Notes
to the Condensed Consolidated Financial Statements
September
30, 2021
(Unaudited)
Note
1. Company Overview
Immune
Therapeutics Inc. (the “Company” or “IMUN”) is a Florida corporation trading on the OTC-Pink market. 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. Such commercialization efforts
include sale, licensing and go to market strategies. The Company has executed two product licenses: one with Cytocom, Inc. (“Cytocom”)
and one with Forte Animal Health, Inc. (“Forte”).
The
implementation of the Company’s 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 guaranty that the Company will be successful in securing
additional capital.
Going
Concern
As
of September 30, 2021, the Company had $29,355 in cash on hand, negative working capital of $7,743,645 and a stockholders’ deficit
of $7,743,645. For the three and nine months ended September 30, 2021, the Company reported net income attributable to common shareholders
of $3,112,940 and $3,790,645, respectively. Included in net income for these periods, are certain non-cash non-operating gains comprised
of the following:
Schedule of Income Statement
|
|
Three Months ended
|
|
|
Nine Months ended
|
|
|
|
September 30, 2021
|
|
Gain on assignment of debt
|
|
$
|
603,204
|
|
|
$
|
711,896
|
|
Receipt of common shares
|
|
|
5,761,500
|
|
|
|
5,761,500
|
|
Change in market value of common shares
|
|
|
(3,105,000
|
)
|
|
|
(3,105,000
|
)
|
Gain on reversal of derivative liability
|
|
|
-
|
|
|
|
1,178,230
|
|
Non-operating
gains
|
|
$
|
3,259,704
|
|
|
$
|
4,546,626
|
|
For
the three and nine months ended September 30, 2020, the Company reported net income attributable to common shareholders of $4,094,415
and $2,497,999,
respectively. Included in net income for the nine-month period ending September 30, 2020 was a non-cash non-operating gain of $3,332,280
resulting from the assignment of debt and $197,008
from the re-valuation of fair market value associated
with derivative liabilities.
Historically
the Company has relied on the funding of operations through private equity financings and management expects operating losses and negative
cash flows to continue at more significant levels in the future. As the Company continues to incur losses, transition to profitability
is dependent upon the successful development, approval, and commercialization of its current or future product candidates as they become
available and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve
profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future
operations through additional private or public debt or equity offerings and may seek additional capital through arrangements with strategic
partners or from other sources.
Working
capital at September 30, 2021 is not sufficient to meet the cash requirements to fund planned operations through the next twelve months
without additional sources of cash. These conditions raise substantial doubt about the Company’s ability to continue as a going
concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not
include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the
Company’s assets and the satisfaction of liabilities in the normal course of business.
If
the Company is unable to secure new working capital, other alternatives strategies will be required.
There
can be no guaranties that the Company will be successful in:.
|
●
|
Executing
its restructuring plan
|
|
●
|
Securing
adequate capital to continue operations.
|
|
●
|
Identifying
and acquiring assets for future development.
|
Note
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, 2020 (including the notes thereto) set forth in Form 10- K.
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.
Shares
Issued and Outstanding
The
Company’s shareholders approved a 1,000:1 reverse stock split in October 2019. The action was filed with the State of Florida during
the first quarter of 2020 at which time all current and historical financial reporting was restated to reflect the impact of the reverse
split on per share and warrant grant disclosures. On May 6, 2021, the Company received approval from the Financial Industry Regulatory
Authority (“FINRA”). All share amounts for all periods have been retroactively adjusted to reflect this reverse split.
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. At September 30, 2021, the Company has no cash balances in excess of insured
limits.
Segment
and Geographic Information
Operating
segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief
operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views
its operations and manages its business in one operating segment and does not segment the business for internal reporting or decision
making.
Fair
Value of Financial Instruments
In
accordance with the reporting requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic
825, “Financial Instruments”, the Company calculates the fair value of its assets and liabilities which qualify as financial
instruments under this standard and includes this additional information in the notes to the financial statements when the fair value
is different than the carrying value of those financial instruments.
Cash,
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 Stratera BioPharma (“STAB”)
is measured based on the quoted per share price as reported on NASDAQ. The carrying value of notes payable approximate fair value since
they bear market rates of interest and other terms. None of these instruments are held for trading purposes.
Derivative
Financial Instruments
FASB
ASC 820, Fair Value Measurements requires bifurcation of certain embedded derivative instruments in certain debt or equity instruments,
and measurement at their fair value for accounting purposes. A holder redemption feature embedded in the Company’s note payable
requires bifurcation from its host instrument had been accounted for as a freestanding derivative in previous reporting periods.
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.
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 September 30, 2021 and 2020, 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 September 30, 2021
and 2020, the Company has not accrued any interest or penalties related to uncertain tax positions.
Stock-Based
Compensation and Issuance of Stock for Non-Cash Consideration
The
Company measures and recognizes compensation expense for share-based payment awards made to employees and directors based on estimated
fair values equaling either the market value of the shares issued, or the value of consideration received, whichever is more readily
determinable. Generally, the non-cash consideration pertains to services rendered by consultants and others and has been valued at the
fair value of the Company’s common stock at the date of the agreement.
The
Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows
the provisions of ASC Topic 718, “Compensation-Stock Compensation.” The measurement date for the fair value of the
equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor
is reached or (ii) the date at which the consultant or vendor’s performance is complete.
The
Company did not grant any stock-based compensation awards during the nine months ended September 30, 2021 and 2020.
Net
Income (Loss) per Share
Basic
net income per share is calculated by dividing the net income attributable to common stockholders by the weighted average number of common
shares outstanding for the period, without consideration for common stock equivalents.
Diluted
income per share is calculated by dividing the net income by the weighted-average number of common shares outstanding for the period
determined using the treasury-stock method and the if-converted method.
A
reconciliation of the weighted average shares outstanding used in basic and diluted earnings per share computation is as follows:
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share
|
|
Three Months ended
|
|
|
Nine Months ended
|
|
|
|
September 30, 2021
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
Income available to common shareholders (Numerator)
|
|
$
|
3,112,940
|
|
|
$
|
3,790,645
|
|
Weighted average common shares (Denominator)
|
|
|
483,714
|
|
|
|
482,527
|
|
Basic EPS
|
|
$
|
6.44
|
|
|
$
|
7.86
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
Income available to common shareholders (Numerator)
|
|
$
|
3,112,940
|
|
|
$
|
3,790,645
|
|
Effect of convertible debt
|
|
$
|
41,307
|
|
|
$
|
109,697
|
|
Numerator
|
|
$
|
4,135,722
|
|
|
$
|
2,607,696
|
|
Weighted average common shares
|
|
|
483,714
|
|
|
|
482,527
|
|
Effect of warrants convertible into common stock
|
|
|
16,584,263
|
|
|
|
14,918,946
|
|
Effect of convertible notes
|
|
|
79,976
|
|
|
|
79,976
|
|
Weighted average common shares assuming exercise of outstanding warrants
|
|
|
12,507,218
|
|
|
|
12,507,218
|
|
Denominator
|
|
|
12,990,932
|
|
|
|
12,989,745
|
|
Diluted EPS
|
|
$
|
0.24
|
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
Income available to common shareholders (Numerator)
|
|
$
|
4,094,415
|
|
|
$
|
2,497,999
|
|
Weighted average common shares (Denominator)
|
|
|
457,578
|
|
|
|
457,578
|
|
Basic EPS
|
|
$
|
8.95
|
|
|
$
|
5.46
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
Income available to common shareholders
|
|
$
|
4,094,415
|
|
|
$
|
2,497,999
|
|
Effect of convertible debt
|
|
$
|
41,307
|
|
|
$
|
109,697
|
|
Numerator
|
|
$
|
4,135,722
|
|
|
$
|
2,607,696
|
|
Weighted average common shares
|
|
|
457,578
|
|
|
|
457,578
|
|
Effect of warrants convertible into common stock
|
|
|
16,584,263
|
|
|
|
14,918,946
|
|
Effect of convertible notes
|
|
|
79,976
|
|
|
|
79,976
|
|
Denominator
|
|
|
17,121,817
|
|
|
|
15,456,500
|
|
Diluted EPS
|
|
$
|
0.24
|
|
|
$
|
0.17
|
|
Recent
Accounting Standards
The
Company has reviewed the accounting pronouncements issued by the Financial Accounting Standards Board during the nine months ended September
30, 2021. Applicable pronouncements will be adopted by the Company in accordance with the accounting guidance and definition. Management
does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s
consolidated financial statements.
Note
3. Investment in Common Stock
On
September 28, 2021, Cytocom announced the completion of its merger with Cleveland BioLabs, Inc. (“CBLI”) which resulted in
the Company’s receipt of 1,150,000
common shares of CBLI, reflecting the Company’s
retained minority interest in Cytocom. The merger was completed in July 2021. Subsequent to the merger, CBLI adopted a new
corporate name, Stratera BioPharma, Inc., with the ticker symbol “STAB” effective September 1, 2021. Cytocom emerged as a
publicly traded entity following the merger with CBLI.
The
Company recorded the fair market value of the 1,150,000
common shares at $5,761,500
upon the announcement of the merger in July 2021
between Cytocom and CBLI. The Company recognized non-operating income upon the receipt of the STAB common shares in the Statement of
Operations during the third quarter of 2021. In accordance with the reporting requirements of FASB ASC Topic 321, “Investments
Equity Securities”, the Company re-measured the fair value of the STAB common shares at $2.31
per share and recognized a change in market value
of $3,105,000
as of September 30, 2021. At September 30, 2021
the fair value of the STAB common shares measured at $2,656,500
and is reflected as a current asset in the Balance
Sheet.
Prior
to May 1, 2018, the Company consolidated the operations and net assets of Cytocom. On May 1, 2018, the Company entered into an amended
and restated licensing agreement with Cytocom, in accordance with which, the Company no longer had any ongoing obligations to pay for
costs in connection with this investment. The Company deconsolidated Cytocom at that time and accounted for its retained interest under
the equity method of accounting, with the Company’s share of Cytocom’s earnings recorded in “loss from equity method
investment” in the consolidated statements of operations. The Company’s investment in Cytocom has been zero since December
31, 2018, and no losses have been recognized since that date.
Note
4. Notes payable
A
summary of Notes Payable at September 30, 2021 and December 31, 2020 follows.
Schedule of
Notes Payable
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Promissory notes issued between December 2014 and January 2015. The notes accrue interest at 10% and include a penalty rate of 5%, plus a pro-rata share of two percent of the Company’s gross receipts for sales of IRT-103-LDN in perpetuity. Notes were to be repaid in 36 monthly installments of principal and interest commencing no later than October 15, 2015. These notes are in default.
|
|
$
|
70,000
|
|
|
$
|
70,000
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued between February 2016 and July 2018 with interest rates ranging from 2 and 10% and maturing between February 2017 and November 2018. These notes are in default.
|
|
|
149,500
|
|
|
|
149,500
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued in the fourth quarter of 2016, accrue interest at 2%, include a penalty rate of 5%, and matured in the fourth quarter of 2017. These notes are in default.
|
|
|
606,500
|
|
|
|
606,500
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued in 2017 accrue interest at 2%, include a penalty rate of 5%, and matured in March 2018. These notes are in default.
|
|
|
205,000
|
|
|
|
205,000
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued in May 2017 accrue interest at 2% with a penalty rate of 5% matured in May 2018. These notes are in default.
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued in the third quarter of 2017 accrue interest at 2% include a penalty rate of 5% and matured in the third quarter of 2018. These notes are in default.
|
|
|
116,800
|
|
|
|
116,800
|
|
|
|
|
|
|
|
|
|
|
A promissory note for $425,000 was issued in October 2017 with an original issue discount of $70,000 and an annual interest rate of 22% on all outstanding balances. The note was in default, which triggered certain penalties, resulting in an outstanding balance of $454,032. The original noteholder entered into a Note Purchase Agreement in November 2020, in the amount of $697,600, reflecting the total principal, interest and penalties, and transferred the note to Global Reverb Corp., an entity wholly owned by the Company’s former Chief Executive Officer and director, Noreen Griffin. During the first quarter of 2021, Global Reverb Corp. sold 50% of the value of the note to another investor.
|
|
|
-
|
|
|
|
454,032
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued in December 2017 accrue interest at 2% with a penalty rate of 5% and matured in December 2018. These notes are in default.
|
|
|
105,500
|
|
|
|
105,500
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued in January 2018 accrue interest at 2% with a penalty rate of 5% and matured between May 2018 and January 2019. These notes are in default.
|
|
|
47,975
|
|
|
|
47,975
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued from March 2018 through June 2018 accrue interest at 2% with a penalty rate of 5% and matured between July and October 2018. These notes include warrants with an exercise price of $5 per share. These notes are in default.
|
|
|
65,000
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued in the second quarter of 2018 accrue interest at 2% with a penalty rate of 5% and matured between November 2018 and August 2019. These notes include warrants with an exercise price of $0.05 per share. These notes are in default.
|
|
|
118,000
|
|
|
|
118,000
|
|
|
|
|
|
|
|
|
|
|
Promissory notes issued in the third and fourth quarters of 2018 accrue interest at 2% with a penalty rate of 5% and matured in November 2019. These notes include warrants with an exercise price ranging from $5 to $40 per share. These notes are in default.
|
|
|
323,855
|
|
|
|
323,855
|
|
|
|
|
|
|
|
|
|
|
Promissory note issued to Global Reverb Corp. in the first quarter of 2019 accrues interest at 2% with a penalty rate of 5% and matured in July 2019. The note includes warrants with an exercise price of $5 per share. The note is in default.
|
|
|
23,000
|
|
|
|
23,000
|
|
Promissory
note issued in the first quarter of 2019, accrues interest at 6% and matured in February 2020. This note is in default.
|
|
|
231,478
|
|
|
|
231,478
|
|
|
|
|
|
|
|
|
|
|
Promissory
note issued in April 2019 accrues interest at 2% with a 5% penalty matured in July 2019. The note includes warrants with an exercise
price of $5 per share. The note is in default.
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Promissory
note issued in October 2019 for the settlement of outstanding debt in the same amount. The note accrues interest at 15% with a penalty
rate of 5%. The note requires $1,875 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 matures in August 2021. The Company recognized a $54,312 derivative
liability for the conversion rights attached to the note as of December 31, 2020. The outstanding principal and interest accrued
on this note were converted into 5,402 common shares in February 2021
|
|
|
-
|
|
|
|
53,000
|
|
|
|
|
|
|
|
|
|
|
Promissory
notes issued in the first quarter of 2021 in connection with a Note Purchase Agreement with a previous note holder. The new notes
reflect all principal, interest and penalties associated with the original instrument. These notes accrue interest at 5% and a penalty
rate of 7%. The holder of $348,800 of these notes (Global Reverb Corp.) is an entity wholly owned by the Company’s former Chief
Executive Officer that is also a former director of the Company. These notes mature in March 2022.
|
|
|
697,600
|
|
|
|
-
|
|
|
|
|
3,070,208
|
|
|
|
2,879,640
|
|
Less:
Original issue discount on notes payable and warrants issued with notes.
|
|
|
-
|
|
|
|
(34,789
|
)
|
|
|
$
|
3,070,208
|
|
|
$
|
2,844,851
|
|
As
of September 30, 2021 and December 31, 2020, the Company had $518,112 and $635,217, respectively, in accrued and unpaid interest and
default penalties.
The
Company did not issue any new promissory notes during the nine months ended September 30, 2021. During the first quarter of 2021,
the Company issued 5,402 common shares, at a price of $10.40 per share, upon the conversion of $53,000 in promissory notes and $3,480
in accrued interest. During the first quarter of 2020, the Company issued a $53,000 promissory note. The noteholder subsequently converted
the principal and all accrued interest on these notes in the amount of $3,180 in October 2020. The Company issued 6,893 shares of common
stock at an average price per share of $8.15 in connection with this conversion.
As
of September 30, 2021 and December 31, 2020, the Company had $1,677,275 and $1,639,275, respectively, in notes payable to shareholders
of record.
Note
5. Derivative Liabilities
As
of September 30, 2021, and December 31, 2020, the fair value of the outstanding derivative liabilities was zero and $1,254,444, respectively.
During
the first quarter of 2021, the Company entered into a Note Exchange Agreement with a noteholder that resulted in the issuance of new
non-convertible promissory notes of $697,600 in exchange for outstanding convertible promissory note with related accrued interest. The
new notes do not have conversion rights and as such, the Company reversed a derivative liability of $1,200,129 during the first quarter
of 2021.
Also
during the first quarter of 2021, the Company issued 5,402 common shares in connection with a noteholder’s election to convert
$56,480 in principal and interest to common shares. The Company recognized $21,899 for the change in fair market value on related derivative
liability prior to the conversion and derecognized $76,211 in derivative liabilities.
The
Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs
may be used to measure fair value:
|
●
|
Level
1 Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement
date.
|
|
●
|
Level
2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.
|
|
●
|
Level
3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets
or liabilities.
|
A
reconciliation of changes in the fair value of derivative liabilities classified as Level 3 in the fair value hierarchy follows:
Schedule of Fair Value, Net Derivative Asset
|
|
Conversion option derivative liability
|
|
Balance December 31, 2020
|
|
$
|
1,254,441
|
|
Change in fair value
|
|
|
21,899
|
|
Settlement of liability upon debt exchange and conversion
|
|
|
(1,276,340
|
)
|
Balance September 30, 2021
|
|
$
|
-
|
|
Note
6. 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
During
the nine months ended September 30, 2021 and September 30, 2020, no warrants were issued or exercised. There were no modifications to
the terms of any warrants issued by the Company during these periods.
The
following is a summary of outstanding common stock warrants at September30, 2021.
Schedule of Outstanding Common Stock Warrant
Expiration Date
|
|
Number of Shares
|
|
|
Exercise Price
|
|
|
Remaining Life (years)
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter 2021
|
|
|
300
|
|
|
$
|
100
|
|
|
|
.50
|
|
First Quarter 2022
|
|
|
150
|
|
|
$
|
200
|
|
|
|
.75
|
|
Second Quarter 2022
|
|
|
1,750
|
|
|
$
|
150
|
|
|
|
1.00
|
|
Third Quarter 2022
|
|
|
1,650
|
|
|
$
|
50 - 100
|
|
|
|
1.25
|
|
Fourth Quarter 2022
|
|
|
9,811
|
|
|
$
|
80 - 290
|
|
|
|
1.50
|
|
First Quarter 2023
|
|
|
1,204,000
|
|
|
$
|
5
- 40
|
|
|
|
1.75
|
|
Second Quarter 2023
|
|
|
802,000
|
|
|
$
|
5
- 200
|
|
|
|
2.00
|
|
Third Quarter 2023
|
|
|
7,521,500
|
|
|
$
|
5
- 100
|
|
|
|
2.25
|
|
Fourth Quarter 2023
|
|
|
6,024,300
|
|
|
$
|
5
|
|
|
|
2.50
|
|
First Quarter 2024
|
|
|
3,660,000
|
|
|
$
|
5
|
|
|
|
2.75
|
|
Second Quarter 2024
|
|
|
800,000
|
|
|
$
|
5
|
|
|
|
3.00
|
|
Third Quarter 2028
|
|
|
3,000
|
|
|
$
|
70
|
|
|
|
7.25
|
|
Second Quarter 2032
|
|
|
28,995
|
|
|
$
|
10
- 70
|
|
|
|
11.00
|
|
|
|
|
20,057,456
|
|
|
$
|
5
- 200
|
|
|
|
|
|
The
following is a summary of outstanding stock warrant activity for the nine months ended September 30, 2021:
Schedule of Stockholders' Equity Note, Warrants or Rights
|
|
Number of Shares
|
|
|
Exercise Price
|
|
|
Weighted Average Price
|
|
Warrants as of December 31, 2020
|
|
|
20,081,035
|
|
|
$
|
5-290
|
|
|
$
|
5.20
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired and forfeited
|
|
|
(23,579
|
)
|
|
$
|
14-200
|
|
|
$
|
145.35
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrants as of September 30, 2021
|
|
|
20,057,456
|
|
|
$
|
5-290
|
|
|
$
|
0.51
|
|
Note
7. Income Taxes – Results of Operations
There
was no income tax expense reflected in the results of operations for the three- and nine-month periods ended September 30, 2021 as the
net income recognized during the period would be offset by the utilization of net operating loss carryforwards available to the Company.
The
Company’s effective tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amount
of income we earn in jurisdictions. This rate 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 2021 and 2020 tax years. The Company has recognized no tax benefit for the losses generated for the periods through September
30, 2021. 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.
Note
8. Licenses Agreements
Due
to the Company’s need to generate short term cash flow to fund operations, the Company sublicensed its remaining technology to
Forte and Cytocom Inc. as detailed below. The Company is currently seeking to acquire pharmaceutical and medical device products, technology
and/or intellectual property that it can incubate for future commercialization.
Forte
Animal Health, Inc.
On
July 8, 2021, the Company amended the license agreement (the “Amended License Agreement”) with Forte Animal Health Inc. (“Forte”)
dated February 27, 2020.
Under
the Amended License Agreement, the Company granted Forte an exclusive license to develop and commercialize pharmaceutical products consisting
of Lodonal and MENK for use in veterinary applications for all indications world-wide. Milestone payments and royalties are defined in
the agreement based on development and royalties are based on sales during the license period.
The
Initial License Fee includes the assumption of certain Company defaulted Notes and other liabilities. Forte will assume a minimum of
IMUN defaulted debt and to assume certain additional obligations of the Company. The note holders and vendors associated with the assigned
liabilities have not yet assigned their rights to Forte.
Consideration
for Amended License Agreement with Forte
Schedule of Consideration
Consideration / Assumption of:
|
|
|
|
Notes in Default
|
|
$
|
1,742,868
|
|
Accounts payable and accruals
|
|
|
245,692
|
|
Past Due Employee Obligations
|
|
|
1,016,648
|
|
Total Consideration to be Recognize Upon Execution
|
|
$
|
3,005,208
|
|
The
documentation and sign off, of the Forte license, have yet to be executed by the individual lenders that will be required to provide
their sign-off and approval for the transfer of these notes. As such the accompanying financial statements do not reflect any gain on
sale. Until such time as the transaction is completed Forte does not have clear title and interest to the veterinary rights.
Forte
has agreed to make payments to the Company in connection with this agreement as follows:
|
●
|
Initial
License Fee, upon the assignment of certain Company Notes Payable.
|
|
●
|
Development
Milestone Payments upon the occurrence of the identified events, one-time, non-creditable, non-refundable milestone payments of $100,000
will be earned by the Company upon: (1) a successful MUMS designation and (2) upon a successful conditional approval.
|
|
●
|
Commercial
Milestone Payments upon reaching the mutually agreed aggregate net sales. Forte will pay one-time, non-creditable, non-refundable
milestone payments to be negotiated and addressed in a separate Amendment later.
|
|
●
|
Royalties
during the royalty term (generally 15 years from the first sale of a product in a country), royalties on annual net sales as follows:
|
Schedule of Royalty Rate
Annual Sales of Royalty Qualifying Licensed Products
|
|
Royalty Rate
|
|
<$500,000,000
|
|
|
2
|
%
|
500,000,000 to < $1,000,000,000
|
|
|
4
|
%
|
> $1,000,000,000)
|
|
|
6
|
%
|
To
date the Company has not received any payments under the terms of this agreement.
Cytocom
On
May 13, 2020, the Company and Cytocom entered into an Amendment to The Second Amendment to The License Agreement (“Third
Amendment”) that was effective December 31, 2018. The sublicense provides Cytocom with the Company’s previously licensed
rights for LDN and MENK in Emerging Markets.
Original
terms for consideration for the sublicense were not finalized until August 12, 2020, at which time Cytocom and the Company signed a letter
agreement in which Cytocom agreed to assume a combination of defaulted notes plus certain other liabilities. Such terms were amended,
and the Company agreed to transfer all the rights, title, and interest to Cytocom in technology licensed from Penn State Research Foundation
(“PSU”) in exchange for Cytocom assuming all past due and future obligations under the PSU license. While the Company formalized
the agreement to assign all outstanding liabilities due to PSU, a vendor of the Company, PSU did not consent to the assignment
of the payables to Cytocom. As of September 30, 2021, the Company had no
outstanding accounts payable balances due to
Penn State University.
In
the third quarter of 2020, the Company received a Notice of Default (“Notice”) from Cytocom relating to the sublicensing
transaction. The Company disputes the validity of the Notice on the basis that Cytocom has failed to execute on their consideration for
the license. On July 20, 2021 the Notice of Default was rescinded.
On
July 20, 2021, Cytocom and the Company agreed to modify the terms of the original sublicense. The renegotiated terms are presented below.
The assignment of the Notes in Default was fully executed in the third quarter of 2020 with the transfer of the notes upon the creditors’
signoff. The Company recognized a gain upon the assignment of these notes in the third quarter of 2020. Cytocom has not completed
the assumption of the remaining liabilities.