Immune Therapeutics, Inc. - FORM 10-Q - August 14, 2015

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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 June 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 __________________
 
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 August 12, 2015 there were 150,023,106 shares of Common Stock outstanding. 
 
 
 
 
 
 
TABLE OF CONTENTS
 
PART I FINANCIAL STATEMENTS
  
         
Item 1
Financial Statements
    
3
  
           
Item 2
Management's Discussion and Analysis of Financial Conditions and Results of Operations
  
22
  
           
Item 3
Quantitative and Qualitative Disclosures About Market Risk
  
31
  
           
Item 4
Controls and Procedures
  
31
  
           
PART II OTHER INFORMATION
  
           
Item 1
Legal Proceedings
  
32
  
           
Item 1A
Risk Factors
      
           
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
  
32
  
           
Item 3
Default upon Senior Securities
  
32
  
           
Item 4
Mine Safety Disclosures
  
33
  
           
Item 5
Other Information
  
33
  
           
Item 6
Exhibits
  
33
  
 
 
 
 
 
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;
●
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.
 
 
1
 
 
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-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.
 
 
2
 
 
PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS 

IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
June 30,
2015
  
December 31,
2014
  
ASSETS
  
(Unaudited)
  
(Audited)
  
Current Assets:
          
Cash and cash equivalents
  
$
22,385
    
$
191,987
  
Accounts receivable
    
7,718
      
-
  
Prepaids and other current assets
    
30,000
      
30,000
  
   Total current assets
    
60,103
      
221,987
  
                 
Fixed Assets:
                
Computer equipment, net of accumulated depreciation
                
 of $5,113 and $3,778 respectively
    
2,900
      
4,235
  
                 
Intangible Assets:
                
Patents and licenses, net of  accumulated amortization
                
 of $1,497,795 and $1,201,678, respectively (Note 10)
    
5,522,468
      
5,818,585
  
                 
Deposits
    
10,183
      
10,183
  
Total assets
  
$
5,595,654
    
$
6,054,990
  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
                 
Current Liabilities:
                
Accounts payable
  
$
1,918,263
    
$
2,077,194
  
Accrued liabilities
    
999,554
      
1,111,839
  
Current portion of notes payable
    
1,028,042
      
186,067
  
   Total current liabilities
    
3,945,859
      
3,375,100
  
                 
Non-current Liabilities:
                
Notes payable, less current portion
    
428,958
      
327,458
  
   Total non-current liabilities
    
428,958
      
327,458
  
                 
Total Liabilities
    
4,374,817
      
3,702,558
  
Commitments and contingencies (Note 11)
 
                
Stockholders' Equity:
                
Common stock - par value $0.0001; 500,000,000 shares authorized;
                
149,123,106 and 134,417,210 shares issued and outstanding respectively
    
14,913
      
13,442
  
Additional paid in capital
    
340,200,927
      
337,985,787
  
Stock issuances due
    
592,606
      
847,279
  
Prepaid services
    
(1,150,667
)
    
(3,553,186
)
                 
Accumulated deficit
    
(338,780,472
)
    
(333,547,377
)
   Equity attributable to common stockholders
    
877,307
      
1,745,945
  
Non-controlling interest
    
343,530
      
606,487
  
   Total stockholders' equity
    
1,220,837
      
2,352,432
  
   Total liabilities and stockholders' equity
  
$
5,595,654
    
$
6,054,990
  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
3
 
 
 IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
Three Months ended
    
Six Months ended
   
June 30, 2015
    
June 30, 2014
    
June 30, 2015
    
June 30, 2014
                       
Revenues, net
  
$
5,648
    
$
-
    
$
7,718
    
$
-
  
                             
Operating expenses
                            
Selling, general and administrative
    
443,585
      
1,840,957
      
845,572
      
2,357,133
  
Research and development expense
    
414,492
      
559,257
      
591,650
      
1,070,509
  
Stock issued for services G&A
    
1,450,334
      
2,294,683
      
3,611,893
      
11,984,389
  
Stock issued for services R&D
    
-
      
1,466,667
              
5,126,250
  
Warrant valuation
    
-
      
(414,684)
      
-
      
1,992,386
  
Depreciation and amortization expense
    
148,726
      
719,287
      
297,452
      
1,438,575
  
      Total operating expenses
    
2,457,137
      
6,466,167
      
5,346,567
      
23,969,242
  
                             
Loss from operations
    
(2,451,489
)
    
(6,466,167
)
    
(5,338,849
)
    
(23,969,242
)
                             
Other income (expense):
                            
Interest expense
    
(50,711
)
    
(120,982
)
    
(68,757
)
    
(282,063
)
Exchange gain (loss)
    
-
      
-
      
-
      
(783
 ) 
Loss on settlement of debt
    
(88,445
)
    
-
      
(88,445
)
    
-
  
     Total other income (expense)
    
(139,156
)
    
(120,982
)
    
(157,202
)
    
(282,846
)
                             
Net (loss)
  
$
(2,590,645
)
  
$
(6,587,149
)
  
$
(5,496,051
)
  
$
(24,252,088
)
Net loss attributable to non-controlling interest
    
(138,891)
              
(262,956)
      
Net (loss) attributable to common shareholders
  
$
(2,451,754
)
  
$
(6,587,149
)
  
$
(5,233,095
)
  
$
(24,252,088
)
                             
Basic and diluted loss per share attributable to common shareholders
  
$
(0.02
)
  
$
(0.08
)
  
$
(0.04
)
  
$
(0.29
)
                                 
Weighted average number of shares outstanding
    
147,387,763
      
87,607,393
      
142,563,007
      
84,601,730
  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
4
 
 
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD ENDED JUNE 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
     10,239,170       1,025       1,809,851       (682,500 )     (671,000 )     -       -       457,376  
                                                                 
Amortization of prepaid services
     -       -       -       -       3,073,518       -       -       3,073,518  
                                                                 
Issuance of common stock in exchange for debt
     2,803,240       280       287,979       312,303       -       -       -       600,562  
                                                                 
Issuance of common stock for cash and exercise of warrants
     1,664,000       166       117,309       34,525       -       -       -       152,000  
                                                                 
Issuance of common stock for legal settlement
                             81.000                               81,000  
                                                                 
Net loss
     -       -       -       -       -       (5,233,095 )     (262,956 )     (5,496,051 )
                                                                 
Balance, June 30, 2015
     149,123,620     $ 14,913     $ 340,200,927     $ 592,606     $ (1,150,667 )   $ (338,780,472 )   $ 343,530     $ 1,220,837  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
5
 
 
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
Six Months Ended
  
   
June 30,
2015
    
June 30,
2014
  
CASH FLOWS FROM OPERATING ACTIVITIES
            
 Net loss
  
$
(5,496,051
)
  
$
(24,252,088
)
   Adjustments to reconcile net loss to net cash flows used in operating activities:
                
       Depreciation
    
1,335
      
1,150
  
       Amortization
    
296,117
      
1,437,424
  
       Stock issued, and amortization of stock issued, for prepaid services
    
3,530,894
      
16,577,236
  
       Loss on settlement of debt
    
600,562
      
-
  
       Stock issued for services
    
-
      
536,899
  
       Stock issued for license
    
-
      
660
  
       Stock issued for legal settlement
    
81,000
      
448,500
  
       Amortization of debt discount
    
-
      
25,000
  
       Stock warrant expense
    
-
      
1,986,927
  
       Stock (returned) issued for donation
    
-
      
(750,000
 )
       Stock issued for interest
    
-
      
225,750
  
       Changes in operating assets and liabilities:
                
          Accounts payable
    
(158,931
)
    
808,430
  
  Accounts receivable
    
(7,718
)
    
-
  
          Accrued liabilities
    
(112,285)
      
205,344
  
          Prepaid expenses and deposits
            
188,152
 
                 
Net cash used in operating activities
    
(1,265,077
)
    
(2,560,616
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
                
 Purchase of computer equipment
    
-
      
(42,503
)
Net cash used in investing activities
    
-
      
(42,503
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES
                
 Proceeds from sale of stock and exercise of warrants
    
152,000
      
1,655,262
  
 Proceeds from issuance of notes payable
    
943,475
      
750,000
  
 Repayments of notes payable, related party
    
-
      
(50,000
  
 Payments made on patent liability
    
-
      
(100,000
)
                 
 Net cash provided by financing activities
    
1,095,475
      
2,255,262
  
                 
Net decrease in cash
    
(169,602
)
    
(347,857
)
Cash and cash equivalents at beginning of period
    
191,987
      
406,596
  
Cash and cash equivalents at end of period
  
$
22,385
    
$
58,739
  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
6
 
 
IMMUNE THERAPEUTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
Six Months Ended
  
   
June 30,
2015
    
June 30,
2014
  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
          
             
Cash paid for interest
  
$
7,500
    
$
-
  
                 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
          
                 
 Common stock issued for license
  
$
0
    
$
57,340
  
                 
 Common stock issued for prepaid services
  
$
10,239,170
    
$
8,922,500
  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
7
 
 
Immune Therapeutics, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements 
June 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 has allowed the Company to retain a 55% stake in Cytocom Inc. until such time as funding for Cytocom Inc. closes.
 
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.
 
 
8
 
 
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 agreements to lease office space in White Plains, New York and Orlando, Florida. The White Plains office is no longer in use.
  
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 December 31, 2014 was not sufficient to meet the cash requirements to fund planned operations through December 31, 2015 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 $5,496,051 and used cash and cash equivalents for operations in the amount of $1,265,077 during the six months ended June 30, 2015, resulting in stockholders equity of $1,220,837 at June 30, 2015.

2. Summary of Significant Accounting Policies

Basis of Presentation

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.
 
 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
 
 
9
 

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. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. At June 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 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, accounts payable, payable to officer, patent liability and net liabilities of discontinued operations are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments.   The carrying value of notes payable and notes payable related party 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 Measurements and Disclosures, 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 June 30, 2015 and June 30, 2014 was $667 and $575, 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 June 30, 2015 and June 30, 2014, the Company did not capitalize any such costs. (See Note 10).  Amortization expense for the quarters ended June 30, 2015 and June 30, 2014 was $148,059 and $718,712, respectively.
 
 
10
 
 
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 360-10-05, “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 June 30, 2015 and June 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 December 31, 2014, and 2013, 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 June 30, 2015 and June 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 market value of the Company’s common stock at the date of the agreement.
 
 
11
 

The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC Topic 505-50, “Equity-Based Payments to Non-Employees.” The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete.
 
Non-controlling Interest

In accordance with ASC 810, Consolidation, the Company consolidates Cytocom, Inc.  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 Financial Accounting Standards Board (“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 June 30,
    
For the six months ended June 30,
  
   
2015
    
2014
    
2015
    
2014
  
Historical net loss per share:
                        
Numerator
                        
Net loss
  
$
(2,590,645
)
  
$
(6,587,149
)
  
$
(5,496,051
)
  
$
(24,252,088
)
Net loss attributed to Common stockholders
  
$
(2,451,754
)
  
$
(6,587,149
)
  
$
(5,233,095
)
  
$
(24,552,088
)
                                 
Denominator
                                
Weighted-average common shares outstanding—
                                
  Denominator for basic and diluted net loss per share
    
147,387,763
      
87,607,393
      
142,563,007
      
84,601,730
  
Basic and diluted net loss per share attributed
                                
  to common stockholders
  
$
(0.02
)
  
$
(0.08
)
  
$
(0.04
)
  
$
(0.29
)
 
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:
 
 
12
 
   
For the three months ended June 30,
  
   
2015
    
2014
  
Warrants to purchase Common stock
    
9,372,750
      
8,486,750
  
     
9,372,750
      
8,486,750
  
 
Recent Accounting Standards

During the quarter ended June 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.
 
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 and did not have such amount as of December 31, 2014, 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.
 
3. Property and Equipment
 
 
June 30,
  
 
2015
  
2014
  
Property and equipment:
        
Computer equipment
   $ 8,013     $ 8,013  
                 
Less accumulated depreciation
     (5,113 )     (2,443 )
                 
Property and equipment, net
   $ 2,900     $ 5,570  
 
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:
 
   
June 30,
2015
    
December 31, 2014
  
   
(in thousands)
  
Retainer for legal services
  
$
60
    
$
60
  
Accrued payroll to officers and others
    
596
      
763
  
Accrued interest - notes payable
    
63
      
2
  
Estimated legal settlement
    
279
      
279
  
Other accrued liabilities
    
0
      
7
  
State payroll taxes
    
2
      
1
  
Total accrued expenses and other liabilities
  
$
1,000
    
$
1,112
  
 
5. Notes Payable
 
Notes payable consist of the following:
   
June 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.
  
$
100,000
    
$
100,000
  
                 
Promissory notes issued between November 26, 2014 and March 31, 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.
    
771,500
      
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 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 borrower. The note earns interest at a rate of 2% per annum and is due on June 30, 2015.
    
200,000
      
-
  
                 
Promissory notes issued by Cytocom Inc. between April 29, 2015 and June 22, 2015. Lenders earn interest at rates between 5% and 10% per annum. Notes will be repaid between June 30, 2015 and September 30, 2015.
    
378,500
      
-
  
                 
Total
    
1,457,000
      
513,525
  
                 
Less: Current portion
    
(1,028,042
)
    
(186,067
)
                 
Long-Term debt, less current portion
  
$
428,958
    
$
327,458
  
 
 
13
 
 
As of June 30, 2015, the Company had accrued $63,064 in unpaid interest, compared to $67,863 as of June 30, 2014. During the six months ended June 30, 2015, no shares were issued by the Company for origination fees and loan expenses under promissory notes (compared to 335,000 shares with a fair value $225,750 in the six months ended June 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 June 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 June 30, 2015, the Company had 149,123,620 shares of common stock outstanding and 90,901,347 outstanding as of June 30, 2014.
 
Stock Warrants 

In the quarter ended June 30, 2015, the Company issued no warrants.

There were no modifications of the terms of any warrants issued by the Company in the quarters ended June 30, 2015 and 2014.  
 
Following is a summary of outstanding stock warrants at June 30, 2015 and activity during the six 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
    
0
    
$
-
    
$
-
  
                         
Expired
    
  -
    
$
-
    
$
-
  
                         
Exercised
    
(24,000
) 
  
$
0.50
    
$
0.50
  
                         
Warrants as of June 30, 2015
    
9,372,750
    
$
  0.14-15
    
$
1.72
  
 
 
14
 
 
Summary of outstanding warrants as of June 30, 2015:
 
Expiration Date
  
Number of Shares
    
Exercise Price
    
Remaining Life (years)
  
Third Quarter 2015
     407,500     $ 1.50-2.00       0.25  
Fourth Quarter 2015
     268,750     $ 1.50       0.50  
Second Quarter 2016
     37,500     $ 3.00-5.00       1.00  
Third Quarter 2016
     525,000     $ 0.50-5.00       1.25  
Third Quarter 2017
     1,500.000     $ 1.00-1.50       2.25  
Fourth Quarter 2017
     2,941,666     $ 1.00-9.00       2.50  
First Quarter 2018
     127,500     $ 15.00       2.75  
Second Quarter 2018
     33,334     $ 15.00       3.00  
Third Quarter 2018
     400,000     $ 1.00-1.50       3.25  
Fourth Quarter 2018
     1,197,500     $ 1.00-1.50       3.50  
First Quarter 2019
     1,024,000     $ 1.50       3.75  
Third Quarter 2019
     500,000     $ .50       4.25  
Fourth Quarter 2019
     410,000     $ 0.14-1.50       4.50  
 
7. Stock Compensation

Shares Issued for Services

During the six months ended June 30, 2015 and 2014, the Company issued 10,239,170 and 7,140,000 shares of common stock respectively for consulting fees.  The Company valued these shares at $1,810,876 and $8,922,500 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 $3,073,518 and $16,577,236 for the six months ended June 30, 2015 and 2014.
 
8. Income Taxes - Results of Operations

There was no income tax expense reflected in the results of operations for the quarters ended June 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.
 
 
15
 
 
9. Subsequent Events

Between June 30, 2015 and August 12, 2015, the Company borrowed $307,000.

Between June 30, 2015 and August 12, 2015, the Company issue 900,000 shares of common stock.
 
As of August 12, 2015, the Company had outstanding 150,023,106 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 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
 
 
16
 
 
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.
 
 
17
 

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.

11. Commitments and Contingencies

Malawi Treatment Facilities
 
 
18
 

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 December of 2014, the Government of Malawi completed an oncology clinic at the Queen Elizabeth Central Hospital in Blantyre, Malawi for the treatment of cancer and infectious diseases.  Protocols for a 120-day bridging trial at the clinic for cancer treatment using Lodonal have been submitted for review and the Company expects to obtain government approvals in 2015 to commence a trial.  Lodonal pills have been produced in Nicaragua in anticipation of the trial.  Shipments will commence once the trial is approved.

The Company and GB will work with the government of Malawi to open and operate other clinics that provide treatments for HIV/AIDS, cancer and other infectious diseases. Under the letter of intent, the Company and GBOIG intend to provide HIV/AIDS treatment to 25,000 patients and hopefully expanding to 500,000 within 24 months.  The Company shall contribute $1,000 in initial capital to the venture.  The Company shall be allocated 50% of the net income from the venture.  Either party may terminate the venture with 180 days’ notice to the other party prior to the one-year anniversary of the Agreement.  After the one-year anniversary, the agreement may only be terminated with 180 days' notice to the other party if the other party has breached the Agreement.

GBOIG, a subsidiary of GB Energie LLC, is a Washington D.C. based minority woman-owned business managed by Dr. Gloria B. Herndon. Dr. Herndon is a former director of the Company.  Dr. Herndon’s directorship with the Company ended September 4, 2014.
 
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

Effective November 9, 2012, we signed an exclusive Distribution Agreement with G-Ex Technologies/St. Maris Pharma and GB Pharma Holdings, LLC for the Federal Republic of Nigeria. Under the terms of the Distribution Agreement, G-Ex Technologies/St. Maris Pharma and GB Pharma Holdings LLC will have exclusive marketing and distribution rights to IRT-103 LDN and IRT-104 LDN cream in Nigeria until the end of the term of the agreement on December 31, 2017. We will be responsible for the manufacture and supply of IRT-103 LDN and IRT-104 LDN cream. As part of the Distribution Agreement, G-Ex Technologies/St. Maris Pharma will provide us with a revolving letter of credit for the minimum purchase of 750,000 doses monthly of IRT-103 LDN or IRT-104 LDN cream priced at $1.00 per dose.   There are no upfront fees.

The Distribution Agreement calls for G-Ex Technologies/St. Maris Pharma and GB Pharma Holdings, LLC to purchase a minimum of 15,000,000 doses monthly within 24 months to maintain the exclusivity of the agreement. Once G-Ex Technologies/St. Maris Pharma and GB Pharma Holdings, LLC reach sales of 1,000,000 doses per day, we have agreed to joint venture a factory in the Federal Republic of Nigeria to meet local demands.
 
G-Ex Technologies/St. Maris Pharma is a consortium of companies organized under the laws of the Republic of Nigeria operated by management, a consultant, general pharmaceutical, clinical pharmacy and marketing executives, each with over 25 years of industry experience and well versed in the changing dynamics of the prescription and over-the-counter drug international marketplace. G-Ex Technologies/St. Maris Pharma has been actively supported by medical practice professionals in business and academia who have been involved in the management of related drug therapies for many years.

The parties have been unable to perform under the agreement because a certificate of free sale was not obtained by the Company until November of 2013, and no extension has been granted.
 
 
19
 

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.

Other Agreements for Africa

In June 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 six 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 six 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 and that the studies include the following:

Exploratory Toxicology (nGLP)
- Dose range finding studies
- Different species and methods of administration
- Multiple dosing regimens
- Estimate the response vs. dose given
 
 
20
 

Definitive Toxicology (GLP)
- Performed in collaboration with Calvert Laboratories (USA) and MPI/Medicillon (China)
- General toxicology studies
- Different species and methods of administration
- Immunogenicity study with NHPs
 
Special Toxicology Studies (planned)

Pursuant to the Amendment, Qianjiang Pharmaceutical will make certain funds available from the co-administrative account opened by Qianjiang Pharmaceutical under the Venture Agreement, in accordance with an approved budget and timeline set forth in the Amendment.  A portion of these funds are expected to be used by Cytocom to run PK and Dosing trials for MENK in the United States.  The Amendment requires Cytocom and Qianjiang Pharmaceutical to meet with the China State Food and Drug Administration to determine that PK and Dosing Trials completed in the United States will be acceptable. All developments and trials run by Cytocom in the U.S. or the European Union will be used for requesting registration approval in China.

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.
 
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 June 30, 2015, the Company was a party to agreements to lease office space in White Plains, New York, and Orlando, Florida.  The White Plains office is no longer in use.  Rent expense for the quarters ended June 30, 2015 and 2014 was $18,319 and $31,207, respectively.

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.  The company has accrued $279,000 for this claim.

Legal Proceedings

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 2015, under a garnishment order the plaintiff withdrew $91,424 from the Company’s bank accounts towards settlement of the claim.
 
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 June 30, 2015 and 2014, the Company paid compensation to Ms. Wilson totaling $40,848 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.

 
21
 
 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 
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 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.
 
 
22
 

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 has allowed the Company to retain a 55.3% stake in Cytocom Inc. until such time as funding for Cytocom Inc. closes.
 
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.
 
 
23
 
 
Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014 (all dollar amounts and numbers in $000s, except percentages or where otherwise indicated)
 
Revenues
 
We had revenues from operations of $5,648 for the three months ended June 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 June 30, 2015 and 2014 were as follows (dollar amounts in thousands):
 
 
For the three months
ended June 30,
  
 
2015
    
2014
  
Selling, general and administrative
  
$
444
    
$
1,841
  
Increase/(decrease) from prior year
  
$
(1,397
)
  
$
(859)
  
Percent decrease from prior year
    
(76
%)
 
  
(32
%)
 
For the three months ended June 30, 2015 and 2014, selling, general and administrative expenses were made up as follows (dollar amounts in thousands):
 
   
For the three months
ended June 30,
  
   
2015
    
2014
  
   
$
      
$
    
Consulting and contractors
    
334
      
484
  
Payroll
    
(43)
      
303
  
Professional fees
    
31
      
566
  
Travel
    
17
      
40
  
Insurance
    
0
      
21
  
Other expenses
    
105
      
427
  

In the three months ended June 30, 2015, total cash and cash accruals for selling, general and administrative expense was $444 compared to $1,841 for the corresponding period in 2014, a decrease of $1,397 or 76%. Significant cash items included:
 
●
consulting and contactor services obtained to assist the Company in raising capital, manage investor relations, and develop business in new markets, in the amount of $334 in 2015, a decrease of $150 or 31% over the $484 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 $31 in 2015, a decrease of $535 or 950% over the $566 spent in 2014.  The decrease was the result primarily of lower spending on contractor services in 2015;
●
payroll in the amount of $(43) in 2015, a decrease of $346 or 114% over the $303 spent in 2014.  The decrease reflects the conversion of deferred payroll owed to a Company officer into an agreement to pay the officer a royalty on future product sales ; and
●
travel in the amount of $17 in 2015, a decrease of $23 or 58% over the $40 spent in 2014.
 
Research and development
 
R&D expenses and related percentages for the three months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):
 
 
24
 

   
For the three months
ended June 30,
   
2015
  
2014
Research and development
  
$
414
    
$
559
  
Increase decrease from prior year
  
$
145
    
$
16
  
Percent decrease from prior year
    
(26
%)
    
(3
%) 
 
Expenses for research and development in the three months ended June 30, 2015 decreased by 26% 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 three months ended June 30, 2015, total cash spent on R&D was $414, a decrease of $145 or 26% over the $559 spent in the same period in 2014. Significant cash items included:

●
payments for contracted technical services, $53 in 2015, a decrease of $123 or 70% over the $176 spent in 2014, reflecting the decreased use of contractors to perform some of our research activities;
●
payments for professional fees $10 in 2015, a decrease of $51 or 84% over the $61 spent in 2014;
●
payroll of $3 in 2015, a decrease of $90 or 97% over the $93 spent in 2014, reflecting the suspension of the R&D program in the 4th 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 accrues a liability 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 accrued liability is amortized over the period in which the services are provided to the Company. The Company reports these costs 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 liabilities for stock issued for services G&A and related percentages for the three months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the three months
ended June 30,
   
2015
  
2014
Stock for services and Prepaid consulting services expense G&A
  
$
1,450
    
$
2,295
  
Percentage decrease from prior year
    
(37
%)
    
(74
%) 

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 June 30, 2015 was 966,668 (2,340,000 in the corresponding period in 2014).

Prepaid consulting services G&A in the three months ended June 30, 2015 consisted of the following:
  
Amortization of cost of stock issued prior to 2015
  
$
1,275
  
Amortization of cost of stock issued in the first quarter 2015
    
172
  
Amortization of cost incurred for new stock issued in the three months ended June 30, 2015 under consulting contracts entered into in 2015
    
3
  
 
 
25
 
 
Amortization of stock issued for services R&D and related percentages for the three months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the three months
ended June 30,
   
2015
  
2014
Prepaid consulting services R&D
  
$
0
    
$
1,467
  
Percentage increase/(decrease) from prior year
    
(100
%)
    
  (74)
 %

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.

There were no new shares issued for prepaid consulting services R&D in the three months ending June 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 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 three months ended June 30, 2015, the Company issued no warrants to stockholders. In the three months ended June 30, 2014, the Company issued no warrants to stockholders.

Depreciation and amortization
 
The Company amortizes the costs incurred to acquire patents and licenses over the period of the related agreements. The increase year over year in depreciation and amortization expense reflects the fact that most of the Company's patents and licenses were acquired after October 1, 2012.
 
Depreciation and amortization expenses for the three months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the three months
ended June 30,
  
   
2015
  
2014
  
Depreciation expense
  
$
1
    
$
1
  
Amortization expense
  
$
148
    
$
718
  
Increase/ (decrease) from prior year
  
$
(570
)
  
$
22
  
Percentage increase/(decrease) from prior year
    
(79
%) 
    
3
%
 
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 three months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the three months
ended June 30,
   
2015
  
2014
  
Interest expense
  
$
51
    
$
121
  
Decrease from prior year
  
$
(70
) 
  
$
(533
) 
Percentage decrease from prior year
    
(58
%) 
    
(81
%) 
 
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 June 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 $88, reflecting the fair value of the shares of common stock issued in exchange for the debt. In three months ended June 30, 2014, the Company recorded an expense of $0 to settle all or a portion of notes or accounts payable.
 
 
26
 
 
Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014 (all dollar amounts and numbers in $000s, except percentages or where otherwise indicated)
 
Revenues
 
We had revenues from operations of $7,718 for the six months ended June 30, 2015.  There were no revenues in 2014.

Operating Expenses
 
Selling, general and administrative
 
Selling, general and administrative expenses and related percentages for the six months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):
 
 
For the six months
ended June 30,
  
 
2015
    
2014
  
Selling, general and administrative
  
$
846
    
$
2,357
  
Increase/(decrease) from prior year
  
$
(1,511
)
  
$
(510
)
Percent decrease from prior year
    
(64
%)
 
  
(18
%)
 
For the six months ended June 30, 2015 and 2014, selling, general and administrative expenses were made up as follows (dollar amounts in thousands):
 
   
For the six months
ended June 30,
  
   
2015
    
2014
  
   
$
      
$
    
Stock listing and investor relations expenses
    
38
      
330
  
Consulting and contractors
    
356
      
975
  
Payroll
    
179
      
611
  
Professional fees
    
104
      
711
  
Travel
    
121
      
168
  
Insurance
    
(126
) 
    
63
  
Other expenses
    
174
      
249
  
Charitable donations
    
-
      
(750
)

In the six months ended June 30, 2015, total cash and cash accruals for selling, general and administrative expense was $846 compared to $2,357 for the corresponding period in 2014, a decrease of $1,511 or 64%. Significant cash items included:
 
●
consulting and contactor services obtained to assist the Company in raising capital, manage investor relations, and develop business in new markets, in the amount of $356 in 2015, a decrease of $619 or 63% over the $975 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 $104 in 2015, a decrease of $607 or 85% over the $711 spent in 2014.  The decrease reflects the reduction in new patent and intellectual property-related activity in 2015;
●
payroll in the amount of $179 in 2015, a decrease of $432 or 71% over the $611 spent in 2014.  The decrease reflects the reduction in headcount in 2015; and
●
travel in the amount of $121 in 2015, a decrease of $47 or 28% over the $168 spent in 2014.
 
Research and development
 
R&D expenses and related percentages for the six months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):
 
 
27
 

   
For the six months
ended June 30,
   
2015
  
2014
Research and development
  
$
592
    
$
1,071
  
Increase decrease from prior year
  
$
(479
)
  
$
(210
)
Percent decrease from prior year
    
(45
%)
    
(20
%) 
 
Expenses for research and development in the six months ended June 30, 2015 decreased by 45% 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 six months ended June 30, 2015, total cash spent on R&D was $592, a decrease of $479 or 45% over the $1,071 spent in the same period in 2014. Significant cash items included:

●
payments for contracted technical services, $139 in 2015, a decrease of $180 or 56% over the $319 spent in 2014, reflecting the decreased use of contractors to perform some of our research activities;
●
payments for professional fees $16 in 2015, a decrease of $133 or 89% over the $149 spent in 2014, reflecting the reduction in new patent and intellectual property-related activity in 2015;
●
payroll of $5 in 2015, a decrease of $181 or 98% over the $186 spent in 2014, reflecting the suspension of the R&D program in the 4th quarter of 2014; and
●
Spending on trials of $339 in 2015, an increase of $339 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.  The Company accrues a liability 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 accrued liability is amortized over the period in which the services are provided to the Company. The Company reports these costs 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 liabilities for stock issued for services G&A and related percentages for the six months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the six months
ended June 30,
   
2015
  
2014
Stock for services and Prepaid consulting services expense G&A
  
$
3,612
    
$
11,984
  
Percentage decrease from prior year
    
(70
%)
    
(38
%) 

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 six months ending June 30, 2015 was 10,239,170 (7,140,000 in the corresponding period in 2014).

Prepaid consulting services G&A in the six months ended June 30, 2015 consisted of the following:
  
Amortization of cost of stock issued prior to 2015
  
$
2,773
  
         
Amortization of cost incurred for new stock issued in the six months ended June 30, 2015 under consulting contracts entered into in 2015
    
839
  
 
 
28
 
 
Amortization of accrued liabilities for stock issued for services R&D and related percentages for the six months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the six months
ended June 30,
   
2015
  
2014
Prepaid consulting services R&D
  
$
0
    
$
5,126
  
Percentage increase/(decrease) from prior year
    
(100
%)
    
  (20)
 %

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.

There were no new shares issued for prepaid consulting services R&D in the six months ending June 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 six months ended June 30, 2015, the Company issued no warrants to stockholders. In the six months ended June 30, 2014, the Company issued 1,448,000 warrants to stockholders at an exercise price range of $1.00 to $1.50, for which it recorded an expense of $1,992.

Depreciation and amortization
 
The Company amortizes the costs incurred to acquire patents and licenses over the period of the related agreements. The increase year over year in depreciation and amortization expense reflects the fact that most of the Company's patents and licenses were acquired after October 1, 2012.
 
Depreciation and amortization expenses for the six months ended June 30, 2015 and 2014 were as follows (dollar amounts in thousands):

   
For the six months
ended June 30,
  
   
2015
  
2014
  
Depreciation expense
  
$
1
    
$
1
  
Amortization expense
  
$
296
    
$
1,438
  
Increase/ (decrease) from prior year
  
$
(1,142
)
  
$
23
  
Percentage increase/(decrease) from prior year
    
(79
%)
    
2
%
 
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 six months ended June 30, 2015 and 2014 was as follows (dollar amounts in thousands):

   
For the six months
ended June 30,
   
2015
  
2014
  
Interest expense
  
$
69
    
$
282
  
Decrease from prior year
  
$
(213
) 
  
$
(389
) 
Percentage decrease from prior year
    
(76
%) 
    
(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 six months ended June 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 $88, reflecting the fair value of the shares of common stock issued in exchange for the debt. In six months ended June 30, 2014, the Company recorded an expense of $0 to settle all or a portion of notes or accounts payable.

 
29
 
 
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 $22,385 at June 30, 2015, compared to $191,987 at June 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 $450,000 per month, we estimate that we need approximately $7-15 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 six months ended June 30, 2015 and 2014, net cash used in operating activities from operations was $1,265,077 and $2,560,616, respectively.

No cash was used in investing activities for the six months ended June 30, 2015 ($42,503 was used in 2014 for the purchase of licenses).
 
During the six months ended June 30, 2015 proceeds from the sale of stock and exercise of stock warrants totaled $152,000 compared to $1,655,262 for the corresponding period in 2014.  We also received $943,475 from the issuance of notes payable in six months ended June 30, 2015, compared to $750,000 in 2014.  There were no loan repayments in the six months ended June 30, 2015 ($50,000 in 2014).  No payments were made for patent liabilities in the six months ended June 30, 2015 ($100,000 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.
 
Off-Balance Sheet Arrangements
 
During the three months ended June 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.
 
 
30
 
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES
 
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 over financial reporting 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 June 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 June 30, 2015, the internal controls over financial reporting were not effective. The reportable conditions and material weakness relate to 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.
 
 
31
 
 
PART II OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS

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, provided the court has accepted the dismissal of the Action with prejudice Mr. Gemignani will receive a cash payment totaling $152,510, payable in monthly instalments between August 2015 and October 2016. Upon the Court’s acceptance of the dismissal of the Action with prejudice, the Company is required to deliver 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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Between January 1, 2015 and June 30, 2015, warrant holders exercised warrants to purchase 24,000 shares. The Company received $12,000 from the warrant holders.

Between January 1, 2015 and June 30, 2015, the Company sold an aggregate 1,640,000 shares of its common stock at an average price of $0.085 per share, and received $140,000 therefor.

2,803,240 shares were issued by the Company in the quarter ended June 30, 2015 to settle amounts aggregating $600,562 owed to certain of the Company’s vendors.

Between April 29, 2015 and June 22, 2015 promissory notes totaling $378,500 were issued by the Company’s subsidiary Cytocom, Inc.  Lenders earn interest at rates between 5% and 10% per annum. Notes will be repaid between June 30, 2015 and September 30, 2015

The issuances of the Company’s securities in connection with the above issuances 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 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.

During the six months ended June 30, 2015 and 2014, the Company issued 10,239,170 and 7,140,000 shares of common stock respectively for consulting fees.  The Company valued these shares at $1,810,876 and $8,922,500 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 $3,073,518 and $16,577,236 for the six months ended June 30, 2015 and 2014.

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

No shares were issued by the Company in the quarters ended June 30, 2015 or 2014 to settle amounts owed under notes payable, including accrued and unpaid interest as applicable, to common stock as repayment of the notes.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company is in arears with the repayment of a promissory note for $100,000 issued July 29, 2014 to Ira Gaines.  The note matured on January 27, 2015, and the Company had insufficient cash on hand to repay the note.  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.

In the second quarter of 2015, Cytocom Inc. issued promissory notes totaling $378,500.  Lenders earn interest at a rates between 5% and 10% per annum.  Certain notes together with accrued and unpaid interest totaling $241,500 matured on June 30, 2015. Cytocom had insufficient cash on hand to repay the notes.  

At June 30, 2015 the Company was in arrears on the payment of the first installment of principal and interest owed on certain promissory notes issued between November 26, 2014 and June 30, 2015.  The total amount in arrears on that date was $259,837.  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.  In July 2015, holders of the applicable notes agreed to extend the first repayment date to October 15, 2015.
 
 
32
 

 
ITEM 4. MINE SAFETY DISCLOSURES 
 
None
 
ITEM 5. OTHER INFORMATION
 
Departure of Executive Officer and Director

On June 16, 2015 the board of directors (i) removed Mr. Seth Elliott from his positions of President and Chief Operating Officer of Immune Therapeutics, Inc., (ii) removed Mr. Vincent Butta as a member of our board of directors, and (iii) in connection with such removals, approved the termination of the Consulting Agreement between The Sevin Group, LLC and us, which became effective December 17, 2014 (the “Agreement”).   

ITEM 6. EXHIBITS
 
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
 
 
33
 
 
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: August 14, 2015
By:
/s/ Noreen Griffin
  
   
Noreen Griffin 
  
   
Chief Executive Officer
  
       
 
 
Immune Therapeutics, Inc.
  
       
Date: August 14, 2015
By:
/s/ Peter Aronstam
  
   
Peter Aronstam
  
   
Chief Financial Officer
  
       
 
 
 34
 

Immune Therapeutics, Inc. Reports