Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 12-May-14 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'TNI BIOTECH, INC. | ' |
Entity Central Index Key | '0001559356 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 86,371,347 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unaudited) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current Assets: | ' | ' |
Cash and cash equivalents | $233,692 | $406,596 |
Prepaids and Other Current assets | 42,500 | 215,900 |
Total current assets | 276,192 | 622,496 |
Fixed Assets: | ' | ' |
Computer equipment, net of accumulated depreciation of $1,868 and $1,293 respectively | 5,032 | 5,607 |
Intangible Assets: | ' | ' |
Patents and licenses, net of amortization of $5,141,087 and $4,422,375, respectively (Note 6) | 17,827,836 | 18,546,548 |
Deposits | 10,183 | 17,435 |
Total assets | 18,119,243 | 19,192,086 |
Current Liabilities: | ' | ' |
Accounts payable | 1,012,088 | 839,909 |
Payable to officer | 76,000 | 76,000 |
Accrued liabilities | 662,454 | 588,271 |
Current portion patent liability | 68,333 | 118,333 |
Notes payable | 1,417,197 | 817,197 |
Total current liabilities | 3,236,072 | 2,439,710 |
Non-current Liabilities: | ' | ' |
Notes payable related party | 101,128 | 121,128 |
Total non-current liabilities | 101,128 | 121,128 |
Commitments and contingencies (Note 7) | ' | ' |
Total Liabilities | 3,337,200 | 2,560,838 |
Stockholders' Equity: | ' | ' |
Common stock - par value $0.001; 500,000,000 shares authorized; 86,371,347 and 74,161,639 shares issued and outstanding respectively | 86,371 | 74,160 |
Additional paid in capital | 322,570,898 | 308,113,375 |
Stock issuances due | 1,302,113 | 4,893,499 |
Prepaid services | -8,509,722 | -13,447,109 |
Accumulated deficit | -300,667,617 | -283,002,677 |
Total stockholders' equity | 14,782,043 | 16,631,248 |
Total liabilities and stockholders' equity | $18,119,243 | $19,192,086 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Accumulated depreciation | $1,868 | $1,293 |
Amortization | $5,141,087 | $4,422,375 |
Common Stock, Par Value | $0.00 | $0.00 |
Common Stock, Shares Authorized | 500,000,000 | 500,000,000 |
Common Stock, Shares Issued | 86,371,347 | 74,161,639 |
Common Stock, Shares Outstanding | 86,371,347 | 74,161,639 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Income Statement [Abstract] | ' | ' |
Revenues, net | ' | ' |
Operating expenses: | ' | ' |
Selling, general and administrative | 12,612,953 | 7,702,170 |
Research and development expense | 4,170,836 | 2,980,101 |
Depreciation and amortization expense | 719,287 | 698,995 |
Total operating expenses | 17,503,076 | 11,381,266 |
Loss from operations | -17,503,076 | -11,381,266 |
Interest expense | -161,081 | -239,912 |
Exchange (loss) | -783 | ' |
Loss on settlement of debt | ' | -3,068,496 |
Total other income (expense) | -161,864 | -3,308,408 |
Net loss | ($17,664,940) | ($14,689,674) |
Basic and diluted loss per share: | ' | ' |
Basic and diluted loss per share | ($0.22) | ($0.29) |
Weighted average number of shares outstanding | 81,562,670 | 49,983,416 |
Consolidated_Statements_of_Sho
Consolidated Statements of Shockholders Equity (Unaudited) (USD $) | Common Stock | Additional Paid-In Capital | Stock To Be Issued | Prepaid Services | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $74,160 | $308,113,375 | $4,893,499 | ($13,447,109) | ($283,002,677) | $16,631,248 |
Beginning Balance, Shares at Dec. 31, 2013 | 74,161,639 | ' | ' | ' | ' | ' |
Issuance of common stock in exchange for debt, Shares | 1,000,000 | ' | ' | ' | ' | ' |
Issuance of common stock in exchange for debt, Amount | 1,000 | 1,251,000 | -1,252,000 | ' | ' | ' |
Issuance of common stock for prepaid services, Shares | 5,490,000 | ' | ' | ' | ' | ' |
Issuance of common stock for prepaid services, Amount | 5,490 | 7,960,010 | ' | -7,965,500 | ' | ' |
Return of stock issued for charitable contributions, Shares | -100,000 | ' | ' | ' | ' | ' |
Return of stock issued for charitable contributions, Amount | -100 | -749,900 | ' | ' | ' | -750,000 |
Amortization of prepaid services | ' | ' | ' | 12,902,887 | ' | 12,902,887 |
Issuance of common stock to employees and consultants, Shares | 2,028,708 | ' | ' | ' | ' | ' |
Issuance of common stock to employees and consultants, Amount | 2,029 | 446,068 | -1,697 | ' | ' | 446,400 |
Issuance of common stock for loan expenses and interest, Shares | 260,000 | ' | ' | ' | ' | ' |
Issuance of common stock for loan expenses and interest, Amount | 260 | 362,090 | -217,000 | ' | ' | 145,350 |
Issuance and modification of common stock warrants | ' | 2,414,073 | ' | ' | ' | 2,414,073 |
Issuance of common stock for cash and exercise of warrants, Shares | 3,531,000 | ' | ' | ' | ' | ' |
Issuance of common stock for cash and exercise of warrants, Amount | 3,532 | 2,774,182 | -2,120,689 | ' | ' | 657,025 |
Net loss | ' | ' | ' | ' | -17,664,940 | -17,664,940 |
Ending Balance, Amount at Mar. 31, 2014 | $86,371 | $322,570,898 | $1,302,113 | ($8,509,722) | ($300,667,617) | $14,782,043 |
Ending Balance, Shares at Mar. 31, 2014 | 86,371,347 | ' | ' | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ' | ' |
Net loss | ($17,664,940) | ($14,689,674) |
Adjustments to reconcile loss from continuing operations to net cash flows used in operating activities: | ' | ' |
Depreciation | 575 | 120 |
Amortization | 718,712 | 696,124 |
Stock issued, and amortization of stock issued, for prepaid services | 13,349,287 | 7,561,740 |
Loss on settlement of debt | ' | 3,068,496 |
Stock warrant expense | 2,414,073 | 1,065,894 |
Stock issued for donation | -750,000 | 750,000 |
Stock issued for interest | 145,350 | 232,250 |
Changes in operating assets and liabilities: | ' | ' |
Accounts payable | 175,441 | 75,676 |
Accrued liabilities | 70,921 | 132,177 |
Prepaid and other current assets | 180,652 | -75,600 |
Net cash used in operating activities from continuing operations | -1,359,929 | -1,182,797 |
CASH FLOWS FROM INVESTING ACTIVITIES | ' | ' |
Purchase of computer equipment | ' | -1,170 |
Purchase of Penn State License | ' | -160,539 |
Net cash used in investing activities from continuing operations | ' | -161,709 |
CASH FLOWS FROM FINANCING ACTIVITIES | ' | ' |
Proceeds from sale of stock and exercise of warrants | 657,025 | 1,030,324 |
Proceeds from issuance of notes payable | 600,000 | 249,000 |
Repayments of notes payable, related party | -20,000 | ' |
Payments made on patent liability | -50,000 | -71,667 |
Net cash provided by financing activities from continuing operations | 1,187,025 | 1,207,657 |
Net decrease iin cash | -172,904 | -136,849 |
Cash, beginning of period | 406,596 | 313,095 |
Cash, end of period | 233,692 | 176,246 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ' | ' |
Cash paid for interest | $0 | $0 |
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ' | ' |
Common Shares issued for Penn State License | 0 | 2,550,000 |
Common shares issued for prepaid services | 7,965,500 | 39,565,400 |
1_Organization_and_Description
1. Organization and Description of Business | 3 Months Ended |
Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
1. Organization and Description of Business | ' |
TNI BioTech, Inc., (“TNI BioTech” or “the Company”) was initially incorporated in Florida on December 2, 1993 as Resorts Club International, Inc. (“Resorts Club”). 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 June 27, 1998. The Company began trading in November 1999 through the filing of a 15C-211. On November 10, 2004, Galliano merged with Resorts Club International, Inc. Resorts Club was the surviving corporation. On February 27, 2012, Resorts Club 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, pH Environmental executed a share exchange agreement for the acquisition of all of the outstanding shares of TNI BioTech, IP. The Company currently operates out of Orlando, Florida and Frederick, Maryland. In July 2012, the Company’s focus turned to acquiring patents that would protect and advance the development of new uses of opioid-related immune- therapies, such as low-dose naltrexone (“LDN”) and Methionine [Met5]-enkephalin (“MENK”). The Company’s therapies are believed to stimulate and/or regulate the immune system in such a way that they provide the potential to treat a variety of diseases. We believe our therapies may be able to correct abnormalities or deficiencies in the immune system in diseases such as HIV infection, autoimmune disease, immune disorders, or cancer; all of which can lead to disease progression and life-threatening situations when the immune system is not functioning optimally. | |
In October 2012, the Company formed TNI BioTech International, Ltd., a BVI company in Tortola, British Virgin Islands. TNI BioTech International was set up to allow the Company to market and sell LDN in those countries outside the U.S. in which we have been able to obtain approval to sell the Company’s products. | |
In August 2013, the Company formed its United Kingdom subsidiary, TNI BioTech, LTD (the “Subsidiary”). TNI BioTech, LTD received approval to be considered a micro, small or medium-sized enterprise (“SME”) with the European Medicines Agency (“EMA”) on August 21, 2013. The designation provides the Subsidiary with significant discounts when holding meetings or submitting filings to the EMA. On September 19, 2013, the Subsidiary submitted a pre-submission package to the EMA regarding Crohn’s Disease. The EMA granted the Subsidiary a meeting that took place on September 27, 2013. The Subsidiary is eligible to benefit from the provisions for administrative and financial assistance for SMEs set out in Regulation (EC) No 2049/2005. | |
In December 2013, the Company formed a new subsidiary, Cytocom Inc. ("Cytocom"), to focus on conducting LDN and MENK clinical trials in the United States. The Company expects that the manufacturing of TNI BioTech therapies and their subsequent distribution into emerging nations will continue to be operated directly through TNI BioTech. The Company initially entered into consulting arrangements with Dr. Graham Burton, M.D., Ph.D., and Mr. Gary G. Gemignani, to focus on the clinical advancement of LDN and MENK through Cytocom. Effective April 1, 2014, Dr. Burton was appointed President and Chief Executive Officer of Cytocom. On the same date, Mr. Gemignani was appointed Chief Operating Officer, Chief Financial Officer and Executive Vice President of Cytocom. Dr. Burton will be responsible for leading Cytocom’s global development, clinical research and medical initiatives. Mr. Gemignani will be responsible for operational and business development activities and financial management of Cytocom. | |
In March 2014, the Company incorporated Airmed Biopharma Limited, an Irish corporation with an address in Dublin, Ireland. Airmed Biopharma Limited was set up to benefit from incentives granted by the Irish government for the establishment of pharmaceutical companies (many of the world’s leading pharmaceutical companies have located in Ireland), and so that the Company could take advantage of Ireland's status as a member of the European Union and the European Economic Area (the “Euro Zone”). An Irish limited liability company enjoys a low corporate income tax rate of 12.5%, one of the lowest in the world. Airmed Biopharma Limited hopes to qualify for tax incentives for Irish holding/headquartered companies and to benefit from the network of double tax treaties that reduce withholding taxes. TNI BioTech International will manage our international distribution, using product that is manufactured in Ireland and elsewhere. | |
TNI BioTech is focused on the development and commercialization of therapeutic treatments for cancer, HIV/AIDS and autoimmune diseases and immune disorders by combating these severe and fatal diseases through the stimulation and/or regulation of the body’s immune system. TNI’s growth strategy includes the near-term commercialization of its existing immunotherapies targeting cancer, Crohn’s disease and/or HIV/AIDS. Phase II dose-response studies of LDN are anticipated to begin in late 2014 to early 2015, to be followed shortly by a Phase III study. | |
Going Concern | |
The Company has incurred significant net losses since inception and has relied on its ability to fund its operations through private equity financings and short-term debt. Management expects operating losses and negative cash flows to continue at more significant levels in the future. As the Company continues to incur losses, transition to profitability is dependent upon the successful development, approval, and commercialization of its products and achieving a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional cash. Management intends to fund future operations through additional private or public debt or equity offerings, and may seek additional capital through arrangements with strategic partners or from other sources. Based on the Company’s operating plan, existing working capital at March 31, 2014 was not sufficient to meet the cash requirements to fund planned operations through December 31, 2014 without additional sources of cash. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. | |
The Company has experienced a net loss from operations of $17,664,940 and has used cash and cash equivalents for operations in the amount of $1,359,929 during the three months ended March 31, 2014, resulting in stockholders’ equity of $14,782,043. |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Accounting Policies [Abstract] | ' | ||||||||||
2. Summary of Significant Accounting Policies | ' | ||||||||||
Basis of Presentation | |||||||||||
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), as amended for interim financial information. The financial information as of March 31, 2014 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 ("2013 10-K"). The unaudited interim financial statements should be read in conjunction with the 2013 10-K, which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the years ended December 31, 2013 and 2012. | |||||||||||
Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the three months ended March 31, 2014 are not necessarily indicative of results for the full fiscal year. | |||||||||||
Use of Estimates | |||||||||||
The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates. | |||||||||||
Cash, Cash Equivalents, and Short-Term Investments | |||||||||||
The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value. | |||||||||||
Concentration of Credit Risk | |||||||||||
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of a default by the financial institutions holding its cash and cash equivalents to the extent of amounts recorded on the balance sheets. | |||||||||||
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. | |||||||||||
Computer Equipment | |||||||||||
Computer equipment is stated at cost, less accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged against expense as incurred. Depreciation expense from continuing operations for the three months ended March 31, 2014 and 2013 was $575 and $120, respectively. | |||||||||||
Intangible Assets | |||||||||||
Costs incurred to acquire and/or develop the Company’s product licenses and patents are capitalized and amortized by straight-line methods over estimated useful lives of seven to sixteen years. Intangible assets are stated at the lower of cost or estimated fair market value. Amortization expense for the three months ended March 31, 2014 and 2013 was $718,712 and $696,124, respectively. The Company estimates its amortization expense related to these assets will approximate $2,800,000 each year for the next five years. | |||||||||||
Impairment of Long-Lived Assets | |||||||||||
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable as prescribed by ASC Topic 360, “Property, Plant and Equipment.” If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company will recognize an impairment loss equal to the difference between its carrying amount and its estimated fair value. No impairment losses were recognized for the three months ended March 31, 2014 or for the corresponding period in 2013. | |||||||||||
Research and Development Costs | |||||||||||
Research and development costs are charged to expense as incurred and are typically comprised of salaries and benefits, pre-clinical studies, clinical trial activities, drug development and manufacturing, fees paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf and third-party service fees, including clinical research organizations and investigative sites. Costs for certain development activities, such as clinical trials are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as operating expenses. | |||||||||||
Income Taxes | |||||||||||
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 ASC 740-10, Accounting for Uncertainty in Income Taxes. 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. | |||||||||||
Share-Based Compensation and Issuance of Stock for Non-Cash Consideration | |||||||||||
The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values equaling either the market value of the shares issued or the value of consideration received, whichever is more readily determinable. | |||||||||||
The 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. | |||||||||||
Net Loss per Share | |||||||||||
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method and the if-converted method. Dilutive common stock equivalents are comprised of common stock purchase warrants and options outstanding. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position. | |||||||||||
A calculation of basic and diluted net loss per share follows: | |||||||||||
For the three months ended March 31, | |||||||||||
2014 | 2013 | ||||||||||
Historical net loss per share: | |||||||||||
Numerator | |||||||||||
Net loss | $ | (17,664,940 | ) | $ | (14,689,674 | ) | |||||
Net loss attributed to Common stockholders | $ | (17,664,940 | ) | $ | (14,689,674 | ) | |||||
Denominator | |||||||||||
Weighted-average common shares outstanding— | 81,562,670 | 49,983,416 | |||||||||
Denominator for basic and diluted net loss per share | |||||||||||
Basic and diluted net loss per share attributed | $ | (0.22 | ) | $ | (0.29 | ) | |||||
to common stockholders | |||||||||||
The Company’s potential dilutive securities which include stock and warrants have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average Common stock outstanding used to calculate both basic and diluted net loss per share is the same. | |||||||||||
The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be antidilutive: | |||||||||||
For the three months ended March 31, | |||||||||||
2014 | 2013 | ||||||||||
Warrants to purchase Common stock | 8,824,250 | 7,957,500 | |||||||||
8,824,250 | 7,957,500 | ||||||||||
Recent Accounting Standards | |||||||||||
Any new accounting pronouncements issued by the FASB, as applicable, have been or will be adopted by the Company upon or before the expiration of the extended transition period provided under Section 102(b)(1) of the JOBS Act. |
3_Promissory_Notes
3. Promissory Notes | 3 Months Ended | |
Mar. 31, 2014 | ||
Debt Disclosure [Abstract] | ' | |
3. Promissory Notes | ' | |
The Company has an outstanding note payable to K-C Operations (an unrelated party) issued on October 15, 2009. The balance as of March 31, 2014 and 2013 was $286,333 and $338,833, respectively. The note matured on October 31, 2010 and accrues interest at a rate of 6% per annum and is convertible to shares of common stock at a rate of $0.20 per share. In 2013, principal and interest aggregating $59,167 was converted to 295,833 shares. The shares issuable under this note are subject to the requirements of Rule 144 of the Securities Act. | ||
The Company has an outstanding note payable to Robert Johnson (former officer and director) issued on September 30, 2006 with a balance as of March 31, 2014 and 2013 was $21,547 and $21,547, respectively. The note matured on September 30, 2007 and is convertible to shares of common stock at a rate of $0.20 per share. The shares issuable under this note are subject to the requirements of Rule 144 of the Securities Act. | ||
The Company has an outstanding note payable to Lexicon (an unrelated party) issued on January 15, 2009. The note is due upon demand. The balance as of March 31, 2014 and 2013 was $10,317 and $10,317, respectively. The note bears an interest rate of 6% per annum and is convertible to shares of common stock at a rate of $0.01 per share. During the three months ended March 31, 2013, $2,500 of this note was converted to 250,000 shares. The shares issuable under this note are subject to the requirements of Rule 144 of the Securities Act of 1933. | ||
The Company has an outstanding note payable to Robert J. Dailey, issued March 11, 2013 for $99,000, with a maturity date of March 25, 2013, and bearing an interest rate of 2% annually, an origination fee of 10,000 restricted common stock shares, a penalty of 10,000 restricted common stock shares if not paid by maturity and an additional 10,000 shares every 30 days after maturity if the loan is not satisfied in full. | ||
The Company has an outstanding note payable to Robert J. Dailey, issued April 25, 2013 for $100,000, with a maturity date of May 9, 2013, and bearing an interest rate of 2% annually, an origination fee of 10,000 restricted common stock shares, a penalty of 10,000 restricted common stock shares if not paid by maturity and an additional 10,000 shares every 30 days after maturity if the loan is not satisfied in full. | ||
The Company has an outstanding note payable to Joel Yanowitz, issued March 11, 2013 for $50,000, with a maturity date of March 25, 2013, and bearing an interest rate of 2% annually, an origination fee of 5,000 restricted common stock shares, a penalty of 5,000 restricted common stock shares if not paid by maturity and an additional 5,000 shares every 30 days after maturity if the loan is not satisfied in full. | ||
The Company has an outstanding note payable to Roger D. Bozarth, issued April 5, 2013 for $100,000, with a maturity date of April 19, 2013 and bearing an interest rate of 2% annually, an origination fee of 10,000 restricted common stock shares, a penalty of 10,000 restricted common stock shares if not paid by maturity and an additional 10,000 shares every 30 days after maturity if the loan is not satisfied in full. | ||
The Company has an outstanding note payable to Christine Dailey, issued August 30, 2013 for $50,000, with a maturity date of October 14, 2013, and bearing an interest rate of 2% annually, a penalty of 15,000 restricted common stock shares if not paid by maturity and an additional 5,000 shares every 30 days after maturity if the loan is not satisfied in full. | ||
The Company has an outstanding note payable to First Choice International Company, issued December 23, 2013 for $100,000, with a maturity date of June 23, 2014, and bearing an interest rate of 10% annually, a penalty of 30,000 restricted common shares if not paid by maturity and an additional 10,000 shares every 30 days after maturity if the loan is not satisfied in full. | ||
In the three months ended March 31, 2014, the company issued three promissory notes totaling $600,000. At March 31, 2014, $600,000 was outstanding respectively under these notes. The notes have the following terms and conditions: | ||
● | Robert J. Dailey, issued February 6, 2014 for $200,000, with a maturity date of June 5, 2014, and bearing an interest rate of 2% annually, a penalty of 15,000 restricted common stock shares if not paid by maturity and an additional 5,000 shares every 30 days after maturity if the loan is not satisfied in full. | |
● | Robert J. Dailey, issued March 7, 2014 for $200,000, with a maturity date of July 6, 2014 and bearing an interest rate of 2% annually, a penalty of 15,000 restricted common stock shares if not paid by maturity and an additional 10,000 shares every 30 days after maturity if the loan is not satisfied in full. | |
● | Robert J. Dailey, issued March 28, 2014 for $200,000, with a maturity date of July 27, 2014, and bearing an interest rate of 2% annually, a penalty of 15,000 restricted common stock shares if not paid by maturity and an additional 10,000 shares every 30 days after maturity if the loan is not satisfied in full. | |
As of March 31, 2014 and 2013, the Company had accrued $39,222 and $9,718 in unpaid interest, respectively. For the three months ended March 31, 2014, the Company issued 260,000 shares with a fair market value of $362,250 for loan expenses and interest under promissory notes including shares for amounts which previously accrued. | ||
4_Capital_StructureCommon_Stoc
4. Capital Structure-Common Stock and Common Stock Purchase Warrants | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
4. Capital Structure-Common Stock and Common Stock Purchase Warrants | ' | ||||||||||||
Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held. No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock or any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend. | |||||||||||||
As of March 31, 2014 and 2013, the Company was authorized to issue 500,000,000 common shares at a par value of $0.001 per share. | |||||||||||||
Stock Warrants | |||||||||||||
Using the Black-Scholes Model, the Company calculated the fair value of $2,414,073 for common stock purchase warrants issued and modified during the three months ended March 31, 2014. Variables used in the Black-Scholes option-pricing model, include (1) a discount rate of 0.76%, (2) an expected remaining life of 5 years and (3) expected volatility of 179%. | |||||||||||||
During the first quarter of 2014, the Company issued 581,250 shares of its restricted common stock through the exercise of common stock purchase warrants. The warrants were exercised at a price of $0.50 per share and the Company received net proceeds of $290,625 for equity from the exercise of the warrants. | |||||||||||||
Following is a summary of outstanding stock warrants at March 31, 2014 and activity during the period then ended: | |||||||||||||
Number of | Exercise | Weighted | |||||||||||
Shares | Price | Average Price | |||||||||||
Warrants as of December 31, 2013 | 7,957,500 | $ | 1.00 – 15.00 | $ | 1.77 | ||||||||
Issued in the three months ended March 31, 2014 | 1,448,000 | $ | 1.00-1.50 | $ | 1.33 | ||||||||
Expired | – | – | |||||||||||
Exercised | 581,250 | $ | 0.5 | $ | 0.5 | ||||||||
Warrants as of March 31, 2014 | 8,824,250 | $ | 0.50-15.00 | $ | 1.66 | ||||||||
Summary of outstanding warrants as of March 31, 2014: | |||||||||||||
Number of | Exercise | Remaining Life (years) | |||||||||||
Expiration Date | Shares | Price | |||||||||||
Third Quarter 2015 | 745,000 | $ | 1.50-2.00 | 1.5 | |||||||||
Fourth Quarter 2015 | 268,750 | $ | 1.5 | 1.75 | |||||||||
Second Quarter 2016 | 37,500 | $ | 3.00-5.00 | 2.25 | |||||||||
Third Quarter 2016 | 525,000 | $ | 0.50-5.00 | 2.5 | |||||||||
Third Quarter 2017 | 1,500,000 | $ | 1.00-1.50 | 3.5 | |||||||||
Fourth Quarter 2017 | 2,941,666 | $ | 1.00-9.00 | 3.75 | |||||||||
First Quarter 2018 | 127,500 | $ | 15 | 4 | |||||||||
Second Quarter 2018 | 33,834 | $ | 15 | 4.25 | |||||||||
Third Quarter 2018 | 400,000 | $ | 1 | 4.5 | |||||||||
Fourth Quarter 2018 | 1,197,500 | $ | 1.00-1.50 | 4.75 | |||||||||
First Quarter 2019 | 1,048,000 | $ | 1.5 | 5 | |||||||||
5_Stock_Compensation
5. Stock Compensation | 3 Months Ended |
Mar. 31, 2014 | |
Equity [Abstract] | ' |
5. Stock Compensation | ' |
Shares Issued for Services | |
During the three months ended March 31, 2014, the Company issued 5,490,000 shares of common stock for prepaid services. The Company valued these shares based upon the fair value of the common stock at the date of the agreements. The consulting fees are amortized over the contract periods, which are typically twelve months. The Company issued common stock for prepaid services of $7,965,500 and $39,559,867 for the three months ended March 31, 2014 and 2013, respectively. The amortization of prepaid services totaled $12,902,887 and $7,561,740 for the three months ended March 31, 2014 and 2013, respectively. | |
6_Lincenses_and_Supply_Agreeme
6. Lincenses and Supply Agreements | 3 Months Ended | ||
Mar. 31, 2014 | |||
Notes to Financial Statements | ' | ||
6. Lincenses and Supply Agreements | ' | ||
Patent and Subsidiary Acquisition | |||
The Company entered into a share exchange agreement April 24, 2013 to acquire all of the outstanding shares of TNI BioTech IP, Inc. (“TNI IP”), a biotechnology firm incorporated in Florida formed to acquire patents related to the treatment of cancer and HIV/AIDS and autoimmune diseases, using Met-enkephalin (“MENK”) and Naltrexone (“LDN”). The goal of TNI IP’s management is to enable mankind and civilization to combat fatal diseases by activating and mobilizing the body’s own immune system using TNI IP’s patented use of MENK. | |||
The first patents acquired by TNI IP were acquired from Dr. Nicholas P. Plotnikoff and Professor Fengping Shan in 2012. Dr. Plotnikoff and Dr. Shan have been specializing in research activities directed toward the study of cytokines, which are hormones naturally produced by the immune system. The primary cytokine, among many others currently being studied by TNI IP, is MENK. The Company is focused on the treatment of cancer, HIV/AIDS and other infectious diseases through the use of our lead compounds. | |||
TNI IP changed its name from TNI BioTech, Inc., to TNI BioTech IP, Inc. on April 23, 2012. TNI BioTech IP, Inc. is the wholly-owned subsidiary of the Company. TNI IP was acquired in exchange for 20,250,000 shares of the Company’s common stock of which 8,000,000 shares were issued for the acquisition of the patent and the remaining 12,250,000 shares were issued to the founders of TNI IP in exchange for all of their right, title and interest in their TNI IP shares. The goodwill arising on the acquisition of TNI BioTech IP, Inc. was valued at $98,000,000 and license agreements arising from the acquisition of TNI BioTech IP, Inc. was valued at $16,006,000. | |||
At the time of the acquisition, the valuation of goodwill and other intangible assets were determined using the fair market price for the Company’s common stock which were exchanged for shares of TNI BioTech IP, Inc. In the fourth quarter of 2012, the Company performed an annual valuation to determine whether any goodwill or intangible assets that had been acquired by the Company were impaired. The result of this valuation was that material impairments were identified. The Company recognized an impairment of the goodwill arising on the acquisition of TNI BioTech IP, Inc. of $98,000,000. | |||
Patent License Agreements | |||
The Company entered into a share exchange agreement on April 24, 2012 to acquire all of the outstanding shares of TNI BioTech IP, Inc., (“TNI IP”) a biotechnology firm incorporated in Florida formed to acquire patents related to the treatment of cancer and HIV/AIDS and autoimmune diseases, using Met-enkephalin (“MENK”) and Naltraxone (“LDN”). The goal of TNI IP’s management is to enable mankind and civilization to combat fatal diseases by activating and mobilizing the body’s own immune system using TNI IP’s patented use of Met-enkephalin (referred to herein as MENK). | |||
The Company entered into a Sale of Technology Agreement with Dr. Nicholas P. Plotnikoff on March 4, 2012, wherein Dr. Plotnikoff agreed to transfer and assign all of his rights, title and interest in: European Patent United Kingdom, Germany, France, Ireland EP 1401471 BI Methods for inducing sustained immune response; Russian Patent Russian Federation patent number 2313364; The Patent Office of the People’s Republic of China, Application No.: 200810165784.8 China Patent CN1015113407 A The Patent Office of the People’s Republic of China ISSN: 1006-2858 CN 21-1349/R; Patent Agencies Government of India Patent, Application number 1627/KOLNP/2003 number 220265 an Enkephalin Peptide Composition; and the US Patent Pending, US Patent Application 10/146.999 e. The Company received all the production formulations and technology designs from Dr. Plotnikoff necessary for the manufacturing, formulation, production and protocols of the MENK treatment of cancer and HIV/AIDS. As consideration for entering into the Sale of Technology Agreement, Dr. Plotnikoff received 8,000,000 shares of common stock, a royalty of a single-digit percentage on all sales of MENK and was granted the position of Non-Executive Chairman of the Board of Directors. | |||
Patent License Agreements | |||
On August 13, 2012, the Company signed an exclusive License Agreement with Ms. Jacqueline Young for the intellectual property developed by Dr. Bernard Bihari relating to treatments with opioid antagonists such as naltrexone and Met-enkephalin for a variety of diseases and conditions including malignant lymphoma, chronic lymphocytic leukemia, Hodgkin’s lymphoma, and non-Hodgkin’s lymphoma, chronic herpes virus infections, chronic herpes viral infections such as chronic genital herpes caused by the herpes simplex virus Type 2 and chronic infections due to the Epstein-Barr virus and a treatment method for humans infected with HTLV-III (AIDS) virus, including patients clinically diagnosed as suffering from AIDS and those suffering from AIDS-related complex (ARC). The Bihari patents were acquired in exchange for 540,000 shares of the Company’s common stock with a fair value of $972,000 and assumed liabilities of $400,000, which is payable to Ms. Young over a twenty-four month period in equal installments to reimburse her for the costs of a New York City office in accordance with the patent license agreement. The patent liability at March 31, 2014 totaled $68,333. The cost of the patent totaled $1,372,000. Additionally, the Company will pay the licensor a royalty payment of 1% of gross MENK sales and provide the licensor a position as non-executive chairman of the Company. The License Agreement is valid for the life of the patents and expires on a country by country basis in each country where patent rights exist, upon the expiration of the last to expire patent in each country or in the event the patent in such country is held to be invalid and/or unenforceable (by a court or government body of competent jurisdiction) or admitted to be invalid or unenforceable. Additionally, TNI can cancel the License Agreement upon 120 days’ written notice and shall pay all royalties and fees that have accrued under the Agreement. TNI has the exclusive rights to the intellectual property however, Licensor retains a right to practice the Licensed Patents solely for noncommercial, academic research purposes. | |||
On December 24, 2012, the Company signed an agreement for the acquisition of patent rights for the intellectual property of Dr. Jill Smith and LDN Research Group, LLC (the “Patent License Agreement”), whose members are Dr. Ian S. Zagon, Dr. Patricia J. McLaughlin and Moshe Rogosnitzky and orphan drug designation by the FDA to a novel late-stage drug, trademarked “LDN,” for the treatment of Pediatric Crohn’s disease. The patent covers methods and formulations for treatment of the inflammatory and ulcerative diseases of the bowel, using naltrexone in low doses as an opioid antagonist. These patents were acquired in exchange for 300,000 shares of the Company’s common stock with a fair value of $2,715,000 and payment of $165,384 (consisting of a $100,000 initial license fee and payment of $65,384 of expenses), which totaled $2,880,384. The Company is also required to pay an annual license fee of $100,000 and a minimum annual royalty of $100,000. The Company has an exclusive, worldwide license to make, have made, use, lease, import, offer for sale and sell Licensed Products and to use the method under the patent rights. The agreement will terminate on the expiration or abandonment of the last patent to expire or ten years after the sale of the first licensed product. The Company may terminate the agreement upon 90 days’ written notice, provided all sublicenses are terminated and all amounts due and owing are paid to the licensor parties. The licensor parties may terminate the agreement ten days' after notice to the Company if the Company is ten days late in payment or there is a breach that remains uncured for ten days after written notice of such breach. | |||
In partial consideration of the Patent License Agreement, the Company agreed to pay to the members the applicable milestone payments listed below after substantial achievement of each milestone event is achieved by the Company, its Affiliates or Sublicensees. | |||
A. | Upon initiation of each Phase III trial, the Company will pay $350,000. | ||
B. | Upon positive completion of each Phase III clinical trial of the therapeutic use of an LDN compound in the Field of Use, the Company will pay $150,000. | ||
C. | When an NDA is accepted for review by the FDA, the Company will pay $250,000. | ||
D. | When FDA approval to market the NDA is approved, the Company will pay $750,000. | ||
E. | Upon the first dosing of the first patient in a Phase III clinical trial for each Licensed Product, the Company will pay 250,000 shares of the Company’s common stock. | ||
F. | Upon the first sale of each Licensed Product, the Company will issue 400,000 shares of the Company’s common stock. | ||
G. | Upon the achievement of $20 million in cumulative sales for each licensed product covered by NDAs, the Company will issue 500,000 shares of the Company’s common stock. | ||
The Company must pay an annual license fee in the low six-figure range and mid single digit percentage royalties on the net sales of each licensed product with an annual minimum royalty payment in the low six-figure range. The Company will pay a sublicense fee between 10-20% calculated on the payments the Company receives from any such sublicense. | |||
As part of the Patent License Agreement, the Company has the right to apply to the Food and Drug Administration ("FDA") for the transfer of the orphan drug status, the investigational new drug applications ("INDs"), and the right to acquire the relevant clinical data set from Dr. Smith. The FDA has designated orphan drug status for the use of low dose naltrexone in the treatment of pediatric patients with Crohn’s disease and ulcerative colitis. | |||
The Patent License Agreement calls for the formation of a Development Committee to monitor the clinical progress of the Licensed Products and will consist of independent scientific and technical leaders who are highly regarded by the scientific community in the Field of Use of each Licensed Product. The development committee consists of at least one representative from the Licensor Parties and one representative from the Company in addition to outside experts in the field. | |||
Naltrexone in low dose is a platform immunomodulatory technology that the Company expects to clinically test in the treatment of other immune-mediated or immune-deficient diseases for which it has previously acquired additional patents. | |||
The Company signed an exclusive licensing agreement with The Penn State Research Foundation on January 18, 2013 to license all of the intellectual property developed by Dr. Ian S. Zagon, Dr. Patricia J. McLaughlin and Dr. Jill P. Smith for the treatment of cancer titled “Opioid Growth Factor and Cancer” and “Combination Therapy with Opioid Growth Factor and Taxanes for the Treatment of Cancer” (the “Licensing Agreement”). | |||
The patent covers methods and formulations related to the treatment and prevention of different cancers. More specifically, the present inventions describe the use of drugs that interact with opioid receptors (naltrexone, naloxone and the pentapeptide growth factor Met-enkephalin) to inhibit and arrest the growth of cancer. | |||
As part of the Licensing Agreement, the Company is working to acquire the orphan drug designation (IND) and clinical data set from Dr. Jill Smith. | |||
The Licensing Agreement calls for TNI BioTech to: (a) use commercially reasonable efforts to develop, commercialize, market and sell Licensed Products in a manner consistent with the Business Plan; (b) expend a minimum of $110,000 (per annum) to develop and commercialize Licensed Products as soon as practicable, consistent with sound business practices and judgment; (c) be responsible for obtaining all requisite regulatory approvals needed to use or sell Licensed Products in the Field of Use; and (d) make the first commercial sale of a Licensed Product by December 31, 2016. The Company is in compliance with these requirements. | |||
The Licensing Agreement provides that the Company must make an initial license fee of $100,000 and the issuance of 300,000 shares and an annual license maintenance fee in the low ten thousand dollar amount range. The Company will also make payments to licensor upon the achievement of certain milestone events such as initiations of Phase II or Phase III clinical trials in a low hundred thousand dollar amount, acceptance of the NDA by the FDA in a low hundred thousand amount and FDA approvals in a high hundred thousand dollar amount. The Company will issue shares upon reaching certain milestones including the issuance of a mid ten thousand amount of shares upon the first dosing of patients in clinical trials, the issuances of a low hundred thousand number of shares upon the initial sale of a licensed product and a milestone fee of a low hundred thousand share amount upon reaching sales of $20 million in cumulative sales. If the Company achieves all of the milestones, a total of $1,350,000 will be paid in milestone payments. | |||
The Company will also pay the licensor a percentage of net sales in the mid single digit range of the licensed products each quarter subject to a minimum royalty payment in the low hundred thousand dollar range. The Company must also pay the licensor a low double digit percentage of any payments received from any sublicenses. | |||
The Licensing Agreement calls for the formation of a Development Committee to monitor the clinical progress of the Licensed Products, which will consist of independent scientific and technical leaders who are highly regarded by the scientific community in the Field of Use of each Licensed Product. | |||
The Licensing Agreement terminates on the expiration or abandonment of the last patent to expire or become abandoned. The Company may terminate the Licensing Agreement at any time upon 60 days’ prior written notice and ceasing to make and sell all licensed products, the termination of all sublicenses and payment of all monies owed under the Licensing Agreement. The licensor may terminate the agreement 30 days after notice to the Company if the Company is 30 days late in payment or a breach that remains uncured for 45 days after written notice of such breach. | |||
On March 15, 2013 the Company executed a Patent License Agreement with Professor Fengping Shan. The Company obtained exclusive rights to develop and commercialize the licensed technology. The licensed technology is the intellectual property developed and owned by Professor Shan (i) relating to the treatment of a variety of diseases and conditions with MENK including multiple forms of lymphoma and cancer and (ii) a treatment method for humans infected with the HLTV-III (AIDS) virus including AIDS and AIDS related complex (ARC). The licensed technology includes the methods and formulations for these treatments including but not limited to all INDs, communications with regulatory agencies, patient data, and letters relating to these treatments. The licensed technology also includes the following patents: 200710158742.7 MENK, its application is in treating leukemia and other blood cancers; No. 200710051586.4 MENK, its application is in preparation of human and animal vaccines; No. 200610046249.1, a nasal spray formulation containing MENK; No. 201210290150.1 LDN, combined with MENK, its application is in preparation of an anticancer drug (Pending); No. 201210302259.2 LDN, combined with MENK, its application is in preparation of leukophoresis for anticancer (Pending); No. 200810229085.5 Compound MENK as a drug for colon cancer and pancreatic cancer; No. 200910011030.1, Naltrexone as well as analougues being anticancer drug. Under this license, the Company must issue 500,000 shares to Prof. Shan upon final transfer of the licenses, and reimburse Prof. Shan for all out of pocket expenses in connection with the patents in mid five figure range. The Company will pay Prof. Shan a mid single digit percentage running royalty of gross sales subject to decreases if third party intellectual property is needed to complete such sale or product but in no event less than a high percentage of a low single digit percentage and a low single digit percentage of all sublicense revenue. This agreement shall last for the duration of each of the licensed patents however the Company may terminate the license agreement on 120 days' written notice to Professor Shan. |
7_Commitments_and_Contingencie
7. Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
7. Commitments and Contingencies | ' |
Malawi Treatment Facilities | |
On July 14, 2012, GB Oncology and Imaging Group LTD (“GBOIG”) in partnership with the Company signed a letter of intent agreement to collaborate with the Government of Malawi to assist in expanding the treatment of cancer, HIV/AIDS and other infectious diseases. | |
The Company and GB will work in connection with the government of Malawi to open and operate clinics that provide treatments for HIV/AIDS, cancer and other infectious diseases. GBOIG and the Company originally expected to have the oncology and infectious disease clinic fully operational within 12 months of the signing of the Agreement, and to begin treatment for HIV patients within 180 days thereafter. However, delays in obtaining approvals required for the importation of the Company’s products are likely to delay the start of the project until the second half of 2014. Under the letter of intent, the Company and GBOIG will begin by providing HIV/AIDS treatment to 10,000 patients and hopefully expanding to 500,000 within 24 months of project start. The Company shall contribute $1,000 in initial capital to the venture. The Company shall be allocated 50% of the net income from the venture. Either party may terminate the venture with 180 days’ notice to the other party prior to the one-year anniversary of the Agreement. After the one-year anniversary, the agreement may only be terminated with 180 days' notice to the other party if the other party has breached the Agreement. | |
GB Oncology and Imaging Group LTD., a subsidiary of GB Energie LLC is a Washington D.C. based minority woman-owned business managed by Dr. Gloria B. Herndon. Dr. Herndon is also a director of TNI BioTech, Inc. | |
Open an Oncology and Infectious Disease Center in Malawi at Queen Elizabeth Central Hospital | |
On September 25, 2012, GBOIG in partnership with the Company, signed an agreement with the Government of Malawi to open an outpatient clinic at Queen Elizabeth Central Hospital (in Malawi) for the treatment of cancer and infectious disease. The duration of the Agreement shall be for 25 years with an optional 10 year renewal to be indicated by the Government of Malawi at least three years prior to the expiration of the term. The Government of Malawi shall bear the upfront costs for the agreement of $2,500,000. | |
Distribution Agreements in Nigeria | |
Effective November 9, 2012, the Company signed an exclusive Distribution Agreement with G-Ex Technologies/St. Maris Pharma and GB Pharma Holdings, LLC for the Federal Republic of Nigeria. Under the terms of the Distribution Agreement, G-Ex Technologies/St. Maris Pharma and GB Pharma Holdings LLC will have exclusive marketing and distribution rights to IRT-103 LDN and IRT-104 LDN cream in Nigeria until the end of the term of the agreement on December 31, 2017. TNI BIOTECH will be responsible for the manufacture and supply of IRT-103 LDN and IRT-104 LDN cream. As part of the Distribution Agreement, G-Ex Technologies/St. Maris Pharma will provide TNI BIOTECH with a revolving letter of credit for the minimum purchase of 750,000 doses monthly of IRT-103 LDN or IRT-104 LDN cream priced at $1.00 per dose. There are no upfront fees. | |
The Distribution Agreement calls for G-Ex Technologies/St. Maris Pharma and GB Pharma Holdings, LLC to purchase a minimum of 15,000,000 doses monthly within 24 months to maintain the exclusivity of the Agreement. Once G-Ex Technologies/St. Maris Pharma and GB Pharma Holdings, LLC reach sales of 1,000,000 doses per day, TNI BIOTECH has agreed to joint venture a factory in the Federal Republic of Nigeria to meet local demands. | |
G-Ex Technologies/St. Maris Pharma is a consortium of companies organized under the laws of the Republic of Nigeria operated by management, a consultant, general pharmaceutical, clinical pharmacy and marketing executives, each with over 25 years of industry experience and well versed in the changing dynamics of the prescription and over-the-counter drug international marketplace. G-Ex Technologies/St. Maris Pharma has been actively supported by medical practice professionals in business and academia who have been involved in the management of related drug therapies for many years. | |
The parties have been unable to perform under the agreement because a certificate of free sale was not obtained by the Company until November of 2013, and no extension has been granted. | |
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. AHAR intends to distribute Lodonal™ through a local distributor network, an Internet client base and directly to hospitals, pharmacists and doctors in Nigeria. The Company expects to implement the agreement in 2014, and expects to treat up to 500,000 patients per day by March 2015. Under the agreement, the Company is obligated to provide delivery of an initial supply of between 1 million and 1.5 million doses of Lodonal™ product to cover AHAR Pharma’s first-year purchase commitment. | |
Strategic Framework Agreement with Hubei Qianjiang Pharmaceutical Company | |
In February 2013, the Company signed a Strategic Framework Agreement for Cooperation with the Hubei Qianjiang Pharmaceutical Company. Under the Strategic Framework Agreement, the parties will work together to further the development of new products and conduct research and development on TNI’s licensed patented technology. Specifically, the parties aim to co-invest to develop and market products focusing on HIV, cancer and related autoimmune system therapies, develop co-ventured manufacturing facilities in China, and develop co-ventured distribution of the developed products in China and Africa. The agreement does not have a definitive term, as each new agreement resulting from the cooperation will set forth the material terms, including, but not limited to, fees, duration and termination therein. | |
Supervision and Inspection of Manufacturing in Nicaragua | |
On April 23, 2013, the Company signed a Contract with ViPharma for the Supervision and Inspection of Manufacturing Processes as part of its negotiations for a contract for the manufacturing of LDN in a tablet, capsule and/or cream. The Contract sets out the terms and conditions under which ViPharma will carry out the services of inspecting and supervising the manufacturing and packaging processes of LDN and ensure compliance with the FDA’s good manufacturing practices and the Company’s specifications. ViPharma will carry out its obligations in whatever Latin American country the Company ultimately decides to manufacture LDN within. Under the Contract, ViPharma has the exclusive rights to supervise and inspect all manufacturing processes of LDN in Latin America. The initial term of the agreement is ten years commencing in September 2013, with automatic five-year renewal terms provided neither party is in breach. The agreement may be terminated by (i) mutual agreement, (ii) in the event of a breach after a 45 day cure period or (iii) by either party upon provision of written notice at least 90 days before the end of the agreement, provided however that if TNI terminates the contract without cause it will be required to pay ViPharma a $10 million penalty. | |
Operating Leases | |
The Company leases office space in White Plains, New York, Frederick, Maryland, and Orlando, Florida. Rental expense for the three months ended March 31, 2014 and 2013 was $31,207 and $16,259, respectively. |
8_Related_Party_Transactions
8. Related Party Transactions | 3 Months Ended |
Mar. 31, 2014 | |
Related Party Transactions [Abstract] | ' |
8. Related Party Transactions | ' |
In 2012, Webfoot, Inc. provided financing to the Company in the amount of $121,128. Webfoot, Inc. is owned by the son of Noreen Griffin. On February 21, 2013, the Company entered into a formal loan agreement to evidence the amount owed by the Company. At March 31, 2014, $101,128 owed under the agreement. The loan bears interest at an annual rate of 6%. The interest is repayable at maturity. The note matures on February 21, 2015. | |
In 2012, Noreen Griffin made payments totaling $30,000 on the Company's behalf covering the costs of incorporation and merger-related expenses. On February 13, 2013, the Company entered into a formal loan agreement to evidence repayment of the amount owed on December 31, 2012. At March 31, 2014, the Company owed Ms. Griffin $30,000 under the agreement. The loan bears interest at an annual rate of 6%. The note matures on February 13, 2015. The interest is repayable at maturity. | |
In 2012, Griffin Enterprises, Inc. made payments on the Company's behalf covering the cost of incorporation and merger-related expenses. Griffin Enterprises, Inc. is wholly owned by Noreen Griffin. At March 31, 2014, the company owed Griffin Enterprises, Inc. $46,000. On February 13, 2013, the Company entered into a formal loan agreement to evidence repayment of the amount owed on December 31, 2012. The loan bears interest at an annual rate of 6%. The note matures on February 13, 2015. The interest is repayable at maturity. | |
On January 3, 2013, the Company formalized the terms under which Kelly O’Brien Wilson, the daughter-in-law of the Company's Chief Executive Officer is employed. Ms. Wilson had been working with the Company in 2012 and her three-year employment agreement is effective as of December 1, 2012. The terms of the agreement define her base salary, a grant of a common stock, and health insurance coverage. Ms. Wilson was issued 500,000 shares of common stock of the Company in January 2014. During the quarter ended March 31, 2014, the Company paid compensation to Ms. Wilson totaling $40,848. | |
9_Subsequent_Events
9. Subsequent Events | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Subsequent Events [Abstract] | ' | ||||
9. Subsequent Events | ' | ||||
The following is a schedule of shares issued subsequent to March 31, 2014. | |||||
Shares | |||||
Shares issued for consulting expenses | 650,000 | ||||
On May 1, 2014, the Company announced a plan to spin off its wholly-owned subsidiary, Cytocom, an entity established to operate the Company's drug development business. Following the spin-off, Cytocom will initially focus on developing LDN and MENK (the "Drug Development Business"). The Company will continue to retain rights to certain intellectual property assets, and will focus on manufacturing, distribution and marketing of these LDN and MENK therapies for the treatment of both humans and animals in certain territories (the "Marketing and Distribution Business"). | |||||
To affect the spin-off "distribution" (the "Distribution"), the Company will first undertake certain internal reorganizational steps, following which Cytocom will hold the Drug Development Business subject to certain terms and conditions. At the time of the Distribution, each Company stockholder will receive one common share of Cytocom for every one share of Company common stock held by such Company stockholder as of 5:00 p.m., Eastern Time, on July 15, 2014, which is the "record date" for the Distribution. However, to the extent that a Company stockholder sells a portion or all of that stockholder's shares of the Company’s common stock prior to the record date, such stockholder also will be pro-rata selling the right to receive common shares of Cytocom through the Distribution. Company stockholders will not be required to pay any consideration to participate in the Distribution; however, mandatory surrender of existing Company shares will be required to receive shares of Cytocom through the Distribution. Company shareholders as of the record date will continue to own shares in the Company in the same form and in the same quantity as of the record date. | |||||
The Company will continue to be quoted on the OTCQB Market after the Distribution is completed and will continue to trade under the symbol "TNIB." Cytocom will be a reporting company under the Securities Exchange Act of 1934, as amended, by the time of the Distribution, but will not initially be quoted on any securities marketplace or exchange. | |||||
The Distribution does not require Company stockholder approval. An information statement containing details regarding the Distribution and Cytocom's proposed business and management will be mailed to the Company stockholders prior to the Distribution. The consummation of the Distribution is subject to the effectiveness of a Form 10 registration statement filed by Cytocom and the satisfaction or waiver of certain conditions that will be described in the information statement. |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Summary Of Significant Accounting Policies Policies | ' | ||||||||||
Basis of Presentation | ' | ||||||||||
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), as amended for interim financial information. The financial information as of March 31, 2014 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 ("2013 10-K"). The unaudited interim financial statements should be read in conjunction with the 2013 10-K, which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the years ended December 31, 2013 and 2012. | |||||||||||
Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the three months ended March 31, 2014 are not necessarily indicative of results for the full fiscal year. | |||||||||||
Use of Estimates | ' | ||||||||||
The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates. | |||||||||||
Cash, Cash Equivalents, and Short-Term Investments | ' | ||||||||||
The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value. | |||||||||||
Concentration of Credit Risk | ' | ||||||||||
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of a default by the financial institutions holding its cash and cash equivalents to the extent of amounts recorded on the balance sheets. | |||||||||||
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. | |||||||||||
Computer Equipment | ' | ||||||||||
Computer equipment is stated at cost, less accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged against expense as incurred. Depreciation expense from continuing operations for the three months ended March 31, 2014 and 2013 was $575 and $120, respectively. | |||||||||||
Intangible Assets | ' | ||||||||||
Costs incurred to acquire and/or develop the Company’s product licenses and patents are capitalized and amortized by straight-line methods over estimated useful lives of seven to sixteen years. Intangible assets are stated at the lower of cost or estimated fair market value. Amortization expense for the three months ended March 31, 2014 and 2013 was $718,712 and $696,124, respectively. The Company estimates its amortization expense related to these assets will approximate $2,800,000 each year for the next five years. | |||||||||||
Impairment of Long-Lived Assets | ' | ||||||||||
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable as prescribed by ASC Topic 360, “Property, Plant and Equipment.” If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company will recognize an impairment loss equal to the difference between its carrying amount and its estimated fair value. No impairment losses were recognized for the three months ended March 31, 2014 or for the corresponding period in 2013. | |||||||||||
Research and Development Costs | ' | ||||||||||
Research and development costs are charged to expense as incurred and are typically comprised of salaries and benefits, pre-clinical studies, clinical trial activities, drug development and manufacturing, fees paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf and third-party service fees, including clinical research organizations and investigative sites. Costs for certain development activities, such as clinical trials are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as operating expenses. | |||||||||||
Income Taxes | ' | ||||||||||
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 ASC 740-10, Accounting for Uncertainty in Income Taxes. 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. | |||||||||||
Share-Based Compensation and Issuance of Stock for Non-Cash Consideration | ' | ||||||||||
The Company measures and recognizes compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values equaling either the market value of the shares issued or the value of consideration received, whichever is more readily determinable. | |||||||||||
The 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. | |||||||||||
Net Loss per Share | ' | ||||||||||
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method and the if-converted method. Dilutive common stock equivalents are comprised of common stock purchase warrants and options outstanding. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position. | |||||||||||
A calculation of basic and diluted net loss per share follows: | |||||||||||
For the three months ended March 31, | |||||||||||
2014 | 2013 | ||||||||||
Historical net loss per share: | |||||||||||
Numerator | |||||||||||
Net loss | $ | (17,664,940 | ) | $ | (14,689,674 | ) | |||||
Net loss attributed to Common stockholders | $ | (17,664,940 | ) | $ | (14,689,674 | ) | |||||
Denominator | |||||||||||
Weighted-average common shares outstanding— | 81,562,670 | 49,983,416 | |||||||||
Denominator for basic and diluted net loss per share | |||||||||||
Basic and diluted net loss per share attributed | $ | (0.22 | ) | $ | (0.29 | ) | |||||
to common stockholders | |||||||||||
The Company’s potential dilutive securities which include stock and warrants have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average Common stock outstanding used to calculate both basic and diluted net loss per share is the same. | |||||||||||
The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be antidilutive: | |||||||||||
For the three months ended March 31, | |||||||||||
2014 | 2013 | ||||||||||
Warrants to purchase Common stock | 8,824,250 | 7,957,500 | |||||||||
8,824,250 | 7,957,500 | ||||||||||
Recent Accounting Standards | ' | ||||||||||
Any new accounting pronouncements issued by the FASB, as applicable, have been or will be adopted by the Company upon or before the expiration of the extended transition period provided under Section 102(b)(1) of the JOBS Act. |
4_Capital_StructureCommon_Stoc1
4. Capital Structure-Common Stock and Common Stock Purchase Warrants (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Capital Structure-Common Stock And Common Stock Purchase Warrants Tables | ' | ||||||||||||
Schedule of outstanding stock warrants | ' | ||||||||||||
Number of | Exercise | Weighted | |||||||||||
Shares | Price | Average Price | |||||||||||
Warrants as of December 31, 2013 | 7,957,500 | $ | 1.00 – 15.00 | $ | 1.77 | ||||||||
Issued in the three months ended March 31, 2014 | 1,448,000 | $ | 1.00-1.50 | $ | 1.33 | ||||||||
Expired | – | – | |||||||||||
Exercised | 581,250 | $ | 0.5 | $ | 0.5 | ||||||||
Warrants as of March 31, 2014 | 8,824,250 | $ | 0.50-15.00 | $ | 1.66 | ||||||||
Summary of outstanding warrants | ' | ||||||||||||
Number of | Exercise | Remaining Life (years) | |||||||||||
Expiration Date | Shares | Price | |||||||||||
Third Quarter 2015 | 745,000 | $ | 1.50-2.00 | 1.5 | |||||||||
Fourth Quarter 2015 | 268,750 | $ | 1.5 | 1.75 | |||||||||
Second Quarter 2016 | 37,500 | $ | 3.00-5.00 | 2.25 | |||||||||
Third Quarter 2016 | 525,000 | $ | 0.50-5.00 | 2.5 | |||||||||
Third Quarter 2017 | 1,500,000 | $ | 1.00-1.50 | 3.5 | |||||||||
Fourth Quarter 2017 | 2,941,666 | $ | 1.00-9.00 | 3.75 | |||||||||
First Quarter 2018 | 127,500 | $ | 15 | 4 | |||||||||
Second Quarter 2018 | 33,834 | $ | 15 | 4.25 | |||||||||
Third Quarter 2018 | 400,000 | $ | 1 | 4.5 | |||||||||
Fourth Quarter 2018 | 1,197,500 | $ | 1.00-1.50 | 4.75 | |||||||||
First Quarter 2019 | 1,048,000 | $ | 1.5 | 5 | |||||||||
9_Subsequent_Events_Tables
9. Subsequent Events (Tables) | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Subsequent Events Tables | ' | ||||
Schedule of shares issued | ' | ||||
Shares | |||||
Shares issued for consulting expenses | 650,000 |
2_Summary_of_Significant_Accou2
2. Summary of Significant Accounting Policies (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Numerator | ' | ' |
Net loss | ($17,664,940) | ($14,689,674) |
Net loss attributed to Common stockholders | ($17,664,940) | ($14,689,674) |
Denominator | ' | ' |
Weighted-average common shares outstanding-Denominator for basic and diluted net loss per share | 81,562,670 | 49,983,416 |
Basic and diluted net loss per share attributed to common stockholders | ($0.22) | ($0.29) |
2_Summary_of_Significant_Accou3
2. Summary of Significant Accounting Policies (Details 1) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Summary Of Significant Accounting Policies Details 1 | ' | ' |
Warrants to purchase Common stock | 8,824,250 | 7,957,500 |
2_Summary_of_Significant_Accou4
2. Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Amortization expense | $718,712 | $696,124 |
Computer equipment | ' | ' |
Depreciation expense | $575 | $120 |
4_Capital_StructureCommon_Stoc2
4. Capital Structure-Common Stock and Common Stock Purchase Warrants (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Number of Warrants | ' |
Beginning Balance | 7,957,500 |
Issued | 1,448,000 |
Forfeited | ' |
Exercised | 581,250 |
Ending Balance | 8,824,250 |
Warrants Price Per Share | ' |
Beginning Balance | '1.00 B 15.00 |
Issued | '1.00 B 15.00 |
Exercised | '0.50 |
Ending Balance | '0.50-15.00 |
Weighted Average Exercise Price | ' |
Beginning Balance | $1.77 |
Issued | $1.33 |
Exercised | 0.5 |
Ending Balance | $1.66 |
4_Capital_StructureCommon_Stoc3
4. Capital Structure-Common Stock and Common Stock Purchase Warrants (Details 1) | Mar. 31, 2014 | Dec. 31, 2013 |
Number of Shares | 8,824,250 | 7,957,500 |
Third Quarter 2015 | ' | ' |
Number of Shares | 745,000 | ' |
Exercise Price | '1.50-2.00 | ' |
Remaining Life (years) | '1 year 6 months | ' |
Fourth Quarter 2015 | ' | ' |
Number of Shares | 268,750 | ' |
Exercise Price | '1.50 | ' |
Remaining Life (years) | '1 year 9 months | ' |
Second Quarter 2016 | ' | ' |
Number of Shares | 37,500 | ' |
Exercise Price | '3.00-5.00 | ' |
Remaining Life (years) | '2 years 3 months | ' |
Third Quarter 2016 | ' | ' |
Number of Shares | 525,000 | ' |
Exercise Price | '0.50-5.00 | ' |
Remaining Life (years) | '2 years 6 months | ' |
Third Quarter 2017 | ' | ' |
Number of Shares | ' | 1,500,000 |
Exercise Price | ' | '1.00-1.50 |
Remaining Life (years) | ' | '3 years 6 months |
Fourth Quarter 2017 | ' | ' |
Number of Shares | ' | 2,941,666 |
Exercise Price | ' | '1.00-9.00 |
Remaining Life (years) | ' | '3 years 9 months |
First Quarter 2018 | ' | ' |
Number of Shares | ' | 127,500 |
Exercise Price | ' | '15.00 |
Remaining Life (years) | ' | '4 years |
Second Quarter 2018 | ' | ' |
Number of Shares | ' | 33,834 |
Exercise Price | ' | '15.00 |
Remaining Life (years) | ' | '4 years 3 months |
Third Quarter 2018 | ' | ' |
Number of Shares | ' | 400,000 |
Exercise Price | ' | '1.00 |
Remaining Life (years) | ' | '4 years 6 months |
Fourth Quarter 2018 | ' | ' |
Number of Shares | ' | 1,197,500 |
Exercise Price | ' | '1.00-1.50 |
Remaining Life (years) | ' | '4 years 9 months |
First Quarter 2019 | ' | ' |
Number of Shares | ' | 1,048,000 |
Exercise Price | ' | '1.50 |
Remaining Life (years) | ' | '5 years |