Biostax Corp. - Annual Report: 2019 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2019

OR

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

For the Transition Period From ____________ to ____________

Commission File Number: 000-54933

IMMUNE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

2431 Aloma Ave., Suite 124,

Winter Park, Florida 32792

(Address of principal executive offices)

(888) 613-8802

Registrant’s telephone number, including area code:

None

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes [X] No [  ]

Indicate by 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. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

The aggregate market value of voting stock held by non-affiliates of the registrant on June 30, 2019, the last business day of the registrant’s most recently completed second quarter, was $2,850,484, based on the last reported sale price of the registrant’s Common Stock on the OTC Markets on that date.

As of May 14, 2020, the registrant had outstanding 457,578 shares of common stock, $0.0001 par value per share.

IMMUNE THERAPEUTICS, INC.

2019 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this Annual Report on Form 10-K 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:

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:

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, 2019, 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:

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.

PART I

Item 1. Business

Company Overview

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 December 2013, the Company formed a subsidiary, Cytocom Inc. (“Cytocom”), 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 to its shareholders. As part of the transaction (“Original Agreement”), the Company transferred to Cytocom certain of its rights, title and interest in or relating to intellectual property (i) patents, patent applications, and all divisional, continuations and continuations-in-part thereof, together with all reissues, reexaminations, renewals and extensions thereof and all rights to obtain such divisionals, continuations and continuations-in-part, reissues, reexaminations, renewals and extensions, and all utility models and statutory invention registrations and any other such analogous rights, (ii) trademarks, service marks, Internet domain names, trade dress, trade styles, logos, trade names, services names, brand names, corporate names, assumed business names and general intangibles and other source identifiers of a like nature, together with the goodwill associated with any of the foregoing, and all registrations and applications for registrations thereof, together with all renewals and extensions thereof and all rights to obtain such renewals and extensions, (iii) copyrights, mask work rights, database and design rights, moral rights and rights in Internet websites, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof and all applications in connection therewith, together with all renewals, continuations, reversions and extensions thereof and all rights to obtain such renewals, continuations, reversions and extensions, and (iv) confidential and proprietary information, including, trade secrets and know-how.

The Original Agreement also granted the Company rights to market Lodonal™ and Met-Enkephalin (“MENK”) in “Emerging Markets,” which included all countries excluding Canada, Italy, Japan, France, Germany, United Kingdom, European Community and the United States. Pursuant to the Original Agreement, the Company was required to pay Cytocom a 5% royalty on all sales all ongoing drug development and fees due in connection with the underlying patents until such time as Cytocom was funded.

On December 8, 2014, the number of Cytocom shares of common stock that were issued to our shareholders totaled 113,242,522 shares. In connection with the Original Agreement, Cytocom issued an additional 140,100,000 shares of its common stock to the Company, which gave the Company a 55.3% stake in Cytocom on that date. In April 2016, the Board of Directors and a majority of shareholders of Cytocom approved a reverse stock split of Cytocom’s outstanding common stock with one new share of stock for each twenty old shares of common stock. Cytocom effectuated and finalized the reverse split in June 2016.

On May 1, 2018, the Company entered into an amended and restated licensing agreement (the “Restated Agreement”) with Cytocom. The Restated Agreement restates the licensing arrangement between the Company and Cytocom as provided by the Original Agreement. The Restated Agreement grants the Company distribution and marketing rights for Lodonal™ and MENK for humans in Emerging Markets. In addition, the Company has been granted the rights to distribute and market Lodonal™ and MENK for animal use in the United States. The royalty due to Cytocom has been reduced from 5% to 1% of sales and the Company no longer has any ongoing obligations to pay for costs in connection with the assets of Cytocom. While the Company formalized the agreement to deconsolidate on May 1, 2018, Cato Research Ltd and Penn State University, both vendors of the Company, did not consent to assign the payables to Cytocom.

On June 4, 2018, the Company and Cytocom entered into a Stock Purchase Agreement (the “Stock Agreement. Pursuant to the Stock Agreement, the Company cancelled approximately $4,000,000 of debt owed to it by Cytocom in exchange for ten percent (10%) of the issued and outstanding common stock of Cytocom, as calculated on a fully diluted basis. The Restated Agreement was a condition of the Stock Agreement.

On April 8, 2019, the Company signed a second amendment to its licensing agreement (the “Second Amendment”) with Cytocom. The Second Amendment confirmed that, as of its effective date (December 31, 2018) the Company owned 15.57% of the common shares issued and outstanding on that date. The Company agreed to assume the obligation to repay all accounts payable obligations and accrued liabilities owed by Cytocom as of the effective date, except those accounts’ payable obligations and accrued liabilities as specified in the Second Amendment. The Company also assumed the obligation to repay all notes payable, together with any interest or fees payable thereon, owed by Cytocom as of the effective date, except those notes’ payable obligations, together with any interest or fees payable thereon, as specified by the Second Amendment. The parties further agreed that in the event of a change of control of Cytocom, and at the option of Cytocom, the Company would have the right to purchase outright the Company’s licensing rights to Emerging Markets for humans under the License Agreement at a price equal to value of those licensing rights as determined by and independent valuator acceptable to the Company and Cytocom.

At December 31, 2019, the Company’s equity interest in Cytocom stood at 14.6% of Cytocom’s issued and outstanding common stock. The Company’s policies with respect to accounting for its equity interest in Cytocom is described in Note 2 to the “Notes to the Condensed Consolidated Financial Statements” below (“Summary of Significant Accounting Policies: Non-Controlling Interest in Consolidated Subsidiaries”).

On February 27, 2020, the Company approved and entered into a license agreement (the “License Agreement”) with Forte Biotechnology International Corp. (“Forte”). Under the License Agreement, the Company granted Forte an exclusive license to develop and commercialize pharmaceutical products consisting of Lodonal and MENK for use in veterinary applications for all indications world-wide.

At present, the Company is a late development-stage biopharmaceutical company focused on the licensing, development and commercialization of innovative prescription medications for humans in Africa, Central and South America, the Caribbean and China (hereinafter referred to as “Emerging Markets”). The Company is not permitted to market its licensed products in the United States.

Current Business Strategy

We are currently focused on developing safe and effective treatments for diseases caused by immune disfunction, inflammation or viral infections for humans in Emerging Markets. We seek to identify drugs for indications already demonstrated safe and effective in humans in order to develop therapeutics, based on these drugs. We believe our development approach enables us to reduce risks associated with obtaining regulatory approval for unproven product candidates while shortening development times to bring our product candidates to market.

We have an active in-licensing effort focused on identifying human therapeutics for development. We are seeking to identify compounds that have demonstrated safety and effectiveness in at least two species and are in, or have completed, Phase I or Phase II clinical trials in humans, with well-developed active pharmaceutical ingredients (“API”), process chemistry and a well-defined manufacturing process.

The Company’s licensed technology platform is based on two interrelated cytokine drug therapies—Lodonal™ (low dose Naltrexone (“LDN”)) and Methionine Enkephalin (“MENK”)—which work by triggering a number of receptors, such as opioid and T Cell receptors on immune cells and activate or balance various cells of the immune system. Lodonal™ is a novel, immunodulator agent which has a basic normalizing effect locally on the gut, and activating and rebalancing the immune system this mechanism of action has the potential to benefit multiple disorders. Lodonal™ is in development for multiple possible follow-on indications, including cancer therapy-related toxic side effects to increase safety and improve efficacy. Our therapies also trigger the tolling receptors to shift Th1 (pro-inflammatory) to Th2 (anti- inflammatory), which is critical when dealing with autoimmune and inflammatory disease in humans. Lodonal™ is approved in the Republic of Nigeria as an immune system regulator in the management of HIV patients. The Republic of Malawi has approved Lodonal™ as an adjunct treatment in cancer patients, and in the Dominican Republic Lodonal™ has been approved in the treatment of HIV/AIDS, Fibromyalgia, Crohn’s Disease, Inflammatory Disease, cancer and adjunct to standard of care in the treatment of cancer. Finally, Lodonal is approved in the Republic of Equatorial New Guinea for treatment of cancer, infection with human immunodeficiency virus (HIV), multiple sclerosis.

There is need for immune-modulatory therapies that act via a mechanism distinct from the current therapies and hence offer an alternate treatment option to patients non-responsive to standard of care, while also providing an option to patients responsive to standard of care but with unacceptable levels of adverse effects. Both drug candidates have more than 15 years of clinical trials in the treatment of various diseases based on published reports in peer-reviewed journals.

We believe there are significant unmet medical needs for pets, and that the pet therapeutics and diagnostics segments of the animal health industry are likely to grow substantially as new treatments and diagnostic processes are identified, developed and marketed specifically for companion animals. By licensing veterinary applications to Forte, we are able to focus on the development and commercialization of Lodonal and MENK in developing markets for humans while still in parallel receiving milestones and royalties.

During the past year, the Company has added new members to both its Board of Directors as well its Scientific Advisory Board to guide it in the sale of follow-on indications currently planned for Lodonal. The Scientific Advisory Board will focus primarily on physician education, and community and global awareness regarding the importance and availability of solutions for neglected comorbidities, such as the first-in-class immunodulator for Lodonal for its currently approved indication in Emerging Markets. The Company has developed relationships with more than 20 physicians, pharmacists and patient advocates around the world who are recognized specialists and key opinion leaders in the planned Lodonal follow-on indications, and is seeking their membership on the Scientific Advisory Board. As announced on August 7, 2018, Dr. Roscoe Moore Jr, a nationally-recognized medical Epidemiologist and veterinarian, joined Company as both a director and a member of the Scientific Advisory Board. In addition to Dr. Moore Jr., we added Dr. Gary Blick, a leading Key Opinion Leader and HIV advocate, to the Scientific Advisory Board.

Therapeutics Industry for Humans

The Company is focused on its lead therapies designed for the treatment in Emerging Markets of cancer, HIV/AIDS, Crohn’s disease, fibromyalgia and Multiple Sclerosis. Management believes the pharmaceutical industry is eager to acquire advanced clinical-phase and approved products. However, despite the strong demand for advanced clinical-phase products worldwide, nearly 4,000 known compounds have had their development suspended in Phase II or earlier. Many of these are promising therapeutic drug candidates, but their development was discontinued because of strategic or financial constraints rather than for clinical reasons. Therefore, management believes there are clear market opportunities with a significant amount of unmet needs and a robust potential for partnering activities.

As described more fully above, Cytocom has granted the Company distribution and marketing rights for Lodonal™ and MENK for humans in Emerging Markets.

Lodonal™

Naltrexone hydrochloride (Naltrexone) is an oral opioid receptor antagonist that was initially approved by the United States (US) Food & Drug Administration (FDA) in 1984 (NDA 018932) for opiate addiction and in 1994 for alcohol dependency. Naltrexone has also been approved in Europe since at least 1989 for the treatment of opiate addiction and more recently alcohol dependency. The standard regimen for these conditions is one 50 mg tablet per day. Multiple generic versions of naltrexone have been approved by FDA over the last three decades. FDA approval of all naltrexone products is for use in the management of opioid addiction and alcohol dependence.

At lower doses (approximately 1/10 for the approved dose [4.5 mg/day]), naltrexone has been reported to exhibit immune modulatory functions that have potential therapeutic benefits in the treatment of autoimmune and/or inflammatory conditions. Low dose naltrexone therapy has shown promise in placebo-controlled clinical trials for use in the treatment of diseases with compromised immune system such as acquired immunodeficiency syndrome (AIDS) caused by infection with human immunodeficiency virus (HIV), cancer, Crohn’s disease and other inflammatory diseases. Immune Therapeutics, Inc. (Immune Therapeutics) has developed a Low Dose Naltrexone (LDN) formulation, known as LDN and trade name Lodonal™ for use as an active immunotherapy drug containing 4.5 mg naltrexone. Lodonal™ is available as tablets, capsules, and liquid formulations for oral administration.

Lodonal™ acts primarily by blocking of the opiate receptors on immune cells for a short time period which results in a reactive increase in the production of opioid receptors on the cells, and an increase in circulating levels of beta-endorphins and enkephalins. Increased levels of beta- endorphin and enkephalins have been shown to stimulate the immune system, promoting an increase in the number and functions of T lymphocytes and natural killer (NK) cells. The increase in the T-cell and NK cell numbers and functions, in turn, appears to restore a more normal balance of the immune cells such that effects of inflammatory diseases are significantly reduced. In controlled clinical trials, treatment with LDN led to up to 300% increases in the numbers of T- cells, both CD4+ helper T cells and CD8+ cytotoxic T cells in patients with Crohn’s Disease, HIV/AIDS, Fibromyalgia, Multiple Sclerosis (MS), autism or cancer. In addition to the antagonist effect on μ-opioid receptors (opioid receptors with a high affinity for enkaphalins and beta-endorphin) and other opioid receptors, LDN also exhibited an antagonist effect on non- opioid receptors [Toll-like receptor 4 (TLR4) or TLR-9 as well as the TLR-p receptors) that are found on macrophages such as microglia, which led to shift in Th1 to Th2 resulting in reduced inflammation.

Lodonal™ is believed to have other biological effects as well. The opioid growth factor (OGF), chemically termed [Met(5)]-enkephalin, is an endogenous opioid peptide that interacts with the OGF receptor (OGFr) which delays the cell cycle by modulating cyclin-dependent inhibitory kinase pathways. The OGF-OGFr axis is an inhibitory pathway that plays a role in the onset and progression of autoimmune diseases and cancer. Studies have shown that the modulation of the OGF-OGFr axis can be accomplished by the use of low doses of naltrexone. By regulating the OGF-OGFr pathway with LDN, this can have an immune modulation and anti-inflammatory effect. Endogenous opioids (enkephalins and endorphins) and opioid receptors are found not only in the central nervous system but also on other cells including immune-mediating cells, and epithelial cells (including those in the gastrointestinal tract) where they play a role in regulation of inflammation, growth, and mucosal repair. Opioid receptors have been associated with most types of immune cells and chemokine receptors, where their interaction involves changes in cell proliferation, alteration of functions, and release of inflammatory cytokines. Due to its ability to block the opioid receptors on a variety of cells, LDN may have effects in a broad range of immune system disorders.

Extensive pharmacokinetic (PK) and metabolism data in humans at doses of 50 mg/day (Wall et al., 1981, Meyer at el., 1984) is available for naltrexone. Additionally, multiple single and repeat dose non-clinical studies have been conducted with naltrexone to evaluate its toxicity profile at a wide range of doses including doses lower than the marketed dose of 50mg/day. Naltrexone has a good safety profile at daily doses of up to 50-100 mg. Based on the available information, LDN is also considered to have a safe profile, accordingly, no additional major non-clinical toxicity studies are deemed necessary for market approval in the US and other regions of the World. The drug product for Lodonal™ does not include any new excipients.

The product may be manufactured as a tablet, capsule and a liquid formulation. All of the ingredients in Lodonal™ are used in similar formulations, and are used in amounts below the maximum daily limit established by FDA for the oral route of administration. The excipients are pregelatinized starch, silicified microcrystalline cellulose, carboxymethy cellulose, crospovidone and stearic acid.

The opioid growth factor (OGF), chemically termed [Met(5)]-enkephalin (MENK), is an endogenous opioid peptide that interacts with the OGF receptor (OGFr) which delays the cell cycle by modulating cyclin-dependent inhibitory kinase pathways. The OGF-OGFr axis is an inhibitory pathway that plays a role in the onset and progression of autoimmune diseases and cancer. Studies have shown that the modulation of the OGF-OGFr axis can be accomplished by the use of low doses of naltrexone (Zagon et al., 2013-A, McLaughlin PJ et al., 2012-A). This effect is credited with the biological response seen with treatment of low dose naltrexone in multiple disease model studies.

Major studies have been conducted with low doses of naltrexone into the treatment of HIV/AIDS, Cancer and Crohn’s Disease. Other studies have been conducted for the treatment of fibromyalgia, chronic pain, Haley-Haley Disease, hypothyroidism, and Lichen Planopilaris.

HIV/AIDS

In an in vitro setting, activated CD4+ lymphocytes were infected with a HIV-1 isolate. Naltrexone was used at a concentration of 10−12–10−10 M in cell culture. At this dose, naltrexone did not affect HIV-1 expression; however, naltrexone was able to increase the antiviral activity of Azidothymidine (AZT) and indinavir 2- to 3-fold. The results of this in vitro study suggested that the use of LDN in HIV-1-infected patients is most likely to cause a synergistic activity with adjunctive therapy, specifically anti-viral drugs used to treat HIV-1 infection (Gekker G, et al., 2001).

Cancer

Significant nonclinical studies have been conducted to evaluate the potency of treatment with naltrexone in cancer disease models. The OGF-OGFr peptide and receptor have been detected in a wide variety of cancers, including thyroid cancer (e.g. follicular-derived thyroid cancers), ovarian cancer, triple negative breast cancer, Hepatocellular carcinoma, squamous cell carcinoma of the head and neck, pancreatic cancer, renal cancer, neuroblastoma, and colon cancer (Zagon et al., 2013-A&B, McLaughlin PG et al., 2009, Meng J et al., 2013, Avella DM et al., 2010, McLaughlin et al., 2012-B, Zagon et al., 2000, Bisignani GJ et al., 1999, Zagon et al., 1996, McLaughlin et al., 1999). It has been shown in a number of animal studies that the OGF- OGFr axis can be directly targeted by the administration of LDN for treatment of a number of cancers. LDN has been shown to stimulate the production of OGF and OGFr for subsequent interaction following blockade of the receptor, thus having a direct impact on this biological pathway, stopping the cell cycle, and therefore having the ability to stop cancerous cell growth. Preclinical data from Zagon et al (2013-A) support the above findings and the use of LDN for the treatment of cancer.

It has also been demonstrated that immune cell activation and proliferation are sensitive to the effects of LDN. The use of LDN on both phenotypic and functional maturation of Bone Marrow- derived Dendritic Cells (BMDCs) was tested (Meng J et al., 2013). This study showed that LDN enhanced maturation of BMDCs by 1) up-regulating the expression of major histocompatibility complex (MHC) II, CD40, CD83, CD80 and CD86 molecules; 2) down-regulating the rates of pinocytosis and phagocytosis; 3) mounting potential of BMDCs to drive T cell; and 4) inducing higher levels of Interleukin (IL)-12 and Tumor Necrosis Factor-alpha (TNF-α). Based upon these data, it was concluded that LDN can efficiently promote the maturation of BMDCs suggesting LDN’s ability for enhancing host immunity, specifically in cancer therapy.

Female nude mice were transplanted intraperitoneally (i.p.) with SKOV-3 human ovarian cancer cells. These mice were then treated daily with OGF (10 mg/kg), LDN (0.1 mg/kg), or an equivalent volume of vehicle (saline, control arm). Tumor burden, as well as DNA synthesis, apoptosis, and angiogenesis were assessed in tumor tissue after completion of 40 days of treatment. Low doses of naltrexone blocked the endogenous opioids from opioid receptors for about 4-6 hours post treatment. Both OGF and LDN markedly reduced ovarian tumor burden by a decrease in tumor nodule numbers and tumor weight (Donahue RN et al., 2011-A).

In another study, nude mice were transplanted with BxPC-3 human pancreatic cancer cells and then were administered 5 mg/kg of OGF three times daily. The treated mice exhibited a marked retardation in tumorigenicity compared to animals injected with only sterile water (controls). OGF-treated animals had a delay of 43% in initial tumor appearance compared to control subjects at 10.6 days post inoculation. While all of the control mice had tumors, 62% of the mice in the OGF group had no signs of neoplasia. Tumor tissue excised from mice after 30 days was assayed for levels of OGF and zeta opioid receptors. Tumor tissue levels of OGF were 24-fold greater in OGF-treated mice than controls, but plasma levels of OGF were 8.6-fold lower in animals receiving OGF (Zagon et al., 1997).

Zagon and team transplanted nude mice with HT-29 human colon cancer cells. On the same day, mice were administered OGF at dosages of 0.5, 5, or 25 mg/kg/day. More than 80% of the mice receiving OGF once daily beginning at the time of tumor cell transplantation did not exhibit neoplasia at 3 weeks post-transplantation, compared with a tumor incidence rate of 93% in control mice. At 7 weeks post-transplantation, 57% of the mice given OGF did not display a tumor. OGF delayed both tumor appearance and growth in animals developing colon cancer in a xenograft model (Zagon et al., 1996).

Mice with established ovarian tumors were treated with LDN and cisplatin. The combination treatment resulted in an additive inhibitory effect on tumorigenesis. LDN alleviated the toxicity associated with cisplatin (e.g. weight loss). LDN had also upregulated the expression of OGF and OGFr, showing its benefits as a stand-alone or combination therapy in the treatment of cancer (Donahue et al., 2011-B). These animal studies support the use of LDN as a non-toxic therapy for the treatment of ovarian, pancreatic, colon and other forms of cancers.

Crohn’s Disease

Crohn’s disease is another indication where significant nonclinical and clinical research has been conducted using LDN. The nonclinical studies are described below, while the clinical studies in Crohn’s disease are described in the following sections. All the studies point towards promising results in Crohn’s disease with LDN

A study in mice was conducted to determine if low dose naltrexone could reduce inflammation of the bowel in a chemically-induced mouse model of Inflammatory Bowel Disease (IBD). To establish the model, C57BL/6J mice were given either untreated drinking water or water containing 2% dextran sulfate sodium (DSS) in two parallel regimens to establish moderate and severe colitis. After colitis was established, animals with moderate colitis were administered either saline (control) or naltrexone (8 µg/kg or 400 µg/kg) daily, while those with severe colitis received 0.1 or 10 mg/kg of naltrexone. DSS-treated animals had significant weight loss (p = 0.006) and higher disease activity index (DAI) scores (p < 0.001) compared to water controls. Mice that had moderate colitis and were administered naltrexone at doses of 8 µg/kg or 400µg/kg exhibited less weight loss, lower DAI scores, and less histologic evidence of inflammation compared to positive controls (DSS + saline). Mice with severe colitis did not significantly respond to treatment with naltrexone at either dose (Matters et al., 2008).

In addition to monitoring weight loss, DAI score, and histology, the expression of several genes of interest, including cytokines and downstream mediators, was examined by real-time reverse transcription polymerase chain reaction. Expression of Interleukin 5 (IL-5), IL-6, IL-12, and signal transducer and activator of transcription 3 (STAT3) and STAT4 were assessed. IL-5 levels were not significantly changed treated and control mice populations. The levels of mRNA encoding the cytokines IL-6 and IL-12, known to be up-regulated in IBD, were reduced in naltrexone treated mice compared to the untreated controls to almost normal levels. There was no effect on the mRNA levels for cytokine signaling intermediate STAT3 but that for STAT4 were improved in the naltrexone-treated mice. There was no significant effect on the levels of inflammatory cytokine markers (Matters et al., 2008).

Other Diseases

Although LDN has been evaluated in several additional indications in clinical trials including fibromyalgia, chronic pain, Haley-Haley Disease, hypothyroidism, Lichen Planopilaris, and autoimmune diseases, there are few non-clinical studies in these indications.

The long term effects of OGF and LDN on expression of myelin oligodendrocyte glycoprotein (MOG)-induced autoimmune encephalomyelitis (EAE) were examined in a C57BL/6 mouse model. The mice were administered daily injections of 10 mg/kg OGF, 0.1 mg/kg LDN or saline at the time of EAE induction. This treatment regimen continued for 60 days. One hundred percent (100%) of the saline control group had behavioral symptoms of EAE, in comparison to 63% and 68% of the OGF and LDN mice, respectively. Both severity and disease indices of the OGF- and LDN-treated mice were notably decreased from saline control cohorts. By the end of the study (day 60), 6- and 3-fold more animals in the OGF and LDN treated groups, respectively, had remission compared to the saline control mice. The results of this study indicate that treatment with OGF or LDN has no long-term repercussions and did not exacerbate EAE, but rather halted progression of the disease, reversed neurological deficits, and prevented the onset of neurological dysfunction (Rahn KA et al., 2011).

The Company has licensed the following intellectual property from Cytocom for sale in Emerging Markets

Cytocom has licensed to the Company the right to use the intellectual property discussed in this section in the following countries (“Emerging Markets”):

For LDN/Lodonal^TM for Crohn’s disease, Patent Number 7879870, filed April 16, 2007, issued February 1, 2011, Methods for the treatment of inflammatory and ulcerative diseases of the bowel (e.g., Crohn’s disease and ulcerative colitis) with low dose opioid antagonists (e.g., naltrexone, nalmefene or naloxone), pharmaceutical compositions for use in such methods, and methods for the manufacture of such pharmaceutical compositions.

For the development of MENK for pancreatic cancer, US Patent Numbers 6,737,397, CA 2,557,504, US 20010046968, US 6737397, US 6136780, US 20080015211, US 20070053838, US 8003630, US 20110123437, US 7807368, US 7576180, US 7517649, US 20080146512, US 7122651, US 20060073565, US 20050191241, Patent No 8,003,630 issued between 2001 and 2011.

The license permits any use in products covered by the license that is consistent with the label approved by the FDA or applicable foreign regulatory authority in the country of sale, including the use of product for the treatment of immune dysfunction and immune dysfunction. As it relates to use of a product in animals, the license permits any use that is consistent with the label approved by the Office of Minor Use and Minor Species or applicable foreign regulatory authority in the country of sale for the use of such product.

In addition to the above patent family the Company has rights under the following intellectual property:

Approvals for sale for human therapies

Lodonal™ has been approved for sale in the following countries:

Republic of Equatorial Guinea

Nigeria

Malawi

Dominican Republic

Since the Company received approval from the National Agency for Food & Drug Administration & Control of Nigeria (“NAFDAC”) to sell Lodonal^TM in Nigeria, the Company has reached agreements with distributors to sell the product in Nigeria and some surrounding countries. In October 2013, the Company announced the signing of a Distribution Agreement with AHAR Pharma, a Nigerian company, to market Lodonal™, in Nigeria for the treatment of autoimmune diseases and cancer. Due to the fact that AHAR Pharma failed to meet its contractual purchase obligations, in April 2018, AHAR Pharma transferred its rights under the distribution agreement to Fidson Healthcare Plc (“Fidson”), and Fidson signed an exclusive distribution agreement with the Company to distribute Lodonal™. In October 2018, the Company shipped 250,000 pills to Fidson. There were no discussions with Fidson regarding the Distribution Agreement in 2019.

On August 22, 2017, the Company entered into a Distribution Agreement with TNI BioTech International Ltd. (“TNI”), a wholly-owned subsidiary, and Omaera Pharmaceuticals Ltd. (“Omaera”). Pursuant to the Agreement, Omaera will be the sole distributor of the Company’s Products, as listed in Section 2 of the Agreement, for sale in Kenya. The Products to be distributed by Omaera will be manufactured by Acromax Dominicana, SA (“Acromax”) in the Dominican Republic. The term of the Agreement began on August 22, 2017 and is to continue for a period of three (3) years, unless earlier terminated. There were no discussions with Omaera regarding the Distribution Agreement in 2019.

On October 25, 2016, the Company and Acromax entered into a contract for manufacturing of LDN tablets, capsules and/or creams (“Agreement”). Subject to the terms and conditions of the Agreement, Acromax will obtain all necessary licenses and permits to carry out the manufacturing and packaging of LDN in exchange for a fixed fee per tablet plus an additional fee for packaging, shipping and customs clearance. The Agreement has an initial term of five years unless terminated by either party in accordance with the terms. Acromax will also distribute LDN in the Dominican Republic.

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. 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.

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.

In December of 2016 Qianjiang Pharmaceutical delivered various documents under the agreements related to its studies of Exploratory Toxicology (nGLP) and Definitive Toxicology (GLP). In addition to the pharmacology and toxicology studies, Qianjiang Pharmaceutical and China Peptide completed the formulation and CMC necessary to scale up manufacturing of MENK.

There has been no progress under the agreements in the past 12 months, since a change of ownership of Qianjiang Pharmaceutical in 2017.

Production

On October 25, 2016, the Company and Acromax Dominicana, SA (“Acromax”) entered into a contract for manufacturing of LDN tablets, capsules and/or creams (“Agreement”). In accordance with the terms and conditions of the Agreement, Acromax will obtain all necessary licenses and permits to carry out the manufacturing and packaging of LDN in exchange for a fixed fee per tablet plus an additional fee for packaging, shipping and customs clearance. The Agreement has an initial term of five years unless terminated by either party in accordance with its terms.

In January 2017, Acromax obtained from the Ministry of Public Health and Social Assistance a Medications and Specialized Pharmaceuticals Registration Certification for Lodonal^TM, which allows for the manufacture and sale of Lodonal^TM in the Dominican Republic and for export. The Ministry also issued a Certificate of Pharmaceutical Product for Nigeria, Kenya, Senegal and Malawi, which will allow for the export of Lodonal^TM to those countries where the Company has drug and marketing approval.

In February 2018, the Company shipped the first Lodonal products made by Acromax to Nigeria.

Raw Materials and Principal Suppliers

The Company relies on third parties for raw materials for the clinical production of its products and product candidates for use in humans.

In prior years, American Peptide Company has been the Company’s supplier of the API in MENK, and S.A.L.A.R.S SpA has supplied the API in LDN. The Company may seek additional sources of the API in the future.

Competition

The industry for treatment of humans is highly competitive and subject to rapid and significant technological change. While we believe that our technology, knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from many different sources including large pharmaceutical and biotechnology companies, specialty pharmaceutical and generic drug companies, academic institutions, government agencies and research institutions. We believe that key competitive factors that will affect the development and commercial success of our product candidates are efficacy, safety, tolerability, reliability, and price and reimbursement level.

Many of our potential competitors, including many of the organizations named below, have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than any drug we may commercialize and may render our product candidates obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product candidates. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. Further, the development of new treatment methods for the conditions we are targeting could render our drugs non-competitive or obsolete.

Lodonal™/LDN

The key competitive factors affecting the success of Lodonal™, if approved, are likely to be efficacy, safety, tolerability, frequency and route administration, convenience and price, the level of branded and generic competition and the availability of coverage and reimbursement from government and other third-party payors.

The markets for medicines to treat Crohn’s disease, fibromyalgia, MS, HIV and other autoimmune diseases are well developed and populated with established drugs marketed by large and small pharmaceutical, biotechnology and generic drug companies. Pfizer (Lyrica), Eli Lilly (Cymbalta) and Forest Laboratories/Cyprus Biosciences (Savella) market FDA approved drugs for fibromyalgia. We are aware of several companies pursuing treatments for fibromyalgia, including Chelsea Therapeutics, Johnson and Johnson, Meda, Pfizer, Synthetic Biologics, Teva Pharmaceutical Industries Ltd., and Theravance. Clinical trials in the U.S. are registered with the FDA and reported on the FDA’s website at www.clinicaltrials.gov.

Large pharmaceutical companies have extensive experience in clinical testing and obtaining regulatory approval for drugs. In addition, many universities and private and public research institutes are active in cancer research, some in direct competition with us. We also may compete with these organizations to recruit scientists and clinical development personnel. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

We expect Lodonal™, if approved for the treatment of Crohn’s disease, to compete directly with Centocor Ortho Biotech Inc.’s Remicade (infliximab), UCB S.A.’s Cimzia (certolizumab pegol) and Abbott Laboratories’ Humira (adalimumab), each of which is currently approved for the treatment of various diseases, including inflammatory bowel disease, ulcerative colitis and Crohn’s disease, and several other products. Lodonal, if developed and approved for the treatment of MS, would compete with Biogen Idec’s Avonex (interferon beta-1a), Bayer Healthcare Pharmaceuticals’ Betaseron (interferon beta-1b) and Teva Pharmaceuticals Industries Ltd.’s Copaxone (Glatiramer Acetate) and several other products. New developments, including the development of other pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries at a rapid pace.

The Company believes that Lodonal^TM will provide the first affordable, non-toxic approach for treatment of immune dysfunction, cancer and chronic inflammatory state in Emerging Markets. Competitive advantages and benefits of Lodonal^TM in Emerging Markets include:

MENK/MENK

The key competitive factors affecting the success of MENK, if approved, are likely to be efficacy, safety, tolerability, frequency and route administration, convenience and price, the level of branded and generic competition and the availability of coverage and reimbursement from government and other third-party payors.

Each cancer indication for which we are developing products has a number of established therapies with which our candidates will compete. Most major pharmaceutical companies and many biotechnology companies are aggressively pursuing new cancer development programs, including both therapies with traditional, as well as novel, mechanisms of action. Some of the anticipated competitor treatments for acute myelogenous leukemia include Genzyme Corporation’s Clolar (clofarabine), currently approved as a treatment for acute lymphoblastic leukemia, Eisai Corporation’s Dacogen (decitabine), currently approved as a treatment for myelodysplastic syndrome, Celgene Corporation’s Vidaza (azacitidine), currently approved as a treatment for myelodysplastic syndrome, and Vion Pharmaceuticals, Inc.’s Onrigin (laromustine) currently being developed as a treatment for acute myelogenous leukemia, any or all of which could change the treatment paradigm of acute leukemia. Each of these compounds is further along in clinical development than is MENK activated NK cell product.

Customers

The Company reported no sales in 2019. In 2018, there were Lodonal™ sales totaling $113,500 to a distributor in Nigeria.

Available Information

Our Current Reports on Form 8-K, and Quarterly Reports are electronically filed with or furnished to the Securities and Exchange Commission (SEC), and all such reports and amendments to such reports have been and will be made available, free of charge, through our website (http://www.immunetherapeutics.com) as soon as reasonably practicable after such submission to the SEC. Such reports will remain available on our website for at least 12 months. The contents of our website are not incorporated by reference into this Annual Report on Form 10-K. The public may read and copy any materials filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street, NW, Washington, D.C. 20549.

Item 1A. Risk Factors

You should carefully consider the following factors and other information in this Annual Report and our other SEC filings before making a decision to invest in our common stock. Additional risks and uncertainties that we are unaware of may become important factors that affect us. If any of the following events occur, our business, financial conditions and operating results may be materially and adversely affected. In that event, the trading price of our common stock may decline, and you could lose all or part of your investment.

Risks Related to our Business

We have a limited operating history and are expected to incur significant operating losses during the early stage of our corporate development.

We have a limited operating history. Our historical financial information consists only of an audit of our financial results at and for the years ended December 31, 2019, 2018, 2017, 2016, 2015, 2014, 2013 and 2012. There is limited historical financial information upon which to base an evaluation of our performance. We are an emerging company, and thus our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operation, particularly in the pharmaceutical industry.

Since inception, we have invested a substantial portion of our time and financial resources in the acquisition and development of our most advanced drug candidate, LDN. We have generated cumulative losses of approximately $385 million and $14.1 million stockholders’ deficit since inception, and we expect to continue to incur losses until LDN is approved by the FDA and foreign regulatory authorities for sale for our therapies. Even if regulatory approval is obtained, there is a risk that we will not be able to generate material sales of LDN, which would cause us to continue to incur losses.

We may never generate revenue, are not profitable and may never become profitable.

We expect to incur substantial losses and negative operating cash flow for the foreseeable future, and we may never achieve or maintain profitability. Even if we are able to launch LDN we expect to incur substantial losses for the foreseeable future and may never become profitable.

We may not generate significant revenue from the sale of our products for the foreseeable future. In addition, if approved, we expect to incur significant costs to commercialize our drug candidates and our drugs may never gain market acceptance. If our drug candidates fail to demonstrate safety and efficacy in clinical trials, do not gain regulatory approval, or do not achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or whether we will become profitable.

We will see losses from our clinical trials conducted either directly or through our licensors for the foreseeable future, and if we or they fail at one or more of our clinical trials, it could affect the value of the Company’s stock.

We rely on financings to fund and conduct clinical trials directly or through our licensors needed for NDA submission with respect to LDN. Any of the following events or factors could have a material adverse effect on our ability to generate revenue from the commercialization of LDN:

To obtain approval from the FDA of an NDA for LDN for treatment of humans, The Company or its licensor will need to demonstrate through evidence of adequate and well-controlled clinical trials that LDN is safe and effective for each proposed indication. However, LDN may not be approved even though it achieved its specified endpoints in future Phase III clinical trials intended to support an NDA, which may be conducted by the Company or its licensor. The FDA may disagree with the trial design and the interpretation of data from clinical trials, may ask the Company or licensor to conduct additional costly and time consuming clinical trials in order to obtain marketing approval or approval to enter into an advanced phase of development, or may change the requirements for approval even after it has reviewed and commented on the design for our future clinical trials. The FDA may also approve LDN for fewer or more limited indications than the Company or its licensor may request, or may grant approval contingent on the performance of costly post-approval clinical trials. In addition, the FDA may not approve the labeling claims that we believe are necessary or desirable for the successful commercialization of LDN.

The Company anticipates that to initiate a clinical trial for humans in the next 12 months, it would need approximately $2-$5 million to fully develop products and for clinical trials. The trials would focus the use of MENK for treatment of cancer in Africa.

The development of new drugs is a highly risky undertaking which involves a lengthy process, and therefore our drug discovery and development activities may not result in products that are approved by the applicable regulatory authorities on the time schedule we have planned, or at all.

Our drug candidates for treatment of humans are in early stages of drug discovery or clinical trials and are prone to the risks of failure inherent in drug development. As of the date of this Form 10-K, both of our current drug candidates, MENK and LDN have been tested on human beings. We or our licensor will need to conduct additional clinical trials before we can demonstrate that our drug candidates are safe and effective to the satisfaction of the FDA and other regulatory authorities. Clinical trials are expensive and uncertain processes that can take multiple years to complete. We cannot assure you that our ongoing clinical trials or any future clinical trial of any of our other drug candidates, will be completed on schedule, or at all, or whether our planned clinical trials will start in a timely manner. The commencement of our planned clinical trials could be substantially delayed or prevented by a number of factors, including:

The completion of clinical trials by us or its licensor could also be substantially delayed or prevented by a number of factors, including:

Any failure or significant delay in completing clinical trials for our licensor’s or our drug candidates will harm the commercial prospects for our drug candidates and adversely affect our financial results.

Additionally, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to regulatory agencies for reexamination, which may impact the costs, timing or successful completion of a clinical trial. If we experience delays in completion of a clinical trial, or if we terminate any of our clinical trials, the commercial prospects for our drug candidates may be harmed and our ability to generate product revenues will be delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a drug candidate.

If we or our licensor are required to suspend or discontinue clinical trials due to side effects or other safety risks, or if we are required to conduct studies on the long-term effects associated with the use of our drug candidates, our efforts to commercialize our products could be delayed or halted.

Our or our licensor’s clinical trials may be suspended or terminated at any time for a number of safety-related reasons. For example, administering any drug candidate to humans may produce undesirable side effects. We may voluntarily suspend or terminate our clinical trials if at any time we believe that our drug candidates present an unacceptable safety risk to the clinical trial patients. In addition, agencies may order the temporary discontinuation or termination of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements, including if they present an unacceptable safety risk to patients. The existence of undesirable side effects resulting from our drug candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials of our drug candidates and could result in the regulatory agencies denying further development or approval of our drug candidates for any or all targeted indications.

Further, cytokine receptors and opiate growth factor receptors are a novel class of targets. As a result, we may experience unforeseen adverse side effects with our existing and future drug candidates, including MENK and LDN. As of the date of this registration statement, although we have not observed harmful side effects in prior studies of LDN or MENK, later trials could reveal such side effects. The pharmacokinetic profile and results of preclinical studies may not be indicative of results in any clinical trial.

Neither we nor or our licensor have not conducted studies on the long-term effects associated with the use of our drug candidates. Studies of long-term effects and chronic dosing (approximately 1 year of dosing); will be required for regulatory approval and may delay introduction of our therapies or our other drug candidates into the market. Additional studies could also be required at any time after regulatory approval of any of our drug candidates. Some or all of our drug candidates may prove to be unsafe for human use.

Even if our or our licensor’s drug candidates do obtain regulatory approval, they may never achieve market acceptance or commercial success.

Even if we or our licensor obtain regulatory approval, our drug candidates may not achieve market acceptance among physicians, veterinarians, patients and/or third-party payers or they may be used only in applications more restricted than we anticipate, and ultimately, may not be commercially successful. Our treatments, if successfully developed, will compete with a number of traditional products manufactured and marketed by major pharmaceutical and biotechnology companies. Our treatments may also compete with new products currently under development by such companies and others. Physicians or veterinarians will prescribe a product only if they determine, based on experience, clinical data, side effect profiles and other factors, that it is beneficial as compared to other products currently available and in use. Physicians or veterinarians also will prescribe a product based on their traditional preferences. Market acceptance of our drug candidates for which we receive approval depend on a number of factors, including:

If our drug candidates that obtain regulatory approval fail to achieve market acceptance or commercial success, the Company’s financial results will be adversely affected.

The commercial success of LDN depends, in part, on Cytocom’s ability to develop and market the drug in North America, and if it fails in its initiatives, our ability to generate future revenue in Emerging Markets could be reduced.

Any of the following events or factors could have a material adverse effect on our ability to generate revenue in Emerging Markets from the commercialization of LDN:

Changes in pharmaceutical and biotechnology industry trends could adversely affect the Company’s operating results.

Industry trends, economic and political factors that affect pharmaceutical, biotechnology, medical device companies and academic/government entities sponsoring clinical research directly affect the Company’s business. For example, many companies in such industries and government organizations have been hiring companies to conduct large development projects. The Company’s operations, financial condition and growth rate could be materially and adversely affected if these industries reduce outsourcing of such projects. In the past, mergers, product withdrawals, liability lawsuits and other factors in the pharmaceutical industry have slowed decision making by pharmaceutical companies and correlating government bodies significantly delaying and/or halting drug development projects. Continuation or increases in such trends could have an adverse effect on the Company’s business. Additionally, numerous government agencies have undertaken efforts to control growing healthcare costs through legislation, regulation and voluntary agreements with medical care providers and pharmaceutical companies. If future regulatory cost-containment efforts limit potential profits derived from new drugs, the Company’s clients may reduce their drug discovery and development spending. A reduction in drug discovery and development spending could have a material adverse effect on the Company’s results and operations creating a significant reduction of the Company’s revenue.

We currently rely on our licensor and third parties to conduct all our clinical trials. If they do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize any of our drug candidates.

We currently do not have the ability to independently conduct clinical trials. We rely on medical institutions, clinical investigators, contract laboratories, collaborative partners and other third parties, such as contract research organizations, to conduct clinical trials on our drug candidates. The third parties with whom we contract for execution of our clinical trials play a significant role in the conduct of these trials and the subsequent collection and analysis of data. These third parties are not our employees, and except for contractual duties and obligations, we have limited ability to control the amount or timing of resources that they devote to our programs. Although we rely on these third parties to conduct our clinical trials, we remain responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with its investigational plan and protocol. Moreover, foreign regulatory authorities require us to comply with regulations and standards, commonly referred to as current Good Clinical Practices (“cGCPs”) for conducting, monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials.

In addition, the execution of preclinical studies and clinical trials, and the subsequent compilation and analysis of the data produced, requires coordination among various parties. In order for these functions to be carried out effectively and efficiently, it is imperative that these parties communicate and coordinate with one another. Moreover, these third parties may also have relationships with other commercial entities, some of which may compete with us. In most cases, these third parties may terminate their agreements upon a material breach by us that is not cured within 30 days by providing us with 30 days’ prior written notice. Many of these agreements may also be terminated by such third parties under certain other circumstances, including our insolvency or our failure to comply with applicable laws. In general, these agreements require such third parties to reasonably cooperate with us at our expense for an orderly winding down of services of such third parties under the agreements. If the third parties conducting our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical trial protocols or cGCPs, or for any other reason, we may need to enter into new arrangements with alternative third parties, which could be costly, and our clinical trials may be extended, delayed or terminated or may need to be repeated, and we may not be able to obtain regulatory approval for or commercialize the drug candidate being tested in such trials.

If any of our drug candidates receive marketing approval, and the Company or others later identify undesirable side effects caused by the drug candidate, our ability to market and derive revenue from the drugs could be compromised.

If the Company or others identify undesirable side effects caused by one of our drug candidates, any of the following adverse events could occur:

Any of these could result in the loss of significant revenues, which would materially and adversely affect our results of operations and business.

We may need additional financing and may be unable to raise capital on acceptable terms, or at all, when needed, which could force us to delay, reduce or eliminate our research and development programs and other operations or commercialization efforts.

We are advancing multiple drug candidates through discovery and development and will require substantial funds to conduct development, including preclinical studies and clinical trials, of our drug candidates. Commercialization of any drug candidate will also require substantial expenditures. To further the development and commercialization efforts of our drug candidates, we may need additional financing to hire additional employees to co-promote drug candidates or to commercialize drug candidates that may not be covered by our current collaboration agreements.

At December 31, 2019, we had $4,925 in cash and cash equivalents. We do not believe that our available cash and cash equivalents will be sufficient to fund our anticipated level of operations for the next 12 months and we will likely need to seek outside sources of funding. Assuming that anticipated investment and revenue does not materialize, business operations would not be able to continue more than 30 days. We believe we require at least $5 million for our operations over the next 12 months. Our future financing requirements will depend on many factors, some of which are beyond our control, including:

Future capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products and technologies. We currently have no understandings, commitments or agreements relating to any of these types of transactions.

Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs primarily through public or private equity offerings, debt financings, government grants and contracts and/or strategic collaborations. Additional financing may not be available to us when we need it or it may not be available on favorable terms, if at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or eliminate one or more of our clinical trials or research and development programs or our commercialization efforts. We may be required to enter into collaborative partnerships for one or more of our drug candidate programs at an earlier stage of development or on less favorable terms, which may require us to relinquish rights to some of our drug candidates that we would otherwise have pursued on our own. We may also be required to pursue strategic alternatives that may affect our business or corporate structure in order to make ourselves more attractive to investors.

In addition, if the Company or any of its future collaboration partners does not perform in the manner we expect or fulfill its responsibilities in a timely manner, or at all, the clinical development, regulatory approval, and commercialization efforts related to LDN could be delayed or terminated. It may be necessary for us to assume the responsibility at our own expense for the development of LDN. In that event, we would likely be required to seek additional funding.

We may form additional strategic alliances in the future with respect to our independent programs, and we may not realize any benefits of such alliances.

We may form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties with respect to our independent programs that we believe will complement or augment our existing business. For example, we plan to find a partner to co-develop and commercialize MENK and LDN outside North America upon completion of clinical development of LDN for the treatment of pediatric and adult patients with Crohn’s disease. We face significant competition in seeking appropriate strategic partners. The negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for any future product candidates and programs because our research and development pipeline may be insufficient, our product candidates and programs may be deemed to be at too early a stage of development for collaborative effort and/or third parties may not view our product candidates and programs as having the requisite potential to demonstrate safety and efficacy. We cannot be certain that, following a strategic transaction or license, we will achieve the revenues or specific net income that justifies such transactions. Any delays in entering into new strategic partnership agreements related to our product candidates could also delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market.

We do not currently manufacture Low Dose Naltrexone (LDN) and therefore must rely on third-party manufacturing to supply the drug for clinical trials. If one of our suppliers or manufacturers fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers or manufacturers, which would cause delays in the development and commercialization of our drug candidates.

The manufacture of pharmaceutical products in compliance with cGMPs requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including stability of the drug candidate and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced regulatory and cGMP requirements, other regulatory requirements, and foreign regulations. If our manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, our ability to provide study drugs in our preclinical studies and clinical trials would be jeopardized. Any delay or interruption in the supply of preclinical study or clinical trial materials could delay the completion of our preclinical studies and clinical trials, increase the costs associated with maintaining our preclinical study and clinical trial programs and, depending upon the period of delay, require us to commence new trials at significant additional expense or terminate the studies and trials completely.

All manufacturers of our drug candidates must comply with cGMP requirements. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. Manufacturers of our component materials may be unable to comply with these cGMP requirements and with other regulatory requirements. Regulatory agencies at any time may also implement new standards, or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of products. We have little control over our manufacturers’ compliance with these regulations and standards. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturers’ failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products, and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization of our drug candidates or entail higher costs or impair our reputation.

We source the API for LDN from third-party vendors. Another pharmaceutical company manufactures the API for MENK. Our current agreements with our suppliers provide for the entire supply of the API necessary for additional clinical trials or for full-scale commercialization. In the event that we and our suppliers cannot agree to the terms and conditions for them to continue to provide some or all of our API clinical and commercial supply needs, or if any single source supplier terminates the agreement in response to a breach by us, we would not be able to manufacture the API on a commercial scale until a qualified alternative supplier is identified, which could also delay the development of, and impair our ability to commercialize, our drug candidates.

Although alternative sources of supplies exist, the number of third-party suppliers with the necessary manufacturing and regulatory expertise and facilities are limited, and it could be expensive and take a significant amount of time to arrange for alternative suppliers, which could have a material adverse effect on our business. New suppliers of any API would be required to qualify under applicable regulatory requirements and would need to have sufficient rights to the method of manufacturing such ingredients under applicable intellectual property laws. Obtaining the necessary regulatory approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement of third-party intellectual property rights could result in a significant interruption of supply and could require the new manufacturer to bear significant additional costs which may be passed on to us.

We currently have only a limited distribution organization with no direct sales and marketing staff. If we are unable to develop sales and marketing and expand distribution capability on our own or through collaborations with marketing partners, we will not be successful in commercializing our future products.

We currently have only a limited distribution organization with no sales or marketing staff. If our products are approved for sale in the United States, we will need to execute a number of sales and marketing agreements, but there can be no assurance that the Company will be able to sign an agreement to market and distribute our products. To the extent we rely on third parties for marketing and distributing our approved products, any revenue we receive will depend upon the efforts of third parties, which may not be successful, and are only partially within our control. Our reliance on third parties makes it likely that our product revenue is likely to be lower than if we directly marketed or sold our products. If we are unable to enter into arrangements with third parties to commercialize the approved products on acceptable terms or at all, we may not be able to successfully commercialize our future products or we will have to market these products ourselves, which will be expensive and require us to build our own sales force, which we do not have experience doing. We cannot assure you we will be successful in any of these initiatives. If we are not successful in commercializing our future products, either on our own or through collaborations with one or more third parties, our future product revenue will be materially adversely affected.

We are dependent on market acceptance of compounding pharmacies and compounded formulations, and physicians may be unwilling to prescribe, and patients may be unwilling to use, our proprietary LDN compounded formulation.

We are currently distributing our proprietary LDN formulation for human use through third-party compounding pharmacies and distributors in Emerging Markets. Our formulation has not undergone the FDA approval process and only limited data, if any, may be available with respect to the safety and efficiency of our formulation for any particular indication. Some physicians may be hesitant to prescribe, and some patients may be hesitant to purchase and use, this non-FDA approved compounded formulation. In addition, certain compounding pharmacies have been the subject of widespread negative media coverage in recent years, and the actions of these pharmacies have resulted in increased scrutiny of compounding pharmacy activities from regulatory agencies. As a result, physicians may be unwilling to prescribe a compounded formulation when an FDA-approved alternative is available, even if they believe the compounded formulation to be superior and less expensive. Other reasons physicians may be unwilling to prescribe or patients may be unwilling to use our proprietary LDN compounded formulation could include the following, among others: our proprietary formulation is not required to be, and has not been, approved for marketing and sale by the FDA; there may be limited or no data available with respect to the clinical efficacy or safety of our compounded formulation the physician is prescribing; and to the extent there is such data available, we are limited in our ability to discuss the efficacy or safety of our formulation with potential purchasers of our formulation.

We aim to generate revenue from our proprietary LDN formulation through agreements with compounding pharmacies outside of the United States, but we may not be successful in our efforts to generate revenue from such formulation.

One aspect of our business strategy is to enter into other sub-licensing arrangements with compounding pharmacies outside of the U.S., through which we can generate revenue from the sale of our proprietary LDN formulation. We have limited experience commercializing our formulation through licensing arrangements with compounding pharmacies. Even if we are successful, we may be unable to generate sufficient revenue to recover our costs.

We have minimal experience sub-licensing products to pharmacies and outsourcing facilities and we may not be successful in our efforts to develop our licensing arrangements. If we elect to sub-license our proprietary LDN formulation to one or more pharmacies or outsourcing facilities outside of the U.S., we may not be able to enter into licensing agreements when desired, on acceptable terms, or at all. Establishing licensing or other relationships with pharmacies and outsourcing facilities could be expensive and time consuming, disrupt our other operations, require significant capital expenditures and distract management and our other employees from other aspects of our business.

Failure to achieve and maintain effective internal controls could have a material adverse effect on our business.

Effective internal controls are necessary for us to safeguard our assets and provide reliable financial reports. If we cannot provide reliable financial reports, our operating results could be harmed. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

While we continue to evaluate and improve our internal controls, we are a small company with limited staff, and we cannot be certain that the measures we implement will ensure that we design, undertake and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.

Failure to achieve and maintain an effective internal control environment could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Our independent registered public accounting firm has identified material weaknesses in our financial reporting process.

At December 31, 2019, our independent registered public accounting firm has identified two material weaknesses in our financial reporting process. Specifically, our independent registered public accounting firm identified material weaknesses with respect to:

In April 2020, the full Board constituted itself as the audit committee and has met subsequently to oversee the Company’s financial reporting. We intend to remediate this weakness by increasing the size of our accounting staff when we have the financial resources to do so, and by appointing a separate audit committee with membership that is qualified to oversee the Company’s financial reporting. However, there can be no assurance that we will be able to successfully implement our plans to remediate the material weaknesses in our financial reporting process. Our failure to successfully implement our plans to remediate these material weaknesses could cause us to fail to meet our reporting obligations, to produce timely and reliable financial information, and to effectively prevent fraud. Additionally, such failure, or other weaknesses that we may experience in our financial reporting process or other internal controls, could cause investors to lose confidence in our reported financial information, which could have a negative impact on our financial condition and stock price.

We will need to increase the size of our organization, but we may experience difficulties in managing growth.

We will need to continue to expand our managerial, operational, financial and other resources in order to manage our operations and clinical trials, continue our development activities and commercialize our drug candidates. Our current management, personnel systems and facilities may not be adequate to support this future growth. Our need to effectively execute our growth strategy requires that we:

If we are unable to expand our managerial, operational, financial and other resources to the extent required to manage our development and commercialization activities, our business will be materially adversely affected.

We face substantial competition. Our competitors may discover, develop or commercialize products faster or more successfully than us.

The biotechnology and pharmaceutical industries are highly competitive. We face significant competition from companies in the pharmaceutical, biotechnology and other related markets that are researching and marketing products designed to address inflammatory disorders, HIV/AIDS and cancer in Emerging Markets. Established pharmaceutical companies that currently sell or are developing drugs in our markets of interest include, for example; Abbott Laboratories, Glaxo Smith Kline, Pfizer, and ViiV in the field of cancer treatment. Johnson & Johnson, Merck, Merck Serono, Takeda, Novartis, Pfizer, Reata, Sanofi-Aventis and Teva compete with us in all fields. Many or all of these established competitors are also involved in research and drug development regarding various OGF receptors. Pharmaceutical and biotechnology companies which are known to be involved in immunotherapy research and related drug development include Pfizer, Bristol-Myers Squibb, Merck, Takeda, Sanofi-Aventis, Incyte, and UCB Pharma among others.

Many of our competitors have greater name recognition and financial, manufacturing, marketing, research and drug development resources than we do. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Large pharmaceutical companies in particular have extensive expertise in preclinical and clinical testing and in obtaining regulatory approvals for drugs. In addition, academic institutions, government agencies, and other public and private organizations conducting research may seek patent protection with respect to potentially competitive products or technologies. These organizations may also establish exclusive collaborative or licensing relationships with our competitors, thus giving our competitors a significant advantage. We may be unable to respond to competitive forces presently in the marketplace, which would severely impact our business.

In addition, in terms of the sub-licensing of LDN formulation to Acromax in the Dominican Republic, we compete against branded drug companies, generic drug companies, outsourcing facilities and other compounding pharmacies. We expect to continue our efforts on making available our proprietary compounded formulation through Acromax and other compounding pharmacies outside of the U.S. The drug products available through branded and generic drug companies with which our formulation competes have been approved for marketing and sale by the FDA and are required to be manufactured in facilities compliant with cGMP standards. As a result, some physicians may be unwilling to prescribe them. Because our proprietary LDN formulation is not required to be, and has not been, approved for marketing and sale by the FDA, our business may be subject to limitations our competitors with FDA-approved drugs may not face.

We may be subject to costly product liability claims related to our clinical trials and drug candidates and, if we are unable to obtain adequate insurance or are required to pay for liabilities resulting from a claim excluded from, or beyond the limits of, our insurance coverage, a material liability claim could adversely affect our financial condition.

Because we conduct clinical trials in Emerging Markets with human patients, we face the risk that the use of our drug candidates may result in adverse side effects to patients and to otherwise healthy volunteers in our clinical trials. We face even greater risks upon any commercialization of our drug candidates. Although we will maintain product liability insurance for clinical trials, our insurance may be insufficient to reimburse us for any expenses or losses we may suffer, and we will be required to increase our product liability insurance coverage for the advanced clinical trials that we plan to initiate. We do not know whether we will be able to continue to obtain product liability coverage and obtain expanded coverage on acceptable terms, or at all. We may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limits of, our insurance coverage. There is also a risk that third parties that we have agreed to indemnify could incur liability. An individual may bring a product liability claim against us if one of our drug candidates, products or compounded formulations cause, or is claimed to have caused, an injury or is found to be unsuitable for consumer use. Any product liability claim brought against us, with or without merit, could result in:

Our business involves the use of hazardous materials. As a result, we, including our third-party manufacturers, must comply with environmental laws and regulations, which may be expensive and restrict how we do business.

Our third-party manufacturers’ activities involve the controlled storage, use and disposal of hazardous materials, including the components of our pharmaceutical products, test samples and reagents, biological materials and other hazardous compounds. We and our manufacturers are subject to foreign laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these hazardous materials. We currently carry no insurance specifically covering environmental claims relating to the use of hazardous materials. Although we believe that our safety procedures for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials. In the event of an accident, applicable authorities may curtail our use of these materials and/or interrupt our business operations. In addition, if an accident or environmental discharge occurs, or if we discover contamination caused by prior operations, including by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages and fines. The substantial unexpected costs we may incur could significantly harm our financial condition and results of operations.

Future financings may adversely affect our stockholders or impose restrictions on our assets or operations, which may harm our business.

If we raise additional capital by issuing equity securities or convertible debt securities, our existing stockholders’ ownership will be diluted and the terms of any new equity securities may have preferences over our common stock. If we raise additional capital through the issuance of debt securities, the debt will have rights senior to the holders of our common stock and may contain covenants that restrict our operational flexibility or impose liens or other restrictions on our assets. In addition, the terms of future financings may restrict our ability to raise additional capital, which would delay or prevent the further development or commercialization of our drug candidates.

If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish potentially valuable rights to our current drug candidates, potential products or proprietary technologies, or grant licenses on terms that are not favorable to us. Additionally, we may consider pursuing strategic opportunity for our business and corporate structure that may make us a more attractive investment candidate. If adequate funds are not available, our ability to achieve profitability or to respond to competitive pressures would be significantly limited and we may be required to delay, significantly curtail or eliminate the development of one or more of our drug candidates.

We may be adversely affected by the current economic environment.

Our ability to attract and retain collaboration partners or customers, invest in and grow our business and meet our financial obligations depends on our operating and financial performance, which, in turn, is subject to numerous factors, including the prevailing economic conditions and financial, business and other factors beyond our control, such as the rate of unemployment, the number of uninsured persons in the United States and inflationary pressures. We cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact our business.

We are exposed to risks associated with reduced profitability and potential financial instability of our collaboration partners or customers, many of which may be adversely affected by volatile conditions in the financial markets. For example, unemployment and underemployment, and the resultant loss of insurance, may decrease the demand for healthcare services and pharmaceuticals. If fewer patients are seeking medical care because they do not have insurance coverage, our collaboration partners or customers may experience reductions in revenues, profitability and/or cash flow that could lead them to reduce their support of our programs or financing activities. If collaboration partners or customers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be able to pay, or may delay payment of, accounts receivable that are owed to us. This, in turn, could adversely affect our financial condition and liquidity. To the extent economic challenges result in fewer individuals pursuing or being able to afford our products once commercialized, our business, results of operations, financial condition and cash flows could be adversely affected.

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely affect our business and operations.

We intend to conduct a number of clinical trials for product candidates in the fields of cancer and other indications in geographies which are affected by the coronavirus pandemic. We believe that the coronavirus pandemic will have an impact on various aspects of our clinical trials. For example, investigators may not want to take the risk of exposing cancer patients to COVID-19 since the dosing of patients is conducted within an in-patient setting. Other potential impacts of the coronavirus pandemic on our various clinical trials include patient dosing and study monitoring, which may be paused or delayed due to changes in policies at various clinical sites, federal, state, local or foreign laws, rules and regulations, including quarantines or other travel restrictions, prioritization of healthcare resources toward pandemic efforts, including diminished attention of physicians serving as our clinical trial investigators and reduced availability of site staff supporting the conduct of our clinical trials, interruption or delays in the operations of the government regulators, or other reasons related to the coronavirus pandemic. If the coronavirus pandemic continues, other aspects of our clinical trials may be adversely affected, delayed or interrupted, including, for example, site initiation, patient recruitment and enrollment, availability of clinical trial materials, and data analysis. Some patients and clinical investigators may not be able to comply with clinical trial protocols and patients may choose to withdraw from our studies or we may have to pause enrollment or we may choose to or be required to pause enrollment and or patient dosing in our ongoing clinical trials in order to preserve health resources and protect trial participants. It is unknown how long these pauses or disruptions could continue.

Our internal computer systems, or the computer systems of our contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our drug development programs.

Despite the implementation of security measures, our internal computer systems and the computer systems of our contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing clinical trials for any of our drug candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our drug candidates could be delayed.

Our current and future operations substantially depend on our management team and our ability to have or recruit other key personnel, the loss of any of whom could disrupt our business operations.

The Company’s future success depends on the efforts and abilities of principal members of its senior management and scientific staff to provide strategic direction, business development, operations management and maintenance of a cohesive and stable work environment. If we are unable to recruit qualified personnel, or if we lose their services or the services of any other key member of management, it could be impossible to replace them.

Additionally, the Company’s ability to maintain, expand and renew existing business with its clients and maximize potential business opportunities from new clients (in both the drug development and the drug discovery areas) depends on its ability to hire and retain scientists with necessary skills. The scientists working for the Company must have the ability to lead ahead of continuing changes and trends in drug discovery and development technologies to create the most innovative products on the market in order to remain competitive within the drug development industry. The Company faces risks, challenges and competition attracting and retaining experienced scientists and healthcare providers.

The Company’s inability to hire qualified personnel may increase the workload for both existing and new personnel. The Company may not be successful in attracting new healthcare providers, scientists and management or in retaining/motivating existing personnel. The shortage of experienced healthcare providers and scientists or other factors may lead to increased recruiting, relocation and compensation costs for the Company. Such increased costs may reduce profit margins or make hiring necessary experts (i.e. healthcare providers or scientists) impracticable. If the Company is unable to attract or retain any of its key personnel its ability to execute a competitive and profitable business plan will be adversely affected. Services and products will be less competitive if not obsolete. If competing companies introduce superior technologies that compete with the Company’s services and products, the Company may not be able to make the necessary enhancements to its services and products that will maintain a competitive position in the marketplace. The Company’s competitive position, business, revenues and financial condition will be materially and adversely affected.

Any failure by the Company to comply with existing health care and drug regulations could harm its reputation, operating results, the quality of the Company’s business strategy and the quality of the Company’s products.

The Company has not experienced any failure to comply and has not received any notice or violation of either good clinical practices, laboratory practices or good manufacturing practices. Any future failure by the Company to comply with existing health care and drug regulations could result in the termination of ongoing research and/or the disqualification of data for submission to regulatory authorities. Failure to comply with existing regulations will harm the Company’s reputation, brand name, its prospects for immediate and future work and its operating results. For example, if the Company fails to verify that informed consent is obtained from patient participants in connection with a particular clinical trial or grant deviations from the inclusion/exclusion criteria in a study protocol, the data collected from that trial could be disqualified at which point the Company may be required to conduct the trial again at no further cost to its client. Furthermore, the issuance of an FDA notice based on a finding of a material violation of good clinical practice, good laboratory practice or good manufacturing practice requirements could materially and adversely affect the Company.

Proposed and future legislation or regulation may increase the cost of the Company’s business or limit its service and product offerings.

Authorities in Emerging Markets may adopt healthcare legislation or regulations that are more burdensome than existing regulations. Possible changes in regulation could increase the Company’s expenses or limit its ability to offer some of its services or products. For example, the confidentiality of patient-specific information and the circumstances under which it may be released for inclusion in the Company’s databases or used in other aspects of business are subject to substantial government regulation. Additional legislation or regulation governing the possession, use and dissemination of medical record information or other personal health information may require the Company to implement new security measures requiring substantial expenditures or limiting the ability to offer services and products. These regulations might also increase costs by creating new privacy requirements for the Company’s business mandating additional privacy procedures for its clinical research business.

Requirements associated with being a public company will increase our costs significantly, as well as divert significant company resources and management attention.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, the expenses that will be required in order to adequately prepare for being a public company could be material.

Compliance with the various reporting and other requirements applicable to public companies will also require considerable time and attention of management. As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and U.S. stock exchanges, have imposed various requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. In addition, the changes we make may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis.

Moreover, we anticipate that compliance with these rules and regulations will increase our legal, accounting and financial compliance costs substantially. In addition, these rules and regulations may make our activities related to legal, accounting and financial compliance more difficult, time-consuming and costly and may also place undue strain on our personnel, systems and resources. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations.

In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

We estimate the additional costs we may incur to respond to these requirements to range from $100 to $500 thousand annually, although unforeseen circumstances could increase actual costs.

As an “emerging growth company” under applicable law, we will be subject to lessened disclosure requirements, which could leave our stockholders without information or rights available to stockholders of more mature companies.

For as long as we remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (which we refer to herein as the JOBS Act), we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:

We expect to take advantage of these reporting exemptions until we are no longer an “emerging growth company.” Because of these lessened regulatory requirements, our stockholders would be left without information or rights available to stockholders of more mature companies.

If we are unable to attract suitable and willing investigators and volunteers for clinical trials and product development, business may suffer.

Our clinical research studies rely on the accessibility and participation of physician investigators and volunteer subjects. Investigators are typically located at hospitals, clinics or other sites and supervise administration of the study drug to patients during the course of a clinical trial. Volunteer subjects generally include individuals from the locale where the studies are conducted. Our clinical research development business could be adversely affected if it is unable to attract suitable and willing investigators or volunteers on a consistent basis.

We may not obtain government approval for our products and/or uses.

The development and commercialization of pharmaceutical products are subject to extensive governmental regulation in the United States and Emerging Markets. Government approvals are required to develop, market and sell potential drug candidates. Obtaining government approval to develop, market and sell drug candidates is time-consuming and expensive. The clinical trial results for a particular drug candidate might not satisfy necessary requirements to obtain government approvals. Even if we are successful in obtaining all required approvals to market and sell a drug candidate, post-approval requirements and the failure to comply with other regulations could result in suspension or limitation of government approvals.

In connection with drug discovery activities in Emerging Markets, we and our licensors will be subject to foreign regulatory requirements governing testing, approval, manufacturing, labeling, marketing and sale of pharmaceutical products. These requirements vary with location. Even if approval has been obtained by a licensor for a product in the United States, approval in a foreign country must be obtained prior to marketing the product. The approval process in foreign countries may be more or less rigorous than the United States and the time required for approval may be longer or shorter. Clinical studies conducted outside of a specific country may not be acceptable. The approval of a pharmaceutical product in one country does not guarantee approval in another.

Even if approved, the products that we may develop and market may be later withdrawn from the market or subject to promotional limitations.

We may not be able to obtain the labeling claims necessary or desirable for the promotion of our treatments if approved. We may also be required to undertake post-marketing clinical trials. If the results of such post-marketing studies are not satisfactory or if adverse events or other safety issues arise after approval, regulatory agency in Emerging Markets may withdraw marketing authorization or may condition continued marketing on commitments from us that may be expensive and/or time consuming to complete. In addition, if we or others identify adverse side effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our products and additional marketing applications may be required. Any reformulation or labeling changes may limit the marketability of our products if approved.

Florida Law and our Articles of Incorporation may protect our Directors and Officers from certain types of lawsuits.

Florida law provides that our officers and directors will not be liable to us or our stockholders for monetary damages for all but certain types of conduct as officers and directors. Our Bylaws permit us broad indemnification powers to all persons against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers and directors against claims, including claims arising out of their negligence, poor judgment or other circumstances.

We may seek to grow our business through acquisitions of or investments in new or complementary businesses, products or technologies, and the failure to manage acquisitions or investments, or the failure to integrate them with our existing business, could have a material adverse effect on us.

From time to time we expect to consider opportunities to acquire or make investments in other technologies, products and businesses that may enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. Potential and completed acquisitions and strategic investments involve numerous risks, including:

We have no current commitments with respect to any acquisition or investment. We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired business, product or technology into our business or retain any key personnel, suppliers or distributors. Our ability to successfully grow through acquisitions depends upon our ability to identify, negotiate, complete and integrate suitable target businesses and to obtain any necessary financing. These efforts could be expensive and time-consuming, and may disrupt our ongoing business and prevent management from focusing on our operations. If we are unable to integrate any acquired businesses, products or technologies effectively, our business, results of operations and financial condition will be materially adversely affected.

We may expend our limited resources to pursue a particular opportunity and fail to capitalize on current research and products that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we have focused on specific research programs, treatments, and products. As a result, we may forego or delay pursuit of opportunities with other products or research that later may prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial treatments or profitable market opportunities. Our spending on current and future research and development programs may not yield any commercially viable treatments.

We are subject to risks associated with our operations in Emerging Markets.

The Foreign Corrupt Practices Act (“FCPA”) and similar worldwide anti-bribery laws in non-U.S. jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. The FCPA also imposes accounting standards and requirements on publicly traded U.S. corporations and their foreign affiliates which are intended to prevent the diversion of corporate funds to the payment of bribes and other improper payments, and to prevent the establishment of “off books” slush funds from which such improper payments can be made. Because of the predominance of government-sponsored healthcare systems around the world, many of our customer or regulatory relationships outside of the United States are with governmental entities and are therefore subject to such anti-bribery laws. Our internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or agents. Violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction and result in a material adverse effect on our business, results of operations and financial condition. We also could suffer severe penalties, including criminal and civil penalties, disgorgement and other remedial measures, including further changes or enhancements to our procedures, policies and controls, as well as potential personnel changes and disciplinary actions.

Furthermore, we are subject to the export controls and economic embargo rules and regulations of the United States, including, but not limited to, the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control within the Department of the Treasury, as well as the laws and regulations administered by the Department of Commerce. These regulations limit our ability to market, sell, distribute or otherwise transfer our products or technology to prohibited countries or persons. A determination that we have failed to comply, whether knowingly or inadvertently, may result in substantial penalties, including fines and enforcement actions and civil and/or criminal sanctions, the disgorgement of profits, the imposition of a court-appointed monitor, the denial of export privileges and/or an adverse effect on our reputation.

These and other factors may have a material adverse effect on our international operations or on our business, results of operations and financial condition generally.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

Due to our net losses, negative cash flow and negative working capital, in their report on our audited financial statements for the years ended December 31, 2019 and 2018, our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern.

We have incurred substantial losses since inception. Because of these losses, we will require additional working capital to develop our business operations. We intend to raise additional working capital through private placements, public offerings, bank financing and/or advances from related parties or shareholder loans.

There are no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or, if available, will be on terms acceptable to us. If adequate working capital is not available, we may not increase our operations.

These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Risks Related to Intellectual Property

Our inability to adequately protect our intellectual property rights could hurt business.

Our commercial success will depend in part on obtaining and maintaining intellectual property protection for our products, formulations, processes, methods and other technologies. We will only be able to protect these technologies and products from unauthorized use by third parties to the extent that our licensor maintains valid and enforceable intellectual property rights, including patents or other market exclusionary rights.

The patent positions of pharmaceutical companies, like those of our licensor, can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date in the United States. The general environment for pharmaceutical patents outside the United States also involves significant uncertainty. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced, or that the scope of these patent rights could provide a sufficient degree of future protection that could permit us to gain or keep our competitive advantage with respect to these products and technologies. For example, we cannot predict:

Some of the patents we have licensed may be subject to challenge and possibly invalidated or rendered unenforceable by third parties. Changes in either the patent laws or in the interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property.

In addition, others may independently develop similar or alternative products and technologies that may be outside the scope of our intellectual property. Furthermore, others may have invented technology claimed by our patents before our licensors or we did so, and they may have filed patents claiming such technology before we did so, weakening our ability to obtain and maintain patent protection for such technology. Should third parties obtain patent rights to similar products or technology, this may have an adverse effect on our business.

We may also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. Trade secrets, however, are difficult to protect. While we believe that we will use reasonable efforts to protect our trade secrets, our own or our strategic partners’ employees, consultants, contractors or advisors may unintentionally or willfully disclose our information to competitors. We seek to protect this information, in part, through the use of non-disclosure and confidentiality agreements with employees, consultants, advisors and others. These agreements may be breached, and we may not have adequate remedies for a breach. In addition, we cannot ensure that those agreements will provide adequate protection for our trade secrets, know-how or other proprietary information or prevent their unauthorized use or disclosure.

If competitors that have greater experience and financial resources learn our trade secrets, the competitors may copy or use our trade secrets and other proprietary information in the advancement of their products, methods or technologies. If we were to prosecute a claim that a third party had illegally obtained and was using our trade secrets, it could be expensive and time consuming and the outcome could be unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets than courts in the United States. Moreover, if our competitors independently develop equivalent knowledge, we would lack any legal or contractual claim to prevent them from using such information, and our business could be harmed.

The Company’s most important licenses for intellectual property include:

We may become subject to intellectual property suits that could cause us to incur significant costs or pay significant damages or that could prohibit us from selling its products.

The Company’s competitors also seek to obtain patents or other protection of their proprietary rights. Third parties may claim in the future that the Company’s products infringe upon their proprietary rights. To date, there have been no claims of infringement. However, in the future, intellectual property claims could force the Company or Cytocom to alter its existing products or withdraw them from the market or could delay the introduction of new products.

Various patents have been issued to the Company’s competitors and these competitors may assert that Cytocom’s or the Company’s products infringe their patent or other proprietary rights. If those products are found to infringe third-party intellectual property rights, the Company may be unable to maintain its sub-license to use such technology, and it could incur substantial costs to redesign its products or to defend legal actions.

The drug discovery and development industry has a history of patent and other intellectual property litigation; thus, we may be involved in costly intellectual property lawsuits.

There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. We or Cytocom may be subject to third party claims in the future that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages, including treble damages and attorney’s fees if we are found to be willfully infringing a third party’s patents. Further, if a patent infringement suit were brought against us or Cytocom, we could be forced to stop or delay research, development, manufacturing or sales of the product or drug candidate that is the subject of the suit. As a result of patent infringement claims, or in order to avoid potential claims, we or Cytocom may choose to seek, or be required to seek, a license from the third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or Cytocom were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or forced to redesign it, or to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims, we or Cytocom are unable to enter into licenses on acceptable terms. This could harm our business significantly.

In addition to infringement claims against us, if third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference proceedings with the United States Patent and Trademark Office (“USPTO”) to determine the priority of invention. We may also become involved in similar opposition proceedings in the European Patent Office regarding our intellectual property rights with respect to our products and technology.

The failure to obtain or maintain patents, licensing agreements and other intellectual property could impact our ability to compete effectively.

Our success will depend, in part, on our ability to obtain and maintain patent protection for our drug candidates, preserve our trade secrets, prevent third parties from infringing upon our licenses proprietary rights and operate without infringing upon the proprietary rights of others. While the patents we license have been issued, pending patent applications we have filed may not result in issued patents or may take longer than we expect to result in issued patents. We cannot be certain that patents will be issued as a result of any of our pending applications, and we cannot be certain that any of our issued patents, whether issued pursuant to our pending applications or licensed from third parties, will give us adequate protection from competing products.

Composition of Matter patents on APIs are generally considered to be the strongest form of intellectual property protection for pharmaceutical products, as they apply without regard to any method of use. Entirely new individual chemical compounds, often referred to as new chemical entities, are typically entitled to Composition of Matter coverage. However, we cannot be certain that the current law will remain the same, or that our drug candidates will be considered novel and non-obvious by patent regulators and courts.

In addition to Composition of Matter patents and patent applications, we also have licensed Method of Use patent applications. This type of patent protects the use of the product only for the specified method. However, this type of patent does not prevent a competitor from making and marketing a product that is identical to our product for an indication that is outside the scope of the patented method. Moreover, even if these competitors do not actively promote their product for our targeted indication, physicians may prescribe these products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement of Method of Use patents, the practice is common and such infringement is difficult to prevent or prosecute.

Patent applications in the United States and most other countries are confidential for a period of time until they are published. The publication of discoveries in scientific or patent literature typically lags actual discoveries by several months or more. As a result, we cannot be certain whether the Company or another inventor were the inventors of the issued patents and applications or that the Company or another inventor were the first to conceive of the inventions covered by such patents and pending patent applications or that the Company or another inventor were the first to file patent applications covering such inventions.

Others may obtain issued patents that could prevent us from commercializing our product candidates or require us to obtain licenses requiring the payment of considerable fees or royalties in order to enable us to conduct our business. As to those patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so.

We have numerous issued patents and some patent applications pending before the USPTO. The protection may lapse before we manage to obtain commercial value from the patents, which might result in increased competition and materially affect our position in the market.

We may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’ or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we may be required to pay monetary damages and may lose valuable intellectual property rights or personnel.

Many of our employees were previously employed at universities, biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper our ability to commercialize, or prevent us from commercializing our drug candidates, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

Some of our intellectual property that was discovered through government funded programs may be subject to federal regulation such as “march-in” rights, certain reporting requirements, and a preference for United States industry. Compliance with such regulations may limit our exclusive rights, subject us to expenditure of resources with respect to reporting requirements, and limit our ability to contract with foreign manufacturers.

Some of our existing drug candidates, including LDN and MENK, and some of the research and development work conducted before we had licensing rights may have been funded, at least in part, by the U.S. government and therefore would be subject to certain federal regulations. Under the “march-in” provisions of the Bayh-Dole Act, the government may have the right under limited circumstances to require the patent owners to grant exclusive, partially exclusive or non-exclusive rights to third parties for intellectual property discovered through the government-funded program. The government can exercise its march-in rights if it determines that action is necessary because the patent owner fails to achieve practical application of the new invention or because action is necessary to alleviate health concerns or address the safety needs of the public. Intellectual property discovered under the government-funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources. Such intellectual property is also subject to a preference for U.S. industry, which may limit our ability to contract with foreign product manufacturers for products covered by such intellectual property. We may apply for additional U.S. government funding, and it is possible that we may discover compounds or drug candidates as a result of such funding. Intellectual property under such discoveries would be subject to the applicable provisions of the Bayh-Dole Act.

Risks Related to Government Regulation

The regulatory approval process is expensive, time consuming and uncertain and may prevent us or our collaboration partners from obtaining approvals for the commercialization of some or all of our drug candidates.

The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of drug products are subject to extensive regulation by regulatory authorities in the United States and other countries. Regulations differ from country to country. Neither we nor our licensor are permitted to market our drug candidates until we receive approval of an NDA from the applicable regulatory agency. Neither we nor our licensor have submitted an application for or received marketing approval for any of our drug candidates. Obtaining approval of an NDA can be a lengthy, expensive and uncertain process. In addition, failure to comply with applicable U.S. and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions, including:

Regulatory approval of an NDA or NDA supplement is not guaranteed, and the approval process is expensive and may take several years. Regulatory agencies have substantial discretion in the approval process. Despite the time and expense exerted, failure can occur at any stage, and we could encounter problems that cause us to abandon or repeat clinical trials, or perform additional preclinical studies and clinical trials. The number of preclinical studies and clinical trials that will be required for approval varies depending on the drug candidate, the disease or condition that the drug candidate is designed to address, and the regulations applicable to any particular drug candidate. The regulatory agencies can delay, limit or deny approval of a drug candidate for many reasons, including, but not limited to, the following:

If any of our drug candidates fail to demonstrate safety and efficacy in clinical trials or do not gain regulatory approval, our business and results of operations will be materially and adversely harmed.

Even if we receive regulatory approval for a drug candidate, we will be subject to ongoing regulatory obligations and continued regulatory review which may result in considerable additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements.

Once regulatory approval has been granted for us to sell our products, the approved product and its manufacturer are subject to continual review by regulatory agencies. Any regulatory approval that we or our licensors or our distributors receive for our drug candidates may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly post-marketing follow-up studies to monitor the safety and efficacy of the product. In addition, if the regulatory agencies approve any of our drug candidates, we will be subject to extensive and ongoing regulatory requirements by regulatory agencies with regard to the labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping for our products. In addition, manufacturers of our drug products are required to comply with current cGMP regulations which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further, regulatory authorities must approve these manufacturing facilities before they can be used to manufacture our drug products, and these facilities are subject to continual review and periodic inspections by the regulatory agencies for compliance with cGMP regulations. If we or a regulatory authority discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory authority may impose restrictions on that product, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing. If we, our drug candidates or the manufacturing facilities for our drug candidates fail to comply with regulatory requirements of the regulatory agencies, we could be subject to administrative or judicially imposed sanctions, including:

The regulatory requirements and policies may change and additional government regulations may be enacted for which we may also be required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or in other countries. If we are not able to maintain regulatory compliance, we will not be permitted to market our future products and our business will suffer.

The availability of adequate third-party coverage and reimbursement for newly approved drugs is uncertain, and failure to obtain adequate coverage and reimbursement from third-party payers could impede our ability to market any future products we may develop and could limit our ability to generate revenue.

There is significant uncertainty related to the third-party payor coverage and reimbursement of newly approved drugs. The commercial success of our future products in both domestic and international markets depends on whether such third-party coverage and reimbursement is available for our future products. Governmental payers, health maintenance organizations and other third-party payers are increasingly attempting to manage their healthcare expenditures by limiting both coverage and the level of reimbursement of new drugs and, as a result, they may not cover or provide adequate reimbursement for our future products. These payers may not view our future products as cost-effective, and coverage and reimbursement may not be available to our customers or may not be sufficient to allow our future products to be marketed on a competitive basis. Third-party payers are exerting increasing influence on decisions regarding the use of, and coverage and reimbursement levels for, particular treatments. Such third-party payers are challenging the prices charged for medical products and services, and many third-party payers limit or delay coverage and reimbursement for newly approved healthcare products. In particular, third-party payers may limit the covered indications. Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in lower than anticipated product revenues. If the prices for our drug candidates decrease or if governmental and other third-party payers do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.

Even if Cytocom obtains FDA approval of any product candidate it may develop or acquire in the future, we may never obtain approval or commercialize those products we license for sale outside of the U.S., which would limit our ability to realize their full market potential. If foreign approval is obtained, there are risks in conducting business in international markets.

We have and continue to seek other distribution and marketing partners for MENK and LDN outside North America that will and may market future products in Emerging Markets. In order to market any of our products we may license, develop or acquire outside of the U.S., we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us and require additional preclinical studies or clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in the U.S. or any foreign country may delay or have negative effects on the process for regulatory approval in other countries. If we fail to comply with regulatory requirements in a foreign country or to obtain and maintain required approvals, our potential market for our products will be reduced and our ability to realize the full market potential of our products will be harmed.

The Company, either directly or through its collaborating partners, is working with drug regulatory authorities in Emerging Markets where an FDA equivalent exists. The Company is working with the agencies to obtain local approval for the therapies for each modality that we intend to market for. We believe this will reduce our risk due to The Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS”) which is an international agreement administered by the World Trade Organization (“WTO”). TRIPS allows emerging nations to manufacture drugs around existing patents.

If our licensed products are approved for commercialization in a foreign country, we intend to enter into agreements with third parties to market our products whenever they may be approved and wherever we have the right to market them. Consequently, we expect that we will be subject to additional risks relating to entering into international business relationships, including:

These and other risks may materially adversely affect our ability to attain or sustain revenue from international markets.

Healthcare policy changes may have a material adverse effect on us.

Our business may be affected by the efforts of government and third-party payers to contain or reduce the cost of healthcare through various means. With regard to pharmaceutical products, among other things, legislation in Emerging Markets is expected to expand and increase industry rebates for drugs covered and make changes to the coverage requirements under that legislation. This adds to the uncertainty of the legislative changes enacted, and we cannot predict the impact that legislative or regulatory proposals will have on our business, in particular our access to licensed products for sale.

If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

Even though we do not and will not control referrals of healthcare services or bill directly to government or other third-party payers, certain healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by governments and regulators where we conduct our business. The regulations that may affect our ability to operate include, without limitation:

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert Management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

Regulators may not accept the results of clinical trials conducted outside of the United States.

It is possible that regulators in our markets may not accept the results of our clinical trials. We would also need to ensure that trials are conducted in accordance with local legal and regulatory requirements and all applicable International Conference on Harmonisation of Good Clinical Practice guidelines and any other applicable regulatory requirements for the overall conduct of the clinical investigation.

Risks Related to our Common Stock

If our chief executive officer, our other executive officers, and our directors and principal stockholders acquire significant stock ownership, they may be able to exert control over us and our significant corporate decisions. Our other stockholders will have limited ability to influence corporate actions or decisions.

This concentration of ownership may harm the value of our common stock by, among other things:

As a group, at March 31, 2020, our officers, directors and certain related parties owned 13.89% of the outstanding common stock of the Company. Our other stockholders will have limited ability to influence corporate actions or decisions.

The price of our common stock may be volatile, and you may not be able to resell your shares.

An active and liquid trading market for our common stock may not develop or be sustainable. Shareholders may be unable to sell shares of common stock at or above their purchase price due to fluctuations in the market price of our common stock. The market price of our common stock may fluctuate significantly in response to factors, some of which are beyond our control. Factors that could cause volatility in the market price of our common stock include, but are not limited to:

In addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation suits against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business.

Future sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.

If our existing stockholders or holders of our convertible notes, options or warrants sell, or indicate an intention to sell substantial amounts of our common stock in the public market, the trading price of our common stock could decline. The perception in the market place that these sales may occur could also cause the trading price of our common stock to decline.

Certain holders of shares of our common stock, warrants to purchase our common stock, and shares of common stock issuable upon exercise of warrants will be entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. In addition, our directors may, and we expect that our executive officers will establish programmed selling plans under Rule 10b5-1 of the Exchange Act, for the purpose of effecting sales of our common stock. Any sales of securities by these stockholders, or the perception that those sales may occur, including the entry into such programmed selling plans, could have a material adverse effect on the trading price of our common stock.

If we sell shares of our common stock in future financings, common stockholders may experience immediate dilution and, as a result, our stock price may decline.

We may from time to time issue additional shares of common stock at a discount from the current trading price of our common stock. As a result, our common stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at such a discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or common stock.

Provisions of our charter documents or Florida law could delay or prevent an acquisition of the Company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for stockholders to change management.

Provisions of our amended and restated articles of incorporation, as amended, and amended and restated bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our board of directors.

We do not anticipate paying any cash dividends on our capital stock in the foreseeable future, therefore capital appreciation, if any, of our common stock will be our shareholders sole source of gain for the foreseeable future.

We have never declared or paid cash dividends on our capital stock. We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of the common stock will be our shareholders sole source of gain for the foreseeable future.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our Company. If no securities or industry analysts commence coverage of our Company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

Our board of directors is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval.

Our amended and restated articles of incorporation, as amended, authorize our board of directors, without the approval of our stockholders, to issue shares of our preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions of our amended and restated articles of incorporation, as amended, as shares of preferred stock in series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The powers, preferences and rights of these additional series of preferred stock may be senior to or on parity with our common stock, which may reduce its value. We do not currently have any class of preferred stock authorized.

Our shares may be subject to the “penny stock” rules, which may subject you to restrictions on marketability and limit your ability to sell your shares.

Broker-dealer practices in connection with transactions in “Penny Stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risk associated with the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer must make a written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. The Company’s securities may be subject to the penny stock rules, and investors may find it more difficult to sell their securities.

An active and visible trading market for our common stock may not develop.

We cannot predict whether an active market for our common stock will develop in the future. In the absence of an active trading market:

Our common stock is currently quoted on the OTC Market under the trading symbol “IMUN”. The OTC Market is unorganized, inter-dealers, over-the-counter markets that provides significantly less liquidity than the New York Stock Exchange or NASDAQ. No assurances can be given that we will ever obtain a listing for our securities on a senior exchange. The trading price of our common stock is therefore expected to be subject to significant fluctuations in response to variations in quarterly operating results, changes in analysts’ earnings estimates, announcements of innovations by us or our competitors, general conditions in the industry in which we operate and other factors. These fluctuations, as well as general economic and market conditions, may have a material or adverse effect on the market price of our common stock.

Because we have elected to use the extended transition period for complying with new or revised accounting standards for an “emerging growth company” our financial statements may not be comparable to companies that comply with public company effective dates.

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates, and thus investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock.

We may not register or qualify our securities with any state agency pursuant to blue sky regulations.

The holders of our shares of common stock and persons who desire to purchase them in the future should be aware that there may be significant state law restrictions upon the ability of investors to resell our shares. We currently do not intend to and may not be able to qualify securities for resale in other states which require shares to be qualified before they can be resold by our shareholders.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this Form 10-K 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:

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:

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 registration statement. 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 registration statement.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

We maintain our headquarters at 2431 Aloma Ave., Suite 124, Winter Park, Florida 32792. The monthly lease cost is approximately $60. The lease is cancelable upon one month’s notice.

Item 3. Legal Proceedings

None.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is listed for quotation on the OTCQB marketplace under the symbol IMUN. Our common stock began trading in November 1999 on OTC under the name Galliano International Ltd. Trading under the name of TNI BioTech, Inc. commenced in March 2012 under the symbol TNIB. The symbol was changed to IMUN on December 11, 2014. The following table sets forth the high and low sales prices per share of our common stock (presented on the basis of a 1:1,000 reverse stock split) for the periods indicated as reported by the OTC Markets Group, Inc.

Period

Record Holders

As of May 14, 2020, we have approximately 457,578 stockholders of record of our common stock.

Dividends

The Company paid no dividends in 2019 or 2018.

We do not anticipate paying any cash dividends in the foreseeable future.

The payment of dividends is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit our ability to pay dividends on its common stock other than those generally imposed by applicable state law.

Securities Authorized for Issuance under Equity Compensation Plans

On September 4, 2014, the Company’s shareholders approved the Company’s 2014 Stock Incentive Plan (“2014 Plan). The 2014 Plan is an important incentive for our employees and is critical to the Company’s ongoing effort to build shareholder value and align the interests of employees and directors with those of the Company’s shareholders. Equity awards are a significant part of the Company’s ability to attract, retain, and motivate our executives and employees whose skills and performance are critical to our success.

A total of 5,000 shares of the Company’s common stock has been approved, but not yet reserved, for issuance under the 2014 Plan. Awards under the 2014 Plan may be made to employees, directors, consultants and advisors of the Company and any successor entity that adopts the 2014 Plan. Awards under the 2014 Plan may be made in the form of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards. Vesting of awards will be determined by our Board. No more than 500 shares may be issued to a single participant pursuant to stock options and stock appreciation rights in a calendar year. Re-pricing of outstanding stock awards is not permitted under the 2014 Plan. The 2014 Plan will terminate upon the earlier of the adoption of a resolution of the Board terminating the 2014 Plan, or September 3, 2024.

Item 6. Selected Financial Data

Not required for smaller reporting companies.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

General

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our discussion of cautionary statements and significant risks to the company’s business under Item 1A. Risk Factors of this Annual report on Form 10-K.

Overview

Revenue

The Company had no revenues during the year ended December 31, 2019. The Company had revenues of $113,500 during the year ended December 31, 2018. In February and October 2018, the Company reported the first shipments of Lodonal^TM to Nigeria.

Direct Expenses and Gross Margin

The Company incurred direct expenses of $0 in 2019 ($47,673 in 2018). Direct expenses include the cost of finished product sold from the Company’s contract manufacturers, sales incentives, associated travel, and inventory return charges.

Research and Development

The Company’s research and development (“R&D”) activities commenced in the third quarter of 2012, after the Company had 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, the Company continued to build an 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.

R&D expenses consist of salaries and benefits paid to employees directly engaged in research, payments made in cash or in kind to contractors for services directly related to research and product development, product development costs, payments made for patents and licenses to which the Company has acquired rights to use, and travel, telecommunications, facilities and external legal costs incurred in relation to research activities. Since 2014, the Company’s spending on R&D has been primarily to maintain patents and licenses acquired earlier, on trials in Africa, and prior to May 2018, to support patent discussions with the FDA in the USA outsourced contractors. In 2019, Company was not able to raise the cash required to resume its planned research program.

We do not collect costs on a product basis or for any category of product involved in carrying out research projects. While we do perform cost calculations to facilitate our internal evaluation of individual products, these calculations include significant estimations and allocations that are not relevant to, or included in, our external financial reporting mechanisms. As a consequence, we do not report research and development costs at the product level.

Operating Expenses

Selling, general and administrative expenses primarily include salary and benefit costs for employees and contractors included in our sales, marketing, finance, legal and administrative organizations, professional services, insurance, unallocated travel expenses, telecommunications, impairment of intangibles, and office expenses. Professional services consist principally of external legal, audit, tax and other consulting services.

Other Expenses, Net

Other expenses, net consists primarily of interest income on cash balances, and interest expense on borrowings. Interest expense will vary periodically depending on prevailing short-term interest rates.

Loss on settlement of debt

Loss on settlement of debt comprises the cost of issuance of common stock for the retirement of principal and accrued interest on promissory notes.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions, and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. Note 1, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

We have identified the policies below as critical to our business operations and the understanding of its results of operations. The Company’s senior management has reviewed these critical accounting policies and related disclosures with the Company’s Board of Directors. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results. Our preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates and such differences may be material.

Revenue Recognition

We recognize revenue on sales to customers and distributors upon satisfaction of our performance obligations when the goods are shipped. For consignment sales, we recognize revenue when the goods are pulled from consignment inventory.

On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (ASC 606),” using the modified retrospective method. Adoption of the new revenue standard had no impact on the Company’s consolidated balance sheet, results of operations, equity or cash flows as of the adoption date.

Sales of Lodonal^TM pills or capsules product are included in revenue when production is sold to a customer in fulfillment of performance obligations under the terms of agreed contracts. Performance obligations primarily comprise delivery of product at a delivery point, as negotiated within each contract. Each quantity of product sold is separately identifiable and represents a distinct performance obligation to which the transaction price is allocated. Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer. The Company considers a variety of facts and circumstances in assessing the point of control transfer, including but not limited to: whether the purchaser can direct the use of the product, the transfer of significant risks and rewards, the Company’s right to payment, and transfer of legal title. In each case, the time between delivery and when payments are due is not significant.

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard will be effective for our interim and annual periods beginning January 1, 2018, and must be applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. At December 31, 2019, we had no leases that fall within the scope of this standard. Accordingly, the standard has no impact on our consolidated financial position or our results of operations.

Use of Estimates

The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates.

Cash, Cash Equivalents, and Short-Term Investments

The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of a default by the financial institutions holding its cash and cash equivalents to the extent of amounts recorded on the condensed consolidated balance sheets. The cash accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. At December 31, 2019, the Company has no cash balances in excess of insured limits.

Segment and Geographic Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment and does not segment the business for internal reporting or decision making.

Fair Value of Financial Instruments

In accordance with the reporting requirements of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 825, “Financial Instruments”, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. Cash, cash equivalents and accounts payable are accounted for at cost which approximates fair value due to the relatively short maturity of these instruments. The carrying value of notes payable also approximate fair value since they bear market rates of interest and other terms. None of these instruments are held for trading purposes.

Fair Value Measurements

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

Inventory

Inventories comprise finished product, raw materials and materials used for packaging. Inventories are stated at the lower of cost or market with cost based on the first-in, first-out (FIFO) method. Inventory that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified for use in a clinical trials or clinical manufacturing campaigns. Inventory used in marketing activities is charged to selling, general and administrative expense.

Fixed Assets

Fixed assets 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 for the years ended December 31, 2019 and December 31, 2018 was $2,074 and $1,733, respectively.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or change 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.

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 patent prosecution expenses, 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 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, 2019 and 2018, the Company does not have a liability for unrecognized tax uncertainties.

The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of December 31, 2019, and 2018, the Company has not accrued any interest or penalties related to uncertain tax positions.

In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which amends ASC Topic 220, Income Statement - Reporting Comprehensive Income. This ASU allows for tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act to be reclassified as retained earnings. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company adopted this policy on January 1, 2019, noting no material impact.

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

The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values equaling either the market value of the shares issued or the value of consideration received, whichever is more readily determinable. The majority of the non-cash consideration pertains to services rendered by consultants and others and has been valued at the fair value of the Company’s common stock at the date of the agreement.

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 Topic 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.

Net Loss per Share of Common Stock

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per share gives effect to all dilutive potential common shares outstanding during the period using the “as if converted” basis.

Uncertainty in Income Taxes

Management considers the likelihood of changes by taxing authorities in its filed income tax returns, and recognizes a liability for or discloses potential changes that management believes are more likely than not to occur upon examination by tax authorities. Management has not identified any uncertain tax positions in filed income tax returns that require recognition or disclosure. The Company’s income tax returns for the past three years are subject to examination by tax authorities, and may change upon examination.

We follow Accounting Standards Codification (“ASC”) 740-10, Accounting for Uncertainty in Income Taxes (“ASC 740-10”). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. ASC 740-10 is effective for fiscal years beginning after December 15, 2006. The Company has adopted ASC 740-10 and evaluates its tax positions on an annual basis.

Results of Operations

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Revenues (dollar amounts in thousands):

We had no revenues from operations for the year ended December 31, 2019, compared to revenues of $114 for the year ended December 31, 2018. All 2018 revenues were earned from shipments of Lodonal^TM to Nigeria.

Operating Expenses

Selling, general and administrative (dollar amounts in thousands):

Selling, general and administrative expenses and related percentages for the years ended December 31, 2019 and 2018 were as follows (dollar amounts in thousands):

In 2019, selling, general and administrative expense was $2,368, compared to $3,232 for 2018, a decrease of $864 or 27%. For the years ended December 31, 2019 and 2018, selling, general and administrative expenses were made up as follows (dollar amounts in thousands):

The decrease year over year in selling, general and administrative expense was attributable primarily to a $948 decrease year over year in consulting expenses.

Significant expenses included:

Research and development

R&D expenses and related percentages for the years ended December 31, 2019 and 2018 were as follows (dollar amounts in thousands):

R&D is overseen and managed internally, working with individuals, universities, and CROs in order to utilize patents that we have sub-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.

For the years ended December 31, 2019 and 2018, research and development expenses were made up as follows (dollar amounts in thousands):

Expenses for research and development in 2019 increased by 133% compared to expenses in the same period 2018. The increase was primarily due to an increase in licensing fees paid in 2019, offset by lower patent prosecution expenses. No patent trials were conducted in 2019. Most of the R&D spending in 2018 was for the development of LDN, primarily under trials in Africa.

Stock issued for services

The cost of stock issued for services G&A and related percentages for the years ended December 31, 2019 and 2018 were as follows (dollar amounts in thousands):

The decrease in expense reflects a reduction in the number of shares issued for services and the decrease in the price of the Company’s stock year over year.

The number of shares issued for consulting services G&A in 2019 was 3,300 (16,999 in 2018).

Consulting services G&A 2019 consisted of the following:

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 Consolidated Statements of Operations above as the Warrant valuation expense.

In 2019, the Company issued 14,600 warrants as part of notes payable at an exercise price of $5, for which it recorded a $0 warrant expense. In 2018, the Company issued 203,995 warrants as part of notes payable at an exercise price of $5 to $3,740, for which it recorded $0 warrant expense .

Depreciation and amortization

The Company amortizes the costs incurred to acquire patents and licenses over the period of the related agreements. The decrease year over year in depreciation and amortization expense reflects the fact that all of the Company’s patents and licenses had been impaired by the end of 2015.

Depreciation and amortization expenses for the years ended December 31, 2019 and 2018 were as follows (dollar amounts in thousands):

Interest Expense

Interest expense for the years ended December 31, 2019 and 2018 were as follows (dollar amounts in thousands):

Interest expenses are comprised of loan origination fees and interest owed by the Company. The decrease year over year was attributable to the lower level of debt in the Company, the result of the deconsolidation of Cytocom in 2018.

Gain/(Loss) on settlement of debt (dollar amounts in thousands):

The Company recorded $0 expense in 2019 for gains/losses on settlement of debt. In 2018, certain lenders to the Company exercised their rights to convert all or a portion of their notes payable to equity. The Company also settled certain obligations in 2018 through the issuance of its common stock. In 2018, the Company recorded a loss of $684,668, reflecting the fair value of the 30,351 shares of common stock issued in exchange for notes and other obligations.

Liquidity:

Liquidity is measured by the Company’s ability to secure enough cash to meet its contractual and operating needs as they arise. The Company had cash of $4,925 at December 31, 2019, compared to $5,859 at December 31, 2018. Cash at the end of 2018 comprised cash for both the Company and Cytocom. For the years ended December 31, 2019 and 2018, net cash used in operating activities was $934 and $1,369,503, respectively. $0 cash was used in investing activities for the year ended December 31, 2019 ($1,971 was used in 2018). In 2019, the Company was able to cover its operating and investing cash-flow requirements through its existing cash balances and without the need to issue notes payable or to sell equity; in 2018 the Company issued notes payable and sold equity, in the amount of $1,099,970.

In 2019, the Company had no sales of Lodonal^TM . The Company cannot be certain that it will generate sufficient cash flows for the next 12 months to pay for operating expenses and to pay off current and past-due obligations. In addition to projected sales, the Company expects to continue fund operations through sales of equity and notes payable, and conversions of exiting obligations into equity. Over the next 12 months, the Company believes it will require between $300,000 and $350,000 monthly to meet its ongoing expenses and obligations.

If the Company is unable to generate sufficient cash flows from sales, or if it does not raise additional working capital to meet all of its operating obligations and expenditures, the Company may have to modify its business plan.

In addition to the cost of its ongoing operations, the Company expects it will incur future research and development expenditures in the next 12 months. The estimated cost of this development is between $2,000,000 and $3,000,000.

During the year ended December 31, 2019, there were no sales of stock or exercise of stock warrants, compared to $240,500 for the corresponding period in 2018. The Company issued 454,478 in notes payable in year ended December 31, 2019, compared to $859,470 in 2018. There were no loan repayments made in cash in the year ended December 31, 2019 ($0 in 2018).

Off-Balance Sheet Arrangements

During the years ended December 31, 2019 and 2018, we did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

Our Consolidated Financial Statements and Notes thereto, for the fiscal years ended December 31, 2019 and 2018 and the report of Turner, Stone & Company, L.L.P. (“Turner”), our independent registered public accounting firm, are set forth on pages F-1 through F-20 of this Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the CEO and CFO have concluded that our disclosure controls and procedures are ineffective to ensure that information 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. This determination was based on the small size of our accounting staff, the lack of segregation of duties and the lack of an audit committee at December 31, 2019, which creates a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness means there is a risk that our financial reports or other filings may contain an error or inaccuracy or not submitted timely.

Management Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Any internal control system, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our internal control over financial reporting as of December 31, 2019 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, because of the Company’s limited resources and limited number of employees, and the absence of an audit committee at December 31, 2019, management concluded that, as of December 31, 2019, our internal control over financial reporting is not effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to permanent rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934) during the year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors

As of May 14, 2020, the number of voting members of our Board of Directors was 3. The members of our Board of Directors as of May 14, 2020 are as follows:

The biographies of each director below contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, and information regarding involvement in certain legal or administrative proceedings, if applicable.

Kevin Phelps — Mr. Phelps, 65, is a General Partner in Trillium Group, LLC, a Rochester, New York based venture capital firm and a Founder of Cashel Rock Advisors and FinanciaLink Strategic Alliances, two private wealth management firms specializing in strategies for corporations and high net-worth individuals. On April 30, 2020, Mr. Phelps was appointed interim Chief Executive Officer following the resignation of Mr. Handley,

His professional experience began as a CPA with Price Waterhouse (now PwC), where he consulted with over 20 companies with a principal focus on emerging growth opportunities. In 1987, he was recruited to head financial planning for Eastman Kodak’s BioProducts Division. He assisted in the spinoff of the business into an international joint venture and became the Chief Financial Officer of the new entity, Genencor International, Inc. In this role, he created and managed Genencor’s finance and treasury groups and established the company’s accounting and reporting practices. He raised in excess of $100 million in debt capital to fund Genencor’s operations and expansion. He also served as Vice President of New Business Development.

Dr. Roscoe Moore — Dr. Moore, 65, was a career officer within the Commissioned Corps of the United States Public Health Service (USPHS) and Assistant United States Surgeon General (Rear Admiral, USPHS) within the Immediate Office of the Secretary, Department of Health and Human Services (HHS). He operated as Principal Liaison between the HHS and the ministries of health of African countries for the development of infrastructure for preventive health needs and was integrally involved in the formation of the President’s Emergency Program for AIDS Relief (PEPFAR) program under President George W. Bush, a program which is credited with turning the tide of the global AIDS pandemic. He was selected as Chief Veterinary Medical Officer, USPHS, by Surgeon General C. Everett Koop, and was the Chief Epidemiologist with the Center for Devices and Radiological Health for the FDA. Dr. Moore served as an Epidemic Intelligence Service Officer with the U.S. Centers for Disease Control and Prevention (CDC) and as the ranking veterinarian across all uniformed services, including the armed forces. Dr. Moore has conducted clinical research on infectious diseases including Venezuelan equine encephalitis, tuberculosis, listeriosis, psittacosis, malaria, and HIV/AIDS. He has also been involved in the development of a sustainable infrastructure for the surveillance of emerging and re-emerging diseases worldwide. He has written or co-authored over 100 publications covering a broad range of public health issues.

Dr. Moore has international experience with North Africa (Morocco), North West Africa Sub-Saharan Africa, West Africa (Senegal, Nigeria, and Mali), Central Africa (Central African Republic, Republic of Congo, Rwanda, and Uganda), East Africa and Southern Africa and the countries of the Southern African Development Community (SADC).

Dr. Moore received his Bachelor of Science and Doctor of Veterinary Medicine degrees from the Tuskegee Institute; his Master of Public Health degree in Epidemiology from the University of Michigan; and his Doctor of Philosophy degree in Epidemiology from the Johns Hopkins University. He was awarded the Doctor of Science degree (Honoris Causa) by Tuskegee University in recognition of his distinguished career in public health. Dr. Moore also served as an Assistant Professor of Oncology within the Howard University College of Medicine Cancer Center.

Michael Sander— Mr. Sander, 56, has been a Director since November 2019. Mr. Sander currently serves as the Senior Managing Director, Strategic Planning & Investor Relations, of Sortis Holdings Inc., a company that provides financial services such as equity capital placement, loan sale advisory, debt restructuring, valuations, strategic capital management, and specialty finance. Mr. Sander has been at Sortis Holdings since December 2010.

Mr. Sander previously served as Executive Vice President of Columbia Capital Consulting Group (formerly known as RTC Pacific), an FDIC-registered contractor for financial institutions, from December 2008 to November 2010; Senior Vice President of Trinity Inc., an import building supply company, from May 2005 to October 2008; Senior Executive Vice President of Cyberworks Robotics Inc., a developer of AI self-driving software aimed to increase mobility and quality of life for vulnerable people in society, from May 2003 to May 2005; and Managing Partner – Advisor of IWE Digital, an internet digital technology developer agency, from October 1996 to April 2003.

Among other qualifications, Mr. Sander brings to the Board executive leadership experience and valuable insights on corporate strategy, risk management, corporate governance and many other issues facing emerging enterprises.

Mr. Sander also holds the following directorships:

Executive Officers

Biographical information concerning Michael Handley, our Chief Executive Officer is set forth above. Biographical information concerning our other executive officers is set forth below.

Peter Aronstam – Mr. Aronstam, age 67, has been our Chief Financial Officer since January 2013. Mr. Aronstam brings more than 30 years of experience in accounting, finance, banking, international trade and law to his clients. His career is marked by a progression of senior finance roles with growth and performance-driven enterprises, from start-up technology and internet companies to chief financial officer roles with small service providers to very large international manufacturers to global banks. Mr. Aronstam has advised publicly-held and privately-owned businesses since 1978, providing both full-time and part-time CFO services. His background includes start-up VC-backed entrepreneurial companies, manufacturing technology and service companies, serving as a public-company CFO, corporate and international banking in major multinational banks, managing HR and IT functions, and raising more than $500,000,000 in debt and equity for his companies and their customers. From 2001 to 2006, Mr. Aronstam was the Chief Financial Officer of Airspan Networks, Inc., a public reporting company in Boca Raton, Florida. He also was the CFO of private company Mainstream Holdings, LLC in West Palm Beach, Florida from 2007 to 2008 and private company The Neptune Society in Plantation, Florida from 2008 to 2009. Since 2010, Mr. Aronstam has been a partner of B2B CFO Partners, LLC, doing business as B2B CFO^©. The firm provides CFO services to its clients on a part time basis. Born and educated in South Africa, Mr. Aronstam earned his Bachelor of Commerce, Bachelor of Law and PhD from the University of the Witwatersrand in South Africa. Mr. Aronstam has worked in South Africa, Canada, and Florida.

Board Committees

In February of 2015, the Board authorized the formation of and adopted charters for an audit committee, compensation committee and nominating committee. At December 31, 2019, we had not yet established an audit committee, compensation committee, or nominating committee. In April 2020, the full Board resolved to constitute itself as the Company’s audit committee until such time as an audit committee is appointed. During 2019, the functions ordinarily handled by these committees were handled by our entire Board. As of the date of filing this annual report, no members were appointed to the audit committee, compensation committee or nominating committee. The compensation committee and nominating committee have not yet held any meetings.

Family Relationships

There are no familial relationships between any of our officers and directors.

Director or Officer Involvement in Certain Legal Proceedings

Our directors and executive officers were not involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.

Director Independence

The Company is not currently listed on any national securities exchange that has a requirement that the board of directors be independent. At December 31, 2019, Dr. Moore, Dr. Selsky, Mr. Phelps and Mr. Sander were “independent directors” as that term is defined under the rules of the NASDAQ Capital Market.

Code of Ethics

We have adopted a Code of Ethics that applies to all of our employees and officers, and the members of our Board of Directors. The Code of Ethics is available on our corporate website at www.immunetherapeutics.com. You can access the Code of Ethics on our website by first clicking “About Us” and then “Corporate Governance.” Any amendment to or waiver of the Code of Ethics will be disclosed on our website promptly following the date of such amendment or waiver.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based on our review of the reports filed by Reporting Persons, we believe that, during the year ended December 31, 2019, the Reporting Persons met all applicable Section 16(a) filing requirements.

Item 11. Executive Compensation

The following table summarizes the annual compensation of our Named Executive Officers (defined below), as of December 31, 2019. “Named Executive Officers,” consistent with Item 402(m) of Regulation S-K promulgated under the Exchange Act, include: (i) the Company’s Principal Executive Officer and individuals acting in a similar capacity during fiscal year 2019, regardless of compensation level; (ii) the Company’s two most highly compensated executive officers other than the Principal Executive Officer who were serving as executive officers at the end of fiscal year 2019; and (iii) up to two additional individuals who would have been included under (ii) above but for the fact that the applicable individual was not serving as an executive officer of the Company at the end of fiscal year 2019.