0001354488-15-005110.txt : 20151116 0001354488-15-005110.hdr.sgml : 20151116 20151116110905 ACCESSION NUMBER: 0001354488-15-005110 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20150930 FILED AS OF DATE: 20151116 DATE AS OF CHANGE: 20151116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Immune Therapeutics, Inc. CENTRAL INDEX KEY: 0001559356 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 593226705 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-54933 FILM NUMBER: 151232519 BUSINESS ADDRESS: STREET 1: 37 NORTH ORANGE AVENUE STREET 2: SUITE 607 CITY: ORLANDO STATE: FL ZIP: 32801 BUSINESS PHONE: (888) 613-8802 MAIL ADDRESS: STREET 1: 37 NORTH ORANGE AVENUE STREET 2: SUITE 607 CITY: ORLANDO STATE: FL ZIP: 32801 FORMER COMPANY: FORMER CONFORMED NAME: TNI BIOTECH, INC. DATE OF NAME CHANGE: 20121001 10-Q 1 tnib_10q.htm QUARTERLY REPORT tnib_10q.htm


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2015
 
OR
 
oTRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
 
From the transition period from ___________ to ____________
 
Commission File Number 000-54933
 
IMMUNE THERAPEUTICS, INC.
(Exact name of small business issuer as specified in its charter)
 
 Florida
 
 59-3226705
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
 
37 North Orange Ave, Suite 607, Orlando, FL 32801
(Address of principal executive offices)
 
  888-613-8802
(Issuer's telephone number)
 
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes þ  No o.
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ  No o.

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” ”accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large Accelerated Filer o
 
Accelerated Filer o
       
 
Non-Accelerated Filer  o
 
Smaller Reporting Company þ
 
Indicate by a check mark whether the company is a shell company (as defined by Rule 12b-2 of the Exchange Act: Yes oNo þ
 


 
 
 
 
 
As of November 16, 2015 there were 117,990,052 shares of Common Stock outstanding. 
 
 
 

 
 
2

 
 
TABLE OF CONTENTS
 
PART I FINANCIAL STATEMENTS
 
         
Item 1
   
6
 
           
Item 2
 
27
 
           
Item 3
 
38
 
           
Item 4
 
38
 
           
PART II OTHER INFORMATION
 
           
Item 1
 
39
 
           
Item 1A
 
39
 
           
Item 2
 
39
 
           
Item 3
 
40
 
           
Item 4
 
41
 
           
Item 5
 
41
 
           
Item 6
 
41
 
 
 

 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
Certain statements contained or incorporated by reference in this Quarterly Report on Form 10-Q are considered forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) concerning our business, results of operations, economic performance and/or financial condition, based on management's current expectations, plans, estimates, assumptions and projections. Forward-looking statements are included, for example, in the discussions about:
 
strategy;
new product discovery and development;
current or pending clinical trials;
our products' ability to demonstrate efficacy or an acceptable safety profile;
actions by the FDA and other regulatory authorities;
product manufacturing, including our arrangements with third-party suppliers;
product introduction and sales;
royalties and contract revenues;
expenses and net income;
credit and foreign exchange risk management;
liquidity;
asset and liability risk management;
the outcome of litigation and other proceedings;
intellectual property rights and protection;
economic factors;
 
 
3

 
 
competition; and
legal risks.
 
Any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements. Forward-looking statements generally are identified by the words "expects," "anticipates," "believes," "intends," "estimates," "aims," "plans," "may," "could," "will," "will continue," "seeks," "should," "predict," "potential," "outlook," "guidance," "target," "forecast," "probable," "possible" or the negative of such terms and similar expressions. Forward-looking statements are subject to change and may be affected by risks and uncertainties, most of which are difficult to predict and are generally beyond our control. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events, except as required by law, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities laws and other applicable laws.
 
We caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements, and therefore you should not place too much reliance on them. These factors include, among others, those described herein, under "Risk Factors" and elsewhere in this Annual Report and in our other public reports filed with the Securities and Exchange Commission. It is not possible to predict or identify all such factors, and therefore the factors that are noted are not intended to be a complete discussion of all potential risks or uncertainties that may affect forward-looking statements. If these or other risks and uncertainties materialize, or if the assumptions underlying any of the forward-looking statements prove incorrect, our actual performance and future actions may be materially different from those expressed in, or implied by, such forward-looking statements. We can offer no assurance that our estimates or expectations will prove accurate or that we will be able to achieve our strategic and operational goals.
 
Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to significant risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.  Important factors that could cause such differences include, but are not limited to:
 
our lack of operating history;
our current and future capital requirements and our ability to satisfy our capital needs;
our inability to keep up with industry competition;
interpretations of current laws and the passages of future laws;
acceptance of our business model by investors and our ability to raise capital;
our drug discovery and development activities may not result in products that are approved by the applicable regulatory authorities.  Even if our drug candidates do obtain regulatory approval they may never achieve market acceptance or commercial success;
our reliance on key personnel, including our ability to attract and retain scientists;
our reliance on third party manufacturing to supply drugs for clinical trials and sales;
our limited distribution organization with no sales and marketing staff;
our being subject to product liability claims;
our reliance on key personnel, including our ability to attract and retain scientists;
legislation or regulation that may increase the cost of our business or limit our service and product offerings;
risks related to our intellectual property, including our ability to adequately protect intellectual property rights;
risks related to government regulation, including our ability to obtain approvals for the commercialization of some or all of our drug candidates, and ongoing regulatory obligations and continued regulatory review which may result in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements; and
our ability to obtain regulatory approvals in foreign jurisdictions to allow us to market our products internationally.
 
Moreover, new risks regularly emerge and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements.  All forward-
 
 
4

 
 
looking statements included in this prospectus are based on information available to us on the date of this Annual Report.  Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.  All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this Annual Report.
 
JUMPSTART OUR BUSINESS STARTUPS ACT
 
 We qualify as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have more than $1,000,000,000 in annual gross revenue and did not have such amount as of December 31, 2014, the last day of our last fiscal year. We are electing to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.
 
 As an emerging growth company, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
 
being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this annual report;
not being requested to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley Act”);
reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
 
We will remain an emerging growth company until the earliest to occur of: (i) our reporting $1 billion or more in annual gross revenues; (ii) the end of fiscal year 2019; (iii) our issuance, in a three year period, of more than $1 billion in non-convertible debt; and (iv) the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million on the last business day of our second fiscal quarter.
 
 
5

 
 

 
PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS 

IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
 
   
September 30,
2015
 
December 31,
2014
 
ASSETS
 
(Unaudited)
 
(Audited)
 
Current Assets:
         
Cash and cash equivalents
 
$
153,868
   
$
191,987
 
Accounts receivable
   
12,676
     
-
 
Prepaids and other current assets
   
45,401
     
30,000
 
   Total current assets
   
211,945
     
221,987
 
                 
Fixed Assets:
               
Computer equipment, net of accumulated depreciation
               
 of $5,752 and $3,778 respectively
   
2,261
     
4,235
 
                 
Intangible Assets:
               
Patents and licenses, net of  accumulated amortization
               
 of $1,645,853 and $1,201,678, respectively (Note 10)
   
5,374,410
     
5,818,585
 
                 
Deposits and other assets
   
42,183
     
10,183
 
Total assets
 
$
5,630,799
   
$
6,054,990
 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current Liabilities:
               
Accounts payable
 
$
1,923,777
   
$
2,077,194
 
Accrued liabilities
   
933,266
     
1,111,839
 
Current portion of notes payable
   
1,729,100
     
186,067
 
   Total current liabilities
   
4,586,143
     
3,375,100
 
                 
Non-current Liabilities:
               
Notes payable, less current portion
   
109,333
     
327,458
 
   Total non-current liabilities
   
109,333
     
327,458
 
                 
Total Liabilities
   
4,695,476
     
3,702,558
 
Commitments and contingencies (Note 11)
 
               
Stockholders' Equity:
               
Common stock - par value $0.0001; 500,000,000 shares authorized;
               
175,444,934 and 134,417,210 shares issued and outstanding respectively
   
17,545
     
13,442
 
Additional paid in capital
   
343,856,174
     
337,985,787
 
Stock issuances due
   
146,303
     
847,279
 
Prepaid services
   
(644,167
)
   
(3,553,186
)
Accumulated deficit
   
(342,618,303
)
   
(333,547,377
)
   Equity attributable to common stockholders
   
757,552
     
1,745,945
 
Non-controlling interest
   
177,771
     
606,487
 
   Total stockholders' equity
   
935,323
     
2,352,432
 
   Total liabilities and stockholders' equity
 
$
5,630,799
   
$
6,054,990
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
6

 
 
 IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
Three Months ended
   
Nine Months ended
   
September 30, 2015
   
September 30, 2014
   
September 30, 2015
   
September 30, 2014
                       
Revenues, net
 
$
4,958
   
$
-
   
$
12,676
   
$
-
 
                             
Operating expenses
                           
Selling, general and administrative
   
865,335
     
901,746
     
1,689,188
     
3,264,342
 
Research and development expense
   
111,361
     
401,424
     
703,011
     
1,471,934
 
Stock issued for services G&A
   
1,393,500
     
4,946,639
     
5,005,393
     
17,021,025
 
Stock issued for services R&D
   
-
     
-
     
-
     
5,036,250
 
Warrant valuation
   
37,451
     
114,939
     
37,451
     
2,101,866
 
Depreciation and amortization expense
   
148,696
     
720,369
     
446,148
     
2,158,943
 
      Total operating expenses
   
2,556,343
     
7,085,117
     
7,881,191
     
31,054,360
 
                             
Loss from operations
   
(2,551,385
)
   
(7,085,117
)
   
(7,868,515
)
   
(31,054,360
)
                             
Other income (expense):
                           
Interest expense
   
(79,924
)
   
(94,101
)
   
(148,681
)
   
(376,163
)
Exchange gain (loss)
   
-
     
-
     
-
     
(783
Loss on settlement of debt
   
(1,394,000
)
   
(4,022,957)
     
(1,482,445
)
   
(4,022,957
 
     Total other income (expense)
   
(1,473,924
)
   
(4,117,058
)
   
(1,631,126
)
   
(4,399,903
)
                             
Net (loss)
 
$
(4,025,309
)
 
$
(11,202,175
)
 
$
(9,499,641
)
 
$
(35,454,263
)
Net loss attributable to non-controlling interest
   
(165,759)
     
-
     
(428,715)
         
Net (loss) attributable to common shareholders
 
$
(3,859,550
)
 
$
(11,202,175
)
 
$
(9,070,926
)
 
$
(35,454,263 )
                                 
Basic and diluted loss per share attributable to common shareholders
 
$
(0.02
)
 
$
(0.12
)
 
$
(0.06
)
 
$
(0.40
)
                                 
Weighted average number of shares outstanding
   
156,814,094
     
94,316,453
     
147,365,571
     
87,875,552 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
7

 
 
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 2015
(Unaudited)

   
Common Stock
   
Additional Paid
   
Stock to
   
Prepaid
   
Accumulated
   
NonControlling
       
   
Shares
   
Amount
   
in Capital
   
Be Issued
   
Services
   
Deficit
   
Interest
   
Total
 
                                                 
Balance, December 31, 2014
   
134,417,210
   
$
13,442
   
$
337,985,788
     
847,278
   
$
(3,553,185
)
 
$
(333,547,377
)
 
$
606,486
   
$
2,352,432
 
                                                                 
Issuance of common stock for prepaid services
   
16,922,504
     
1,693
     
2,748,683
     
(735,000
)
   
(986,000
)
   
-
     
-
     
1,029,376
 
                                                                 
Amortization of prepaid services
   
-
     
-
     
-
     
-
     
3,895,018
     
-
     
-
     
3,895,018
 
                                                                 
Issuance of common stock for investment
   
400,000
     
40
     
31,960
     
-
     
-
     
-
     
-
     
32,000
 
                                                                 
Issuance of common stock for legal settlements
   
1,000,000
     
100
     
79,900
     
1,000
     
-
     
-
     
-
     
81,000
 
                                                                 
Issuance of common stock for interest expense
   
62,500
     
6
     
15,619
     
-
     
-
     
-
     
-
     
15,625
 
                                                                 
Issuance of common stock in exchange for debt
   
16,278,720
     
1,628
     
2,504,934
     
(102,000
)
   
-
     
-
     
-
     
2,404,562
 
                                                                 
Issuance of common stock for cash and exercise of warrants
   
6,364,000
     
636
     
451,839
     
135,025
     
-
     
-
     
-
     
587,500
 
                                                                 
                                                                 
Issuance and modification of common stock warrants
                   
37,451
                                     
37,451
 
                                                                 
 Net loss
   
-
     
-
     
-
     
-
     
-
     
(9,070,926
)
   
(428,715)
     
(9,499,641
)
                                                                 
Balance, September 30, 2015
   
175,444,934
    $
17,545
    $
343,856,174
    $
146,303
    $
(644,167
)
  $
(342,618,303
)
  $
177,771
    $
935,323
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
8

 
 
 IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
Nine Months Ended
 
   
September 30,
2015
   
September 30,
2014
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
 Net loss
 
$
(9,499,641
)
 
$
(35,454,263
)
   Adjustments to reconcile net loss to net cash flows used in operating activities:
               
       Depreciation
   
1,974
     
1,817
 
       Amortization
   
444,175
     
2,157,125
 
       Stock issued, and amortization of stock issued, for prepaid services
   
3,895,018
     
19,771,875
 
       Loss on settlement of debt
   
1,482,444
     
4,022,957
 
       Stock issued for services
   
1,029,375
     
2,148,900
 
       Stock issued for license
   
-
     
468,000
 
       Stock issued for legal settlement
   
81,000
     
448,500
 
       Debt discount
   
-
     
25,000
 
       Stock warrant expense
   
37,452
     
2,101,866
 
       Stock (returned) issued for donation
   
-
     
(750,000
)
       Stock issued for interest
   
15,625
     
298,200
 
       Changes in operating assets and liabilities:
               
          Accounts payable
   
605,634
     
1,101,734
 
          Accounts receivable
   
(12,676
)
   
-
 
          Accrued liabilities
   
31,427
     
342,550
 
          Prepaid expenses and deposits
   
(15,401)
     
226,642
 
Net cash used in operating activities
   
(1,903,594
)
   
(3,089,097
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
 Purchase of computer equipment
   
-
     
(42,503
)
 Purchase of  License
   
-
     
(57,340
)
Net cash used in investing activities
   
-
     
(99,843
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
 Proceeds from sale of stock and exercise of warrants
   
587,500
     
1,799,262
 
 Proceeds from notes payable
   
1,277,975
     
1,210,000
 
 Payments made on patent liability
   
-
     
(50,000
 
 Payments made on Bihari patent
   
-
     
(118,333
)
 Net cash provided by financing activities
   
1,865,475
     
2,840,929
 
                 
Net decrease in cash and cash equivalents
   
(38,119
)
   
(348,011
)
Cash and cash equivalents at beginning of period
   
191,987
     
406,596
 
Cash and cash equivalents at end of period
 
$
153,868
 
 
$
58,585
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
9

 
 
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
Nine Months Ended
 
   
September 30,
2015
   
September 30,
2014
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
         
             
Cash paid for interest
 
$
12,000
   
$
-
 
                 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
         
                 
Common stock issued for loan expense and interest
 
$
15,625
   
$
298,200
 
                 
Common stock issued for prepaid services
 
$
1,029,376
   
$
12,662,000
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
10

 
 
Immune Therapeutics, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements 
September 30, 2015
(Unaudited)
 
1. Organization and Description of Business

Immune Therapeutics, Inc. (collectively, the “Company,” “us” or “we”) 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 of 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.

The Company currently resides in Orlando, Florida. In July 2012, the Company’s focus turned to acquiring patents that would protect and advance the development of new uses of opioid-related immune- therapies, such as low dose naltrexone (“LDN”) and Methionine [Met5]-enkephalin (“MENK”). The Company’s therapies are believed to stimulate and/or regulate the immune system in such a way that they provide the potential to treat a variety of diseases.  We believe our therapies may be able to correct abnormalities or deficiencies in the immune system in diseases such as HIV infection, autoimmune disease, immune disorders, or cancer; all of which can lead to disease progression and life-threatening situations when the immune system is not functioning optimally.
 
In October 2012, the Company formed TNI BioTech International, Ltd., a BVI company in Tortola, British Virgin Islands, which was set up to allow the Company to market and sell LDN in those countries outside the U.S. in which we have been able to obtain approval to sell the Company’s products.
 
In August 2013, the Company formed its United Kingdom subsidiary, TNI BioTech, LTD (the “UK Subsidiary”). The UK Subsidiary received approval to be considered a micro, small or medium-sized enterprise (“SME”) with the European Medicines Agency (“EMA”) on August 21, 2013. The designation provides the UK Subsidiary with significant discounts when holding meetings or submitting filings to the EMA. On September 19, 2013, the UK Subsidiary submitted a pre-submission package to the EMA regarding Crohn’s Disease. The EMA granted the UK Subsidiary a meeting that took place on September 27, 2013. The UK Subsidiary is eligible to benefit from the provisions for administrative and financial assistance for SMEs set out in Regulation (EC) No 2049/2005.
 
In December 2013, the Company formed a new subsidiary, Cytocom Inc., to focus on conducting LDN and MENK clinical trials in the United States. In December 2014, the Company completed the distribution of common stock of Cytocom Inc. to its shareholders. As part of the transaction, the Company retained certain exclusive rights to patents, in-country approvals, formulations, trademarks, manufacturing, marketing, sales, and distributions rights in emerging nations, including Africa, Central America, South America, Russia, India, China, Far East, and The Commonwealth of Independent States (former Soviet Union).  The Company will continue to have access to existing clinical data as well as any new data generated by Cytocom Inc. during drug development.  On December 8, 2014, the number of Cytocom Inc. shares of common stock that were issued to our shareholders totaled 113,242,522 shares.   In connection with the transaction, Cytocom Inc. issued 140,100,000 shares of its common stock to the Company, which gave the Company a 55.3% stake in Cytocom Inc. at that time.  As of September 30, 2015, the Company owns 140,100,000 shares of the common stock of Cytocom Inc, representing 50.5% of the total shares issued and outstanding.
 
In March 2014, the Company incorporated Airmed Biopharma Limited, an Irish corporation with an address in Dublin, Ireland, and Airmed Holdings Limited, an Irish company domiciled in Bermuda. The Irish companies were
 
 
11

 
 
set up to benefit from incentives granted by the Irish government for the establishment of pharmaceutical companies (many of the world’s leading pharmaceutical companies have located in Ireland), and so that the Company could take advantage of Ireland's status as a member of the European Union and the European Economic Area.  An Irish limited liability company enjoys a low corporate income tax rate of 12.5%, one of the lowest in the world. The Irish-domiciled company hopes to qualify for tax incentives for Irish holding/headquartered companies and to benefit from the network of double tax treaties that reduce withholding taxes.  TNI BioTech International, Ltd. will manage our international distribution, using product that is manufactured in Ireland and elsewhere.
 
We are focused on the development and commercialization of therapeutic treatments for cancer, HIV/AIDS and autoimmune diseases and immune disorders by combating these severe and fatal diseases through the stimulation and/or regulation of the body’s immune system. Our growth strategy includes the near-term commercialization of our existing immunotherapies targeting cancer, Crohn’s disease and/or HIV/AIDS.
 
The Company is currently a party to an agreement to lease office space in Orlando, Florida.
  
Going Concern

The Company has incurred significant net losses since inception and has relied on its ability to fund its operations through private equity financings. 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 product candidate and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, 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. Based on the Company’s operating plan, existing working capital at September 30, 2015 was not sufficient to meet the cash requirements to fund planned operations through March 31, 2016 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.
 
The Company experienced a net loss from operations of $9,499,641 and used cash and cash equivalents for operations in the amount of $1,903,594 during the nine months ended September 30, 2015, resulting in stockholder's equity of $935,323 at September 30, 2015.

2. Summary of Significant Accounting Policies

Basis of Presentation

The 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, 2014 (including the notes thereto) set forth in Form 10-K.
 
The accompanying consolidated financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (U.S. GAAP) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

The Company qualifies as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have more than $1,000,000,000 in annual gross revenue for the year ended
 
 
12

 
 
December 31, 2014. We are electing to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.
 
Revenue Recognition

Revenue from product sales is recognized upon passage of title and risk of loss to customers. Provisions for discounts, rebates and sales incentives to customers, and returns and other adjustments are provided for in the period the related sales are recorded. Historical data are not yet readily available and reliable for use in estimating the amount of the reduction in gross sales. Revenue from the launch of a new product, from an improved version of an existing product, or for shipments in excess of a customer's normal requirements will be recorded when the conditions noted above are met. In those situations, management will record a returns reserve for such revenue, if necessary. If in future the Company participates in selling arrangements that include multiple deliverables (e.g., instruments, reagents, procedures, and service agreements), under these arrangements, the Company will recognize revenue upon delivery of the product or performance of the service and will allocate the revenue based on the relative selling price of each deliverable, which will be based primarily on vendor specific objective evidence. Revenue from license of product rights is recorded over the periods earned.

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for accounting for revenue from contracts with customers and will supersede most existing revenue recognition guidance. Early adoption is not permitted. The standard becomes effective for the Company in the first quarter of 2017. The Company is currently evaluating the effect, if any, that the standard will have on its consolidated financial statements and related disclosures.

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 balance sheets exceed the federally insured limits. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2015, the Company has no uninsured cash balances.

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
 
 
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In accordance with the reporting requirements of the 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 and cash equivalents, accounts receivable, 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 notes payable also approximate fair value since they bear market rates of interest and other terms.  None of these instruments are held for trading purposes.
 
Fair Value Measurements
 
The ASC Topic 820, Fair Value Measurement, defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the customer's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time.
 
Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged against expense as incurred. Depreciation expense from continuing operations for the quarters ended September 30, 2015 and September 30, 2014 was $638 and $668, respectively.  Depreciation expense from continuing operations for the nine months ended September 30, 2015 and September 30, 2014 was $1,974 and $1,817, respectively.
 
Intangible Assets

Costs incurred to acquire and/or develop the Company’s product licenses and patents are capitalized and amortized by straight-line methods over estimated useful lives of seven to sixteen years. Intangible assets are stated at the lower of cost or estimated fair market value.  During the quarters ended September 30, 2015 and September 30, 2014, the Company did not capitalize any such costs. (See Note 10). During the nine months ended September 30, 2015 and September 30, 2014, the Company did not capitalize any such costs. 

Amortization expense for the quarters ended September 30, 2015 and September 30, 2014 was $148,058 and $719,701, respectively.  Amortization expense for the nine months ended September 30, 2015 and September 30, 2014 was $444,175 and $2,157,125, respectively.
 
Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable as prescribed by ASC Topic 360, Property, Plant and Equipment. If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company will recognize an impairment loss equal to the difference between its carrying amount and its estimated fair value.  No impairment losses were recognized for the quarters ended September 30, 2015 and September 30, 2014.

Research and Development Costs

Research and development costs are charged to expense as incurred and are typically comprised of salaries and benefits, pre-clinical studies, clinical trial activities, drug development and manufacturing, fees paid to consultants
 
 
14

 
 
and other entities that conduct certain research and development activities on the Company’s behalf and third-party service fees, including clinical research organizations and investigative sites. Costs for certain development activities, such as clinical trials are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as operating expenses.
 
Income Taxes

The Company follows FASB 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, 2015, and December 31, 2014, 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. At the end of the quarters ended September 30, 2015 and September 30, 2014, the Company had 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 all share-based payment awards made to employees and directors, including employee stock options, 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. The majority of 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.
 
Non-controlling Interest

In accordance with ASC 810, Consolidation, the Company consolidates Cytocom, Inc. (“Cytocom”).  The non-controlling interests in Cytocom represent the interests of outside shareholders in the equity and results of operations of Cytocom.

The Company has adopted changes issued by the FASB to the accounting for non-controlling interests in consolidated financial statements. These changes require, among other items, that a non-controlling interest be included within equity separate from the parent’s equity; consolidated net income be reported at amounts inclusive of both the parent’s and non-controlling interest’s shares; and, separately, the amounts of consolidated net income attributable to the parent and non-controlling interest all be reported on the consolidated statements of operations and comprehensive loss.
             
Net Loss per Share
 
 
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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. Dilutive common stock equivalents are comprised of common stock purchase warrants and options outstanding. For all periods presented, 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.

A calculation of basic and diluted net loss per share follows:

   
For the three months ended September 30,
   
For the nine months ended September 30,
 
   
2015
   
2014
   
2015
   
2014
 
Historical net loss per share:
                       
Numerator
                       
Net loss
 
$
(4,025,309
)
 
$
(11,202,175
)
 
$
9,499,641
)
 
$
(34,454,263
)
Net loss attributed to Common stockholders
 
$
(3,859,550
)
 
$
(11,202,175
)
 
$
(9,070,926
)
 
$
(34,454,263
)
                                 
Denominator
                               
Weighted-average common shares outstanding—
                               
  Denominator for basic and diluted net loss per share
   
156,814,094
     
94,316,453
     
147,365,571
     
87,875,552
 
Basic and diluted net loss per share attributed
                               
 to common stockholders
 
$
(0.02
)
 
$
(0.12
)
 
$
(0.06
)
 
$
(0.40
)
 
The Company’s potential dilutive securities which include stock and 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. Therefore, the weighted-average Common stock outstanding used to calculate both basic and diluted net loss per share is the same.
 
The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be antidilutive:
 
   
At September 30,
 
   
2015
   
2014
 
Warrants to purchase Common stock
   
9,355,250
     
8,986,750
 
     
9,355,250
     
8,986,750
 
 
Recent Accounting Standards

During the quarter ended September 30, 2015, there were several new accounting pronouncements issued by the Financial Accounting Standards Board.  Each of these pronouncements, as applicable, has been or will be adopted by the Company.  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.
 
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for accounting for revenue from contracts with customers and will supersede most existing revenue recognition guidance. Early adoption is not permitted. The standard becomes effective for the Company in the first quarter of 2017. the Company is currently evaluating the effect, if any, that the standard will have on its consolidated financial statements and related disclosures.
 
3. Property and Equipment
 
 
16

 
 
 
September 30, 2015
 
December 31,
2014
 
Property and equipment:
       
Computer equipment
 
$
8,013
   
$
8,013
 
                 
Less accumulated depreciation
   
(5,752
)
   
(3,778
)
                 
Property and equipment, net
 
$
2,261
   
$
4,235
 
 
The Company utilizes the straight-line method for depreciation, using three to five-year depreciable asset lives. Depreciation expense was not material for all periods presented.
 
4. Accrued Liabilities
 
Accrued expenses and other liabilities consist of the following:
 
   
September 30,
2015
   
December 31, 2014
 
   
(in thousands)
 
Retainer for legal services
 
$
60
   
$
60
 
Accrued payroll to officers and others
   
472
     
763
 
Accrued interest - notes payable
   
120
     
2
 
Estimated legal settlement
   
279
     
279
 
Other accrued liabilities
   
-
     
7
 
State payroll taxes
   
2
     
1
 
Total accrued liabilities
 
$
933
   
$
1,112
 
 
5. Notes Payable
 
Notes payable consist of the following:
   
September 30,
2015
   
December 31, 2014
 
Promissory note issued July 29, 2014 to Ira Gaines. The note matures on January 27, 2015 and earns interest at a rate of 18% per annum.  The Company was unable to repay the note at maturity and the note is in default, although no demand for repayment has been made by the lender.
 
$
100,000
   
$
100,000
 
                 
Promissory notes issued between November 26, 2014 and September 30, 2015, to raise up to $2,000,000 in debt. Lenders earn interest at a rate of 10% per annum, plus a pro-rata share of two percent of the Company’s gross receipts for sales of IRT-103-LDN in perpetuity. Notes will be repaid in 36 monthly installments of principal and interest commencing no later than October 15, 2015.  Notes aggregating $547,500 were in default at September 30, 2015, as the Company was unable to pay installments on those notes on their due dates.  No demands for repayment have been made by the lenders.
   
711,500
     
406,525
 
                 
Promissory note issued October 17, 2014 to Roger Bozarth. The note matures on October 17, 2015 and earns interest at a rate of 2% per annum.
   
7,000
     
7,000
 
                 
Promissory notes issued between May 1, 2015 and September 30, 2015, and maturing between June 14, 2015 and December 31, 2015.  Lenders on loans aggregating $506,433 earn interest at rates between 10% and 18% per annum.  On loans aggregating $163,500, interest is payable in a fixed amount not tied to a specific interest rate.  At September 30, 2015, total interest payable is $51,500. Notes aggregating $263,500 were in default at September 30, 2015, as the Company was unable to repay those notes on their due dates.  No demands for repayment have been made by the lenders
   
669,933
     
-
 
                 
Promissory note issued January 26, 2015 to Robert J. Dailey. The note is senior to, and has priority in right of payment over, all indebtedness of the Company. The note earns interest at a rate of 2% per annum and is due on September 30, 2015.  The Company was unable to repay the note at maturity and the note is in default, although no demand for repayment has been made by the lender.
   
200,000
     
-
 
 
 
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Promissory notes issued by Cytocom Inc. between April 29, 2015 and September 30, 2015. Lenders earn interest at rates between 5% and 10% per annum. Notes are repayable between September 30, 2015 and September 30, 2016.  The Company was unable to repay notes aggregating $50,000 that matured on or before September 30, 2015, although no demand for repayment has been made by the lenders.
   
150,000
     
-
 
                 
Total
   
1,838,433
     
513,525
 
Less: Current Portion                
                 
Less: Current portion
   
(1,729,100
)
   
(186,067
)
                 
Long-Term debt, less current portion
 
$
109,333
   
$
327,458
 
 
As of September 30, 2015, the Company had accrued $120,364 in unpaid interest, compared to $2 as of September 30, 2014. During the nine months ended September 30, 2015, 62,500 shares with a fair value of $15,625 were issued by the Company for interest expense under promissory notes (compared to 655,000 shares issued for interest and loan expenses with a fair value $298,200 in the nine months ended September 30, 2014).
 
6. Capital Structure—Common Stock and Common 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.

As of September 30, 2015 and 2014, the Company was authorized to issue 500,000,000 common shares at a par value of $0.0001 per share.

As of September 30, 2015, the Company had 175,444,934 shares of common stock outstanding and 129,015,249 outstanding as of September 30, 2014.
 
Stock Warrants 

In the quarter ended September 30, 2015, the Company issued 390,000 warrants.

There were no modifications of the terms of any warrants issued by the Company in the quarters ended September 30, 2015 and 2014.  
 
Following is a summary of outstanding stock warrants at September 30, 2015 and activity during the nine months then ended:
 
 
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Number of Shares
   
Exercise Price
   
Weighted Average Price
 
                         
Warrants as of December 31, 2014
   
9,396,750
   
$
0.14-15
   
$
1.72
 
                         
Issued in 2015
   
390,000
   
$
0.07-0.50
   
$
0.42
 
                         
Expired
   
 (407,500
)
 
$
1.50-2.00
   
$
1.50
 
                         
Exercised
   
(24,000
)
 
$
0.50
   
$
0.50
 
                         
Warrants as of September 30, 2015
   
9,355,250
   
$
  0.07-15.00
   
$
1.68
 
 
Summary of outstanding warrants as of September 30, 2015:
 
Expiration Date
 
Number of Shares
   
Exercise Price
   
Remaining Life (years)
 
                         
Fourth Quarter 2015
   
268,750
   
$
1.50
     
.25
 
Second Quarter 2016
   
37,500
   
$
5.00
     
.75
 
Third Quarter 2016
   
525,000
   
$
1.00-5.00
     
1.00
 
Third Quarter 2017
   
1,500.000
   
$
1.00-1.50
     
2.00
 
Fourth Quarter 2017
   
2,941,666
   
$
1.00-9.00
     
2.25
 
First Quarter 2018
   
127,500
   
$
15.00
     
2.50
 
Second Quarter 2018
   
33,334
   
$
15.00
     
2.75
 
Third Quarter 2018
   
650,000
   
$
1.00-1.50
     
3.00
 
Fourth Quarter 2018
   
1,197,500
   
$
1.00-1.50
     
3.25
 
First Quarter 2019
   
1,024,000
   
$
1.50
     
3.50
 
Second Quarter 2019
   
90,000
   
$
0.07–0.23
     
3.75
 
Third Quarter 2019
   
260,000
   
$
0.50
     
4.00
 
Fourth Quarter 2019
   
400,000
   
$
0.14-1.50
     
4.25
 
Second Quarter 2020
   
300,000
   
$
0.50
     
4.75
 
 
7. Stock Compensation

Shares Issued for Services

During the nine months ended September 30, 2015 and 2014, the Company issued 16,922,504 and 16,390,000 shares of common stock respectively for consulting fees.  The Company valued these shares at $1,029,375 and $12,662,001 respectively, based upon the fair value of the common stock at the dates of the agreements.  The consulting fees are amortized over the contract periods which are typically between 12 and 24 months.   The amortization of prepaid services totaled $3,895,018 and $19,771,875 for the nine months ended September 30, 2015 and 2014.  In the nine months ended September 30, 2015, the company also issued and expensed $1,110,375 of stock for services.
 
8. Income Taxes - Results of Operations

There was no income tax expense reflected in the results of operations for the quarters ended September 30, 2015 and 2014 because the Company incurred a net loss in both quarters.

The Company has recognized no tax benefit for the losses generated for the periods through December 31, 2014. ASC Topic 740 requires that a valuation allowance be provided if it is more likely than not that some portion or all of 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.
 
 
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Our effective tax rate for fiscal years 2014 and 2013 was 0%. 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.

As of December 31, 2014, we have estimated federal and state income tax net operating loss (“NOL”) carry-forwards of approximately $1,500,000, which will expire in 2032-2036.
 
9. Subsequent Events

Between October 1, 2015 and November 16, 2015, Cytocom issued notes payable totaling $500,000.

Between October 1, 2015 and November 16, 2015, the Company issued 2,545,118 shares of common stock.
 
As of November 16, 2015, the Company had outstanding 177,990,052 shares of common stock.

10. Licenses and Supply Agreements

Patent and Subsidiary Acquisition
 
The Company entered into a share exchange agreement on April 24, 2012 to acquire all of the outstanding shares of TNI BioTech IP, Inc. (“TNI IP”), a biotechnology firm incorporated in Florida and formed to acquire patents related to the treatment of cancer and HIV/AIDS and autoimmune diseases, using Met-enkephalin (“MENK”) and Naltraxone (“LDN”). The goal of TNI IP’s management was to enable mankind and civilization to combat fatal diseases by activating and mobilizing the body’s own immune system using TNI IP’s patented use of MENK.  The first patents acquired by TNI IP were acquired from Dr. Nicholas P. Plotnikoff and Professor Fengping Shan in 2012.  TNI IP was acquired in exchange for 20,250,000 shares of the Company’s common stock, of which 8,000,000 shares were issued to Dr. Plotnikoff for the acquisition of patents and the remaining 12,250,000 shares were issued to the founders of TNI IP in exchange for all of their right, title and interest in their TNI IP shares. The goodwill arising on the acquisition of TNI IP was valued at $98,000,000 and license agreements arising from the acquisition of TNI IP were valued at $16,006,000.

In connection with the share exchange, we entered into a Sale of Technology Agreement with Dr. Nicholas P. Plotnikoff on March 4, 2012, wherein Dr. Plotnikoff agreed to transfer and assign all of his rights, title and interest in: European Patent United Kingdom, Germany, France, Ireland EP 1401471 BI Methods for inducing sustained immune response; Russian Patent Russian Federation patent number 2313364; The Patent Office of the People’s Republic of China, Application No.: 200810165784.8 China Patent CN1015113407 A The Patent Office of the People’s Republic of China ISSN: 1006-2858 CN 21-1349/R; Patent Agencies Government of India Patent, Application number 1627/KOLNP/2003 number 220265 an Enkephalin Peptide Composition; and the US Patent Pending, US Patent Application 10/146.999 e. The Company received all the production formulations and technology designs from Dr. Plotnikoff necessary for the manufacturing, formulation, production and protocols of the MENK treatment of cancer and HIV/AIDS. As consideration for entering into the Sale of Technology Agreement, Dr. Plotnikoff received 8,000,000 shares of common stock, a royalty of a single-digit percentage on all sales of MENK and was granted the position of Non-Executive Chairman of the Board of Directors.
 
At the time of the acquisition, the valuation of goodwill and other intangible assets were determined using the fair market price for the Company’s common stock, which were exchanged for shares of TNI IP.  In the fourth quarter of 2012, the Company performed an annual valuation to determine whether any goodwill or intangible assets that had been acquired by the Company were impaired. The result of this valuation was that material impairments were identified. The Company recognized an impairment of the goodwill arising on the acquisition of TNI IP of $98,000,000.

Patent License Agreements

On August 13, 2012, the Company signed an exclusive License Agreement with Ms. Jacqueline Young (the “Young Agreement”) for the intellectual property developed by Dr. Bernard Bihari relating to treatments with opioid antagonists such as naltrexone and Met-enkephalin for a variety of diseases and conditions including malignant
 
 
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lymphoma, chronic lymphocytic leukemia, Hodgkin’s lymphoma, and non-Hodgkin’s lymphoma, chronic herpes virus infections, chronic herpes viral infections such as chronic genital herpes caused by the herpes simplex virus Type 2 and chronic infections due to the Epstein-Barr virus and a treatment method for humans infected with HTLV-III (AIDS) virus, including patients clinically diagnosed as suffering from AIDS and those suffering from AIDS-related complex (ARC).  The Bihari patents were acquired in exchange for 540,000 shares of the Company’s common stock with a fair market value of $972,000 and assumed liabilities of $400,000, which is payable to Ms. Young over a twenty-four month period in equal installments to reimburse her for the costs of a New York City office in accordance with the Young Agreement.  The patent liability at December 31, 2013 totaled $118,333. The cost of the patent totaled $1,372,000.  The Company will pay the licensor a royalty payment of 1% of gross MENK sales and provide the licensor a position as non-executive chairman of the Company. In addition, we are required to make a minimum royalty in the amount of $100,000 for each year after 2014 until such time as we make a first commercial sale. The Young Agreement is valid for the life of the patents and expires on a country by country basis in each country where patent rights exist, upon the expiration of the last to expire patent in each country or in the event the patent in such country is held to be invalid and/or unenforceable (by a court or government body of competent jurisdiction) or admitted to be invalid or unenforceable. Additionally, we can cancel the Young Agreement upon 120 days’ written notice and shall pay all royalties and fees that have accrued under the Young Agreement. We have the exclusive rights to the intellectual property; however, Ms. Young retains a right to practice the patents licensed under the Young Agreement solely for noncommercial, academic research purposes.

On December 24, 2012, the Company signed an agreement for the acquisition of patent rights (the “Smith Agreement”) for the intellectual property of Dr. Jill Smith and LDN Research Group, LLC (collectively, the “Licensor Parties”), whose members are Dr. Ian S. Zagon, Dr. Patricia J. McLaughlin and Moshe Rogosnitzky and orphan drug designation by the FDA to a novel late-stage drug, trademarked “LDN,” for the treatment of Pediatric Crohn’s disease. The patent covers methods and formulations for treatment of the inflammatory and ulcerative diseases of the bowel, using naltrexone in low doses as an opioid antagonist. These patents were acquired in exchange for 300,000 shares of our common stock with a fair market value of $2,715,000 and payment of $165,384 (consisting of a $100,000 initial license fee and payment of $65,384 of expenses), which totaled $2,880,384. 
 
The Smith Agreement requires the Company to (i) use commercially reasonable efforts to develop, commercialize, market and sell licensed products in a manner consistent with a business plan, (ii) expend a minimum amount of funds per annum to develop and commercialize licensed products as soon as practicable, (iii) obtain all requisite regulatory approvals needed to use or sell licensed products in the field of use, and (iv) make the first commercial sale of a licensed product by March of 2017.

The Company is required to pay an annual license fee, an annual running royalty on net sales of each licensed product or a minimum royalty, whichever is greater, and a sublicense fee on payments received by the Company from sublicensees. The Company has an exclusive, worldwide license to make, have made, use, lease, import, offer for sale and sell licensed products and to use the method under the patent rights. The Smith Agreement will terminate on the expiration or abandonment of the last patent to expire or ten years after the sale of the first licensed product. The Company may terminate the Smith Agreement upon 90 days’ written notice, provided all sublicenses are terminated and all amounts due and owing are paid to the Licensor Parties. The Licensor Parties may terminate the agreement ten days' after notice to the Company if the Company is ten days late in payment or there is a breach that remains uncured for ten days after written notice of such breach.
 
The Company is also required to pay milestone payments after substantial achievement of certain milestone events for each licensed product including payment: upon initiation of each Phase III trial; upon positive completion of each Phase III clinical trial of the therapeutic use of an LDN compound in the field of use; when a New Drug Application (“NDA”) is accepted for review by the FDA; and when FDA approval to market the NDA is approved. The Company will issue shares upon reaching certain milestones including upon the first dosing of the first patient in a Phase III clinical trial for each licensed product, upon the first sale of each licensed product, and upon the achievement of a set dollar amount in cumulative sales for each licensed product covered by NDAs.
 
As part of the Smith Agreement, the Company has the right to apply to the FDA for the transfer of the orphan drug status for the use of naltrexone for the treatment of pediatric Crohn’s disease and ulcerative colitis, the Investigation New Drug Application (“IND”), and the right to acquire the relevant clinical data set from Dr. Jill Smith.  Dr. Jill
 
 
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Smith made arrangements to transfer the IND to the Company as well as the relevant clinical data set, and the FDA has acknowledged that the Company is now the sponsor for this IND.

On September 24, 2014, the Company and the Licensor Parties jointly agreed to terminate the Smith Agreement, and in place thereof, have the Licensor Parties grant a similar license in their patent rights to Cytocom Inc. pursuant to a Patent License Agreement between the Licensor Parties, Cytocom Inc. and the Company with substantially similar terms as set forth in the Smith Agreement.  Pursuant to this agreement, the Company issued 1,000,000 shares of its common stock valued at $270,000, upon execution to the Licensor Parties and the Company guaranteed the obligations of Cytocom Inc. to the Licensor Parties under the agreement.
 
On January 18, 2013, the Company signed an exclusive licensing agreement with The Penn State Research Foundation to license all of the intellectual property developed by Dr. Ian S. Zagon, Dr. Patricia J. McLaughlin and Dr. Jill P. Smith for the treatment of cancer titled “Opioid Growth Factor and Cancer” and “Combination Therapy with Opioid Growth Factor and Taxanes for the Treatment of Cancer” (the “Foundation Agreement”).

The Foundation Agreement requires the Company to: (a) use commercially reasonable efforts to develop, commercialize, market and sell licensed products in a manner consistent with a business plan; (b) expend a minimum amount of funds per annum to develop and commercialize licensed products as soon as practicable; (c) obtain all requisite regulatory approvals needed to use or sell licensed products in the field of use; and (d) make the first commercial sale of a licensed product by December 31, 2016.

The Foundation Agreement provides that the Company must pay to the licensor an initial license fee, a license maintenance fee on each anniversary of the effective date of the Foundation Agreement, and an annual running royalty on net sales for each licensed product or a minimum royalty, whichever is greater.  In addition, the Company must pay a sublicense fee on payments received by the Company from sublicensees. 
 
The Foundation Agreement also requires the Company to make payments upon the achievement of certain milestone events including: initiation of each Phase II trial; initiation of each Phase III trial; when the NDA is accepted for review by the FDA; and when FDA approval to market is approved.  The Company must also issue shares upon certain milestones including upon the first dosing of the first patient in a Phase II clinical trial for each licensed product, upon the first dosing of the first patient in a Phase III clinical trial for each licensed product, upon the first sale of each licensed product, and upon the achievement of a set dollar amount of cumulative sales for each licensed product covered by NDAs.
 
The Foundation Agreement terminates on the expiration or abandonment of the last patent to expire or become abandoned. The Company may terminate the Foundation Agreement at any time upon 60 days’ prior written notice and ceasing to make and sell all licensed products, the termination of all sublicenses and payment of all monies owed under the Foundation Agreement. The licensor may terminate the agreement 30 days after notice to the Company if the Company is 30 days late in payment or a breach that remains uncured for 45 days after written notice of such breach.
 
In May of 2013, the Company executed a Patent License Agreement with Professor Fengping Shan (the “Shan Agreement”) pursuant to which it obtained exclusive rights to develop and commercialize the licensed technology. The licensed technology is the intellectual property developed and owned by Professor Shan (i) relating to the treatment of a variety of diseases and conditions with MENK including multiple forms of lymphoma and cancer and (ii) a treatment method for humans infected with the HLTV-III (AIDS) virus including AIDS and AIDS related complex (ARC). The licensed technology includes the methods and formulations for these treatments including all INDs, communications with regulatory agencies, patient data, and letters relating to these treatments. The licensed technology also includes certain patents developed by Professor Shan. Under the Shan Agreement, the Company must issue 500,000 shares to Professor Shan upon final transfer of the licenses, and reimburse Professor Shan for all out of pocket expenses in connection with the patents. The Company will pay Professor Shan a running royalty on gross sales subject to decreases if third party intellectual property is needed to complete such sale or product. The Shan Agreement lasts for the duration of each of the licensed patents however the Company may terminate the Shan Agreement on 120 days' written notice to Professor Shan.
 
 
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On August 6, 2014, Professor Fengping Shan executed an Assignment pursuant to which he transferred to the Company his entire right, title and interest in and to the licensed patents under the Shan Agreement and CN 201210302259 Application of combination of low-dose naltrexone and methionine-enkephalin to preparation of anti-cancer drug for the consideration of 500,000 shares of common stock valued at $140,000.

11. Commitments and Contingencies

Malawi Treatment Facilities
 
On July 14, 2012, GB Oncology and Imaging Group LTD (“GBOIG”) in partnership with the Company signed a letter of intent agreement to collaborate with the Government of Malawi to assist in expanding the treatment of cancer, HIV/AIDS and other infectious diseases.

In 2015, the Company submitted protocols seeking permission from the Pharmacy, Medicines and Poisons Board of Malawi (“PMPB”) to conduct two trials involving Lodonal™ in Malawi:
 
a.  
The first protocol, submitted jointly with The Jack Brewer Foundation (“JBF Worldwide”), received PMPB approval on November 11, 2015.  The protocol covers a 12-month trial for a “Single Visit Approach to Cervical Cancer Prevention”.   The approach is designed to deliver a preventive and simple procedure that can be performed in a clinical setting without the use of a laboratory and to allow for immediate treatment of any precancerous lesions utilizing Wallach LL100 Cryosurgical systems. The protocol provides for 50% of the patient group to be put on Lodonal™ to determine if the drug lowers the number of opportunistic infections during the year, and if it can be shown that LDN increases CD4, CE8, NK and T cell count, which would show that the incidence rates of opportunistic infection could decrease with Lodonal™ and that Lodonal™ could be used as a prophylaxis to prevent substantial HIV-related morbidity in Malawi.  The Company expects the final trial agreement with PMPB to be signed by the end of 2015.  Lodonal™ pills have been produced in Nicaragua in anticipation of the trial.  Shipments will commence once the trial is approved.
 
b.  
The second protocol, which has not yet been approved, covers a trial using Lodonal™ for the treatment of cancer.  The protocol is still under discussion with the PMPB, and the Company expects a final protocol to be submitted for approval by year end.
 
Open an Oncology and Infectious Disease Center in Malawi at Queen Elizabeth Central Hospital
 
On September 25, 2012, GBOIG, in partnership with the Company, signed an agreement with the Government of Malawi to open an outpatient clinic at Queen Elizabeth Central Hospital (in Malawi) for the treatment of cancer and infectious disease.  The duration of the Agreement shall be for 25 years with an optional 10-year renewal to be indicated by the Government of Malawi at least three years prior to the expiration of the term.  The Government of Malawi shall bear the upfront costs for the agreement of $2,500,000.
 
Distribution Agreements in Nigeria
 
In September 2013, TNI BioTech International, Ltd., a wholly-owned subsidiary of the Company, signed a Distribution Agreement with AHAR Pharma, a Nigerian company, to market Lodonal™, in Nigeria for the treatment of autoimmune diseases and cancer.  AHAR intends to distribute Lodonal™ through a local distributor network, an Internet client base and directly to hospitals, pharmacists and doctors in Nigeria. The agreement gives AHAR exclusive rights to sell to customers in the private sector and non-exclusive rights to public-sector companies.  The Company may terminate the exclusivity if AHAR fails to meet minimum purchase targets.  Unless terminated earlier, the agreement is valid for five years, subject to the right of the parties to extend for one additional five-year term.  The Company expects to implement the agreement in 2015.  Under the agreement, the Company is obligated to provide delivery of an initial supply of between 1 million and 1.5 million doses of Lodonal™ product to cover AHAR Pharma’s first-year purchase commitment.

In August 2015, the Company announced the signing of a letter of interest with GB Pharma/AHAR and Fidson Healthcare of Nigeria to enable Fidson to market and sell LodonalTM in Nigeria. The agreement will become effective upon completion of the ongoing NAFDAC-approved trial evaluating the efficacy and safety of Lodonal™.
 
 
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The agreement will require an amendment to the agreement signed in September 2013 with AHAR, so that both contracts conform.  In October, 2015 the Company announced that it does not expect the results of the trial to be available until receipt of approval by Nigerian National Agency for Food and Drug Administration and Control, targeted for the first quarter of 2016.

Other Agreements for Africa

In September 2014, Airmed Biopharma Limited (“Airmed”), a wholly-owned subsidiary of the Company, signed an exclusive agency agreement with GB Pharma Holdings Inc., to market and promote Lodonal™, and to solicit purchase orders for Lodonal™, in various counties in Africa.  Airmed is required to pay GB Pharma Holdings Inc. a commission based on payments actually received on purchase orders procured by the GB Pharma Holdings Inc. from customers in Africa during the term of the agreement, after deduction for certain costs incurred by Airmed for product supply. The agreement has an initial term of five years, with automatic renewals for additional one-year periods unless terminated by either party.
 
Agreements with Hubei Qianjiang Pharmaceutical Company

On October 18, 2012, the Company and Hubei Qianjiang Pharmaceutical Co., Ltd. (“Qianjiang Pharmaceutical”), signed a Venture Cooperation Agreement on New Drug Methionine Enkephalin (the “Venture Agreement”) pursuant to which Qianjiang Pharmaceutical acquired an exclusive license for the production of MENK in China.  The Venture Agreement requires that Qianjiang Pharmaceutical conduct drug research and pilot testing for MENK, organize pre-clinical studies, and apply for clinical trials for MENK with the Chinese State Food and Drug Administration. Under the Venture Agreement, Qianjiang Pharmaceutical must open a co-administration account for the development of MENK in China. Qianjiang Pharmaceutical must pay the Company, upon the marketing of MENK products, a half-year amount equaling 6% of its gross sales from MENK of the preceding half year.  The Company may cancel the Venture Agreement if Qianjiang Pharmaceutical does not pay expenses for a period exceeding nine months or does not commence clinical trials within 12-months after receiving certain approvals. Qianjiang Pharmaceutical may cancel the Venture Agreement if the Company fails to perform its obligations for a period of nine months or the failure to receive approval of clinical trials is due to the Company’s MENK technologies.  The Venture Agreement was amended on February 24, 2013 to expand the clinical trials from pancreatic to both pancreatic and liver cancer and amended on March 6, 2014 to require Qianjiang Pharmaceutical to commence studies and clinical trials in China and place funds in the co-administration account.

On August 6, 2014, the Company entered into a Supplementary Agreement on New Drug Methionine – Enkephalin Cooperation (the “Amendment”) with Qianjiang Pharmaceutical, amending the Venture Agreement, as amended. The Company and Qianjiang Pharmaceutical executed the Amendment to accelerate clinical trials in both the United States and China, and agreed to immediately initiate three month Good Laboratory Practice (“GLP”) Toxicology Studies (rat and dog) within 30 days of signing the Amendment. The Amendment requires that the GLP Toxicology Studies Trials are conducted in China in accordance with international standards and standards acceptable to the FDA.

In February 2013, the Company signed a Strategic Framework Agreement for Cooperation with Qianjiang Pharmaceutical. Under the agreement, the parties will work together to further the development of new products and conduct research and development on the Company’s licensed patented technology. Specifically, the parties aim to co-invest to develop and market products focusing on HIV, cancer and related autoimmune system therapies, develop co-ventured manufacturing facilities in China, and develop co-ventured distribution of the developed products in China and Africa. The agreement does not have a definitive term, as each new agreement resulting from the cooperation will set forth the material terms, including, but not limited to, fees, duration and termination therein.

In accordance with these agreements, Qianjiang Pharmaceutical has acquired MENK material for the preclinical and clinical trial.  MENK toxicology studies are in process under the trial, including a six-month toxicology study in animals.  Other studies, including stability and general pharmacology (on normal animals to determine the effect to heart, blood pressure, etc.) have commenced.  All FDA-required tests, including formulation and quality control tests, are in process.

 
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Supervision and Inspection of Manufacturing in Nicaragua
 
On April 23, 2013, the Company signed a Contract with ViPharma for the Supervision and Inspection of Manufacturing Processes as part of its negotiations for a contract for the manufacturing of LDN in a tablet, capsule and/or cream. The contract sets out the terms and conditions under which ViPharma will carry out the services of inspecting and supervising the manufacturing and packaging processes of LDN and ensure compliance with the FDA’s Current Good Manufacturing Practice regulations (“cGMP”) and the Company’s specifications. ViPharma will carry out its obligations in whatever Latin American country the Company ultimately decides to manufacture LDN. Under the contract, ViPharma has the exclusive rights to supervise and inspect all manufacturing processes of LDN in Latin America. The initial term of the agreement is ten years commencing in September 2013, with automatic five-year renewal terms provided neither party is in breach. The agreement may be terminated by (i) mutual agreement, (ii) in the event of a breach after a 45 day cure period or (iii) by either party upon provision of written notice at least 90 days before the end of the agreement, provided however that if the Company terminates the contract without cause it will be required to pay ViPharma a $10 million penalty.

Operating Leases

At September 30, 2015, the Company was a party to an agreement to lease office space in Orlando, Florida.  The lease expires on April 30, 2016.  Rent expense for the quarters ended September 30, 2015 and 2014 was $4,988 and $40,605, respectively.

Legal Proceedings

In February 2014, a claim was filed for breach of contract and unjust enrichment in the Circuit Court for Montgomery County, Maryland, E.J. Krause & Associates, Inc. v. TNI BioTech, Inc., in which the named plaintiff claims that we breached a sub-sublease. The plaintiff is seeking damages in excess of $75,000, along with costs, attorneys’ fees, pre-judgment interest and post-judgment interest.  On April 2, 2015 a default judgment was entered in favor of Plaintiff EK Krause & Associates in the amount of $259,894.16 plus post judgment interest.  The Company has accrued $279,000 for this claim.

In October 2014, a claim was filed for breach of contract and unjust enrichment in the United States District Court, Middle District of Florida, Orlando Division, QS Pharma, LLC v. TNI BioTech, Inc. n/k/a Immune Therapeutics, Inc., in which the named plaintiff claims that we breached various proposals between the parties. The plaintiff was seeking an amount of damages to be proven at trial and pre-judgment interest.  The plaintiff filed a Motion for Order of Default, which the court entered against the Company in favor of the plaintiff on December 15, 2014. The Company has accrued $210,452 for this claim. In May and October 2015, under a garnishment order the plaintiff withdrew $92,590 from the Company’s bank accounts towards settlement of the claim. At September 30, 2015, $1,191 was in bank accounts that were subject to the garnishment order.

In September 2015, a claim was filed for breach of contract, account stated, quantum meruit, and unjust enrichment in District Court for the Middle District of Florida, Epstein Becker & Green PC v. TNI Biotech, Immune Therapeutics, Inc. Cytocom, Inc. in which the named plaintiff claims that it is owed outstanding attorney fees.  The plaintiff is seeking damages in excess of $194,000.00.
 
12. Related Party Transactions

On January 3, 2013, the Company formalized the terms under which Kelly O’Brien Wilson, the daughter-in-law of the Company's Chief Executive Officer is employed. Ms. Wilson had been working with the Company in 2012 and her three-year employment agreement is effective as of December 1, 2012. The terms of the agreement define her base salary, a grant of a common stock, and health insurance coverage. Ms. Wilson was issued 500,000 shares of common stock of the Company in January 2014. In the quarters ended September 30, 2015 and 2014, the Company paid compensation to Ms. Wilson totaling $34,040 and $40,848 respectively.
 
 
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On May 15, 2015, the Company entered into a Royalty Agreement with Chris Pearce, a member of our Board of Directors. The Board of Directors approved the Agreement at a meeting held on April 16, 2015.  The purpose of the Agreement is to compensate Pearce for his time as one of our founders and pay Pearce certain deferred compensation.  Pursuant to the Agreement, Pearce shall receive a royalty payment in perpetuity in an amount equal to $0.010 per one tablet or capsule of low dose naltrexone sold by us outside of the United States, and $0.005 per one tablet or capsule of low dose naltrexone sold by us in the United States.  The Agreement continues in effect in perpetuity unless terminated by the Company and Mr. Pearce’s written consent.  At September 30, 2015, the Company owed Pearce $126 under the Agreement.

 
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Forward-Looking Statements and Associated Risks
 
This section and other parts of this Form 10-Q contain forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements also 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 guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 31, 2015 (the “2014 Form 10-K”) under the heading “Risk Factors”.
 
The following discussion should be read in conjunction with the 2014 Form 10-K and the consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. All information presented herein is based on the Company’s fiscal calendar. Unless otherwise stated, references in this report to particular years, quarters, months or periods refer to the Company’s fiscal years ended in December and the associated quarters, months, or periods of those fiscal years. 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. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
 
General
 
Immune Therapeutics, Inc. (the “Company”) 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 of 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.

The Company currently operates out of Orlando, Florida. In July 2012, the Company’s focus turned to acquiring patents that would protect and advance the development of new uses of opioid-related immune- therapies, such as low dose naltrexone (“LDN”) and Methionine [Met5]-enkephalin (“MENK”). The Company’s therapies are believed to stimulate and/or regulate the immune system in such a way that they provide the potential to treat a variety of diseases.  We believe our therapies may be able to correct abnormalities or deficiencies in the immune system in diseases such as HIV infection, autoimmune disease, immune disorders, or cancer; all of which can lead to disease progression and life-threatening situations when the immune system is not functioning optimally.
 
In October 2012, the Company formed TNI BioTech International, Ltd., a BVI company in Tortola, British Virgin Islands, which was set up to allow the Company to market and sell LDN in those countries outside the U.S. in which we have been able to obtain approval to sell the Company’s products.
 
In August 2013, the Company formed its United Kingdom subsidiary, TNI BioTech, LTD (the “UK Subsidiary”). The UK Subsidiary received approval to be considered a micro, small or medium-sized enterprise (“SME”) with the European Medicines Agency (“EMA”) on August 21, 2013. The designation provides the UK Subsidiary with significant discounts when holding meetings or submitting filings to the EMA. On September 19, 2013, the UK
 
 
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Subsidiary submitted a pre-submission package to the EMA regarding Crohn’s Disease. The EMA granted the UK Subsidiary a meeting that took place on September 27, 2013. The UK Subsidiary is eligible to benefit from the provisions for administrative and financial assistance for SMEs set out in Regulation (EC) No 2049/2005.
 
In December 2013, the Company formed a new subsidiary, Cytocom Inc., to focus on conducting LDN and MENK clinical trials in the United States. In December 2014, the Company finalized the distribution of common stock of Cytocom Inc. to its shareholders. As part of the transaction, the Company retained exclusive rights to all international patents, in-country approvals, formulations, trademarks, manufacturing, marketing, sales, and distributions rights in emerging nations, including Africa, Central America, South America, Russia, India, China, Far East, and The Commonwealth of Independent States (former Soviet Union).  The Company will continue to have access to existing clinical data as well as any new data generated by Cytocom Inc. during drug development.  On December 8, 2014, the number of Cytocom Inc. shares of common stock that were issued to our shareholders totaled 113,242,522 shares.   In connection with the transaction, Cytocom Inc. issued 140,100,000 shares of its common stock to the Company, which gave the Company a 55.3% stake in Cytocom Inc. at the time of the transaction.  At September 30, 2015, there were 277,454,727 Cytocom common shares outstanding, of which the Company owned 140,100,000 or 50.5%.
 
In March 2014, the Company incorporated Airmed Biopharma Limited, an Irish corporation with an address in Dublin, Ireland, and Airmed Holdings Limited, an Irish company domiciled in Bermuda. The Irish companies were set up to benefit from incentives granted by the Irish government for the establishment of pharmaceutical companies (many of the world’s leading pharmaceutical companies have located in Ireland), and so that the Company could take advantage of Ireland's status as a member of the European Union and the European Economic Area.  An Irish limited liability company enjoys a low corporate income tax rate of 12.5%, one of the lowest in the world. The Irish-domiciled company hopes to qualify for tax incentives for Irish holding/headquartered companies and to benefit from the network of double tax treaties that reduce withholding taxes.  TNI BioTech International, Ltd. will manage our international distribution, using product that is manufactured in Ireland and elsewhere.
 
We are focused on the development and commercialization of therapeutic treatments for cancer, HIV/AIDS and autoimmune diseases and immune disorders by combating these severe and fatal diseases through the stimulation and/or regulation of the body’s immune system. Our growth strategy includes the near-term commercialization of our existing immunotherapies targeting cancer, Crohn’s disease and/or HIV/AIDS.

Research and Development

The Company's research and development ("R&D") activities commenced in the third quarter of 2012, the Company having only completed the initial acquisition of MENK-related patents required for research in the second quarter of that year.  Through 2013 and the first nine months of 2014, we continued to build R&D organization and capabilities focusing primarily on new uses for opioid-related immuno-therapies, such as LDN and MENK. Those activities were suspended at the end of September 2014, due to lack of funding.  We expect to be able to resume activities in the second half of 2015.

Our R&D priorities include development of IRT-101 or MENK, a small synthetic peptide that is naturally occurring in the body, and IRT-103 LDN, an opioid receptor antagonist. Our pipeline provides two therapies with a wide range of indications that can be pursued. We believe that both molecules have the ability to stimulate the immune system in order to treat a variety of autoimmune diseases including multiple sclerosis, immune disorders such as Crohn’s disease, cancer, and viral infections such as HIV/AIDS.

Our R&D is overseen and managed internally, working with individuals, universities, and contract research organizations in order to utilize patents that we have licensed or acquired since our inception. We continue to seek to expand our pipeline of patents by reviewing other compounds, technologies or capabilities. We also seek out promising compounds and innovative technologies developed by third parties to incorporate into our discovery and development processes or projects.
 
Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014 (all dollar amounts and numbers in $000s, except percentages or where otherwise indicated)
 
 
28

 
 
Revenues
 
We had revenues from operations of $4,958 for the three months ended September 30, 2015.  There were no revenues in 2014.

Operating Expenses
 
Selling, general and administrative
 
Selling, general and administrative expenses and related percentages for the three months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):
 
 
For the three months
ended September 30,
 
 
2015
   
2014
 
Selling, general and administrative
 
$
865
   
$
902
 
Increase/(decrease) from prior year
 
$
(37
)
 
$
(388
)
Percent decrease from prior year
   
(4%
)
   
(30%
)
 
For the three months ended September 30, 2015 and 2014, selling, general and administrative expenses were made up as follows (dollar amounts in thousands):
 
   
For the three months
ended September 30,
 
   
2015
   
2014
 
   
$
     
$
   
Consulting and contractors
   
388
     
196
 
Payroll
   
262
     
304
 
Professional fees
   
75
     
94
 
Travel
   
9
     
61
 
Insurance
   
0
     
23
 
Other expenses
   
131
     
224
 
   
$
865
   
$
902
 

In the three months ended September 30, 2015, total cash and cash accrual for selling, general and administrative expense was $865 compared to $902 for the corresponding period in 2014, a decrease of $37 or 4%. Significant cash items included:
 
consulting and contractor services obtained to assist the Company in raising capital, manage investor relations, and develop business in new markets, in the amount of $388 in 2015, an increase of $192 or 98% over the $196 spent in 2014. The increase primarily reflects  the conversion of amounts owed from prior periods to equity;
professional fees for legal, tax and accounting services in the amount of $75 in 2015, a decrease of $19 or 20% over the $94 spent in 2014.  The decrease reflects lower spending in 2015 primarily on legal fees and the costs to maintain the Company’s subsidiaries;
payroll in the amount of $262 in 2015, a decrease of $42 or 14% over the $304 spent in 2014.  The decrease reflects lower headcount in 2015; and
travel in the amount of $9 in 2015, a decrease of $52 or 85% over the $61 spent in 2014, reflecting a reduction in travel to Africa.
 
Research and development
 
R&D expenses and related percentages for the three months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):
 
 
29

 


   
For the three months
ended September 30,
   
2015
 
2014
Research and development
 
$
111
   
$
401
 
Increase (decrease) from prior year
 
$
(290
)
 
$
(240
)
Percent decrease from prior year
   
(72%
)
   
(37%
 
Expenses for research and development in the three months ended September 30, 2015 decreased by 72% compared to expenses in the same period in 2014. The decrease reflects the reduction in R&D activities in 2015 primarily due to the lack of funding to pay for R&D.  Expenses in 2015 reflect the cost of stock payments for licenses, purchases of materials for R&D, and legal fees paid to maintain patents and licenses.

In the three months ended September 30, 2015, total cash spent on R&D was $111, a decrease of $290 or 72% over the $401 spent in the same period in 2014. Significant cash items included:

payments for contracted technical services, $29 in 2015, a decrease of $93 or 76% over the $122 spent in 2014, reflecting the decreased use of contractors to perform some of our research activities;
payments to maintain patents as required under license agreements ($36 in 2015, a reduction of $268 from the $303 spent in 2014).  The reduction reflects the fact that payments for the license acquired from the Penn State University were completed in 2014;
costs incurred for the trial of LDN in Nigeria ($34 in 2015 compared to $0 in 2014);
payments for professional fees $9 in 2015, a decrease of $13 or 59% over the $22 spent in 2014; and
payroll of $0 in 2015, a decrease of $65 or 100% over the $65 spent in 2014, reflecting the suspension of the R&D program in the fourth quarter of 2014.
 
Approximately 75% of the R&D spending in both 2015 and 2014 was on the development of LDN; the balance was spent on MENK.

Stock issued for services
 
The Company periodically issues stock to consultants who provide services to the Company under consulting contracts.  The Company incurs a cost for these services calculated by the number of shares issued for the services multiplied by the price of the Company’s stock on the effective date of the consulting contract.  The cost is amortized over the period in which the services are provided to the Company. The Company reports this cost separately from selling, general and administrative costs, and research and development costs, to better demonstrate the true costs of selling, general and administrative activities, and research and development.

Amortization of accrued costs for stock issued for services G&A and related percentages for the three months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the three months
ended September 30,
   
2015
 
2014
Stock for services and Prepaid consulting services expense G&A
 
$
1,394
   
$
4,947
 
Percentage decrease from prior year
   
(72%
)
   
(56%

The decline in expense reflects the decrease in the price of the Company’s stock year over year and the fact that the cost of shares issued for services prior to 2014 had been fully amortized prior to the third quarter of 2014.

The number of  shares issued for prepaid consulting services G&A in the three months ending September 30, 2015 was 6,683,334 (9,250,000 in the corresponding period in 2014).
 
 
30

 

Prepaid consulting services G&A in the three months ended September 30, 2015 consisted of the following:
 
Amortization of cost of stock issued prior to 2015
 
$
600
 
Amortization of cost of stock issued in the first half 2015
   
176
 
Amortization of cost incurred for new stock issued in the three months ended September 30, 2015 under consulting contracts entered into in 2015
   
618
 
   
$
1,394
 
 
Amortization of stock issued for services R&D and related percentages for the three months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the three months
ended September 30,
   
2015
 
2014
Prepaid consulting services R&D
 
$
0
   
$
0
 
Percentage increase/(decrease) from prior year
   
0
%
   
  (100)
 %

The cost of shares issued for services was fully amortized prior to the third quarter of 2014.

There were no new shares issued for prepaid consulting services R&D in the three months ending September 30, 2015 or 2014.
 
Warrant valuation expense
 
When the Company sells its stock to stockholders for cash, it periodically issues warrants to those stockholders to acquire additional stock at prices agreed at the date of the original sale.  The Company incurs a cost for the rights attached to the warrants, which is calculated using the Black-Scholes Model (see above 6. Capital Structure—Common Stock and Common Stock Purchase Warrants.)  This expense is reported in the Condensed Consolidated Statements of Operations above as the Warrant valuation expense.

In the three months ended September 30, 2015, the Company issued 390,000 warrants to stockholders and consultants. In the three months ended September 30, 2014, 500,000 warrants were issued.

Depreciation and amortization
 
The Company amortizes the costs incurred to acquire patents and licenses over the period of the related agreements. The decrease year over year in depreciation and amortization expense reflects the fact that the value of most of the Company's patents and licenses were impaired in 2014.
 
Depreciation and amortization expenses for the three months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the three months
ended September 30,
 
   
2015
 
2014
 
Depreciation expense
 
$
1
   
$
1
 
Amortization expense
 
$
148
   
$
719
 
Increase/ (decrease) from prior year
 
$
(571
)
 
$
1
 
Percentage increase/(decrease) from prior year
   
(79
%) 
   
0
%
 
The decrease reflects the fact that the LDN patents acquired from Dr. Nicholas P. Plotnikoff and Professor Fengping Shan in 2012 were fully amortized by the end of 2014. 
 
 
31

 

Interest Expense

Interest expense for the three months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the three months
ended September 30,
   
2015
 
2014
Interest expense
 
$
80
   
$
94
 
Decrease from prior year
 
$
(14
 
$
111
 
Percentage decrease from prior year
   
(16
%) 
   
54
 
The decrease reflects the lower levels of interest-bearing debt in the second quarter of 2015. 

Loss on settlement of debt (dollar amounts in thousands)

In three months ended September 30, 2015, certain lenders to the Company settled all or a portion of their notes payable or accounts payable by converting them to equity. The Company recorded an expense of $1,394, reflecting the fair value of the shares of common stock issued in exchange for the debt less the carrying value of the debt. In three months ended September 30, 2014, the Company recorded an expense of $1,482 to settle all or a portion of notes or accounts payable.
 
 
32

 
 
Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014 (all dollar amounts and numbers in $000s, except percentages or where otherwise indicated)
 
Revenues
 
We had revenues from operations of $12,676 for the nine months ended September 30, 2015.  There were no revenues in 2014.

Operating Expenses
 
Selling, general and administrative
 
Selling, general and administrative expenses and related percentages for the nine months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):
 
 
For the nine months
ended September 30,
 
 
2015
   
2014
 
Selling, general and administrative
 
$
1,689
   
$
3,264
 
Increase/(decrease) from prior year
 
$
(1,575
)
 
$
(878
)
Percent decrease from prior year
   
(48
%)
   
(21
%)
 
For the nine months ended September 30, 2015 and 2014, selling, general and administrative expenses were made up as follows (dollar amounts in thousands):
 
   
For the nine months
ended September 30,
 
   
2015
   
2014
 
   
$
     
$
   
Stock listing and investor relations expenses
   
73
     
429
 
Consulting and contractors
   
722
     
1,171
 
Payroll
   
441
     
915
 
Professional fees
   
179
     
805
 
Travel
   
131
     
229
 
Insurance
   
(107
   
86
 
Other expenses
   
250
     
379
 
Charitable donations
   
-
     
(750
)
$
   
1,689
   
$
3,264
 

In the nine months ended September 30, 2015, total cash and accruals for selling, general and administrative expense was $1,689 compared to $3,264 for the corresponding period in 2014, a decrease of $1,575 or 48%. Significant cash items included:
 
consulting and contractor services obtained to assist the Company in raising capital, manage investor relations, and develop business in new markets, in the amount of $722 in 2015, a decrease of $449 or 38% over the $1,171 spent in 2014. The decrease was the result primarily of the conversion of amounts owed from prior periods to equity, which resulted in a large credit to this expense category;
professional fees for legal, tax and accounting services in the amount of $179 in 2015, a decrease of $626 or 78% over the $805 spent in 2014.  The decrease reflects the reduction in patent and intellectual property-related activity in 2015;
payroll in the amount of $441 in 2015, a decrease of $474 or 52% over the $915 spent in 2014.  The decrease reflects the reduction in headcount in 2015; and
travel in the amount of $131 in 2015, a decrease of $98 or 43% over the $229 spent in 2014.
 
 
 
33

 
 
The negative insurance expense reflects credits received for insurance expenses accrued in prior periods that were credited when the insurance policies were cancelled in 2015.
 
Research and development
 
R&D expenses and related percentages for the nine months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the nine months
ended September 30,
   
2015
 
2014
Research and development
 
$
703
   
$
1,472
 
Increase decrease from prior year
 
$
(769
)
 
$
(107
)
Percent decrease from prior year
   
(52
%)
   
(7
%) 
 
Expenses for research and development in the nine months ended September 30, 2015 decreased by 52% compared to expenses in the same period in 2014. The decrease occurred mainly as a result a reduction in the cost of stock payments for licenses, purchases of materials for R&D, and legal fees paid to maintain patents and licenses.

In the nine months ended September 30, 2015, total cash spent on R&D was $703, a decrease of $769 or 52% over the $1,472 spent in the same period in 2014. Significant cash items included:

payments for contracted technical services, $168 in 2015, a decrease of $273 or 62% over the $441 spent in 2014, reflecting the decreased use of contractors to perform some of our research activities;
payments for professional fees $25 in 2015, a decrease of $146 or 85% over the $171 spent in 2014, reflecting the reduction in new patent and intellectual property-related activity in 2015;
payroll of $5 in 2015, a decrease of $246 or 98% over the $251 spent in 2014, reflecting the suspension of the R&D program in the 4th quarter of 2014; and
Spending on trials of $373 in 2015, an increase of $373 or 100% over the $0 spent in 2014, reflecting the commencement of trials in Africa in 2015.
 
Most of the R&D spending in 2015 was for the development of LDN, compared to 75% of spending on LDN in 2014.  The balance of 2014 R&D spending was on MENK.

Stock issued for services
 
The Company periodically issues stock to consultants who provide services to the Company under consulting contracts.  

Amortization of accrued liabilities for stock issued for services G&A and related percentages for the nine months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the nine months
ended September 30,
   
2015
 
2014
Stock for services and prepaid consulting services expense G&A
 
$
5,005
   
$
17,021
 
Percentage decrease from prior year
   
(71
%)
   
(24
%) 

The decline in expense reflects the decrease in the price of the Company’s stock year over year.

The number of  shares issued for prepaid consulting services G&A in the nine months ending September 30, 2015 was 16,922,504 (16,390,000 in the corresponding period in 2014).
 
 
34

 

Prepaid consulting services G&A in the nine months ended September 30, 2015 consisted of the following:
 
Amortization of cost of stock issued prior to 2015
 
$
3,373
 
         
Amortization of cost incurred for new stock issued in the nine months ended September 30, 2015 under consulting contracts entered into in 2015
   
1,632
 
   
$
5,005
 
 
Amortization of accrued liabilities for stock issued for services R&D and related percentages for the nine months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the nine months
ended September 30,
   
2015
 
2014
Prepaid consulting services R&D
 
$
0
   
$
5,036
 
Percentage increase/(decrease) from prior year
   
(100
%)
   
  (64%
)

The decline in expense reflects the fact that the cost of shares issued for services have been fully amortized prior to the third quarter of 2014, and the decline in our R&D activities since the fourth quarter of 2014.

There were no new shares issued for prepaid consulting services R&D in the nine months ending September 30, 2015 or 2014.
 
Warrant valuation expense (dollar amounts in thousands)
 
When the Company sells its stock to stockholders for cash, it periodically issues warrants to those stockholders to acquire additional stock at prices agreed at the date of the original sale.  The Company incurs a cost for the rights attached to the warrants, which is calculated using the Black-Scholes Model (see above 4. Capital Structure—Common Stock and Common Stock Purchase Warrants.)  This expense is reported in the Condensed Consolidated Statements of Operations above as the Warrant valuation expense.

In the nine months ended September 30, 2015, the Company issued 390,000 warrants to stockholders at an exercise price range of $0.07 to $0.50, for which it recorded an expense of $37,451.
 
In the nine months ended September 30, 2014, the Company issued 1,948,000 warrants to stockholders at an exercise price range of $1.00 to $1.50, for which it recorded an expense of $2,102.

Depreciation and amortization
 
The Company amortizes the costs incurred to acquire patents and licenses over the period of the related agreements. The decrease year over year in depreciation and amortization expense reflects the fact that the value of most of the Company's patents and licenses were impaired in 2014.
 
Depreciation and amortization expenses for the nine months ended September 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the nine months
ended September 30,
 
   
2015
 
2014
 
Depreciation expense
 
$
1
   
$
2
 
Amortization expense
 
$
445
   
$
2,157
 
Increase/ (decrease) from prior year
 
$
(1,713
)
 
$
24
 
Percentage increase/(decrease) from prior year
   
(79
%)
   
1
%
 
 
35

 
 
The decrease reflects the fact that the LDN patents acquired from Dr. Nicholas P. Plotnikoff and Professor Fengping Shan in 2012 were fully amortized by the end of 2014. 

Interest Expense

Interest expense for the nine months ended September 30, 2015 and 2014 was as follows (dollar amounts in thousands):

   
For the nine months
ended September 30,
   
2015
 
2014
Interest expense
 
$
149
   
$
376
 
Decrease from prior year
 
$
(227
 
$
(635
Percentage decrease from prior year
   
(60
%) 
   
(58
%) 
 
The decrease reflects the lower levels of interest-bearing debt in the first half of 2015. 

Loss on settlement of debt (dollar amounts in thousands)

In nine months ended September 30, 2015, certain lenders to the Company settled all or a portion of their notes or accounts payable by converting them to equity. The Company recorded an expense of $1,482, reflecting the fair value of the shares of common stock issued in exchange for the debt less the carrying value of the related debt. In nine months ended September 30, 2014, the Company recorded an expense of $4,023 to settle all or a portion of notes payable or accounts payable.
 
Liquidity
 
Liquidity is measured by our ability to secure enough cash to meet our contractual and operating needs as they arise. We do not anticipate generating sufficient net positive cash flows from our operations to fund the next twelve months. We had cash of $153,868 at September 30, 2015, compared to $191,987 at September 30, 2014.

We do not expect that our cash reserves will be sufficient to meet our operational needs and we will need to raise additional capital to pay for our operational expenses and provide for capital expenditures. In addition to the Company's operational expenses, which are estimated at between $275,000 and $325,000 per month, we estimate that we need approximately $6-8 million in the next twelve months to fully develop our products and for Phase III clinical trials for Crohn’s disease. If we are not able to raise additional working capital, we may have to cease operations altogether.
 
For the nine months ended September 30, 2015 and 2014, net cash used in operating activities from operations was $1,903,594 and $3,089,097, respectively.

No cash was used in investing activities for the nine months ended September 30, 2015 ($99,843 was used in 2014 for the purchase of licenses and computer equipment).
 
During the nine months ended September 30, 2015 proceeds from the sale of stock and exercise of stock warrants totaled $587,500 compared to $1,799,262 for the corresponding period in 2014.  We also received $1,277,975 from the issuance of notes payable in nine months ended September 30, 2015, compared to $1,210,000 in 2014.  There were no loan repayments in the nine months ended September 30, 2015 ($50,000 in 2014).  No payments were made for patent liabilities in the nine months ended September 30, 2015 ($118,333 in 2014).
 
Our ability to continue as a going concern is dependent entirely on raising funds through the sale of equity or debt. We anticipate that we will continue our attempt to raise capital through private equity and debt transactions, develop a credit facility with a lender, or the exercise of options and warrants; however, such additional capital may not be available to us at acceptable terms or available at all. In the event that we are unable to obtain additional capital, we would be forced to cease operations altogether.
 
 
36

 
 
Off-Balance Sheet Arrangements
 
During the three months ended September 30, 2015 and 2014, we did not engage in any off balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.
 
 
37

 
 

Not Applicable.

 
Changes in Internal Controls over Financial Reporting
 
There were no changes in our internal controls over financial reporting that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
Evaluation of Disclosure Controls and Procedures

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

Management assessed the effectiveness of the internal controls over financial reporting as of September 30, 2015, using the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon this assessment, our management concluded that, as of September 30, 2015, the internal controls over stock and note issuances and financial reporting were not effective. The reportable conditions and material weakness relate to a shortage of employees trained to document and record stock and note issuances, a limited segregation of duties and lack of an audit committee. The limited segregation of duties within our Company and the lack of an audit committee are due to the small number of employees. Management has determined that this control deficiency constitutes a material weakness. This material weakness could result in material misstatements of significant accounts and disclosures that would result in a material misstatement to our interim or annual financial statements that would not be prevented or detected. In addition, due to limited staffing, we are not always able to detect minor errors or omissions in reporting.

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

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
 
 
38

 
 
PART II OTHER INFORMATION
 

In addition to the proceeding described below, the legal proceedings described in Note 11 of the “Notes to the Condensed Consolidated Financial Statements” are incorporated in this “Item 1: Legal Proceedings” by reference.

In December 2014, a claim was filed for breach of contract in the United States District Court, Southern District of Florida, Gary Gemignani v. Immune Therapeutics, Inc. f/k/a TNI BioTech, Inc., in which the named plaintiff claims that we breached a consulting agreement.  In July 2015 the parties agreed to settle the claim.  In accordance with the agreement, Mr. Gemignani will receive a cash payment totaling $152,510, payable in monthly installments between August 2015 and October 2016. As part of the agreement, the Company has also delivered to Gemignani a stock certificate representing one million (1,000,000) shares of Immune’s common stock, together with a statement representing one million (1,000,000) shares of Cytocom’s common stock, held electronically in book-entry.
 
ITEM 1A. RISK FACTORS

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 31, 2015.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition and/or operating results.
 
 
The following table describes all securities we issued during in the three months ended September 30, 2015 without registering the securities under the Securities Act of 1933, as amended (the “Securities Act”):
 
Date
 
Description
 
Number
 
Purchaser
 
Proceeds
 
Consideration
 
Exemption
7/9/2015
 
Common Stock Purchase
    500,000  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
7/15/2015
 
Common Stock Purchase
    400,000  
Subsidiary company
 
$ Nil
 
Incorporation new subsidiary
 
Sec. 4(a)(2)
8/31/2015
 
Common Stock Purchase
    4,000,000  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
8/31/2015
 
Common Stock Purchase
    1,200,000  
Shareholder
  $ 60,000  
Purchase
 
Sec. 4(a)(2)
8/31/2015
 
Common Stock Purchase
    280,000  
Shareholder
  $ 14,000  
Purchase
 
Sec. 4(a)(2)
8/31/2015
 
Common Stock Purchase
    200,000  
Shareholder
  $ 10,000  
Purchase
 
Sec. 4(a)(2)
8/31/2015
 
Common Stock Purchase
    200,000  
Shareholder
  $ 10,000  
Purchase
 
Sec. 4(a)(2)
8/31/2015
 
Common Stock Purchase
    200,000  
Shareholder
  $ 10,000  
Purchase
 
Sec. 4(a)(2)
8/31/2015
 
Common Stock Purchase
    40,000  
Shareholder
  $ 2,000  
Purchase
 
Sec. 4(a)(2)
8/31/2015
 
Common Stock Purchase
    500,000  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
9/1/2015
 
Common Stock Purchase
    2,500,000  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
9/1/2015
 
Common Stock Purchase
    462,500  
Consultant
 
$ Nil
 
Debt settlement
 
Sec. 4(a)(2)
9/1/2015
 
Common Stock Purchase
    100,000  
Consultant
 
$ Nil
 
Debt settlement
 
Sec. 4(a)(2)
9/1/2015
 
Common Stock Purchase
    1,000,000  
Officer
 
$ Nil
 
Employment services
 
Sec. 4(a)(2)
9/1/2015
 
Common Stock Purchase
    2,000,000  
Officer
 
$ Nil
 
Employment services
 
Sec. 4(a)(2)
9/2/2015
 
Common Stock Purchase
    1,200,000  
Officer
 
$ Nil
 
Employment services
 
Sec. 4(a)(2)
9/2/2015
 
Common Stock Purchase
    1,000,000  
Employee
 
$ Nil
 
Settlement agreement
 
Sec. 4(a)(2)
9/3/2015
 
Common Stock Purchase
    4,501,880  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
9/4/2015
 
Common Stock Purchase
    16,664  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
9/4/2015
 
Common Stock Purchase
    80,000  
Shareholder
  $ 4,000  
Purchase
 
Sec. 4(a)(2)
9/4/2015
 
Common Stock Purchase
    33,335  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
9/4/2015
 
Common Stock Purchase
    33,335  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
9/4/2015
 
Common Stock Purchase
    773,600  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
9/17/2015
 
Common Stock Purchase
    1,300,000  
Consultant
 
$ Nil
 
Employment services
 
Sec. 4(a)(2)
9/17/2015
 
Common Stock Purchase
    1,300,000  
Consultant
 
$ Nil
 
Employment services
 
Sec. 4(a)(2)
9/22/2015
 
Common Stock Purchase
    1,000,000  
Shareholder
  $ 10,000  
Purchase
 
Sec. 4(a)(2)
9/22/2015
 
Common Stock Purchase
    1,000,000  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
9/23/2015
 
Common Stock Purchase
    500,000  
Consultant
 
$ Nil
 
Advisory services
 
Sec. 4(a)(2)
                             
July-September 2015
 
Warrants to purchase Common Stock
    90,000  
Consultant
 
$ Nil
 
Advisory Services
 
Sec. 4(a)(2)
   
Warrants to purchase Common Stock
    300,000  
Consultant
 
$ Nil
 
Advisory Services
 
Sec. 4(a)(2)
                 
$ Nil
       
 
The issuances of the Company’s securities in connection with the above transactions were completed in private transactions by the Company not involving any public offering pursuant to Section 4(a)(2) and Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). The shares were issued bearing a
 
 
39

 
 
restrictive legend and may not be resold by the holders unless such securities are registered or an exemption from registration is available. The Company determined, based on representations of the investors, that the investors were “accredited investors” as defined under Rule 501(a) of the Securities Act.

No shares were issued by the Company in the quarters ended September 30, 2015 or 2014 pursuant to the exercise of warrants issued in prior periods to consultants.

During the nine months ended September 30, 2015 and 2014, the Company issued 16,922,504 and 16,390,000 shares of common stock respectively for consulting fees.  The Company valued these shares at $2,750,376 and $12,452,000 respectively, based upon the fair value of the common stock at the dates of the agreements.  The consulting fees are amortized over the contract periods which are typically between 12 and 24 months.   The amortization of prepaid services totaled $3,895,018 and $19,771,875 for the nine months ended September 30, 2015 and 2014.

Between July 1, 2015 and September 30, 2015 promissory notes totaling $150,000 were issued by the Company’s subsidiary Cytocom, Inc.  Lenders earn interest at rates between 5% and 10% per annum. The due dates for repayment of these Notes are between August 31, 2015 and September 30, 2016.
 

The Current portion of notes payable on the Company’s Condensed Consolidated Balance Sheets above contains, at September 30, 2015, certain promissory notes on which the Company was in arrears on payments of principal as follows:

1.  
Repayment of a promissory note for $100,000 issued July 29, 2014 to Ira Gaines.  The note matured on January 27, 2015.  The note earns interest at a rate of 18% per annum. The Company has continued to pay monthly interest on the note since the maturity date.
 
2.  
Payment of principal aggregating $711,500 on certain promissory notes issued between November 26, 2014 and September 30, 2015, to raise up to $2,000,000 in debt, on which lenders earn interest at a rate of 10% per annum, plus a pro-rata share of 2 percent of the Company’s gross receipts for sales of IRT-103-LDN in perpetuity.
 
3.  
Repayment of a promissory note for $200,000 issued January 26, 2015 to R J Dailey.  The note matured on June 30, 2015.  The note earns interest at a rate of 2% per annum.
 
4.  
Repayment of a promissory note for $25,000 issued May 1, 2015 to Robert Fleet.  The note matured on June 14, 2015.  The note earns interest at a rate of 10% per annum.
 
5.  
Repayment of a promissory note for $15,000 issued May 7, 2015 to Robert Fleet.  The note matured on June 22, 2015.  The note earns interest at a rate of 10% per annum.
 
6.  
Repayment of a promissory note for $25,000 issued May 14, 2015 to Joel Yanowitz.  The note matured on June 30, 2015.  The note earns interest at a rate of 5% per annum.
 
7.  
Repayment of a promissory note for $98,500 issued May 15, 2015 to Ira Gaines.  The note matured on June 30, 2015.  $45,000 of interest is owed on the note.
 
8.  
Repayment of a promissory note for $100,000 issued July 10, 2015 to David Gebers.  The note matured on September 10, 2015.  The note earns interest at a rate of 18% per annum.
 
At September 30, 2015 the Company had insufficient cash on hand to repay these notes.
 
At September 30, 2015, Cytocom was in arrears on the payments for certain promissory notes as follows:
 
1.  
Repayment of a promissory note for $12,500 issued June 3, 2015 to Paul Akin.  The note matured on August 31, 2015.  The note earns interest at a rate of 5% per annum.
 
 
40

 
 
2.  
Repayment of a promissory note for $12,500 issued June 3, 2015 to Christy Akin.  The note matured on August 31, 2015.  The note earns interest at a rate of 5% per annum.
 
3.  
Repayment of a promissory note for $25,000 issued June 16, 2015 to MJW Properties.  The note matured on September 30, 2015.  The note earns interest at a rate of 5% per annum.
 
At September 30, 2015, Cytocom had insufficient cash on hand to repay these notes.  
 
 
None
 
 
None.

 
Exhibit Number
 
Name of Exhibit
31.1
 
Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1
 
Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.
       
101.INS
 
XBRL Instance Document
       
101.SCH
 
XBRL Taxonomy Extension Schema
       
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
       
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
       
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
       
101.PRE
 
 XBRL Taxonomy Extension Presentation Linkbase
 
 
41

 
 
SIGNATURES
 
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
Immune Therapeutics, Inc.
 
       
Date: November 16, 2015
By:
/s/ Noreen Griffin
 
   
Noreen Griffin 
 
   
Chief Executive Officer
 
       
 
 
Immune Therapeutics, Inc.
 
       
Date: November 16, 2015
By:
/s/ Peter Aronstam
 
   
Peter Aronstam
 
   
Chief Financial Officer
 
       
 
 
 
 42

EX-31.1 2 tnib_1ex311.htm CERTIFICATION tnib_1ex311.htm
Exhibit 31.1
 
CERTIFICATION

I, Noreen Griffin, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Immune Therapeutics, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting
 
 
 
.

       
Date: November 16, 2015
By:
/s/ Noreen Griffin
 
   
Noreen Griffin
 
   
Chief Executive Officer
 
   
 (Principal Executive Officer) 
 

 
EX-31.2 3 tnib_1ex312.htm CERTIFICATION tnib_1ex312.htm
Exhibit 31.2
CERTIFICATION
I, Peter Aronstam, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Immune Therapeutics, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 

Date: November 16, 2015
By:
/s/ Peter Aronstam
 
   
Peter Aronstam
 
   
Chief Financial Officer
 
   
 (Principal Financial and Accounting Officer)
 


 
EX-32.1 4 tnib_1ex32.htm CERTIFICATION tnib_1ex32.htm
Exhibit 32
 
CERTIFICATION

In connection with the periodic report of Immune Therapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2015 as filed with the Securities and Exchange Commission (the “Report”), we, Noreen Griffin, Chief Executive Officer (Principal Executive Officer) and Peter Aronstam, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of our knowledge:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
 
 
       
Date: November 16, 2015
By:
/s/ Noreen Griffin
 
   
Noreen Griffin
 
   
Chief Executive Officer
 
   
(Principal Executive Officer)
 
       
 
By:
/s/ Peter Aronstam
 
   
Peter Aronstam
 
   
Chief Financial Officer
 
   
(Principal Financial and Accounting Officer)
 


 

 

 
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Our growth strategy includes the near-term commercialization of our existing immunotherapies targeting cancer, Crohn&#146;s disease and/or HIV/AIDS.</p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company is currently a party to an agreement to lease office space in Orlando, Florida.</p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Going Concern</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has incurred significant net losses since inception and has relied on its ability to fund its operations through private equity financings. 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Related Party Transactions Summary Of Significant Accounting Policies Policies Basis of Presentation Revenue Recognition Use of Estimates Cash, Cash Equivalents, and Short-Term Investments Concentration of Credit Risk Segment and Geographic Information Fair Value of Financial Instruments Fair Value Measurements Property and Equipment Intangible Assets Impairment of Long-Lived Assets Research and Development Costs Income Taxes Share-Based Compensation and Issuance of Stock for Non-Cash Consideration Non-controlling Interest Net Loss per Share Recent Accounting Standards Summary Of Significant Accounting Policies Tables Schedule of basic and diluted net loss per share Schedule of antidilutive securities Property And Equipment Tables Schedule of Property and Equipment Accrued Liabilities Tables Accrued Liabilities Notes Payable Tables Schedule of Notes payable Capital Structure-common Stock And Common Stock Purchase Warrants Tables Schedule of outstanding stock warrants Summary of outstanding warrants Summary Of Significant Accounting Policies Details Historical net loss per share: Numerator Net loss Net loss attributed to Common stockholders Denominator Weighted-average common shares outstanding-Denominator for basic and diluted net loss per share Basic and diluted net loss per share attributed to common stockholders Summary Of Significant Accounting Policies Details 1 Warrants to purchase Common stock Potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding Summary Of Significant Accounting Policies Details Narrative Depreciation expense Amortization expense Property And Equipment Details Computer equipment Less accumulated depreciation Property and equipment, net Accrued Liabilities Details Retainer for legal services Accrued payroll to officers and others Accrued interest - notes payable Estimated legal settlement Other accrued liabilities State payroll taxes Total accrued liabilities NotesPayableAxis [Axis] Total Less: Current portion Long-Term debt, less current portion Capital Structure-common Stock And Common Stock Purchase Warrants Details Number of Warrants Beginning Balance Issued Expired Exercised Ending Balance Exercise Price Beginning Balance Minimum Beginning Balance Maximum Issued Minimum Issued Maximum Expired Minimum Expired Maximum Exercised Ending Balance Minimum Ending Balance Maximum Weighted Average Exercise Price Beginning Balance Issued Expired Exercised Ending Balance Number of Shares Exercise Price Remaining Life (years) Stock Compensation Details Narrative Common stock issued for consulting fees, shares Common stock issued for consulting fees, amount Commitments And Contingencies Details Narrative Rent expense Compensation paid Owed Pearce custom:AmortizationOfPrepaidServices custom:AmortizationOfStockIssuedForPrepaidServices Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. custom:FixedAssets custom:IssuanceOfCommonStockForCashAndExerciseOfWarrantsAmount custom:IssuanceOfCommonStockForCashAndExerciseOfWarrantsShares Custom Element. Custom Element. custom:IssuanceOfCommonStockInExchangeForDebtAmount custom:IssuanceOfCommonStockIssuedForPrepaidServicesAmount custom:IssuanceOfCommonStockIssuedForPrepaidServicesShares custom:LincenseAndSupplyAgreementsTextBlock Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. Custom Element. custom:NotesToFinancialStatementsAbstract Custom Element. custom:PrepaidServices custom:PrepaidServicesMember custom:StockIssuancesDue custom:StockIssuedForDonation custom:StockIssuedForInterest Custom Element. Custom Element. custom:StockToBeIssuedMember custom:StockWarrantExpense1 Summary of outstanding warrants. Summary of significant accounting policies policies abstract. Warrant valuation expense. Stock issued for services. Stock issued for license. Stock issued for legal settlement. Loss on settlement of debt. Issuance of common stock for investment shares. Issuance of common stock for investment amount. Issuance of common stock for interest expense amount. Issuance of common stock for interest expense shares. Common stock issued for prepaid services. Common stock issued for loan expense and interest. Common stock issued for prepaid assets. Common stock issued returned from foundation. Common stock issued for notes payable and accrued interest. Payments made on bihari patent. Purchase of license. Issuance of common stock in exchange for debt shares. Numerator Abstract. Denominator Abstract. Warrants to purchase Common stock. Beginning Balance Minimum. Beginning Balance Maximum. Issued Minimum. Issued Maximum. Expired Minimum. Expired Maximum. Exercised. Custom Element. Exercise Price. Custom Element. Custom Element. Assets Liabilities, Current Liabilities, Noncurrent Liabilities Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest Liabilities and Equity Operating Income (Loss) Interest Expense Other Nonoperating Expense Nonoperating Income (Expense) Net Income (Loss) Attributable to Parent Shares, Outstanding Depreciation, Amortization and Accretion, Net LossOnSettlementOfDebt StockWarrantExpense1 StockIssuedForDonation StockIssuedForInterest Increase (Decrease) in Accounts Payable Increase (Decrease) in Accounts Receivable Increase (Decrease) in Accrued Liabilities Increase (Decrease) in Prepaid Expense Net Cash Provided by (Used in) Operating Activities Payments to Acquire Property, Plant, and Equipment PurchaseOfLicense Net Cash Provided by (Used in) Investing Activities PaymentsMadeOnPatentLiability PaymentsMadeOnBihariPatent Net Cash Provided by (Used in) Financing Activities Cash Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period ExercisePriceMinimum ExercisePriceMaximum ExercisePriceExercised Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price ExercisePrice EX-101.PRE 10 tnib-20150930_pre.xml EXCEL 11 Financial_Report.xlsx IDEA: XBRL DOCUMENT begin 644 Financial_Report.xlsx M4$L#!!0````(`%)9<$=,.FCZM@$``!07```3````6T-O;G1E;G1?5'EP97-= M+GAM;,V8RT[#,!!%?Z7*%C6N'=ZBW5"V@`0_8))I8S6.+=M]_3UV"@BJ@EJ@ MTMWDT3N>>Y-QSJ(WSVM+OK?23>N'61V"O6;,ES5IZ7-CJ8W*Q#@M0[QU4V9E M.9-38F(P.&>E:0.UH1]2CVQT\[`@YU1%O=N-D'H/,VEMHTH9E&G9HJVVNO;- M9*)*JDPYUW%)'J(UG40]ZSU*%^ZECBW8JF&=L#GR/.GL?PR]=20K7Q,%W>0^ MK!ORN_PWRKOSF"9RWH2#C-_>7>ZHZ6I\K>R;U=TJ=O'QMV$65;^7P_;"GY(I MG89FV^F7%>G^E\^R]1(7NAD[N51;!HNCC2F=::W?]W=`[T;/N=$1(')1#@.0H0'*<@N0X`\EQ#I+C`B3')4B.*Y`QW8OG*\M"_V/Z'D4X$G1H>)%]2-F`Q+M*;V"^GH`A3&^.R6:E((C-Z." 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7. Stock Compensation (Details Narrative) - USD ($)
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Stock Compensation Details Narrative    
Common stock issued for consulting fees, shares 16,922,504 16,390,000
Common stock issued for consulting fees, amount $ 1,029,375 $ 12,662,001
Amortization of prepaid services $ 3,895,018 $ 19,771,875

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2. Summary of Significant Accounting Policies (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Numerator        
Net loss $ (4,025,309) $ (11,202,175) $ (9,499,641) $ (35,454,263)
Net loss attributed to Common stockholders $ (3,859,550) $ (11,202,175) $ (9,070,926) $ (35,454,263)
Denominator        
Weighted-average common shares outstanding-Denominator for basic and diluted net loss per share 156,814,094 94,316,453 147,365,571 87,875,552
Basic and diluted net loss per share attributed to common stockholders $ (0.02) $ (0.12) $ (0.06) $ (0.40)
XML 15 R9.htm IDEA: XBRL DOCUMENT v3.3.0.814
3. Property and Equipment
9 Months Ended
Sep. 30, 2015
Property And Equipment  
3. Property and Equipment
  September 30, 2015  

December 31,

2014

 
Property and equipment:        
Computer equipment   $ 8,013     $ 8,013  
                 
Less accumulated depreciation     (5,752 )     (3,778 )
                 
Property and equipment, net   $ 2,261     $ 4,235  

 

The Company utilizes the straight-line method for depreciation, using three to five-year depreciable asset lives. Depreciation expense was not material for all periods presented.

XML 16 R29.htm IDEA: XBRL DOCUMENT v3.3.0.814
4. Accrued Liabilities (Details) - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Accrued Liabilities Details    
Retainer for legal services $ 60,000 $ 60,000
Accrued payroll to officers and others 472,000 763,000
Accrued interest - notes payable 120,000 2,000
Estimated legal settlement $ 279,000 279,000
Other accrued liabilities 7,000
State payroll taxes $ 2,000 1,000
Total accrued liabilities $ 933,000 $ 1,112,000
XML 17 R28.htm IDEA: XBRL DOCUMENT v3.3.0.814
3. Property and Equipment (Details) - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Property And Equipment Details    
Computer equipment $ 8,013 $ 8,013
Less accumulated depreciation (5,752) (3,778)
Property and equipment, net $ 2,261 $ 4,235
XML 18 R30.htm IDEA: XBRL DOCUMENT v3.3.0.814
5. Notes Payable (Details) - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Sep. 30, 2014
Total $ 1,838,433 $ 513,525  
Less: Current portion (1,729,100) (186,067)  
Long-Term debt, less current portion 109,333 327,458  
Note 1 [Member]      
Total 100,000 100,000  
Note 2 [Member]      
Total 711,500 406,525  
Note 3 [Member]      
Total 7,000 $ 7,000  
Note 4 [Member]      
Total 669,933  
Note 5 [Member]      
Total 200,000  
Note 6 [Member]      
Total $ 150,000  
XML 19 R31.htm IDEA: XBRL DOCUMENT v3.3.0.814
6. Capital Structure-Common Stock and Common Stock Purchase Warrants (Details)
9 Months Ended
Sep. 30, 2015
$ / shares
shares
Number of Warrants  
Beginning Balance | shares 9,396,750
Issued | shares 390,000
Expired | shares (407,500)
Exercised | shares (24,000)
Ending Balance | shares 9,355,250
Exercise Price  
Beginning Balance Minimum $ 0.14
Beginning Balance Maximum 0.15
Issued Minimum 0.07
Issued Maximum 0.50
Expired Minimum 1.50
Expired Maximum 2.00
Exercised 0.50
Ending Balance Minimum 0.07
Ending Balance Maximum 15.00
Weighted Average Exercise Price  
Beginning Balance 1.72
Issued 0.42
Expired 1.50
Exercised 0.50
Ending Balance $ 1.68
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2. Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2015
Accounting Policies [Abstract]  
2. Summary of Significant Accounting Policies

Basis of Presentation

 

The 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, 2014 (including the notes thereto) set forth in Form 10-K.

 

The accompanying consolidated financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (U.S. GAAP) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

 

The Company qualifies as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have more than $1,000,000,000 in annual gross revenue for the year ended December 31, 2014. We are electing to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.

 

Revenue Recognition

 

Revenue from product sales is recognized upon passage of title and risk of loss to customers. Provisions for discounts, rebates and sales incentives to customers, and returns and other adjustments are provided for in the period the related sales are recorded. Historical data are not yet readily available and reliable for use in estimating the amount of the reduction in gross sales. Revenue from the launch of a new product, from an improved version of an existing product, or for shipments in excess of a customer's normal requirements will be recorded when the conditions noted above are met. In those situations, management will record a returns reserve for such revenue, if necessary. If in future the Company participates in selling arrangements that include multiple deliverables (e.g., instruments, reagents, procedures, and service agreements), under these arrangements, the Company will recognize revenue upon delivery of the product or performance of the service and will allocate the revenue based on the relative selling price of each deliverable, which will be based primarily on vendor specific objective evidence. Revenue from license of product rights is recorded over the periods earned.

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for accounting for revenue from contracts with customers and will supersede most existing revenue recognition guidance. Early adoption is not permitted. The standard becomes effective for the Company in the first quarter of 2017. The Company is currently evaluating the effect, if any, that the standard will have on its consolidated financial statements and related disclosures.

 

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 balance sheets exceed the federally insured limits. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2015, the Company has no uninsured cash balances.

 

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 the 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 and cash equivalents, accounts receivable, 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 notes payable also approximate fair value since they bear market rates of interest and other terms.  None of these instruments are held for trading purposes.

 

Fair Value Measurements

 

The ASC Topic 820, Fair Value Measurement, defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the customer's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time.

 

Property and Equipment

 

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged against expense as incurred. Depreciation expense from continuing operations for the quarters ended September 30, 2015 and September 30, 2014 was $638 and $668, respectively.  Depreciation expense from continuing operations for the nine months ended September 30, 2015 and September 30, 2014 was $1,974 and $1,817, respectively.

 

Intangible Assets

 

Costs incurred to acquire and/or develop the Company’s product licenses and patents are capitalized and amortized by straight-line methods over estimated useful lives of seven to sixteen years. Intangible assets are stated at the lower of cost or estimated fair market value.  During the quarters ended September 30, 2015 and September 30, 2014, the Company did not capitalize any such costs. (See Note 10). During the nine months ended September 30, 2015 and September 30, 2014, the Company did not capitalize any such costs. 

 

Amortization expense for the quarters ended September 30, 2015 and September 30, 2014 was $148,058 and $719,701, respectively.  Amortization expense for the nine months ended September 30, 2015 and September 30, 2014 was $444,175 and $2,157,125, respectively.

 

Impairment of Long-Lived Assets

 

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable as prescribed by ASC Topic 360, Property, Plant and Equipment. If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company will recognize an impairment loss equal to the difference between its carrying amount and its estimated fair value.  No impairment losses were recognized for the quarters ended September 30, 2015 and September 30, 2014.

 

Research and Development Costs

 

Research and development costs are charged to expense as incurred and are typically comprised of salaries and benefits, pre-clinical studies, clinical trial activities, drug development and manufacturing, fees paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf and third-party service fees, including clinical research organizations and investigative sites. Costs for certain development activities, such as clinical trials are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as operating expenses.

 

Income Taxes

 

The Company follows FASB 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, 2015, and December 31, 2014, 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. At the end of the quarters ended September 30, 2015 and September 30, 2014, the Company had 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 all share-based payment awards made to employees and directors, including employee stock options, 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. The majority of 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.

 

Non-controlling Interest

 

In accordance with ASC 810, Consolidation, the Company consolidates Cytocom, Inc. (“Cytocom”).  The non-controlling interests in Cytocom represent the interests of outside shareholders in the equity and results of operations of Cytocom.

 

The Company has adopted changes issued by the FASB to the accounting for non-controlling interests in consolidated financial statements. These changes require, among other items, that a non-controlling interest be included within equity separate from the parent’s equity; consolidated net income be reported at amounts inclusive of both the parent’s and non-controlling interest’s shares; and, separately, the amounts of consolidated net income attributable to the parent and non-controlling interest all be reported on the consolidated statements of operations and comprehensive loss.

             

Net Loss per Share

 

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. Dilutive common stock equivalents are comprised of common stock purchase warrants and options outstanding. For all periods presented, 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.

 

A calculation of basic and diluted net loss per share follows:

 

    For the three months ended September 30,     For the nine months ended September 30,  
    2015     2014     2015     2014  
Historical net loss per share:                        
Numerator                        
Net loss   $ (4,025,309 )   $ (11,202,175 )   $ 9,499,641 )   $ (34,454,263 )
Net loss attributed to Common stockholders   $ (3,859,550 )   $ (11,202,175 )   $ (9,070,926 )   $ (34,454,263 )
                                 
Denominator                                
Weighted-average common shares outstanding—                                
  Denominator for basic and diluted net loss per share     156,814,094       94,316,453       147,365,571       87,875,552  
Basic and diluted net loss per share attributed                                
 to common stockholders   $ (0.02 )   $ (0.12 )   $ (0.06 )   $ (0.40 )

 

The Company’s potential dilutive securities which include stock and 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. Therefore, the weighted-average Common stock outstanding used to calculate both basic and diluted net loss per share is the same.

 

The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be antidilutive:

 

    At September 30,  
    2015     2014  
Warrants to purchase Common stock     9,355,250       8,986,750  
      9,355,250       8,986,750  

 

Recent Accounting Standards

 

During the quarter ended September 30, 2015, there were several new accounting pronouncements issued by the Financial Accounting Standards Board.  Each of these pronouncements, as applicable, has been or will be adopted by the Company.  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.

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for accounting for revenue from contracts with customers and will supersede most existing revenue recognition guidance. Early adoption is not permitted. The standard becomes effective for the Company in the first quarter of 2017. The Company is currently evaluating the effect, if any, that the standard will have on its consolidated financial statements and related disclosures.

XML 21 R32.htm IDEA: XBRL DOCUMENT v3.3.0.814
6. Capital Structure-Common Stock and Common Stock Purchase Warrants (Details 1) - shares
9 Months Ended
Sep. 30, 2015
Dec. 31, 2014
Number of Shares 9,355,250 9,396,750
Fourth Quarter 2015    
Number of Shares 268,750  
Exercise Price 1.50  
Remaining Life (years) 3 months  
Second Quarter 2016    
Number of Shares 37,500  
Exercise Price 5.00  
Remaining Life (years) 9 months  
Third Quarter 2016    
Number of Shares 525,000  
Exercise Price 1.00-5.00  
Remaining Life (years) 1 year  
Third Quarter 2017    
Number of Shares 1,500,000  
Exercise Price 1.00-1.50  
Remaining Life (years) 2 years  
Fourth Quarter 2017    
Number of Shares 2,941,666  
Exercise Price 1.00-9.00  
Remaining Life (years) 2 years 3 months  
First Quarter 2018    
Number of Shares 127,500  
Exercise Price 15.00  
Remaining Life (years) 2 years 6 months  
Second Quarter 2018    
Number of Shares 33,334  
Exercise Price 15.00  
Remaining Life (years) 2 years 9 months  
Third Quarter 2018    
Number of Shares 650,000  
Exercise Price 1.00-1.50  
Remaining Life (years) 3 years  
Fourth Quarter 2018    
Number of Shares 1,197,500  
Exercise Price 1.00-1.50  
Remaining Life (years) 3 years 3 months  
First Quarter 2019    
Number of Shares 1,024,000  
Exercise Price 1.50  
Remaining Life (years) 3 years 6 months  
Second Quarter 2019    
Number of Shares 90,000  
Exercise Price 0.07–0.23  
Remaining Life (years) 3 years 9 months  
Third Quarter 2019    
Number of Shares 260,000  
Exercise Price 0.50  
Remaining Life (years) 4 years  
Fourth Quarter 2019    
Number of Shares 400,000  
Exercise Price 0.14-1.50  
Remaining Life (years) 4 years 3 months  
Second Quarter 2020    
Number of Shares 300,000  
Exercise Price 0.50  
Remaining Life (years) 4 years 9 months  
XML 22 R2.htm IDEA: XBRL DOCUMENT v3.3.0.814
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Current Assets:    
Cash and cash equivalents $ 153,868 $ 191,987
Accounts Receivable 12,676
Prepaids and Other Current assets 45,401 $ 30,000
Total current assets 211,945 221,987
Fixed Assets:    
Computer equipment, net of accumulated depreciation of $5,752 and $3,778 respectively 2,261 4,235
Intangible Assets:    
Patents and licenses, net of accumulated amortization of $1,645,853 and $1,201,678, respectively (Note 10) 5,374,410 5,818,585
Deposits and other assets 42,183 10,183
Total assets 5,630,799 6,054,990
Current Liabilities:    
Accounts payable 1,923,777 2,077,194
Accrued liabilities 933,266 1,111,839
Current portion of notes payable 1,729,100 186,067
Total current liabilities 4,586,143 3,375,100
Non-current Liabilities:    
Notes payable, less current portion 109,333 327,458
Total non-current liabilities 109,333 327,458
Total Liabilities 4,695,476 $ 3,702,558
Commitments and contingencies (Note 11)  
Stockholders' Equity:    
Common stock - par value $0.0001; 500,000,000 shares authorized; 175,444,934 and 134,417,210 shares issued and outstanding respectively 17,545 $ 13,442
Additional paid in capital 343,856,174 337,985,787
Stock issuances due 146,303 847,279
Prepaid services (644,167) (3,553,186)
Accumulated deficit (342,618,303) (333,547,377)
Equity attributable to common stockholders 757,552 1,745,945
Non-controlling interest 177,771 606,487
Total stockholders' equity 935,323 2,352,432
Total liabilities and stockholders' equity $ 5,630,799 $ 6,054,990
XML 23 R6.htm IDEA: XBRL DOCUMENT v3.3.0.814
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (9,499,641) $ (35,454,263)
Adjustments to reconcile net loss to net cash flows used in operating activities:    
Depreciation 1,974 1,817
Amortization 444,175 2,157,125
Stock issued, and amortization of stock issued, for prepaid services 3,895,018 19,771,875
Loss on settlement of debt 1,482,444 4,022,957
Stock issued for services $ 1,029,375 2,148,900
Stock issued for license 468,000
Stock issued for legal settlement $ 81,000 448,500
Debt discount 25,000
Stock warrant expense $ 37,452 2,101,866
Stock (returned) issued for donation (750,000)
Stock issued for interest $ 15,625 298,200
Changes in operating assets and liabilities:    
Accounts payable 605,634 $ 1,101,734
Accounts receivable (12,676)
Accrued liabilities 31,427 $ 342,550
Prepaid expenses and deposits (15,401) 226,642
Net cash used in operating activities $ (1,903,594) (3,089,097)
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchase of computer equipment (42,503)
Purchase of License (57,340)
Net cash used in investing activities (99,843)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from sale of stock and exercise of warrants $ 587,500 1,799,262
Proceeds from notes payable $ 1,277,975 1,210,000
Payments made on patent liability (50,000)
Payments made on Bihari patent (118,333)
Net cash provided by financing activities $ 1,865,475 2,840,929
Net decrease in cash and cash equivalents (38,119) (348,011)
Cash and cash equivalents at beginning of period 191,987 406,596
Cash and cash equivalents at end of period 153,868 $ 58,585
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Cash paid for interest 12,000
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:    
Common stock issued for loan expense and interest $ 15,625 $ 298,200
Common stock issued for prepaid services 1,029,376 12,662,000
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12. Related Party Transactions (Details Narrative) - USD ($)
3 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Owed Pearce   $ 126
Ms. Wilson [Member]    
Compensation paid $ 34,040 $ 40,848
XML 26 R22.htm IDEA: XBRL DOCUMENT v3.3.0.814
4. Accrued Liabilities (Tables)
9 Months Ended
Sep. 30, 2015
Accrued Liabilities Tables  
Accrued Liabilities
   

September 30, 2015

    December 31, 2014  
    (in thousands)  
Retainer for legal services   $ 60     $ 60  
Accrued payroll to officers and others     472       763  
Accrued interest - notes payable     120       2  
Estimated legal settlement     279       279  
Other accrued liabilities     -       7  
State payroll taxes     2       1  
Total accrued liabilities   $ 933     $ 1,112  
XML 27 R24.htm IDEA: XBRL DOCUMENT v3.3.0.814
6. Capital Structure-Common Stock and Common Stock Purchase Warrants (Tables)
9 Months Ended
Sep. 30, 2015
Capital Structure-common Stock And Common Stock Purchase Warrants Tables  
Schedule of outstanding stock warrants
    Number of Shares     Exercise Price     Weighted Average Price  
                         
Warrants as of December 31, 2014     9,396,750     $ 0.14-15     $ 1.72  
                         
Issued in 2015     390,000     $ 0.07-0.50     $ 0.42  
                         
Expired      (407,500 )   $ 1.50-2.00     $ 1.50  
                         
Exercised     (24,000 )   $ 0.50     $ 0.50  
                         
Warrants as of September 30, 2015     9,355,250     $   0.07-15.00     $ 1.68  
Summary of outstanding warrants

Expiration Date   Number of Shares     Exercise Price     Remaining Life (years)  
                         
Fourth Quarter 2015     268,750     $ 1.50       .25  
Second Quarter 2016     37,500     $ 5.00       .75  
Third Quarter 2016     525,000     $ 1.00-5.00       1.00  
Third Quarter 2017     1,500.000     $ 1.00-1.50       2.00  
Fourth Quarter 2017     2,941,666     $ 1.00-9.00       2.25  
First Quarter 2018     127,500     $ 15.00       2.50  
Second Quarter 2018     33,334     $ 15.00       2.75  
Third Quarter 2018     650,000     $ 1.00-1.50       3.00  
Fourth Quarter 2018     1,197,500     $ 1.00-1.50       3.25  
First Quarter 2019     1,024,000     $ 1.50       3.50  
Second Quarter 2019     90,000     $ 0.07–0.23       3.75  
Third Quarter 2019     260,000     $ 0.50       4.00  
Fourth Quarter 2019     400,000     $ 0.14-1.50       4.25  
Second Quarter 2020     300,000     $ 0.50       4.75  

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1. Organization and Description of Business
9 Months Ended
Sep. 30, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
1. Organization and Description of Business

Immune Therapeutics, Inc. (collectively, the “Company,” “us” or “we”) 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 of 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.

 

The Company currently resides in Orlando, Florida. In July 2012, the Company’s focus turned to acquiring patents that would protect and advance the development of new uses of opioid-related immune- therapies, such as low dose naltrexone (“LDN”) and Methionine [Met5]-enkephalin (“MENK”). The Company’s therapies are believed to stimulate and/or regulate the immune system in such a way that they provide the potential to treat a variety of diseases.  We believe our therapies may be able to correct abnormalities or deficiencies in the immune system in diseases such as HIV infection, autoimmune disease, immune disorders, or cancer; all of which can lead to disease progression and life-threatening situations when the immune system is not functioning optimally.

 

In October 2012, the Company formed TNI BioTech International, Ltd., a BVI company in Tortola, British Virgin Islands, which was set up to allow the Company to market and sell LDN in those countries outside the U.S. in which we have been able to obtain approval to sell the Company’s products.

 

In August 2013, the Company formed its United Kingdom subsidiary, TNI BioTech, LTD (the “UK Subsidiary”). The UK Subsidiary received approval to be considered a micro, small or medium-sized enterprise (“SME”) with the European Medicines Agency (“EMA”) on August 21, 2013. The designation provides the UK Subsidiary with significant discounts when holding meetings or submitting filings to the EMA. On September 19, 2013, the UK Subsidiary submitted a pre-submission package to the EMA regarding Crohn’s Disease. The EMA granted the UK Subsidiary a meeting that took place on September 27, 2013. The UK Subsidiary is eligible to benefit from the provisions for administrative and financial assistance for SMEs set out in Regulation (EC) No 2049/2005.

 

In December 2013, the Company formed a new subsidiary, Cytocom Inc., to focus on conducting LDN and MENK clinical trials in the United States. In December 2014, the Company completed the distribution of common stock of Cytocom Inc. to its shareholders. As part of the transaction, the Company retained certain exclusive rights to patents, in-country approvals, formulations, trademarks, manufacturing, marketing, sales, and distributions rights in emerging nations, including Africa, Central America, South America, Russia, India, China, Far East, and The Commonwealth of Independent States (former Soviet Union).  The Company will continue to have access to existing clinical data as well as any new data generated by Cytocom Inc. during drug development.  On December 8, 2014, the number of Cytocom Inc. shares of common stock that were issued to our shareholders totaled 113,242,522 shares.   In connection with the transaction, Cytocom Inc. issued 140,100,000 shares of its common stock to the Company, which gave the Company a 55% stake in Cytocom Inc. at that time.  As of September 30, 2015, the Company owns 140,100,000 shares of the common stock of Cytocom Inc, representing 54% of the total shares issued and outstanding.

 

In March 2014, the Company incorporated Airmed Biopharma Limited, an Irish corporation with an address in Dublin, Ireland, and Airmed Holdings Limited, an Irish company domiciled in Bermuda. The Irish companies were set up to benefit from incentives granted by the Irish government for the establishment of pharmaceutical companies (many of the world’s leading pharmaceutical companies have located in Ireland), and so that the Company could take advantage of Ireland's status as a member of the European Union and the European Economic Area.  An Irish limited liability company enjoys a low corporate income tax rate of 12.5%, one of the lowest in the world. The Irish-domiciled company hopes to qualify for tax incentives for Irish holding/headquartered companies and to benefit from the network of double tax treaties that reduce withholding taxes.  TNI BioTech International, Ltd. will manage our international distribution, using product that is manufactured in Ireland and elsewhere.

 

We are focused on the development and commercialization of therapeutic treatments for cancer, HIV/AIDS and autoimmune diseases and immune disorders by combating these severe and fatal diseases through the stimulation and/or regulation of the body’s immune system. Our growth strategy includes the near-term commercialization of our existing immunotherapies targeting cancer, Crohn’s disease and/or HIV/AIDS.

 

The Company is currently a party to an agreement to lease office space in Orlando, Florida.

 

Going Concern

 

The Company has incurred significant net losses since inception and has relied on its ability to fund its operations through private equity financings. 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 product candidate and the achievement of a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, 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. Based on the Company’s operating plan, existing working capital at September 30, 2015 was not sufficient to meet the cash requirements to fund planned operations through March 31, 2016 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.

 

The Company experienced a net loss from operations of $9,499,641 and used cash and cash equivalents for operations in the amount of $1,903,594 during the nine months ended September 30, 2015, resulting in stockholder's equity of $935,323 at September 30, 2015.

XML 30 R3.htm IDEA: XBRL DOCUMENT v3.3.0.814
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)
Sep. 30, 2015
Dec. 31, 2014
Statement of Financial Position [Abstract]    
Accumulated depreciation $ 5,752 $ 3,778
Amortization $ 1,645,853 $ 1,201,678
Common Stock, Par Value $ .0001 $ .0001
Common Stock, Shares Authorized 500,000,000 500,000,000
Common Stock, Shares Issued 175,444,934 134,417,210
Common Stock, Shares Outstanding 175,444,934 134,417,210
XML 31 R17.htm IDEA: XBRL DOCUMENT v3.3.0.814
11. Commitments and Contingencies
9 Months Ended
Sep. 30, 2015
Commitments and Contingencies Disclosure [Abstract]  
11. Commitments and Contingencies

Malawi Treatment Facilities

 

On July 14, 2012, GB Oncology and Imaging Group LTD (“GBOIG”) in partnership with the Company signed a letter of intent agreement to collaborate with the Government of Malawi to assist in expanding the treatment of cancer, HIV/AIDS and other infectious diseases.

 

In 2015, the Company submitted protocols seeking permission from the Pharmacy, Medicines and Poisons Board of Malawi (“PMPB”) to conduct two trials involving Lodonal™ in Malawi:

 

a.   The first protocol, submitted jointly with The Jack Brewer Foundation (“JBF Worldwide”), received PMPB approval on November 11, 2015.  The protocol covers a 12-month trial for a “Single Visit Approach to Cervical Cancer Prevention”.   The approach is designed to deliver a preventive and simple procedure that can be performed in a clinical setting without the use of a laboratory and to allow for immediate treatment of any precancerous lesions utilizing Wallach LL100 Cryosurgical systems. The protocol provides for 50% of the patient group to be put on Lodonal™ to determine if the drug lowers the number of opportunistic infections during the year, and if it can be shown that LDN increases CD4, CE8, NK and T cell count, which would show that the incidence rates of opportunistic infection could decrease with Lodonal™ and that Lodonal™ could be used as a prophylaxis to prevent substantial HIV-related morbidity in Malawi.  The Company expects the final trial agreement with PMPB to be signed by the end of 2015.  Lodonal™ pills have been produced in Nicaragua in anticipation of the trial.  Shipments will commence once the trial is approved.

 

b.   The second protocol, which has not yet been approved, covers a trial using Lodonal™ for the treatment of cancer.  The protocol is still under discussion with the PMPB, and the Company expects a final protocol to be submitted for approval by year end.

 

Open an Oncology and Infectious Disease Center in Malawi at Queen Elizabeth Central Hospital

 

On September 25, 2012, GBOIG, in partnership with the Company, signed an agreement with the Government of Malawi to open an outpatient clinic at Queen Elizabeth Central Hospital (in Malawi) for the treatment of cancer and infectious disease.  The duration of the Agreement shall be for 25 years with an optional 10-year renewal to be indicated by the Government of Malawi at least three years prior to the expiration of the term.  The Government of Malawi shall bear the upfront costs for the agreement of $2,500,000.

 

Distribution Agreements in Nigeria

 

In September 2013, TNI BioTech International, Ltd., a wholly-owned subsidiary of the Company, signed a Distribution Agreement with AHAR Pharma, a Nigerian company, to market Lodonal™, in Nigeria for the treatment of autoimmune diseases and cancer.  AHAR intends to distribute Lodonal™ through a local distributor network, an Internet client base and directly to hospitals, pharmacists and doctors in Nigeria. The agreement gives AHAR exclusive rights to sell to customers in the private sector and non-exclusive rights to public-sector companies.  The Company may terminate the exclusivity if AHAR fails to meet minimum purchase targets.  Unless terminated earlier, the agreement is valid for five years, subject to the right of the parties to extend for one additional five-year term.  The Company expects to implement the agreement in 2015.  Under the agreement, the Company is obligated to provide delivery of an initial supply of between 1 million and 1.5 million doses of Lodonal™ product to cover AHAR Pharma’s first-year purchase commitment.

 

In August 2015, the Company announced the signing of a letter of interest with GB Pharma/AHAR and Fidson Healthcare of Nigeria to enable Fidson to market and sell LodonalTM in Nigeria. The agreement will become effective upon completion of the ongoing NAFDAC-approved trial evaluating the efficacy and safety of Lodonal™.

 

The agreement will require an amendment to the agreement signed in September 2013 with AHAR, so that both contracts conform.  In October, 2015 the Company announced that it does not expect the results of the trial to be available until receipt of approval by Nigerian National Agency for Food and Drug Administration and Control, targeted for the first quarter of 2016.

 

Other Agreements for Africa

 

In September 2014, Airmed Biopharma Limited (“Airmed”), a wholly-owned subsidiary of the Company, signed an exclusive agency agreement with GB Pharma Holdings Inc., to market and promote Lodonal™, and to solicit purchase orders for Lodonal™, in various counties in Africa.  Airmed is required to pay GB Pharma Holdings Inc. a commission based on payments actually received on purchase orders procured by the GB Pharma Holdings Inc. from customers in Africa during the term of the agreement, after deduction for certain costs incurred by Airmed for product supply. The agreement has an initial term of five years, with automatic renewals for additional one-year periods unless terminated by either party.

 

Agreements with Hubei Qianjiang Pharmaceutical Company

 

On October 18, 2012, the Company and Hubei Qianjiang Pharmaceutical Co., Ltd. (“Qianjiang Pharmaceutical”), signed a Venture Cooperation Agreement on New Drug Methionine Enkephalin (the “Venture Agreement”) pursuant to which Qianjiang Pharmaceutical acquired an exclusive license for the production of MENK in China.  The Venture Agreement requires that Qianjiang Pharmaceutical conduct drug research and pilot testing for MENK, organize pre-clinical studies, and apply for clinical trials for MENK with the Chinese State Food and Drug Administration. Under the Venture Agreement, Qianjiang Pharmaceutical must open a co-administration account for the development of MENK in China. Qianjiang Pharmaceutical must pay the Company, upon the marketing of MENK products, a half-year amount equaling 6% of its gross sales from MENK of the preceding half year.  The Company may cancel the Venture Agreement if Qianjiang Pharmaceutical does not pay expenses for a period exceeding nine months or does not commence clinical trials within 12-months after receiving certain approvals. Qianjiang Pharmaceutical may cancel the Venture Agreement if the Company fails to perform its obligations for a period of nine months or the failure to receive approval of clinical trials is due to the Company’s MENK technologies.  The Venture Agreement was amended on February 24, 2013 to expand the clinical trials from pancreatic to both pancreatic and liver cancer and amended on March 6, 2014 to require Qianjiang Pharmaceutical to commence studies and clinical trials in China and place funds in the co-administration account.

 

On August 6, 2014, the Company entered into a Supplementary Agreement on New Drug Methionine – Enkephalin Cooperation (the “Amendment”) with Qianjiang Pharmaceutical, amending the Venture Agreement, as amended. The Company and Qianjiang Pharmaceutical executed the Amendment to accelerate clinical trials in both the United States and China, and agreed to immediately initiate three month Good Laboratory Practice (“GLP”) Toxicology Studies (rat and dog) within 30 days of signing the Amendment. The Amendment requires that the GLP Toxicology Studies Trials are conducted in China in accordance with international standards and standards acceptable to the FDA.

 

In February 2013, the Company signed a Strategic Framework Agreement for Cooperation with Qianjiang Pharmaceutical. Under the agreement, the parties will work together to further the development of new products and conduct research and development on the Company’s licensed patented technology. Specifically, the parties aim to co-invest to develop and market products focusing on HIV, cancer and related autoimmune system therapies, develop co-ventured manufacturing facilities in China, and develop co-ventured distribution of the developed products in China and Africa. The agreement does not have a definitive term, as each new agreement resulting from the cooperation will set forth the material terms, including, but not limited to, fees, duration and termination therein.

 

In accordance with these agreements, Qianjiang Pharmaceutical has acquired MENK material for the preclinical and clinical trial.  MENK toxicology studies are in process under the trial, including a six-month toxicology study in animals.  Other studies, including stability and general pharmacology (on normal animals to determine the effect to heart, blood pressure, etc.) have commenced.  All FDA-required tests, including formulation and quality control tests, are in process.

 

Supervision and Inspection of Manufacturing in Nicaragua

 

On April 23, 2013, the Company signed a Contract with ViPharma for the Supervision and Inspection of Manufacturing Processes as part of its negotiations for a contract for the manufacturing of LDN in a tablet, capsule and/or cream. The contract sets out the terms and conditions under which ViPharma will carry out the services of inspecting and supervising the manufacturing and packaging processes of LDN and ensure compliance with the FDA’s Current Good Manufacturing Practice regulations (“cGMP”) and the Company’s specifications. ViPharma will carry out its obligations in whatever Latin American country the Company ultimately decides to manufacture LDN. Under the contract, ViPharma has the exclusive rights to supervise and inspect all manufacturing processes of LDN in Latin America. The initial term of the agreement is ten years commencing in September 2013, with automatic five-year renewal terms provided neither party is in breach. The agreement may be terminated by (i) mutual agreement, (ii) in the event of a breach after a 45 day cure period or (iii) by either party upon provision of written notice at least 90 days before the end of the agreement, provided however that if the Company terminates the contract without cause it will be required to pay ViPharma a $10 million penalty.

 

Operating Leases

 

At September 30, 2015, the Company was a party to an agreement to lease office space in Orlando, Florida.  The lease expires on April 30, 2016.  Rent expense for the quarters ended September 30, 2015 and 2014 was $4,988 and $40,605, respectively.

 

Legal Proceedings

 

In February 2014, a claim was filed for breach of contract and unjust enrichment in the Circuit Court for Montgomery County, Maryland, E.J. Krause & Associates, Inc. v. TNI BioTech, Inc., in which the named plaintiff claims that we breached a sub-sublease. The plaintiff is seeking damages in excess of $75,000, along with costs, attorneys’ fees, pre-judgment interest and post-judgment interest.  On April 2, 2015 a default judgment was entered in favor of Plaintiff EK Krause & Associates in the amount of $259,894.16 plus post judgment interest.  The Company has accrued $279,000 for this claim.

 

In October 2014, a claim was filed for breach of contract and unjust enrichment in the United States District Court, Middle District of Florida, Orlando Division, QS Pharma, LLC v. TNI BioTech, Inc. n/k/a Immune Therapeutics, Inc., in which the named plaintiff claims that we breached various proposals between the parties. The plaintiff was seeking an amount of damages to be proven at trial and pre-judgment interest.  The plaintiff filed a Motion for Order of Default, which the court entered against the Company in favor of the plaintiff on December 15, 2014. The Company has accrued $210,452 for this claim. In May and October 2015, under a garnishment order the plaintiff withdrew $92,590 from the Company’s bank accounts towards settlement of the claim. At September 30, 2015, $1,191 was in bank accounts that were subject to the garnishment order.

 

In September 2015, a claim was filed for breach of contract, account stated, quantum meruit, and unjust enrichment in District Court for the Middle District of Florida, Epstein Becker & Green PC v. TNI Biotech, Immune Therapeutics, Inc. Cytocom, Inc. in which the named plaintiff claims that it is owed outstanding attorney fees.  The plaintiff is seeking damages in excess of $194,000.00.

XML 32 R1.htm IDEA: XBRL DOCUMENT v3.3.0.814
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2015
Nov. 16, 2015
Document And Entity Information    
Entity Registrant Name Immune Therapeutics, Inc.  
Entity Central Index Key 0001559356  
Document Type 10-Q  
Document Period End Date Sep. 30, 2015  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   177,990,052
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2015  
XML 33 R18.htm IDEA: XBRL DOCUMENT v3.3.0.814
12. Related Party Transactions
9 Months Ended
Sep. 30, 2015
Related Party Transactions [Abstract]  
12. Related Party Transactions

On January 3, 2013, the Company formalized the terms under which Kelly O’Brien Wilson, the daughter-in-law of the Company's Chief Executive Officer is employed. Ms. Wilson had been working with the Company in 2012 and her three-year employment agreement is effective as of December 1, 2012. The terms of the agreement define her base salary, a grant of a common stock, and health insurance coverage. Ms. Wilson was issued 500,000 shares of common stock of the Company in January 2014. In the quarters ended September 30, 2015 and 2014, the Company paid compensation to Ms. Wilson totaling $34,040 and $40,848 respectively.

 

On May 15, 2015, the Company entered into a Royalty Agreement with Chris Pearce, a member of our Board of Directors. The Board of Directors approved the Agreement at a meeting held on April 16, 2015.  The purpose of the Agreement is to compensate Pearce for his time as one of our founders and pay Pearce certain deferred compensation.  Pursuant to the Agreement, Pearce shall receive a royalty payment in perpetuity in an amount equal to $0.010 per one tablet or capsule of low dose naltrexone sold by us outside of the United States, and $0.005 per one tablet or capsule of low dose naltrexone sold by us in the United States.  The Agreement continues in effect in perpetuity unless terminated by the Company and Mr. Pearce’s written consent.  At September 30, 2015, the Company owed Pearce $126 under the Agreement.

XML 34 R4.htm IDEA: XBRL DOCUMENT v3.3.0.814
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Income Statement [Abstract]        
Revenues, net $ 4,958 $ 12,676
Operating expenses        
Selling, general and administrative 865,335 $ 901,746 1,689,188 $ 3,264,342
Research and development expense 111,361 401,424 703,011 1,471,934
Stock issued for services G&A $ 1,393,500 $ 4,946,639 $ 5,005,393 17,021,025
Stock issued for services R&D 5,036,250
Warrant valuation $ 37,451 $ 114,939 $ 37,451 2,101,866
Depreciation and amortization expense 148,696 720,369 446,148 2,158,943
Total operating expenses 2,556,343 7,085,117 7,881,191 31,054,360
Loss from operations (2,551,385) (7,085,117) (7,868,515) (31,054,360)
Other income (expense):        
Interest expense $ (79,924) $ (94,101) $ (148,681) (376,163)
Exchange gain (loss) (783)
Loss on settlement of debt $ (1,394,000) $ (4,022,957) $ (1,482,445) (4,022,957)
Total other income (expense) (1,473,924) (4,117,058) (1,631,126) (4,399,903)
Net (loss) (4,025,309) $ (11,202,175) (9,499,641) (35,454,263)
Net loss attributable to non-controlling interest (165,759) (428,715)  
Net (loss) attributable to common shareholders $ (3,859,550) $ (11,202,175) $ (9,070,926) $ (35,454,263)
Basic and diluted loss per share attributable to common shareholders $ (0.02) $ (0.12) $ (0.06) $ (0.40)
Weighted average number of shares outstanding 156,814,094 94,316,453 147,365,571 87,875,552
XML 35 R12.htm IDEA: XBRL DOCUMENT v3.3.0.814
6. Capital Structure-Common Stock and Common Stock Purchase Warrants
9 Months Ended
Sep. 30, 2015
Notes to Financial Statements  
6. Capital Structure-Common Stock and Common 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.

 

As of September 30, 2015 and 2014, the Company was authorized to issue 500,000,000 common shares at a par value of $0.0001 per share.

 

As of September 30, 2015, the Company had 175,444,934 shares of common stock outstanding and 129,015,249 outstanding as of September 30, 2014.

 

Stock Warrants 

 

In the quarter ended September 30, 2015, the Company issued 390,000 warrants.

 

There were no modifications of the terms of any warrants issued by the Company in the quarters ended September 30, 2015 and 2014.  

 

Following is a summary of outstanding stock warrants at September 30, 2015 and activity during the nine months then ended:

 

    Number of Shares     Exercise Price     Weighted Average Price  
                         
Warrants as of December 31, 2014     9,396,750     $ 0.14-15     $ 1.72  
                         
Issued in 2015     390,000     $ 0.07-0.50     $ 0.42  
                         
Expired      (407,500 )   $ 1.50-2.00     $ 1.50  
                         
Exercised     (24,000 )   $ 0.50     $ 0.50  
                         
Warrants as of September 30, 2015     9,355,250     $   0.07-15.00     $ 1.68  

 

Summary of outstanding warrants as of September 30, 2015:

 

Expiration Date   Number of Shares     Exercise Price     Remaining Life (years)  
                         
Fourth Quarter 2015     268,750     $ 1.50       .25  
Second Quarter 2016     37,500     $ 5.00       .75  
Third Quarter 2016     525,000     $ 1.00-5.00       1.00  
Third Quarter 2017     1,500.000     $ 1.00-1.50       2.00  
Fourth Quarter 2017     2,941,666     $ 1.00-9.00       2.25  
First Quarter 2018     127,500     $ 15.00       2.50  
Second Quarter 2018     33,334     $ 15.00       2.75  
Third Quarter 2018     650,000     $ 1.00-1.50       3.00  
Fourth Quarter 2018     1,197,500     $ 1.00-1.50       3.25  
First Quarter 2019     1,024,000     $ 1.50       3.50  
Second Quarter 2019     90,000     $ 0.07–0.23       3.75  
Third Quarter 2019     260,000     $ 0.50       4.00  
Fourth Quarter 2019     400,000     $ 0.14-1.50       4.25  
Second Quarter 2020     300,000     $ 0.50       4.75  

 

XML 36 R11.htm IDEA: XBRL DOCUMENT v3.3.0.814
5. Notes Payable
9 Months Ended
Sep. 30, 2015
Debt Disclosure [Abstract]  
5. Notes Payable

Notes payable consist of the following:

 

   

September 30,

2015

    December 31, 2014  
Promissory note issued July 29, 2014 to Ira Gaines. The note matures on January 27, 2015 and earns interest at a rate of 18% per annum. The Company was unable to repay the note at maturity and the note is in default, although no demand for repayment has been made by the lender.   $ 100,000     $ 100,000  
                 
Promissory notes issued between November 26, 2014 and September 30, 2015, to raise up to $2,000,000 in debt. Lenders earn interest at a rate of 10% per annum, plus a pro-rata share of two percent of the Company’s gross receipts for sales of IRT-103-LDN in perpetuity. Notes will be repaid in 36 monthly installments of principal and interest commencing no later than October 15, 2015. Notes aggregating $547,500 were in default at September 30, 2015, as the Company was unable to pay installments on those notes on their due dates. No demands for repayment have been made by the lenders.     711,500       406,525  
                 
Promissory note issued October 17, 2014 to Roger Bozarth. The note matures on October 17, 2015 and earns interest at a rate of 2% per annum.     7,000       7,000  
                 
Promissory notes issued between May 1, 2015 and September 30, 2015, and maturing between June 14, 2015 and December 31, 2015.  Lenders on loans aggregating $506,433 earn interest at rates between 10% and 18% per annum.  On loans aggregating $163,500, interest is payable in a fixed amount not tied to a specific interest rate.  At September 30, 2015, total interest payable is $51,500. Notes aggregating $263,500 were in default at September 30, 2015, as the Company was unable to repay those notes on their due dates. No demands for repayment have been made by the lenders.     669,933       -  
                 
Promissory note issued January 26, 2015 to Robert J. Dailey. The note is senior to, and has priority in right of payment over, all indebtedness of the Company. The note earns interest at a rate of 2% per annum and is due on September 30, 2015.  The Company was unable to repay the note at maturity and the note is in default, although no demand for repayment has been made by the lender.     200,000       -  
                 
Promissory notes issued by Cytocom Inc. between April 29, 2015 and September 30, 2015. Lenders earn interest at rates between 5% and 10% per annum. Notes are repayable between September 30, 2015 and September 30, 2016.  The Company was unable to repay notes aggregating $50,000 that matured on or before September 30, 2015, although no demand for repayment has been made by the lenders.     150,000       -  
                 
Total     1,838,433       513,525  
                 
Less: Current portion     (1,729,100 )     (186,067 )
                 
Long-Term debt, less current portion   $ 109,333     $ 327,458  

 

As of September 30, 2015, the Company had accrued $120,364 in unpaid interest, compared to $2 as of September 30, 2014. During the nine months ended September 30, 2015, 62,500 shares with a fair value of $15,625 were issued by the Company for interest expense under promissory notes (compared to 655,000 shares issued for interest and loan expenses with a fair value $298,200 in the nine months ended September 30, 2014).

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5. Notes Payable (Tables)
9 Months Ended
Sep. 30, 2015
Notes Payable Tables  
Schedule of Notes payable

   

September 30,

2015

    December 31, 2014  
Promissory note issued July 29, 2014 to Ira Gaines. The note matures on January 27, 2015 and earns interest at a rate of 18% per annum. The Company was unable to repay the note at maturity and the note is in default, although no demand for repayment has been made by the lender.   $ 100,000     $ 100,000  
                 
Promissory notes issued between November 26, 2014 and September 30, 2015, to raise up to $2,000,000 in debt. Lenders earn interest at a rate of 10% per annum, plus a pro-rata share of two percent of the Company’s gross receipts for sales of IRT-103-LDN in perpetuity. Notes will be repaid in 36 monthly installments of principal and interest commencing no later than October 15, 2015. Notes aggregating $547,500 were in default at September 30, 2015, as the Company was unable to pay installments on those notes on their due dates. No demands for repayment have been made by the lenders.     711,500       406,525  
                 
Promissory note issued October 17, 2014 to Roger Bozarth. The note matures on October 17, 2015 and earns interest at a rate of 2% per annum.     7,000       7,000  
                 
Promissory notes issued between May 1, 2015 and September 30, 2015, and maturing between June 14, 2015 and December 31, 2015.  Lenders on loans aggregating $506,433 earn interest at rates between 10% and 18% per annum.  On loans aggregating $163,500, interest is payable in a fixed amount not tied to a specific interest rate.  At September 30, 2015, total interest payable is $51,500. Notes aggregating $263,500 were in default at September 30, 2015, as the Company was unable to repay those notes on their due dates. No demands for repayment have been made by the lenders.     669,933       -  
                 
Promissory note issued January 26, 2015 to Robert J. Dailey. The note is senior to, and has priority in right of payment over, all indebtedness of the Company. The note earns interest at a rate of 2% per annum and is due on September 30, 2015.  The Company was unable to repay the note at maturity and the note is in default, although no demand for repayment has been made by the lender.     200,000       -  
                 
Promissory notes issued by Cytocom Inc. between April 29, 2015 and September 30, 2015. Lenders earn interest at rates between 5% and 10% per annum. Notes are repayable between September 30, 2015 and September 30, 2016.  The Company was unable to repay notes aggregating $50,000 that matured on or before September 30, 2015, although no demand for repayment has been made by the lenders.     150,000       -  
                 
Total     1,838,433       513,525  
                 
Less: Current portion     (1,729,100 )     (186,067 )
                 
Long-Term debt, less current portion   $ 109,333     $ 327,458  

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2. Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2015
Summary Of Significant Accounting Policies Policies  
Basis of Presentation

The 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, 2014 (including the notes thereto) set forth in Form 10-K.

 

The accompanying consolidated financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (U.S. GAAP) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

 

The Company qualifies as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (“JOBS Act”) as we do not have more than $1,000,000,000 in annual gross revenue for the year ended December 31, 2014. We are electing to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.

Revenue Recognition

Revenue from product sales is recognized upon passage of title and risk of loss to customers. Provisions for discounts, rebates and sales incentives to customers, and returns and other adjustments are provided for in the period the related sales are recorded. Historical data are not yet readily available and reliable for use in estimating the amount of the reduction in gross sales. Revenue from the launch of a new product, from an improved version of an existing product, or for shipments in excess of a customer's normal requirements will be recorded when the conditions noted above are met. In those situations, management will record a returns reserve for such revenue, if necessary. If in future the Company participates in selling arrangements that include multiple deliverables (e.g., instruments, reagents, procedures, and service agreements), under these arrangements, the Company will recognize revenue upon delivery of the product or performance of the service and will allocate the revenue based on the relative selling price of each deliverable, which will be based primarily on vendor specific objective evidence. Revenue from license of product rights is recorded over the periods earned.

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for accounting for revenue from contracts with customers and will supersede most existing revenue recognition guidance. Early adoption is not permitted. The standard becomes effective for the Company in the first quarter of 2017. The Company is currently evaluating the effect, if any, that the standard will have on its consolidated financial statements and related disclosures.

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 balance sheets exceed the federally insured limits. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2015, the Company has no uninsured cash balances.

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 the 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 and cash equivalents, accounts receivable, 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 notes payable also approximate fair value since they bear market rates of interest and other terms.  None of these instruments are held for trading purposes.

Fair Value Measurements

The ASC Topic 820, Fair Value Measurement, defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the customer's creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged against expense as incurred. Depreciation expense from continuing operations for the quarters ended September 30, 2015 and September 30, 2014 was $638 and $668, respectively.  Depreciation expense from continuing operations for the nine months ended September 30, 2015 and September 30, 2014 was $1,974 and $1,817, respectively.

Intangible Assets

Costs incurred to acquire and/or develop the Company’s product licenses and patents are capitalized and amortized by straight-line methods over estimated useful lives of seven to sixteen years. Intangible assets are stated at the lower of cost or estimated fair market value.  During the quarters ended September 30, 2015 and September 30, 2014, the Company did not capitalize any such costs. (See Note 10). During the nine months ended September 30, 2015 and September 30, 2014, the Company did not capitalize any such costs. 

 

Amortization expense for the quarters ended September 30, 2015 and September 30, 2014 was $148,058 and $719,701, respectively. Amortization expense for the nine months ended September 30, 2015 and September 30, 2014 was $444,175 and $2,157,125, respectively.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable as prescribed by ASC Topic 360, Property, Plant and Equipment. If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company will recognize an impairment loss equal to the difference between its carrying amount and its estimated fair value.  No impairment losses were recognized for the quarters ended September 30, 2015 and September 30, 2014.

Research and Development Costs

Research and development costs are charged to expense as incurred and are typically comprised of salaries and benefits, pre-clinical studies, clinical trial activities, drug development and manufacturing, fees paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf and third-party service fees, including clinical research organizations and investigative sites. Costs for certain development activities, such as clinical trials are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as operating expenses.

Income Taxes

The Company follows FASB 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, 2015, and December 31, 2014, 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. At the end of the quarters ended September 30, 2015 and September 30, 2014, the Company had not accrued any interest or penalties related to uncertain tax positions.

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

The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including employee stock options, 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. The majority of 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.

Non-controlling Interest

In accordance with ASC 810, Consolidation, the Company consolidates Cytocom, Inc. (“Cytocom”).  The non-controlling interests in Cytocom represent the interests of outside shareholders in the equity and results of operations of Cytocom.

 

The Company has adopted changes issued by the FASB to the accounting for non-controlling interests in consolidated financial statements. These changes require, among other items, that a non-controlling interest be included within equity separate from the parent’s equity; consolidated net income be reported at amounts inclusive of both the parent’s and non-controlling interest’s shares; and, separately, the amounts of consolidated net income attributable to the parent and non-controlling interest all be reported on the consolidated statements of operations and comprehensive loss.

Net Loss per Share

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. Dilutive common stock equivalents are comprised of common stock purchase warrants and options outstanding. For all periods presented, 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.

 

A calculation of basic and diluted net loss per share follows:

 

    For the three months ended September 30,     For the nine months ended September 30,  
    2015     2014     2015     2014  
Historical net loss per share:                        
Numerator                        
Net loss   $ (4,025,309 )   $ (11,202,175 )   $ 9,499,641 )   $ (34,454,263 )
Net loss attributed to Common stockholders   $ (3,859,550 )   $ (11,202,175 )   $ (9,070,926 )   $ (34,454,263 )
                                 
Denominator                                
Weighted-average common shares outstanding—                                
  Denominator for basic and diluted net loss per share     156,814,094       94,316,453       147,365,571       87,875,552  
Basic and diluted net loss per share attributed                                
 to common stockholders   $ (0.02 )   $ (0.12 )   $ (0.06 )   $ (0.40 )

 

The Company’s potential dilutive securities which include stock and 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. Therefore, the weighted-average Common stock outstanding used to calculate both basic and diluted net loss per share is the same.

 

The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be antidilutive:

 

    At September 30,  
    2015     2014  
Warrants to purchase Common stock     9,355,250       8,986,750  
      9,355,250       8,986,750  
Recent Accounting Standards

During the quarter ended September 30, 2015, there were several new accounting pronouncements issued by the Financial Accounting Standards Board.  Each of these pronouncements, as applicable, has been or will be adopted by the Company.  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.

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for accounting for revenue from contracts with customers and will supersede most existing revenue recognition guidance. Early adoption is not permitted. The standard becomes effective for the Company in the first quarter of 2017. The Company is currently evaluating the effect, if any, that the standard will have on its consolidated financial statements and related disclosures.

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9. Subsequent Events
9 Months Ended
Sep. 30, 2015
Subsequent Events [Abstract]  
9. Subsequent Events

Between October 1, 2015 and November 16, 2015, Cytocom issued notes payable totaling $500,000.

 

Between October 1, 2015 and November 16, 2015, the Company issued 2,545,118 shares of common stock.

 

As of November 16, 2015, the Company had outstanding 177,990,052 shares of common stock.

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7. Stock Compensation
9 Months Ended
Sep. 30, 2015
Equity [Abstract]  
7. Stock Compensation

Shares Issued for Services

 

During the nine months ended September 30, 2015 and 2014, the Company issued 16,922,504 and 16,390,000 shares of common stock respectively for consulting fees.  The Company valued these shares at $1,029,375 and $12,662,001 respectively, based upon the fair value of the common stock at the dates of the agreements.  The consulting fees are amortized over the contract periods which are typically between 12 and 24 months.   The amortization of prepaid services totaled $3,895,018 and $19,771,875 for the nine months ended September 30, 2015 and 2014. In the nine months ended September 30, 2015, the company also issued and expensed $1,110,375 of stock for services.

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8. Income Taxes - Results of Operations
9 Months Ended
Sep. 30, 2015
Income Taxes - Results Of Operations  
8. Income Taxes - Results of Operations

There was no income tax expense reflected in the results of operations for the quarters ended September 30, 2015 and 2014 because the Company incurred a net loss in both quarters.

 

The Company has recognized no tax benefit for the losses generated for the periods through December 31, 2014. ASC Topic 740 requires that a valuation allowance be provided if it is more likely than not that some portion or all of 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.

 

Our effective tax rate for fiscal years 2014 and 2013 was 0%. 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.

 

As of December 31, 2014, we have estimated federal and state income tax net operating loss (“NOL”) carry-forwards of approximately $1,500,000, which will expire in 2032-2036.

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10. Licenses and Supply Agreements
9 Months Ended
Sep. 30, 2015
Notes to Financial Statements  
10. Licenses and Supply Agreements

Patent and Subsidiary Acquisition

 

The Company entered into a share exchange agreement on April 24, 2012 to acquire all of the outstanding shares of TNI BioTech IP, Inc. (“TNI IP”), a biotechnology firm incorporated in Florida and formed to acquire patents related to the treatment of cancer and HIV/AIDS and autoimmune diseases, using Met-enkephalin (“MENK”) and Naltraxone (“LDN”). The goal of TNI IP’s management was to enable mankind and civilization to combat fatal diseases by activating and mobilizing the body’s own immune system using TNI IP’s patented use of MENK.  The first patents acquired by TNI IP were acquired from Dr. Nicholas P. Plotnikoff and Professor Fengping Shan in 2012.  TNI IP was acquired in exchange for 20,250,000 shares of the Company’s common stock, of which 8,000,000 shares were issued to Dr. Plotnikoff for the acquisition of patents and the remaining 12,250,000 shares were issued to the founders of TNI IP in exchange for all of their right, title and interest in their TNI IP shares. The goodwill arising on the acquisition of TNI IP was valued at $98,000,000 and license agreements arising from the acquisition of TNI IP were valued at $16,006,000.

 

In connection with the share exchange, we entered into a Sale of Technology Agreement with Dr. Nicholas P. Plotnikoff on March 4, 2012, wherein Dr. Plotnikoff agreed to transfer and assign all of his rights, title and interest in: European Patent United Kingdom, Germany, France, Ireland EP 1401471 BI Methods for inducing sustained immune response; Russian Patent Russian Federation patent number 2313364; The Patent Office of the People’s Republic of China, Application No.: 200810165784.8 China Patent CN1015113407 A The Patent Office of the People’s Republic of China ISSN: 1006-2858 CN 21-1349/R; Patent Agencies Government of India Patent, Application number 1627/KOLNP/2003 number 220265 an Enkephalin Peptide Composition; and the US Patent Pending, US Patent Application 10/146.999 e. The Company received all the production formulations and technology designs from Dr. Plotnikoff necessary for the manufacturing, formulation, production and protocols of the MENK treatment of cancer and HIV/AIDS. As consideration for entering into the Sale of Technology Agreement, Dr. Plotnikoff received 8,000,000 shares of common stock, a royalty of a single-digit percentage on all sales of MENK and was granted the position of Non-Executive Chairman of the Board of Directors.

 

At the time of the acquisition, the valuation of goodwill and other intangible assets were determined using the fair market price for the Company’s common stock, which were exchanged for shares of TNI IP.  In the fourth quarter of 2012, the Company performed an annual valuation to determine whether any goodwill or intangible assets that had been acquired by the Company were impaired. The result of this valuation was that material impairments were identified. The Company recognized an impairment of the goodwill arising on the acquisition of TNI IP of $98,000,000.

 

Patent License Agreements

 

On August 13, 2012, the Company signed an exclusive License Agreement with Ms. Jacqueline Young (the “Young Agreement”) for the intellectual property developed by Dr. Bernard Bihari relating to treatments with opioid antagonists such as naltrexone and Met-enkephalin for a variety of diseases and conditions including malignant lymphoma, chronic lymphocytic leukemia, Hodgkin’s lymphoma, and non-Hodgkin’s lymphoma, chronic herpes virus infections, chronic herpes viral infections such as chronic genital herpes caused by the herpes simplex virus Type 2 and chronic infections due to the Epstein-Barr virus and a treatment method for humans infected with HTLV-III (AIDS) virus, including patients clinically diagnosed as suffering from AIDS and those suffering from AIDS-related complex (ARC).  The Bihari patents were acquired in exchange for 540,000 shares of the Company’s common stock with a fair market value of $972,000 and assumed liabilities of $400,000, which is payable to Ms. Young over a twenty-four month period in equal installments to reimburse her for the costs of a New York City office in accordance with the Young Agreement.  The patent liability at December 31, 2013 totaled $118,333. The cost of the patent totaled $1,372,000.  The Company will pay the licensor a royalty payment of 1% of gross MENK sales and provide the licensor a position as non-executive chairman of the Company. In addition, we are required to make a minimum royalty in the amount of $100,000 for each year after 2014 until such time as we make a first commercial sale. The Young Agreement is valid for the life of the patents and expires on a country by country basis in each country where patent rights exist, upon the expiration of the last to expire patent in each country or in the event the patent in such country is held to be invalid and/or unenforceable (by a court or government body of competent jurisdiction) or admitted to be invalid or unenforceable. Additionally, we can cancel the Young Agreement upon 120 days’ written notice and shall pay all royalties and fees that have accrued under the Young Agreement. We have the exclusive rights to the intellectual property; however, Ms. Young retains a right to practice the patents licensed under the Young Agreement solely for noncommercial, academic research purposes.

 

On December 24, 2012, the Company signed an agreement for the acquisition of patent rights (the “Smith Agreement”) for the intellectual property of Dr. Jill Smith and LDN Research Group, LLC (collectively, the “Licensor Parties”), whose members are Dr. Ian S. Zagon, Dr. Patricia J. McLaughlin and Moshe Rogosnitzky and orphan drug designation by the FDA to a novel late-stage drug, trademarked “LDN,” for the treatment of Pediatric Crohn’s disease. The patent covers methods and formulations for treatment of the inflammatory and ulcerative diseases of the bowel, using naltrexone in low doses as an opioid antagonist. These patents were acquired in exchange for 300,000 shares of our common stock with a fair market value of $2,715,000 and payment of $165,384 (consisting of a $100,000 initial license fee and payment of $65,384 of expenses), which totaled $2,880,384. 

 

The Smith Agreement requires the Company to (i) use commercially reasonable efforts to develop, commercialize, market and sell licensed products in a manner consistent with a business plan, (ii) expend a minimum amount of funds per annum to develop and commercialize licensed products as soon as practicable, (iii) obtain all requisite regulatory approvals needed to use or sell licensed products in the field of use, and (iv) make the first commercial sale of a licensed product by March of 2017.

 

The Company is required to pay an annual license fee, an annual running royalty on net sales of each licensed product or a minimum royalty, whichever is greater, and a sublicense fee on payments received by the Company from sublicensees. The Company has an exclusive, worldwide license to make, have made, use, lease, import, offer for sale and sell licensed products and to use the method under the patent rights. The Smith Agreement will terminate on the expiration or abandonment of the last patent to expire or ten years after the sale of the first licensed product. The Company may terminate the Smith Agreement upon 90 days’ written notice, provided all sublicenses are terminated and all amounts due and owing are paid to the Licensor Parties. The Licensor Parties may terminate the agreement ten days' after notice to the Company if the Company is ten days late in payment or there is a breach that remains uncured for ten days after written notice of such breach.

 

The Company is also required to pay milestone payments after substantial achievement of certain milestone events for each licensed product including payment: upon initiation of each Phase III trial; upon positive completion of each Phase III clinical trial of the therapeutic use of an LDN compound in the field of use; when a New Drug Application (“NDA”) is accepted for review by the FDA; and when FDA approval to market the NDA is approved. The Company will issue shares upon reaching certain milestones including upon the first dosing of the first patient in a Phase III clinical trial for each licensed product, upon the first sale of each licensed product, and upon the achievement of a set dollar amount in cumulative sales for each licensed product covered by NDAs.

 

As part of the Smith Agreement, the Company has the right to apply to the FDA for the transfer of the orphan drug status for the use of naltrexone for the treatment of pediatric Crohn’s disease and ulcerative colitis, the Investigation New Drug Application (“IND”), and the right to acquire the relevant clinical data set from Dr. Jill Smith.  Dr. Jill Smith made arrangements to transfer the IND to the Company as well as the relevant clinical data set, and the FDA has acknowledged that the Company is now the sponsor for this IND.

 

On September 24, 2014, the Company and the Licensor Parties jointly agreed to terminate the Smith Agreement, and in place thereof, have the Licensor Parties grant a similar license in their patent rights to Cytocom Inc. pursuant to a Patent License Agreement between the Licensor Parties, Cytocom Inc. and the Company with substantially similar terms as set forth in the Smith Agreement.  Pursuant to this agreement, the Company issued 1,000,000 shares of its common stock valued at $270,000, upon execution to the Licensor Parties and the Company guaranteed the obligations of Cytocom Inc. to the Licensor Parties under the agreement.

 

On January 18, 2013, the Company signed an exclusive licensing agreement with The Penn State Research Foundation to license all of the intellectual property developed by Dr. Ian S. Zagon, Dr. Patricia J. McLaughlin and Dr. Jill P. Smith for the treatment of cancer titled “Opioid Growth Factor and Cancer” and “Combination Therapy with Opioid Growth Factor and Taxanes for the Treatment of Cancer” (the “Foundation Agreement”).

 

The Foundation Agreement requires the Company to: (a) use commercially reasonable efforts to develop, commercialize, market and sell licensed products in a manner consistent with a business plan; (b) expend a minimum amount of funds per annum to develop and commercialize licensed products as soon as practicable; (c) obtain all requisite regulatory approvals needed to use or sell licensed products in the field of use; and (d) make the first commercial sale of a licensed product by December 31, 2016.

 

The Foundation Agreement provides that the Company must pay to the licensor an initial license fee, a license maintenance fee on each anniversary of the effective date of the Foundation Agreement, and an annual running royalty on net sales for each licensed product or a minimum royalty, whichever is greater.  In addition, the Company must pay a sublicense fee on payments received by the Company from sublicensees. 

 

The Foundation Agreement also requires the Company to make payments upon the achievement of certain milestone events including: initiation of each Phase II trial; initiation of each Phase III trial; when the NDA is accepted for review by the FDA; and when FDA approval to market is approved.  The Company must also issue shares upon certain milestones including upon the first dosing of the first patient in a Phase II clinical trial for each licensed product, upon the first dosing of the first patient in a Phase III clinical trial for each licensed product, upon the first sale of each licensed product, and upon the achievement of a set dollar amount of cumulative sales for each licensed product covered by NDAs.

 

The Foundation Agreement terminates on the expiration or abandonment of the last patent to expire or become abandoned. The Company may terminate the Foundation Agreement at any time upon 60 days’ prior written notice and ceasing to make and sell all licensed products, the termination of all sublicenses and payment of all monies owed under the Foundation Agreement. The licensor may terminate the agreement 30 days after notice to the Company if the Company is 30 days late in payment or a breach that remains uncured for 45 days after written notice of such breach.

 

In May of 2013, the Company executed a Patent License Agreement with Professor Fengping Shan (the “Shan Agreement”) pursuant to which it obtained exclusive rights to develop and commercialize the licensed technology. The licensed technology is the intellectual property developed and owned by Professor Shan (i) relating to the treatment of a variety of diseases and conditions with MENK including multiple forms of lymphoma and cancer and (ii) a treatment method for humans infected with the HLTV-III (AIDS) virus including AIDS and AIDS related complex (ARC). The licensed technology includes the methods and formulations for these treatments including all INDs, communications with regulatory agencies, patient data, and letters relating to these treatments. The licensed technology also includes certain patents developed by Professor Shan. Under the Shan Agreement, the Company must issue 500,000 shares to Professor Shan upon final transfer of the licenses, and reimburse Professor Shan for all out of pocket expenses in connection with the patents. The Company will pay Professor Shan a running royalty on gross sales subject to decreases if third party intellectual property is needed to complete such sale or product. The Shan Agreement lasts for the duration of each of the licensed patents however the Company may terminate the Shan Agreement on 120 days' written notice to Professor Shan.

 

On August 6, 2014, Professor Fengping Shan executed an Assignment pursuant to which he transferred to the Company his entire right, title and interest in and to the licensed patents under the Shan Agreement and CN 201210302259 Application of combination of low-dose naltrexone and methionine-enkephalin to preparation of anti-cancer drug for the consideration of 500,000 shares of common stock valued at $140,000.

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11. Commitments and Contingencies (Details Narrative) - USD ($)
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Commitments And Contingencies Details Narrative    
Rent expense $ 4,988 $ 40,605
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3. Property and Equipment (Tables)
9 Months Ended
Sep. 30, 2015
Property And Equipment Tables  
Schedule of Property and Equipment
  September 30, 2015  

December 31, 2014

 
Property and equipment:        
Computer equipment   $ 8,013     $ 8,013  
                 
Less accumulated depreciation     (5,752 )     (3,778 )
                 
Property and equipment, net   $ 2,261     $ 4,235  
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2. Summary of Significant Accounting Policies (Details 1) - shares
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Summary Of Significant Accounting Policies Tables    
Warrants to purchase Common stock 9,355,250 8,986,750
Potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding 9,355,250 8,986,750
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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - 9 months ended Sep. 30, 2015 - USD ($)
Common Stock
Additional Paid-In Capital
Stock To Be Issued
Prepaid Services
Accumulated Deficit
Non-Controlling Interest
Total
Beginning Balance, Shares at Dec. 31, 2014 134,417,210            
Beginning Balance, Amount at Dec. 31, 2014 $ 13,442 $ 337,985,788 $ 847,278 $ (3,553,185) $ (333,547,377) $ 606,486 $ 2,352,432
Issuance of common stock for prepaid services, Shares 16,922,504            
Issuance of common stock for prepaid services, Amount $ 1,693 2,748,683 $ (735,000) (986,000) 1,029,376
Amortization of prepaid services       $ 3,895,018     3,895,018
Issuance of common stock for investment, Shares 400,000            
Issuance of common stock for investment, Amount $ 40 31,960 32,000
Issuance of common stock for legal settlement, Shares 1,000,000            
Issuance of common stock for legal settlement, Amount $ 100 79,900 $ 1,000 81,000
Issuance of common stock for interest expense, Shares 62,500            
Issuance of common stock for interest expense, Amount $ 6 15,619         15,625
Issuance of common stock in exchange for debt, Shares 16,278,720            
Issuance of common stock in exchange for debt, Amount $ 1,628 2,504,934 (102,000)       2,404,562
Issuance of common stock for cash and exercise of warrants, Shares 6,364,000            
Issuance of common stock for cash and exercise of warrants, Amount $ 636 451,839 135,025       587,500
Issuance and modification of common stock warrants   37,451         37,451
Net loss         $ (9,070,926) $ (428,715) (9,499,641)
Ending Balance, Shares at Sep. 30, 2015 175,444,934            
Ending Balance, Amount at Sep. 30, 2015 $ 17,545 $ 343,856,174 $ 146,303 $ (644,167) $ (342,618,303) $ 177,771 $ 935,323
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4. Accrued Liabilities
9 Months Ended
Sep. 30, 2015
Accrued Liabilities  
4. Accrued Liabilities

Accrued expenses and other liabilities consist of the following:

 

   

September 30,

2015

    December 31, 2014  
    (in thousands)  
Retainer for legal services   $ 60     $ 60  
Accrued payroll to officers and others     472       763  
Accrued interest - notes payable     120       2  
Estimated legal settlement     279       279  
Other accrued liabilities     -       7  
State payroll taxes     2       1  
Total accrued liabilities   $ 933     $ 1,112  
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2. Summary of Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Summary Of Significant Accounting Policies Details Narrative        
Depreciation expense $ 638 $ 668 $ 1,974 $ 1,817
Amortization expense $ 148,058 $ 719,701 $ 444,175 $ 2,157,125
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2. Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2015
Summary Of Significant Accounting Policies Tables  
Schedule of basic and diluted net loss per share
    For the three months ended September 30,     For the nine months ended September 30,  
    2015     2014     2015     2014  
Historical net loss per share:                        
Numerator                        
Net loss   $ (4,025,309 )   $ (11,202,175 )   $ 9,499,641 )   $ (34,454,263 )
Net loss attributed to Common stockholders   $ (3,859,550 )   $ (11,202,175 )   $ (9,070,926 )   $ (34,454,263 )
                                 
Denominator                                
Weighted-average common shares outstanding—                                
  Denominator for basic and diluted net loss per share     156,814,094       94,316,453       147,365,571       87,875,552  
Basic and diluted net loss per share attributed                                
 to common stockholders   $ (0.02 )   $ (0.12 )   $ (0.06 )   $ (0.40 )
Schedule of antidilutive securities
    At September 30,  
    2015     2014  
Warrants to purchase Common stock     9,355,250       8,986,750  
      9,355,250       8,986,750