), announced the completion of its merger with Cleveland BioLabs, Inc. (“CBLI”) which resulted in the Company’s receipt of 1,150,000 common shares of CBLI, reflecting the Company’s retained minority interest in Cytocom. Subsequent to the merger, CBLI adopted a new corporate name, Statera BioPharma, Inc., with the ticker symbol “STAB” effective September 1, 2021. Cytocom emerged as a publicly traded entity following the merger with CBLI.

 

The Company evaluated the carrying value of the STAB common shares during the three-month period ended June 30, 2022 and determined that an impairment loss of $362,250 should be reflected in the Statement of Operations. The impairment loss reflects the Company’s assessment of a series of events reported by Statera BioPharma, Inc. to the Securities and Exchange Commission on and after March 25, 2022 including alleged events of default with respect to STAB’s outstanding indebtedness, resignations of members of STAB’s board of directors and notice by STAB to NASDAQ of its failure to comply with the Nasdaq Listing Rules. As a result of the foregoing, the Company recognized an impairment loss of $362,250 during the three-month period ended June 30, 2022.

 

4. Notes payable

 

During the three-month period ended June 30, 2022 the Company reported the following activity in notes and accrued interest:

 

  ●  The Company assigned $1,775,275 in notes and $264,790 in accrued interest and penalties to Forte Animal Health, Inc. (“Forte”) upon the receipt of release and assignments signed by these note holders in connection with the issuance of an Amended License Agreement. (Note 7) In connection with the Amended License Agreement, Forte issued 2,235,000 of its outstanding stock to the Company, representing 15% of the issued and outstanding shares of Forte.
  Certain note holders utilized $302,000 in principal and $29,503 in accrued interest and penalties as proceeds in the exercise of warrant for common shares at a conversion rate of $0.05 per share.
  Certain note holders converted $605,345 in principal and $209,610 in accrued interest and penalties into common shares at a conversion price of $0.05 per share.
  The Company issued $246,357 in new notes in satisfaction of certain vendor and employee obligations. The new notes have a conversion price of $0.05 per share.

 

13
 

 

Notes outstanding as of June 30, 2022 and December 31, 2021 are as follows:

 

           
   June 30, 2022   December 31, 2021 
         
Promissory notes issued between December 2014 and January 2015. Lender earns interest at 10%. Notes were to be repaid in 36 monthly instalments of principal and interest commencing no later than October 15, 2015. These notes are in default.  $33,500   $70,000 
           
Promissory notes issued between May 2015 and June 2016 and matured between February 2017 and November 2018. Lenders earn interest at rates between 2% and 10%. These notes are in default.  $-    149,500 
           
Promissory notes were issued in 2016. The notes accrue interest at 2% and matured between November 2017 and December 2017. These notes are in default.  $50,000    606,500 
           
Promissory notes were issued in 2017 accrue interest at 2% and matured between January 2018 and September 2018. These notes are in default.  $-    205,000 
           
Promissory notes were issued in 2017 accrue interest at 2% and matured in May 2018. These notes are in default.  $-    150,000 
           
Promissory notes were issued in 2017 accrue interest at 2% and matured between August 2018 and September 2018. These notes are in default.  $36,218    116,800 
           
Promissory notes were issued in 2017 accrue interest at 2%.  $-    105,500 
           
Promissory notes were issued in the 2018 accrue interest at 2% and matured between May 2018 and January 2019. These notes are in default.  $-    47,975 
           
Promissory notes were issued in 2018 accrue interest at 2% and matured between July 2018 and October 2018. These notes include warrants between 1,000 and 5,000 shares with an exercise price of $.05. These notes are in default.  $-    65,000 
           
Promissory notes were issued in 2018. The notes accrue interest at 2% and matured between August 2019 and January 2019. These notes include warrants between 60,000 and 500,000 shares with an exercise price of $0.05. These notes are in default.  $-    118,000 
           
Promissory notes were issued in 2018. The notes accrue interest at 2% and matured between January 2019 and November 2019. These notes are in default.  $178,605    323,855 
           
Promissory note was 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 $.05. The note is in default.  $23,000    23,000 
           
Promissory note was 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 note was 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 $.05. The note is in default.  $-    10,000 
           
Promissory note issued in 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 matured on April 30, 2021. The note is in default.  $150,000    150,000 
           
Promissory note issued in the third quarter of 2020 accrues interest at 12% and matured in August 2021. The outstanding principal and interest accrued on this note were converted into 5,402 common shares in February 2021.   -    53,000 
           
Promissory note accrue interest at 5%, matured in March 2022 and were issued in the second quarter of 2021 upon the cancellation of a previous obligation. The new notes reflect all principal, interest and penalties associated with the original instrument. This note is in default.  $174,400    697,600 
           

Convertible promissory note accrues interest at 6%, is convertible at $0.05 per share and matures in June 2022. The holder, shareholder Noreen Griffin, converted the note in July 2022.

   

200,000

    - 
Notes payable  $1,077,201   $3,070,208 

 

14
 

 

At June 30, 2022, the Company had $419,718 in promissory notes payable to shareholders of record on that date.

 

5. Capital Structure – Common Stock and Stock Purchase Warrants

 

Each holder of common stock is entitled to vote on all 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.

 

Stock Warrants

 

On June 29, 2022, the Company’s board of directors approved a resolution to clarify the anti-dilution protection granted to certain note and warrant holders. In connection with this board action, the Company recognized a non-cash charge of $1,011,625 in the Statement of Operations for the three- and six-month periods ended June 30, 2022. The fair value of the re-measured warrants was determined using the Black Scholes model and used the following assumptions:

 

Expected term (years)   0.63 
Risk free rate   2.04%
Volatility   436%
Dividend yield   - 

 

The average risk-free interest rate is based on the U.S. Treasury security rate in effect on June 29, 2022. We determined expected volatility using the historical closing stock price. The expected life was determined using the simplified method as we do not believe we have sufficient historical warrant exercise experiences on which to base the expected term.

 

Warrant holders exercised 12,565,000 common stock warrants during the second quarter of 2022. An additional 31,899 warrants were forfeited or cancelled during the second quarter of 2022. During the six months ended June 30, 2021, no warrants issued or exercised.

 

The following is a summary of outstanding common stock warrants as of June 30, 2022.

 

Expiration Date  Number of Shares   Exercise Price   Remaining Life (years) 
             
Third Quarter 2022   1,650   $ 50-100    0.25 
Fourth Quarter 2022   9,811   $ 80-290    0.50 
First Quarter 2023   1,004,000   $0.05-40    0.75 
Second Quarter 2023   2,000   $200    1.00 
Third Quarter 2023   1,701,500   $0.05-100    1.25 
Fourth Quarter 2023   2,249,300   $0.05-2    1.50 
First Quarter 2024   2,460,000   $0.05    1.75 
Third Quarter 2028   3,000   $70    6.25 
Second Quarter 2032   28,995   $ 10-70    10 
    7,460,257   $0.05-290      

 

Following is a summary of stock warrant activity for the six months ended June 30 2022:

 

  

Number of

Shares

   Exercise Price  

Weighted

Average Price

 
Warrants as of December 31, 2021   20,057,156   $ 2-290   $5.21 
Issued   -   $-   $- 
Expired and forfeited   (31,899)  $200   $9.22 
Exercised   (12,565,000)  $-   $- 
Warrants as of June 30, 2022   7,460,257   $0.05-290   $5.52 

 

6. Income Taxes – Results of Operations

 

There was no income tax expense reflected in the results of operations for the periods ended June, 2022 and 2021 because the Company has significant net loss operating carryforwards available to offset the potential tax liabilities. Our tax rate can be affected by recurring items, such as tax rates in foreign jurisdictions and the relative amount of income we earn in jurisdictions. It may also be affected by discrete items that may occur in any given year but are not consistent from year to year.

 

For U.S. federal purposes the corporate statutory income tax rate was 21%, for 2022 and 2021 tax years. The Company has recognized no tax benefit for the losses generated for the periods through June 30, 2022.

 

ASC Topic 740 requires that a valuation allowance be provided if it is more likely than not that some portion or all a deferred tax asset will not be realized. The Company’s ability to realize the benefit of its deferred tax asset will depend on the generation of future taxable income. Because the Company has yet to recognize revenue, we believe that the full valuation allowance should be provided.

 

7. License Agreement with Forte Animal Health, Inc.

 

On July 8, 2021 the Company entered into an amended license agreement with Forte Animal Health, Inc (“Forte”). The initial license fee included the assignment of certain Company defaulted notes and other vendor and employee obligations. During the second quarter of 2022, these debtors associated with the assigned obligations completed the assignment of $1,775,275 in notes payable, $264,790 of accrued interest and $1,125,086 in other vendor and employee obligations to Forte. The Company recognized a non-cash gain upon the assignment of these obligations.

 

In connection with the amended license agreement, Forte issued 2,235,000 of its outstanding stock to the Company, representing 15% of the issued and outstanding shares of Forte. The Company has not recognized a minority interest in the balance sheet as of June 30, 2022 as Forte is in the start-up phase of its business and has no earnings from operations to date.

 

8. Subsequent Events

 

The Company issued 50,731,896 common shares after June 30, 2022 in connection with convertible promissory note conversions at $0.05 per share.

 

15
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

 

The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following financial information is derived from our condensed consolidated financial statements and should be read in conjunction with such condensed consolidated financial statements and notes thereto and set forth elsewhere herein.

 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This report contains certain forward-looking statements that are based on the beliefs of management as well as assumptions made by and currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, future demand for our products and services, the successful commercialization of our products, general domestic and global economic conditions, government and environmental conditions and regulations, competition and customer strategies, changes in our business strategy or development plans, capital deployment, business disruptions, including those by fires, raw material supplies, environmental regulations, and other risks and uncertainties, certain of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those forward-looking statements. For further discussion of certain of the matters described above see the Cautionary Note Regarding Forward-Looking Statements included in our 2021 Annual Report on Form 10-K.

 

Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim an obligation to update any factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in this quarterly report on Form 10-Q to reflect new information, future events, or other developments. The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.

 

Forward-looking statements can be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not a guarantee of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Each of the terms the “Company”, “we”, “us” or “our” as used herein refers collectively to Immune Therapeutics, Inc. and its subsidiaries, unless otherwise stated.

 

COMPANY OVERVIEW

 

Immune Therapeutics Inc. (the “Company,” “IMUN,” “we,” “us” or “our”) is a Florida corporation trading on the OTC-Pink. We are a drug development and commercialization company. We identify, evaluate, and seek to acquire technologies in the medical and drug development sectors with the intent to further develop them and move them to commercialization. Such commercialization efforts include sale, licensing and go to market strategies.

 

Our strategy has been limited due to lack of capital. Management is seeking to secure new investment capital with which to continue to pursue the Company’s strategy. There is no guarantee that the Company will be successful in securing additional capital.

 

GOING CONCERN

 

As of June 30, 2022, the Company had $271,533 in cash and a stockholders’ deficit of $6,569,630. For the six months ended June 30, 2022, the Company reported a net loss of $763,697 which included: non-cash gains from the settlement of certain notes and other current obligations upon the issuance of common shares and certain non-cash charges for the write-off the Company’s investment in common shares of Statera BioPharma, Inc., and the revaluation of the fair market value of certain warrants. For the six months ended June 30, 2021, the Company reported net income of $677,705.

 

Historically the Company has relied on the funding of operations through private equity financings and management expects operating losses and negative cash flows to continue at more significant levels in the future. As the Company continues to incur losses, transition to profitability is dependent upon the successful development, approval, and commercialization of its current or future product candidates as they become available and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic partners or from other sources. If the Company is unable to secure new working capital, other alternatives strategies will be required.

 

16
 

 

Based on our operating plan, working capital at June 30, 2022 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 our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we 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.

 

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 continues to review several opportunities which it may pursue as soon as funding is available. At present no definitive actions have been taken.

 

There can be no guarantees that the Company will be successful in:

 

  Executing its restructuring plan
  Securing adequate capital to continue operations.
 

Identifying and acquiring assets for future development.

 

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2022, TO THE THREE MONTHS ENDED JUNE 30, 2021

 

Revenues

 

We had no revenues from operations for the three months ended June 30, 2022 and 2021.

 

Operating Expenses

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the three months ended June 30, 2022 and 2021 were as follows (dollar amounts in thousands):

 

   For the three months ended June 30 
   2022   2021 
Selling, general and administrative  $292   $185 
Decrease from prior year  $107   $163 
Percent change from prior year   58%     

 

During the three months ended June 30, 2022, the Company has focused on the negotiation and finalization of certain licensing transactions and business development opportunities.

 

For the three months ended June 30, 2022 and 2021, selling, general and administrative expenses were comprised of the following: (dollar amounts in thousands):

 

   For the three months ended June 30 
   2022   2021 
Shareholder and investor relations  $4   $4 
Professional fees and consulting costs   14    58 
Consulting fees with related parties   206    - 
Board fees   20    30 
Salaries and benefits   41    90 
Other expenses   7    3 

 

17
 

 

The selling, general and administrative expense categories for the three months ended June 30, 2022 included the following items and trends:

 

  ● 

Professional fees and consulting costs for services provided for legal, tax and accounting services associated with the Company’s financial reorganization efforts and licensing strategies implemented in the second quarter of 2022.

  ● 

Two shareholders provided services to the Company during the second quarter of 2022. The Company’s board of directors approved the issuance of a $200,000 convertible promissory note to Noreen Griffin, a shareholder of the Company, for services performed in connection with the recapitalization of the Company. This note was converted into common shares at $0.05 per share during the quarter. Another shareholder was paid $6,000 for advisory services.

  ●  Payroll expenses reflect accrued salaries and statutory tax benefits including one part time accountant to support financial reporting.

 

The increase in selling, general and administrative expenses for the three months ended June 30, 2022 over the same period in 2021 was primarily due to an increase in consulting fees with related parties, offset by decreased professional fees and consulting costs and salaries and benefits.

 

Research and Development Expenses

 

The Company did not incur any research and development related costs during the second quarter of 2022.

 

During the second quarter of 2021, the Company recorded approximately $4,000 in fees payable to The Pennsylvania State University (“Penn State”) related to license maintenance fees, minimum royalties and various patent evaluation and filing expenses. These liabilities were assigned to Cytocom in connection with the August 12, 2020 letter agreements. As Penn State had not consented to the assignment of these fees, the Company retained the liability until paid by Cytocom; at which time, the Company recognized a gain on the assignment of liabilities.

 

Non-operating Income (Expense)

 

The Company recognized several non-recurring non-operating transactions during the three-month period ended June 30, 2022 as described below.

 

The Company recognized a non-cash gain of $3,165,151 upon the assumption of certain Company defaulted notes and other vendor and employee obligations by Forte. The assignments of these obligations were made as consideration for the July 8, 2021 Amended License Agreement with Forte.

 

The Company recognized a non-cash gain of $297,579 upon the receipt of signed releases of obligations from certain vendors, employees, and notes holders in connection with the corporate recapitalization designed to improve the financial condition of the Company and to position it for future growth.

 

On June 29, 2022, the Company entered into agreements to allow certain holders of warrants and promissory notes currently in default to exercise and convert these instruments at $0.05 per share. The Company recognized the fair market value of the warrants using the Black Scholes valuation model and recognized a charge of $1,011,625 in connection with this action.

 

During the three-month period ended June 30, 2022, the Company recognized an asset impairment associated with the carrying value of the shares of commons stock of STAB held by the Company in the amount of $362,250 (see Note 3 to the financial statements accompanying this report).

 

Interest Expense

 

Interest expense for the three months ended June 30, 2022 and 2021 were as follows (dollar amounts in thousands):

 

   For the three months ended June 30 
   2022   2021 
Interest expense  $4   $32 
(Decrease) from prior year  $(28)  $(95)
Percentage change from prior year   (88)%     

 

The Company reduced the total notes outstanding as of June 30, 2021 through the assignment of $1,775,275 of notes to Forte (see Note 7 to the financial statements accompanying this report) and the issuance of common shares upon the receipt of conversion notices aggregating $479,900.

 

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SIX MONTHS ENDED JUNE 30, 2022 COMPARED TO SIX MONTHS ENDED JUNE 30, 2021

 

Revenues

 

We had no revenues from operations for the six months ended June 30, 2022 and 2021.

 

Operating Expenses

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses and related percentages for the six months ended June 30, 2022 and 2021 were as follows (dollar amounts in thousands):

 

   For the six months ended June 30 
   2022   2021 
Selling, general and administrative  $473   $324 
Increase from prior year  $149   $(61)
Percent change from prior year   46%     

 

During the six months ended June 30, 2022, the Company focused on business development activities and the negotiation and finalization of certain licensing transactions.

 

For the six months ended June 30, 2022 and 2021, selling, general and administrative expenses were made up as follows (dollar amounts in thousands):

 

   For the six months ended June 30 
   2022   2021 
Shareholder and investor relations  $6   $10 
Professional fees and consulting costs   73    58 
Consulting fees with related parties   206    - 
Board fees   50    60 
Salaries and benefits   127    189 
Other expenses   11    7 

 

The selling, general and administrative expense categories for the six months ended June 30, 2022 included the following items:

 

  ●  Professional fees and advisory fees were for services provided for legal, tax and accounting services directly associated with the Company’s financial reorganization efforts and licensing strategies implemented in the second quarter of 2022.
  Two shareholders provided services to the Company during the second quarter of 2022. The Company’s board of directors approved the issuance of a $200,000 convertible promissory note to Noreen Griffin, a shareholder of the Company for services performed in connection with the recapitalization of the Company. This note was converted into common shares at $0.05 per share during the quarter. Another shareholder was paid $6,000 for advisory services.
  Payroll expenses reflect accrued salaries and statutory tax benefits including one part time accountant to support financial reporting.

 

The increase in selling, general and administrative expenses for the six months ended June 30, 2022 over the same period in 2021 was primarily due to an increase in consulting fees with related parties and professional fees and consulting costs, offset by decreased salaries and benefits.

 

Research and Development Expenses

 

The Company did not incur any research and development related costs during the first and second quarters of 2022.

 

During the six months ended June 30, 2021, the Company recorded approximately $153,000 in fees to Penn State related to license maintenance fees, minimum royalties, and various patent evaluation and filing expenses. These liabilities were assigned to Cytocom in connection with the August 12, 2020 letter agreements. As Penn State had not consented to the assignment of these fees, the Company retained the liability until paid by Cytocom; at that time, the Company recognized a gain on the assignment of liabilities.

 

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Non-operating Income (Expense)

 

The Company recognized several non-recurring non-operating transactions during the six-month period ended June 30, 2022 as described below.

 

The Company recognized a non-cash gain of $3,165,151 upon the assumption of certain Company defaulted notes and other vendor and employee obligations by Forte. The assignments of these obligations were made as consideration for the July 8, 2021 Amended License Agreement with Forte.

 

The Company recognized a non-cash gain of $297,579 upon the receipt of signed releases of obligations from certain vendors, employees, and notes holders in connection with the corporate recapitalization designed to improve the financial condition of the Company and to position it for future growth.

 

On June 29, 2022, the Company entered into agreements to allow certain warrants holders of and promissory notes currently in default to exercise and convert these instruments at $0.05 per share. The Company recognized the fair market value of the warrants using the Black Scholes valuation model and recognized a charge of $1,011,625 in connection with this action.

 

During the six-month period ended June 30, 2022, the Company recognized an asset impairment associated with the carrying value of the shares of common stock of STAB held by the Company in the amount of $362,250. (See Note 3 to the financial statements accompanying this report).

 

Interest Expense

 

Interest expense for the six months ended June 30, 2022 and 2021 were as follows (dollar amounts in thousands):

 

   For the six months ended June 30 
   2022   2021 
Interest expense  $96   $133 
(Decrease) from prior year  $(37)  $(80)
Percentage change from prior year   (28)%     

 

The Company reduced the total notes outstanding as of June 30, 2021 through the assignment of $1,775,275 of notes to Forte (see Note 7 to the financial statements accompanying this report) and the issuance of common shares upon the receipt of conversion notices aggregating $479,900.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Overview

 

Liquidity is measured by our ability to secure enough cash to meet our contractual and operating needs as they arise. The Company does not anticipate generating sufficient cash flows from our operations to fund the next twelve months. We had cash on hand of $271,533 at June 30, 2022, compared to $493,888 at December 31, 2021.

 

Summary of Cash Flows

 

For the six months ended June 30, 2022, the Company used $222,352 in cash to support operating activities. Included in net income for the six months ended June 30, 2022, are non-cash gains of: $3,165,151 recognized upon the assignment of notes and other obligations in connection with a license agreement, $297,579 recognized upon the settlement with owners of the obligations, offset by non-cash charges upon the recognition of an asset impairment of the STAB common shares held by the Company, and a charge for the market value from the modification of certain warrant provisions.

 

During the six months ended June 30, 2021, the Company used $126,755 in operating activities. Net income from operations was $677,705 during the six months ended June 30, 2021 included non-cash items aggregating $1,286,923 related to a gain on the settlement of liabilities and changes in carrying value of derivative liability. The reason for the increase in operating activities was the increase in selling, general and administrative expenses.

 

No cash was provided by or used in investing activities during either the six months ended June 30, 2021 or the six months ended June 30, 2022.

 

During the first half of 2021, the Company received $140,000 from investors for which the documentation had not been completed as of June 30, 2021. These proceeds are included in financing activities during the six months ended June 30, 2021.No cash was used in or provided by financing activities during the six months ended June 30, 2022.

 

The Company does not expect to generate revenues in the foreseeable future. If the Company is unable to raise additional working capital to meet its operating obligations and expenditures, the Company will be required to modify its business plan.

 

20
 

 

OFF BALANCE SHEET ARRANGEMENTS

 

During the six months ended June 30, 2022, and 2021, the Company did not engage in any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial conditions, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

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.

 

Fair Value of Financial Instruments

 

In accordance with the reporting requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 825, “Financial Instruments”, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.

 

Cash, cash equivalents and accounts payable are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of the Company’s investment in the common stock of Statera BioPharma, Inc. (“STAB”) has been measured based on the quoted per share price as reported on NASDAQ and reflects an impairment loss as of June 30, 2022. The carrying value of notes payable approximate fair value since they bear market rates of interest and other terms. None of these instruments are held for trading purposes.

 

Research and Development Costs

 

Research and development costs are charged to expense as incurred and are typically comprised of expenses associated with advancing the commercialization of our technologies.

 

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.

 

Stock-Based Compensation and Issuance of Stock for Non-Cash Consideration

  

The Company measures and recognizes compensation expense for share-based awards based on estimated fair values equaling either the market value of the shares issued, or the value of consideration received, whichever is more readily determinable. Generally, the non-cash consideration pertains to services rendered by consultants and others and has been valued at the fair value of the Company’s common stock at the date of the agreement.

 

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC Topic 718, “Compensation-Stock Compensation.” The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not Applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the period covered by this report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based on this evaluation, the principal executive officer and the principal financial officer concluded that, because of the weakness in internal control over financial reporting described below, our disclosure controls and procedures are ineffective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

 

Management assessed the effectiveness of our internal control over financial reporting using the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this assessment, management concluded that our internal control over financial reporting was not effective. The reportable conditions and material weakness relate to a limited segregation of duties and lack of an audit committee. The limited segregation of duties within the Company and the lack of an audit committee are due to the small number of employees. Management has determined that this control deficiency constitutes a material weakness. This material weakness could result in material misstatements of significant accounts and disclosures that would result in a material misstatement to our interim or annual financial statements that would not be prevented or detected. In addition, due to limited staffing, we are not always able to detect minor errors or omissions in reporting.

 

Going forward, management anticipates that additional staff will be necessary to remediate these weaknesses, as well as other planned improvements. Additional staff will enable us to document and apply transactional and periodic controls procedures, permit a better review and approval process and improve quality of financial reporting. However, the potential addition of new staff is contingent on obtaining additional financing, and there is no assurance that we will be able to do so.

 

Limitations on the Effectiveness of Disclosure Controls and Procedures and Internal Control Over Financial Reporting

 

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

 

21
 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

On January 27, 2022, the Company was named as defendant in a lawsuit filed in the Superior Court of the State of Arizona for the County of Maricopa by Ira Gaines (“Mr. Gaines”). The lawsuit is based on claims for breach of contract alleging the failure by the Company to make required payments of principal and interest arising out of the secured promissory note dated October 1, 2019 made by the Company in favor of Mr. Gaines in the original principal amount of $150,000. The relief sought by the plaintiff includes payment by the Company of the full principal balance, accrued and unpaid interest, continuing interest through the date of entry of judgment, late fees, post-judgment interest, and attorneys’ fees. The Company has retained counsel to respond to the complaint. As of August 2022, the case is pending.

 

ITEM 1A. RISK FACTORS

 

Not applicable.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During the quarter ended June 30, 2022, the Company issued or sold the following securities:

 

The Company issued 12,565,000 shares of common stock upon the exercise of warrants at the exercise price of $0.05 per share.

 

The Company issued 6,630,060 shares of common stock to certain note holders, who utilized $302,000 in principal and $29,503 in accrued interest and penalties as proceeds in the exercise of warrants for shares of common stock at the warrants’ exercise price of $0.05 per share.

 

The Company issued 7,255,660 shares of common stock to certain note holders and in satisfaction of certain vendor and employee obligations, who converted the related obligations into shares of common stock at a conversion price of $0.05 per share.

 

The Company issued 49,500 shares of common stock to a vendor for services provided at a share price of $0.05.

 

The issuance of the convertible promissory notes, shares of common stock upon the exercise of warrants, and shares of common stock upon conversion of promissory notes described above will not be registered under the Securities Act of 1933, as amended, or the Securities Act, in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act, and/or Regulation D promulgated thereunder.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Refer to Note 4 to the Condensed Consolidated Financial Statements of Part I Item 1, which is incorporated by reference, for additional details. The notes payable on the Company’s Condensed Consolidated Balance Sheet above contains, at June 30, 2022, certain promissory notes on which the Company was in arrears on payment of principal as follows:

 

  $33,500 promissory note issued in 2014. The note accrues interest at 10% and matured in 2015.
  $50,000 promissory note issued in 2016.The note accrues interest at 2% and matured in 2017.
  $36,218 promissory note issued in 2017.The note accrues interest at 2% and matured in 2018.
  $178,605 of promissory notes issued in 2018.The notes accrue interest at 2% and matured in 2019.
  $23,000 promissory note issued in 2019.The note accrues interest at 2%
  $231,478 in promissory notes issued in 2019. The notes accrue interest at 6% and matured in 2020.
  $150,000 promissory note issued in 2019. The note accrued interest at 15% and matured in 2021.
  $174,400 promissory note issued in 2021.The note accrues interest at 5% and matures in 2022.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

22
 

 

ITEM 6. EXHIBITS

 

The following exhibits are filed with this Quarterly Report:

 

Exhibit   Description
     
3.1   Restated Articles of Incorporation, incorporated by reference to Immune Therapeutics, Inc. Form 10 Registration Statement filed with the Securities and Exchange Commission on April 22, 2013 and the Amendment No. 1 to the Form 10 Registration Statement filed with the Securities and Exchange Commission on June 7, 2013.
     
3.2   Articles of Amendment to Articles of Incorporation, filed October 27, 2014, incorporated by reference to Exhibit 3.2 Immune Therapeutics, Inc. 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 16, 2021.
     
3.3   Articles of Amendment to Articles of Incorporation, incorporated by reference to Exhibit 10.68 of Immune Therapeutics, Inc. Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on June 29, 2020
     
3.4   Articles of Amendment to Articles of Incorporation, incorporated by reference to Exhibit 10.69 of Immune Therapeutics, Inc. Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on June 29, 2020.
     
3.5   Bylaws, incorporated by reference to Immune Therapeutics, Inc. Form 10 Registration Statement filed with the Securities and Exchange Commission on April 22, 2013 and the Amendment No. 1 to the Form 10 Registration Statement filed with the Securities and Exchange Commission on June 7, 2013.
     
31.1*   Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2*   Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1**   Certification of Chief Executive Officer pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2**   Certification of Chief Financial Officer pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS*   Inline XBRL Instance Document
101.SCH*   Inline XBRL Taxonomy Extension Schema
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*   Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase
104*   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*Filed herewith

** Furnished herewith

 

23
 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Immune Therapeutics, Inc.
     
Date: August 24, 2022 By: /s/ Dr. Stephen Wilson
  Name: Dr. Stephen Wilson
  Title: Chief Executive Officer

 

  Immune Therapeutics, Inc.
     
Date: August 24, 2022 By: /s/ Glen Farmer
  Name: Glen Farmer
  Title: Chief Financial Officer

 

24