Item
1.01. Entry into a Material Definitive Agreement.
Settlement
Agreement
On
October 12, 2017, Immune Therapeutics, Inc. (the “Company”) entered into a settlement and release agreement (the “Release
Agreement”) with Phoenix Fund Management, LLC (“PFM”) and Far East Holdings, LLC (“FEH”) relating
to certain claims between the Company and PFM before the Circuit Court of the Eleventh Judicial Circuit (the “Court”),
in and for Miami-Dade County, Florida, case No. 2017-003521 CA-01 (the “Lawsuit”). The debt to PFM, the Lawsuit, a
previous settlement agreement between PFM and the Company (“3(a)(10) Settlement Agreement”) and the Court’s
previous order that the Company pay PFM in the amount of $675,000 through issuance of the Company’s common stock pursuant
to the 3(a)(10) Settlement Agreement, was initially disclosed in the Company’s current report filed March 14, 2017.
The
Release Agreement is meant to memorialize that the $675,000 due PFM has been overpaid by the Company and to establish the responsibilities
of the parties henceforth. Pursuant to the Release Agreement, the Company agreed to dismiss all claims filed against PFM, not
attempt to impede or frustrate the ability of PFM to deposit, clear or sell its shares of the Company’s stock, and provide
any assistance necessary to aid in the deposit and clearance of PFM’s shares. Also pursuant to the Release Agreement, PFM
shall transfer one million (1,000,000) shares of the Company’s stock to ClearTrust, LLC, the Company’s transfer agent
(“ClearTrust”), for the shares to be deposited in the Company’s treasury and FEH shall transfer one and half
million (1,500,000) shares of the Company’s stock to ClearTrust for the shares to be deposited in the Company’s treasury.
Upon the terms and conditions of the Release Agreement being met, each party has agreed to fully release the other party from
any claims or complaints, known or unknown, which the party may have had against the other.
As
the debt owed to PFM has been paid in full, PFM shall release the 90,000,000 shares of common stock held in reserve by ClearTrust
pursuant to the 3(a)(10) Settlement Agreement, to be returned to the Company’s treasury; however, in the event that the
Company violates the Release Agreement, the reserve amount of 90,000,000 common shares shall be fully reinstated with ClearTrust.
Securities
Purchase and Related Documents
On
October 25, 2017, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Iliad Research and
Trading, L.P., a Utah limited partnership (“Iliad”) whereby the Company agreed to sell and Iliad agreed to purchase
the following securities (“Securities”) (i) a convertible promissory note (the “Note”) convertible into
common shares of the Company, (ii) a warrant exercisable into 2,656,250 common shares of the Company (the “Warrant”),
and (iii) 560,000 newly issued common shares of the Company (the “Origination Shares”). The purchase price for the
Securities is $350,000.00.
Pursuant
to the Agreement, the Company has agreed to initially reserve 45,000,000 common shares towards issuance of the common shares issuable
upon exercise of the Warrant and conversion of the Note. It has further agreed to increase the reserve in 5,000,000 share increments
so that the reserve remains at least 3x the number of common shares issuable upon exercise of the Warrant and conversion of the
Note. The Company and its transfer agent have executed an irrevocable letter of instruction relating to the reservation of shares
pursuant to the Agreement.
In
addition, should the Company offer securities during any period while the Securities are outstanding on better terms than those
offered to Iliad pursuant to the Agreement, Iliad or its assign shall have the option to incorporate the preferable terms conversion
or exercise of it remaining outstanding Securities. Further, the Agreement contains numerous restrictive covenants relating to,
among others, the Company’s issuance of variable rate securities. The Agreement also contains standard representations and
warranties.
The
Warrant issued pursuant to the Agreement on or around October 25, 2017, may be exercised for a term of five (5) years for a total
of up to 2,656,250. The exercise price for each share of common stock under the Warrant is $0.08, as the same may be adjusted
from time to time pursuant to the terms and conditions of this Warrant, including following a stock split or dividend. The Warrant
holder may elect a “cashless” exercise of the Warrant whereby the holder shall be entitled to receive a number of
shares of common stock equal to (i) the excess of the “Current Market Value” (as defined in the Warrant) over the
aggregate exercise price of the shares being exercised, divided by (ii) the “Adjusted Price” (the lower of the market
price and exercise price, as adjusted).
The
Company has three days from the date of any exercise of the Warrant to deliver the warrant shares before it incurs substantial
late fees not to exceed 200% of the value of the warrant shares being exercised. The Warrant contains a 4.99% ownership limitation
whereby the Warrant cannot be exercised if it would cause the holder’s ownership to exceed 4.99% of the Company’s
voting stock. This limitation may be increased by the holder to 9.99%.
The
Company issued the Note on or around October 25, 2017 in the principal amount of $425,000.00. In addition to containing a $70,000.00
original issuance discount (OID), the Note included $5,000.00 to cover Iliad’s legal expenses relating to the foregoing
transactions. No interest will accrue on the principal balance of the Note unless there is a default, at which time, it will be
22%. The Note has a seven (7) month maturity but may be prepaid in full anytime; however, if prepaid within 90 days from issuance,
the Company will be required to pay only $400,000.00 in full satisfaction of the Note.
The
Note holder may convert the principal and interest under the Note to common shares of the Company at a conversion rate of, subject
to adjustment, 60% of the lowest intra-day trade price during the period twenty five (25) trading days prior to conversion. The
conversion price may be reduced by factors of 5% upon certain events of default.
Upon
any enumerated event of default under the Note, the Note holder may declare all amounts under the Note immediately due and payable
at a premium based on a formula using the conversion price, outstanding balance and market price of the Company’s common
stock. In the alternative, the Note holder may apply a default premium rather than declaring the balance due. In such case the
outstanding balance will be increased by the default premium, which is 5% for minor defaults and 15% for major defaults. The premium
for major defaults may be applied three times, as may the premium for minor defaults. The Note also contains similar ownership
limitations and late fees for failure to timely deliver share certificates as those contained in the Warrant.