ITEM
1. FINANCIAL STATEMENTS
IMMUNE
THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
UNAUDITED
The
accompanying notes are an integral part of these condensed consolidated financial statements.
IMMUNE
THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED JUNE
30, 2022 AND 2021
(Unaudited)
The
accompanying notes are an integral part of these condensed consolidated financial statements.
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)
FOR
THE PERIODS ENDED JUNE 30, 2022 AND 2021
(Unaudited)
The
accompanying notes are an integral part of these condensed consolidated financial statements.
IMMUNE
THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED JUNE 30, 2022 AND 2021
(Unaudited)
The
accompanying notes are an integral part of these condensed consolidated financial statements.
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. |
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.
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.
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:
Schedule of Basic and Diluted Earnings per Share
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.
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. |
Notes
outstanding as of June 30, 2022 and December 31, 2021 are as follows:
Schedule of Notes Payable
| |
| | | |
| | |
| |
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 | |
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:
Schedule of Share-based Payment Award, Stock Options, Valuation 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.
Schedule of Outstanding Common Stock Warrant
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:
Schedule of Outstanding Stock Warrants
| |
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.
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.
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 | |
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.
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.
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.
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.