Notes
to the Condensed Consolidated Financial Statements
March
31, 2022
(Unaudited)
1.
Company Overview
Immune
Therapeutics Inc. (the “Company” or “IMUN”) is a Florida Public Company trading on the OTC-Pink. The Company
has been inactive for the last year due to a lack of funding, and with the Company’s current structure, it is impossible to move
forward until a restructuring of the Company is completed.
Going
Concern
As
of March 31, 2022, the Company had $436,888 in
cash on hand, negative working capital of $10,867,056
and a stockholders’ deficit of $10,504,806.
For the first quarter ended March 31, 2022, the Company reported a net loss attributable to common shareholders of $2,556,550.
For the three months ended March 31, 2021, the Company reported net income attributable to common shareholders of $790,407.
Included in net income for the first quarter of 2021 was a non-cash non-operating gain of $1,178,230
resulting from elimination of a derivative liability
upon the satisfaction of the underlying debt instrument.
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 March 31, 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 developing as a strategy 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 guaranties 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 alternatives 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 guaranties that the Company will be successful in:
| |
● |
Executing its restructuring plan |
| |
● |
Securing adequate capital to continue operations. |
| |
● |
Identifying and acquiring assets for future development.
|
Company
History
Immune
Therapeutics, Inc. (“the Company”, “Immune”) 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 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.
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
March 31, 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.
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 March 31, 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 March 31, 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 three months ended March 31, 2022 and 2021.
The
Company measures and recognizes compensation expense for share-based awards based on estimated fair values equalling 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
(Loss) Income per Share
For
the three months ended March 31, 2022, basic 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.
Diluted
net loss per share is calculated by dividing the net loss by the weighted-average number of common share equivalents outstanding for
the period determined using the treasury-stock method and the if-converted method. For the three months ended March 31, 2022, there is
no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.
The Company’s potential dilutive securities, which include stock warrants, have been excluded from the computation of diluted net
loss per share as the effect would be to reduce the net loss per share.
For
the three-month ended March 31, 2021, basic net income per share was 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, for the three-month period ended March 31, 2021, was 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 for the three-month period ended March 31, 2021 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
| | |
Net Income
(Numerator) | | |
Weighted Average
Common Shares
(Denominator) | | |
Per Share Amount | |
| Basic EPS | |
| | | |
| | | |
| | |
| Income available to common stockholders | |
$ | 790,407 | | |
| 478,305 | | |
$ | 1.65 | |
| Diluted EPS | |
| | | |
| | | |
| | |
| Effect of warrants convertible into common stock | |
| - | | |
| 20,012,083 | | |
| - | |
| Potential shares purchasable using proceeds of warrants | |
| - | | |
| (3,925,915 | ) | |
| - | |
| Effect of convertible debt | |
| - | | |
| 30,422 | | |
| - | |
| Income available to common stockholders | |
$ | 790,407 | | |
| | |
$ | 0.05 | |
Recent
Accounting Standards
The
Company has reviewed the accounting pronouncements issued by the Financial Accounting Standards Board during the first quarter 2022.
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
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.
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 $0.32
per share and recognized a decrease in market
value of $2,282,500
as of March 31, 2022.
4.
Notes payable
Notes
Payable on March 31, 2022 and December 31, 2021:
Schedule of Notes Payable
| | |
March 31, 2022 | | |
December 31, 2021 | |
| |
$ | 70,000 | | |
$ | 70,000 | |
| 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. | |
$ | 70,000 | | |
$ | 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 | | |
| 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. | |
$ | 606,500 | | |
| 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 | | |
| 205,000 | |
| | |
| | | |
| | |
| Promissory notes were issued in 2017 accrue interest at 2% and matured in May 2018. These notes are in default. | |
$ | 150,000 | | |
| 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. | |
$ | 116,800 | | |
| 116,800 | |
| | |
| | | |
| | |
| Promissory notes were issued in 2017 accrue interest at 2%. The notes are in default. | |
$ | 105,500 | | |
| 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 | | |
| 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 $5. These notes are in default. | |
$ | 65,000 | | |
| 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 | | |
| 118,000 | |
| | |
| | | |
| | |
| Promissory notes were issued in 2018. The notes accrue interest at 2% and matured between January 2019 and November 2019. These notes include warrants between 200 and 39,500 shares with an exercise price of $5 to $40. These notes are in default. | |
$ | 323,855 | | |
| 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 $5. 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 $5. 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% 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 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 matured in March
2022 and are in default. | |
$ | 697,600 | | |
| 697,600 | |
| | |
$ | 3,070,208 | | |
$ | 3,070,208 | |
As
of March 31, 2022, the Company had accrued $656,484 in unpaid interest and default penalties. As of March 31, 2022 and December 31, 2021,
the Company had $1,677,275 and $1,677,275, respectively, in notes payable to shareholders of record.
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
During
the three months ended March 31, 2022 and March 31, 2021, no warrants issued or exercised. There were no modifications to the terms of
any warrants issued by the Company during these periods.
On
March 31, 2022, the Company had a total of 20,057,006
warrants rights outstanding. Included in the
outstanding warrants are 18,730,000
warrants, held by thirty-one investors with an
exercise price of $5.00
per share, that include provisions that limit
the maximum impact of a reverse split on their warrant
shares and the exercise price per share at 10-to-1.
The
following is a summary of outstanding common stock warrants for the three-month period ended March 31, 2022.
Schedule of Outstanding Common Stock Warrant
| Expiration Date | |
Number
of Shares | | |
Exercise Price | | |
Remaining Life (years) | |
| | |
| | |
| | |
| |
| Second Quarter 2022 | |
| 1,750 | | |
$ | 150 | | |
| .25 | |
| Third Quarter 2022 | |
| 1,650 | | |
$ | 50-100 | | |
| .50 | |
| Fourth Quarter 2022 | |
| 9,811 | | |
$ | 80-290 | | |
| .75 | |
| First Quarter 2023 | |
| 1,204,000 | | |
$ | 5-40 | | |
| 1.00 | |
| Second Quarter 2023 | |
| 802,000 | | |
$ | 5-200 | | |
| 1.25 | |
| Third Quarter 2023 | |
| 7,521,500 | | |
$ | 5-100 | | |
| 1.50 | |
| Fourth Quarter 2023 | |
| 6,024,300 | | |
$ | 2-5 | | |
| 1.75 | |
| First Quarter 2024 | |
| 3,660,000 | | |
$ | 5 | | |
| 2.00 | |
| Second Quarter 2024 | |
| 800,000 | | |
$ | 5 | | |
| 2.25 | |
| Third Quarter 2028 | |
| 3,000 | | |
$ | 70 | | |
| 6.50 | |
| Second Quarter 2032 | |
| 28,995 | | |
$ | 10-70 | | |
| 10.00 | |
| | |
| 20,057,006 | | |
$ | 5-200 | | |
| | |
Following
is a summary of outstanding stock warrants activity for the three months ended March 31, 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 | |
| (150 | ) | |
$ | 200 | | |
$ | 200 | |
| Exercised | |
| - | | |
$ | - | | |
$ | - | |
| Warrants as of March 31, 2022 | |
| 20,057,006 | | |
$ | 2-290 | | |
$ | 5.20 | |
6.
Income Taxes – Results of Operations
There
was no income tax expense reflected in the results of operations for the years ended March 31, 2022 and 2021 because the Company incurred
a net loss and has significant net loss operating carryforwards. 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 March 31, 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.