As filed with the Securities and Exchange Commission on October 16, 2017

Registration No. 333-220413​

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 2
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

IMMUNE PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

(Address including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Elliot Maza
Chief Executive Officer
550 Sylvan Avenue
Englewood Cliffs, NJ 07632
Telephone: (201) 464-2677
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of  “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 in Section 7(a)(2)(B) of the Securities Act.

(1)

Pursuant to Rule 416, the securities being registered hereunder include such indeterminate number of additional securities as may be issuable to prevent dilution resulting from stock splits, stock dividends or similar transactions.

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(2)

Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

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(3)

Pursuant to Rule 457(i) of and existing interpretations under the Securities Act, no separate registration fee is required for the common stock underlying the Preferred Stock because such securities are being registered at the same time as the Preferred Stock.

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(4)

No fee pursuant to Rule 457(g) under the Securities Act.

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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is subject to completion, is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to completion, dated October 16, 2017

PRELIMINARY PROSPECTUS

Immune Pharmaceuticals Inc.

15,000 Units consisting of Series E convertible preferred stock and warrants
(and shares of common stock underlying shares of Series E convertible preferred stock and warrants)

We are offering 15,000 units, with each unit consisting of one share of Series E Convertible Preferred Stock, par value $0.0001 per share, with a stated value of  $1,080.00 per share (the “Series E Preferred Stock” or “Preferred Stock”), convertible at any time at the holder’s option into a number of shares of our common stock equal to $        divided by the Conversion Price (as defined herein), and warrants (the “Warrants”) to purchase shares of our common stock at an initial exercise price of  $       per share, at a public offering price of  $1,000 per unit. The number of Warrants included in each unit shall be equal to the number of shares of common stock issuable upon conversion of the Series E Preferred Stock at the “Set Price” (as defined herein). Assuming a Set Price (as defined herein) of  $1.60 per share, the closing price of our common stock on the NASDAQ Capital Market on October 13, 2017, each unit shall consist of one (1) share of our Series E Preferred Stock and Warrants to purchase 675 shares of our common stock. The Conversion Price and the exercise price are subject to appropriate adjustment in the event of recapitalization events, stock dividends, dilutive issuances, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock. Each Warrant will be immediately exercisable after issuance and will expire seven (7) years from the date of issuance.

The units will not be certificated and the shares of Series E Preferred Stock and warrants comprising such units are immediately separable and will be issued separately in this offering.

The price of our common stock on the NASDAQ Capital Market during recent periods was only one of many factors in determining the public offering price. Other factors we considered in determining the public offering price included our history, our prospects, the industry in which we operate, our past and present operating results, the previous experience of our executive officers and the general condition of the securities markets at the time of this offering.

Our common stock is listed on the NASDAQ Capital Market under the symbol “IMNP.” The last reported sale price of our common stock on October 13, 2017 was $1.60 per share. There is no established public trading market for the Series E Preferred Stock or the Warrants and we do not expect a market to develop. In addition, we do not intend to list the Series E Preferred Stock or the Warrants on the NASDAQ Capital Market, any other national securities exchange or any other nationally recognized trading system.

Maxim Group LLC, which we refer to as the “representative,” has agreed to act as the representative of the underwriters in connection with this offering. The underwriters may engage one or more selected dealers in this offering.

(1)

We estimate the total expenses of this offering payable by us, excluding the underwriting discount, will be approximately $130,000.

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Please refer to the section entitled “Underwriting” in this prospectus for additional information regarding total compensation for the underwriter.

The above summary of offering proceeds to us does not give effect to any exercise of the warrants being issued in this offering. Delivery of the Series E Preferred Stock and the Warrants is expected to be made on or before            , 2017 subject to customary closing conditions.

Investing in our common stock involves a high degree of risk. See the section entitled “Risk Factors” beginning on page 16 of this prospectus and elsewhere in this prospectus for a discussion of information that should be considered in connection with an investment in our common stock.

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Sole Book Running Manager

Maxim Group LLC

The date of this prospectus is            , 2017

TABLE OF CONTENTS

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ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus, including information incorporated by reference herein, or in any related free writing prospectus filed by us with the Securities and Exchange Commission, or the SEC. We have not, and the underwriters and their affiliates have not, authorized anyone to provide you with any information or to make any representation not contained in this prospectus. We do not, and the underwriters and their affiliates do not, take any responsibility for, and can provide no assurance as to the reliability of, any information that others may provide to you. This prospectus is not an offer to sell or an offer to buy securities in any jurisdiction where offers and sales are not permitted. The information in this prospectus is accurate only as of its date, regardless of the time of delivery of this prospectus or any sale of securities. You should also read and consider the information in the documents to which we have referred you under the caption “Where You Can Find More Information” in the prospectus. In addition, this prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under the heading “Where You Can Find More Information.”

You should assume that the information in this prospectus is accurate only as of the date on the front of this document and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus, or any sale of a security registered under the registration statement of which this prospectus is a part.

For investors outside the United States, neither we nor the underwriters have done anything that would permit a public offering of the securities or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities and the distribution of this prospectus outside of the United States.

This prospectus contains and incorporates by reference market data and industry statistics and forecasts that are based on our own internal estimates as well as independent industry publications and other publicly-available information. Although we believe these sources are reliable, we do not guarantee the accuracy or completeness of this information and we have not independently verified this information. Although we are not aware of any misstatements regarding the market and industry data presented in this prospectus or the documents incorporated herein by reference, these estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Risk Factors” in this prospectus, and under similar headings in the other documents that are incorporated herein by reference. Accordingly, investors should not place undue reliance on this information.

We and the underwriter have not authorized anyone to provide any information or to make any representations other than those contained in or incorporated by reference in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in or incorporated by reference in this prospectus is accurate only as of its date regardless of the time of delivery of this prospectus or of any sale of Preferred Stock, Warrants or common stock.

To the extent there is a conflict between the information contained in this prospectus, on the one hand, and the information contained in any document incorporated by reference filed with the Securities and Exchange Commission (SEC) before the date of this prospectus, on the other hand, you should rely on the information in this prospectus. If any statement in a document incorporated by reference is inconsistent with a statement in another document incorporated by reference having a later date, the statement in the document having the later date modifies or supersedes the earlier statement.

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Neither we nor the underwriter has done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who come into possession of this prospectus and any free writing prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any free writing prospectus applicable to that jurisdiction.

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Program	​	​	Primary Indication(s)	​	​	Status	​
Bertilimumab	​	​	Bullous Pemphigoid	​	​	Phase 2	​
		​	Ulcerative colitis	​	​	Phase 2	​
NanoCyclo	​	​	Atopic Dermatitis, Psoriasis	​	​	Preclinical	​
Ceplene/IL-2	​	​	Acute Myeloid Leukemia	​	​	Phase 3 (US)	​
		​	​	​	​	Approved (EU)	​
Crolibulin	​	​	Solid Tumors	​	​	Phase 2	​
Azixa	​	​	Glioblastoma multiforme	​	​	Phase 2	​
NanomAbs	​	​	Solid Tumors	​	​	Preclinical	​
Bispecific Antibodies	​	​	Oncology	​	​	Preclinical	​
AmiKet	​	​	Neuropathic Pain	​	​	Phase 2	​
Lido PAIN	​	​	Pain	​	​	Phase 2	​

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this prospectus and the documents incorporated by reference herein that are not purely historical are forward-looking statements. This prospectus and the documents incorporated by reference herein contain forward-looking statements. Such statements include statements regarding our expectations, hopes, beliefs or intentions regarding the future, including but not limited to statements regarding our market, strategy, competition, development plans (including acquisitions and expansion), financing, revenues, operations, and compliance with applicable laws. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks described in greater detail in the following paragraphs. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement. Market data used throughout this prospectus is based on published third party reports or the good faith estimates of management, which estimates are based upon their review of internal surveys, independent industry publications and other publicly available information. Although we believe that such sources are reliable, we do not guarantee the accuracy or completeness of this information, and we have not independently verified such information.

Forward-looking statements contained herein involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These factors include, among others:

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our limited liquidity and ability to generate revenue;

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our ability to continue to meet our obligations under our existing debt agreements;

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risks associated with our ability to raise additional funds sufficient to meet our working capital requirements;

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our limited operating history;

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our history of operating losses since our inception;

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our ability to continue to operate as a going concern;

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our ability to maintain the listing of our common stock on NASDAQ;

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risks associated with our ability to protect our intellectual property;

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risks associated with litigation;

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our reliance on collaborative partners and others for further clinical trials, development, manufacturing and commercialization of our product candidates;

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our ability to complete our planned clinical trials (or initiate other trials) in accordance with our estimated timelines due to delays;

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the cost, delays and uncertainties associated with our scientific research, product development, clinical trials and regulatory approval process;

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the cost, delays and uncertainties associated with our scientific research, product development, clinical trials and regulatory approval process;

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our dependence upon key personnel;

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success in retaining or recruiting, or changes required in, our officers, key employees or directors:

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our ability to find partners for our products on attractive terms, on a timely basis, or at all;

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our ability to obtain approval to market and commercialize any of our product candidates;

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our expectations regarding government and third-party payor coverage and reimbursement; and

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the highly competitive nature of our business.

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RISK FACTORS

Investing in our securities involves a high degree of risk. Prospective investors should carefully consider the risks described below, together with all of the other information included, incorporated by reference or referred to in this prospectus, including our Annual Report on Form 10-K for the year ended December 31, 2016, our Quarterly Report for the periods ended March 31, 2017 and June 30, 2017 and our Current Reports on Form 8-K, before purchasing our securities. There are numerous and varied risks as set forth below that may prevent us from achieving our goals, and the risks we describe are not the only ones facing us. If any of these risks actually occur, or if any risks or uncertainties not presently known to us or that we currently deem immaterial may impair our business or operations, then our business, financial condition or results of operations may be materially adversely affected. In such cases, the trading price of our common stock could decline and investors could lose all or part of their investment.

Risks relating to our financial position and need for additional capital

We have limited liquidity and, as a result, we may not be able to meet our obligations under existing debt agreements.

Since our inception in July 2010, we have incurred significant losses and expect to continue to operate at a net loss in the foreseeable future. For the fiscal year ended December 31, 2016, we incurred net losses of $32.7 million and a total accumulated deficit of  $95.6 million. For the six months ended June 30, 2017, our net loss was $8.7 million and our accumulated deficit was $104.3 million. To date, we have financed our operations primarily through private placements of common stock and preferred stock, public offering, convertible debt securities and borrowings under secured loans. Our revenue to date has consisted of royalties on licensed patents. We have devoted substantially all of our financial resources and efforts to developing bertilimumab, our phase 2 drug for the treatment of inflammatory diseases and NanomAbs, our platform for the targeted delivery of cancer drugs, manufacturing bertilimumab under cGMPs, conducting preclinical studies and clinical trials. We are still in the early stages of development of our product candidates, and we have not completed development of bertilimumab, NanomAbs or other drugs. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially as we continue the research and development of our product candidates.

We will require additional financing during the remainder of fiscal 2017 to continue at our expected level of operations. Management believes the Company’s ability to continue its operations depends on its ability to access capital markets and generate and grow revenue though management believes that the Company will continue to incur losses for the immediate future. We expect to satisfy our cash needs through additional equity or debt financing, and/or strategic alliances until we can achieve profitability and positive cash flows from operating activities, if ever.

To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling any products for which we may obtain regulatory approval, and establishing and managing our collaborations at various stages of each candidate’s development. We are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.

None of our drug candidates has received FDA or foreign regulatory marketing approval (except Ceplene). In order to grant marketing approval, the FDA or foreign regulatory agencies must conclude that our clinical data and that of our collaborators establish the safety and efficacy of our drug candidates. Furthermore, our strategy includes entering into collaborations with third parties to participate in the development and commercialization of its products. In the event that third parties have control over the preclinical development or clinical trial process for a product candidate, the estimated completion date would largely be under control of that third party rather than under our control. We cannot forecast with any degree of certainty which of its drug candidates will be subject to future collaborations or how such arrangements would affect its development plan or capital requirements.

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Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the FDA or EMA to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase and revenue could be further delayed.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our Company could also cause you to lose part or all of your investment.

We will require substantial additional funding which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional capital, we will be unable to complete the development and commercialization of our product candidates, or continue our development programs.

Our operations have consumed substantial amounts of cash since our inception in 2010. We will require additional capital for the further development and commercialization of our product candidates as well as to fund our other operating expenses and capital expenditures.

We cannot be certain that additional funding will be available on acceptable terms or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates. We may also seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available. Any of these events could significantly harm our business, financial condition and results of operations.

We expect that a large percentage of our future research and development expenses will be incurred in support of current and future preclinical and clinical development programs. These expenditures are subject to numerous uncertainties in timing and cost to completion. We test our product candidates in numerous preclinical studies for toxicology, safety and efficacy. We then conduct early stage clinical trials for each drug candidate. As we obtain results from clinical trials, we may elect to discontinue or delay clinical trials for certain product candidates or programs in order to focus resources on more promising product candidates or programs. Completion of clinical trials may take several years but the length of time generally varies according to the type, complexity, novelty and intended use of a drug candidate. The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development.

In order to carry out our business plan and implement our strategy, we will need to obtain additional financing from time to time and may choose to raise additional funds through strategic collaborations, licensing arrangements, public or private equity or debt financing, bank lines of credit, asset sales, government grants, or other arrangements. We cannot be sure that any additional funding will be available on terms favorable to us, or at all. Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders, and debt or equity financing, if available, may subject us to restrictive covenants and significant interest costs. If we obtain funding through strategic collaborations or licensing arrangement, we may be required to relinquish our rights to certain of our product candidates or marketing territories.

In addition, certain investors, including institutional investors, may be unwilling to invest in our securities if we are unable to maintain the listing of our common stock on a U.S. national securities exchange. Our inability to raise capital when needed would harm our business, financial condition and results of operations, and could cause our stock price to decline or require that we wind down our operations altogether.

We have incurred operating losses since our inception. We expect to incur operating losses for the foreseeable future and may never achieve or maintain profitability.

At December 31, 2016, we had a working capital deficit of  $8.5 million. Our accumulated deficit amounted to $95.6 million and $63.0 million at December 31, 2016 and December 2015, respectively. Our

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net loss for the years ended December 31, 2016 and 2015 was $32.7 million and $17.2 million, respectively. Net cash used in operating activities for both the years ended December 31, 2016 and 2015 was $12.3 million and $13.9 million, respectively. Operations since inception have been funded primarily with the proceeds from equity and debt financings. As of December 31, 2016, we had cash of  $0.3 million. As of June 30, 2017, we had a working capital deficit of  $14.2 million and our accumulated deficit was $104.3 million. Our net loss was $8.7 million and $8.8 million for the six months ended June 30, 2017 and 2016, respectively. Our cash used in operations was $4.5 million and $5.9 million for the six months ended June 30, 2017 and 2016, respectively. As of June 30, 2017, we had approximately $22,000 in cash. We will continue to fund operations from cash on hand and through the similar sources of capital previously described. We can give no assurance that such capital will be available to us on favorable terms or at all. If we are unable to raise additional funds in the future on acceptable terms, or at all, we will be forced to cease or curtail our development activities. Any additional sources of financing will likely involve the sale of our equity securities, which will have a dilutive effect on existing stockholders.

We have a limited operating history, expect to continue to incur substantial operating losses and may be unable to obtain additional financing, causing substantial doubt about our ability to continue as a going concern over the next twelve months. The report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern.

The Independent Registered Public Accounting Firm’s Report issued in connection with our audited financial statements for the year ended December 31, 2016 stated that there is “substantial doubt about our ability to continue as a going concern”. If we are not able to continue our business as a going concern, we may be forced to liquidate our assets for an amount less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose part or all of their investment. Our ability to continue as a going concern is dependent on a combination of several factors, including, our ability to raise capital by issuing debt or equity securities to investors, license or sell our product candidates to other pharmaceutical companies, and generate revenues from successfully developed products. We have limited capital resources and our operations, since inception, have been funded by the proceeds of equity and debt financings.

In connection with the preparation of our audited financial statements as of and for the six months ended June 30, 2017 and as of and for the year ended December 31, 2016, the Company’s management has evaluated whether there is substantial doubt about the Company’s ability to continue as a going concern and has determined that substantial doubt existed based on the following factors: (i) the Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations within 12 months after the financial statements were issued; (ii) the Company may not identify commercial partners to support development of its drug candidates; (iii) the Company will require additional financing for the remainder of fiscal 2017 to continue at its expected level of operations; (iv) if the Company fails to obtain the needed capital, it will be forced to delay, scale back, or eliminate some or all of its R&D programs or perhaps cease operations. In the opinion of management, these factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern.

The terms of our loan and security agreement place restrictions on our operating and financial flexibility. If we raise additional capital through this facility, the terms of any new debt could further restrict our ability to operate our business.

As of September 29, 2017, the outstanding principal balance of our loan and security agreement with MEF I, L.P. (assigned by Hercules Capital, Inc.) was $1.0 million. The loan and security agreement contains customary affirmative and negative covenants and events of default applicable to us and our subsidiaries. The negative covenants include, among others, restrictions on transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making certain investments, incurring liens and selling certain assets in each case subject to certain exceptions. If we default under the facility, the lender may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lenders right to repayment would be senior to the rights of the holders of our common stock to receive any proceeds

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from the liquidation. Any declaration by the lender of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

If we fail to comply with the continued minimum closing bid requirements of the NASDAQ Capital Market LLC (“NASDAQ”) or other requirements for continued listing, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.

Our common stock is listed for trading on the NASDAQ. We must satisfy NASDAQ’s continued listing requirements, including, among other things, a minimum closing bid price requirement of  $1.00 per share for 30 consecutive business days. If a company’s common stock trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, NASDAQ will send a deficiency notice to the company, advising that it has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements. Thereafter, if such a company does not regain compliance with the bid price requirement, a second 180-day compliance period may be available.

A delisting of our common stock from NASDAQ could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development opportunities.

On January 5, 2016, we received a notification letter from NASDAQ informing us that for the last 30 consecutive business days, the bid price of our securities had closed below $1.00 per share. This notice had no immediate effect on our NASDAQ listing and we had 180 calendar days, or until July 5, 2016, to regain compliance. To regain compliance, the closing bid price of our securities must be at least $1.00 per share for a minimum of ten consecutive business days.

On July 6, 2016, we received a notification from the Listing Qualifications Department of the NASDAQ indicating that we had been granted an additional 180-calendar day extension, or until January 3, 2017, to regain compliance with the requirements under NASDAQ Listing Rule 5810(c)(3) (the “Rule”). The notification stated that extension determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Capital Market, with the exception of the bid price requirement. The notification had no immediate effect on the NASDAQ listing or trading of our common stock.

On January 4, 2017, we received a letter from the NASDAQ Listing Qualifications Staff  (the “Staff”) stating that the Staff has determined to delist our securities from the NASDAQ because the Company is not in compliance with the $1.00 minimum bid price requirement for continued listing set forth in the NASDAQ Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), unless we timely request a hearing before the NASDAQ’s Hearings Panel (the “Panel”) by January 11, 2017.

On March 13, 2017, we announced that following a hearing on March 9, 2017, where we presented our plan to regain compliance including ongoing business events, the Nasdaq Hearings Panel (the “Panel”) granted our request for additional time to comply with NASDAQ listing requirements, subject to the following: (i) we must inform the Panel on or before April 14, 2017 that we have effected a split in a ratio sufficient to cure the deficiency and (ii) we must have evidenced a closing bid price of  $1.00 or more for a minimum of ten prior consecutive trading days on or before May 1, 2017. On April 13, 2017, we effected a 1-for-20 reverse stock split under a new CUSIP number 45254C200. On May 24, 2017, we received written confirmation from NASDAQ that we had regained compliance with Rule 5550(a)(2). All share and per share amounts in this registration statement have been reflected on a post-split basis.

Also, as we reported on April 24, 2017, and as noted in the above-referenced May 24th notification letter issued by NASDAQ’s Hearing Panel, we were notified of additional deficiencies on April 18, 2017 and May 23, 2017, due to our failure to timely file our Form 10-K for the year ended December 31, 2016 and our Form 10-Q for the period ended March 31, 2017. On May 10, 2017, we provided a submission to the Panel explaining the reason for the late filings and asked that the Panel to extend our listing through June 15, 2017. The Panel delayed a decision on that issue until after May 17, 2017, the date by which we

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represented we would file our delinquent Form 10-K. We filed the delinquent annual report on May 17, 2017, as acknowledged by the Panel, and informed the Panel shortly thereafter that we were on target to file the late Form 10-Q and regain compliance with the filing rule by June 15, 2017. We filed the delinquent First Quarter Report on Form 10-Q on June 14, 2017. Thereafter, the Panel confirmed by letter dated June 15, 2017 that we had regained compliance with Nasdaq’s Listing Rule 5250(c)(1) and that we are in compliance with other applicable requirements as set forth in the decision and required for listing on the NASDAQ Stock Market, and Nasdaq has closed this matter, and determined to continue the listing of the Company’s securities.

On August 23, 2017, we received a notification letter from NASDAQ informing us that we no longer comply with the NASDAQ listing rule that requires companies listed on the NASDAQ Capital Market to maintain a minimum of  $2,500,000 in stockholders’ equity. Our Form 10-Q for the period ended June 30, 2017 reported a stockholders’ deficit of  ($131,000). This notice has no immediate effect on our NASDAQ listing as we have 180 calendar days, or until February 23, 2018, to regain compliance; however, if we are unable to regain compliance with the minimum stockholders’ equity requirement by February 23, 2018, our securities may be delisted from NASDAQ. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. Further, if we were to be delisted from NASDAQ, our common stock would no longer be recognized as a “covered security” and we would be subject to regulation in each state in which we offer our securities. Thus, delisting from NASDAQ could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly impact the ability of investors to trade our securities and would negatively impact the value and liquidity of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.

Risks related to our Common Stock

The price of our common stock is volatile and fluctuates substantially, which could result in substantial losses for purchasers of our shareholders.

Our stock price is often volatile. The stock market in general and the market for smaller biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price for our common stock may be influenced by many factors, including:

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the success of competitive products or technologies;

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results of clinical trials of our product candidates or those of our competitors;

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developments related to our existing or any future collaboration;

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regulatory or legal developments in the U.S. and other countries;

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developments or disputes concerning patent applications, issued patents or other proprietary rights;

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the recruitment or departure of key personnel;

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the level of expenses related to any of our product candidates or clinical development programs;

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product candidates or products;

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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

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variations in our financial results or those of companies that are perceived to be similar to us;

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changes in the structure of healthcare payment systems;

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market conditions in the pharmaceutical and biotechnology sectors;

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•

general economic, industry and market conditions; and

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the other factors described in this “Risk Factors” section.

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If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about our business or us. Three analysts in the U.S. and one in Sweden currently cover our stock. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our target animal studies and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

A significant number of shares of our common stock are issuable pursuant to outstanding notes, options and warrants, and we expect to issue additional shares of common stock in the future. Sales of these shares will dilute the interests of other security holders and may depress the price of our common stock.

As of October 10, 2017, there were 13,676,961 shares of common stock outstanding, with 758,041 shares of common stock issuable upon exercise of outstanding options as of October 10, 2017 under our Amended and Restated 2015 Equity Incentive Plan (the “2015 Plan”); and 715,413 shares of common stock issuable upon the exercise of warrants outstanding as of October 10, 2017, 480,000 shares potentially issuable upon conversion of the May 2017 Notes, 300,000 shares potentially issuable upon conversion of the July 2017 Note, 1,589,879 shares potentially issuable upon conversion of the July Senior Secured Convertible Promissory Note, 858,000 shares potentially issuable upon conversion of August 2017 Convertible Debentures and 149,500 shares potentially issuable upon conversion of the September 2017 Convertible Debentures. In addition, we may issue additional common stock and warrants from time to time to finance our operations. We may also issue additional shares to fund potential acquisitions or in connection with additional stock options or other equity awards granted to our employees, officers, directors and consultants under our 2015 Plan. The issuance of additional shares of common stock, convertible securities or warrants to purchase common stock, perception that such issuances may occur, or exercise of outstanding warrants, convertible securities or options will have a dilutive impact on other shareholders and could have a material negative effect on the market price of our common stock.

A substantial number of shares of common stock may be sold in the market following this offering, which may depress the market price for our common stock.

Sales of a substantial number of shares of our common stock or securities convertible or exercisable into our common stock in the public market following this offering could cause the market price of our common stock to decline. A substantial majority of the outstanding shares of our common stock are, and the shares of common stock sold in this offering upon issuance will be, freely tradable without restriction or further registration under the Securities Act of 1933, as amended.

Provisions in our Third Amended and Restated Certificate of Incorporation, as amended (our “Certificate of Incorporation”) and amended and restated bylaws (our “Bylaws”) and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our Certificate of Incorporation and our Bylaws may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our Board of Directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors. Among other things, these provisions include those establishing:

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•

a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our Board of Directors;

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no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

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the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from filling vacancies on our Board of Directors;

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the ability of our Board of Directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

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the ability of our Board of Directors to alter our Bylaws without obtaining stockholder approval;

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the required approval of the holders of at least three-quarters (75%) of the shares entitled to vote at an election of directors to adopt, amend or repeal our Bylaws or repeal the provisions of our Certificate of Incorporation regarding the election and removal of directors;

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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

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the requirement that a special meeting of stockholders may be called only by the Chairman of the Board of Directors, the chief executive officer, the president or the Board of Directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

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advance notice procedures that stockholders must comply with in order to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

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Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, our credit facility currently prohibits us from paying dividends on our equity securities, and any future debt agreements may likewise preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Risks Relating to this offering and the securities offered herein

If you purchase units in this offering, you will incur immediate and substantial dilution in the net tangible book value per share of common stock as a result of this offering.

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Investors in this offering will experience immediate dilution in their net tangible book value per share to the extent of the difference between the conversion price per share of common stock and the “adjusted” net tangible book value per share after giving effect to the offering. The conversion price for one share of common stock underlying the Series E Preferred Stock is substantially higher than the net tangible book value per share of our common stock. As a result, investors purchasing units in this offering will incur immediate dilution of  $2.54 per share of common stock, based on an initial conversion price of  $1.00 per share of Series E Preferred Stock. See “Dilution.”

Because our management will have broad discretion and flexibility in how the net proceeds from this offering are used, our management may use the net proceeds in ways with which you disagree or which may not prove effective.

We currently intend to use the net proceeds from this offering as discussed under “Use of Proceeds” in this prospectus supplement. Our management will have significant discretion and flexibility in applying the net proceeds of this offering. You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flow.

The Series E Preferred Stock and the Warrants are unlisted securities and there is no public market for them.

There is no established public trading market for the Series E Preferred Stock or the Warrants, and we do not expect a market to develop. In addition, neither the Series E Preferred Stock nor the Warrants are listed, and we have not applied, and do not intend to apply, for listing of the Series E Preferred Stock or the Warrants on any securities exchange or trading system. Without an active market, the liquidity of the Series E Preferred Stock and the Warrants is limited, and investors may be unable to liquidate their investments in the Series E Preferred Stock or the Warrants.

The Warrants may not have any value.

The Warrants will be exercisable for seven years from the closing date at an initial exercise price of  $ per share. In the event that the price of the shares of common stock underlying the Warrants does not exceed the exercise price of the warrants during the period when the Warrants are exercisable, the Warrants may not have any value.

The Series E Preferred stock and Warrants purchased in this offering do not entitle the holder to any rights as common stockholders until the holder converts the shares of Series E Preferred Stock or exercises the warrant into shares of common stock or then converts the shares of Series E Preferred Stock into shares of our common stock.

Until you acquire shares of our common stock upon conversion of your shares of Series E Preferred Stock or exercise of your Warrants purchased in this offering into shares of common stock, such shares of Series E Preferred Stock and Warrants will not provide you any rights as a common stockholder, except as set forth in the shares of Series E Preferred Stock and warrants. Upon conversion of your shares of Series E Preferred Stock or exercise of your Warrants purchased in this offering, you will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs on or after the conversion or exercise date.

Our management has identified internal control deficiencies, which our management believes constitute material weaknesses. Any future material weaknesses or deficiencies in our internal control over financial reporting could harm stockholder and business confidence in our financial reporting, our ability to obtain financing and other aspects of our business.

In connection with the preparation of our audited financial statements as of and for the six months ended June 30, 2017 and for the year ended December 31, 2016 and 2015 we concluded that a material weakness existed in internal control over financial reporting. As of December 31, 2016, we carried out an assessment of the effectiveness of our internal control over financial reporting based on the framework in

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Internal Control — Integrated Framework (2013), updated and reissued by the Committee of Sponsoring Organizations (2013) (“COSO Framework”). Based on our evaluation under the COSO Framework, our management concluded that our internal control over financial reporting was not effective as of June 30, 2017 and December 31, 2016. In connection with the above assessment, Immune management identified a material weakness in the control environment relating to lack of sufficient entity level controls, segregation of duties issues due to lack of sufficient accounting and finance personnel, accounting for complex financial transactions and lack of a sufficient technology infrastructure to support the financial reporting function.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by management or employees in the normal course of performing their assigned functions. Although the Company has attempted to address the identified material weaknesses, management has concluded that the Company’s internal controls over financial reporting were not effective at June 30, 2017 and December 31, 2016. Therefore, we cannot be certain that, in the future, additional material weaknesses or significant deficiencies will not exist or otherwise be discovered. If our efforts to address the weakness identified are not successful, or if other deficiencies occur, these weaknesses or deficiencies could result in misstatements of our results of operations, restatements of our financial statements, a decline in our stock price and investor confidence or other material effects on our business, reputation, financial condition or liquidity.

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USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately $13.6 million, excluding the proceeds, if any, from the exercise of the Warrants, based on the public offering price of  $1,000 per share of Preferred Stock and related Warrants and after deducting underwriting discounts, commissions and other estimated offering expenses payable by us.

We expect to use approximately $2.1 million of the net proceeds from this offering to repay outstanding convertible notes and $3.5 million of the net proceeds to reduce outstanding accounts payable balances. The convertible notes we plan to repay and reduce are provided in the schedule below:

(1)

The July Senior Secured Promissory Note matures on July 7, 2018 and the interest rate is 15% per annum, which twelve months’ interest is guaranteed.

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(2)

The August Debentures are due and payable on the earlier of  (i) February 28, 2018 and (ii) the closing by the Company of one of more subsequent financings with gross proceeds equal to $3.0 million in the aggregate.

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(3)

The September Debentures are due and payable on the earlier of  (i) May 30, 2018 and (ii) the closing of one or more subsequent financings with gross proceeds of  $3.0 million in the aggregate.

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Following the payments described above, we expect that the net proceeds from this offering available to fund our operations will be approximately $8.0 million. We currently intend to use such proceeds to continue development of bertilimumab and nano-cyclosporine, including payment of Phase 2 clinical trial and drug manufacturing costs. Our management will have significant discretion and flexibility in applying the net proceeds from the sale of these securities. See “Risk Factors” for a discussion of certain risks that may affect our intended use of the net proceeds from this offering.

Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot currently allocate specific percentages of the net proceeds that we may use for the purposes specified above, and we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including our ability to obtain additional financing. We may find it necessary or advisable to use the net proceeds for other purposes, and our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds from this offering.

Pending the use of the net proceeds from this offering, we intend to invest the net proceeds in investment-grade, interest-bearing instruments.

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MARKET PRICE OF COMMON STOCK

Our common stock trades on the NASDAQ Capital Market under the symbol “IMNP.” The last reported sale price for our common stock on October 13, 2017 was $1.60 per share. As of October 10, 2017, we had approximately 81 holders of record of our common stock. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.

The following table sets forth for the periods indicated the high and low sale prices per share of our common stock as reported on the NASDAQ Capital Market, but as adjusted to reflect applicable reverse stock splits:

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DIVIDEND POLICY

We have not paid any dividends on our common stock to date and do not anticipate that we will pay dividends on our common stock in the foreseeable future. Any payment of cash dividends on our common stock in the future will be dependent upon the amount of funds legally available, our earnings, if any, our financial condition, our anticipated capital requirements and other factors that the board of directors may think are relevant.

Holders of Preferred Stock are entitled to receive cumulative dividends at the rate of 8.0% per annum, payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date after the original issue date and continuing for a period of twenty four (24) months thereafter. We have the right to pay dividends in cash or in shares of common stock. If we do not have funds legally available to pay cash dividends and certain equity conditions are not met, at the election of the holder, such dividends accrete to and increase the outstanding stated value of the Preferred Stock.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization, as of June 30, 2017 on an actual basis and as adjusted, based on an assumed offering price of  $1,000 per share of Preferred Stock, after deducting the estimated underwriter discounts and commissions and estimated offering expenses payable by us.

You should consider this table in conjunction with “Use of Proceeds” above as well as our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes to those financial statements included elsewhere in this prospectus.

(1)

Cash and cash equivalents and long-term debt as adjusted as of June 30, 2017 do not reflect the use of proceeds for the repayment of debt since those notes were not outstanding as of June 30, 2017.

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DILUTION

If you invest in the units, your interest in the common stock underlying the Series E Preferred Stock and the Warrants offered hereunder may be diluted to the extent of the difference between the price you pay for each share of common stock and the net tangible book value per share of our common stock immediately after this offering. As of June 30, 2017, our net tangible book value was ($22.1 million), or $(2.22) per share of common stock, based on 9,964,301 shares of our common stock outstanding at June 30, 2017. Our historical net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of shares of our common stock outstanding as of June 30, 2017.

Assuming that we issue 15,000 units at a price of  $1,000 per unit, the Series E Preferred Stock sold in this offering has a conversion price of  $1.60 per share, the closing price of our common stock on the NASDAQ Capital Market on October 13, 2017, and assuming the conversion of all the shares of Series E Preferred Stock sold in the offering and after deducting the commissions and estimated offering expenses payable by us, our net tangible book value as of June 30, 2017 would have been ($8.5) million, or ($0.85) per share of our common stock. This calculation excludes the proceeds, if any, from the exercise of warrants issued in this offering. This amount represents an immediate increase of net tangible book value to our existing stockholders of  $1.36 per share and an immediate dilution of  $2.45 per share to the new investors purchasing securities in this offering.

The following table illustrates this per share dilution:

The above discussion and table are based on 9,964,301 shares of common stock outstanding as of June 30, 2017 and excludes:

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758,041 shares of common stock issuable upon exercise of outstanding options as of October 10, 2017 under our Amended and Restated 2015 Equity Incentive Plan (the “2015 Plan”);

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715,413 shares of common stock issuable upon the exercise of warrants outstanding as of October 10, 2017 at a weighted average exercise price of  $50.40 per share.

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480,000 shares potentially issuable upon conversion of the May 2017 Notes.

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300,000 shares potentially issuable upon conversion of the July 2017 Note.

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1,589,879 shares potentially issuable upon conversion of the July Senior Secured Convertible Promissory Note.

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858,000 shares potentially issuable upon conversion of August 2017 Convertible Debentures.

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149,500 shares potentially issuable upon conversion of September 2017 Convertible Debentures.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our common stock by (i) each person who, to our knowledge, owns more than 5% of our common stock, (ii) each of our current directors and the named executive officer identified under the heading “Executive Compensation” and (iii) all of our current directors and executive officers as a group. We have determined beneficial ownership in accordance with applicable rules of the SEC, and the information reflected in the table below is not necessarily indicative of beneficial ownership for any other purpose. Under applicable SEC rules, beneficial ownership includes any shares of common stock as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within 60 days after October 10, 2017 through the exercise of any option, warrant or right or through the conversion of any convertible security. Unless otherwise indicated in the footnotes to the table below and subject to community property laws where applicable, we believe, based on the information furnished to us that each of the persons named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

The information set forth in the table below is based on 13,676,961 shares of our common stock issued and outstanding on October 10, 2017. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock subject to options, warrants, rights or other convertible securities held by that person that are currently exercisable or will be exercisable within 60 days after October 10, 2017. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the principal address of each of the stockholders below is in care of Immune Pharmaceuticals Inc., 550 Sylvan Avenue, Suite 101, Englewood Cliffs, NJ 07632.

*

Represents beneficial ownership of less than 1% of the shares of common stock.

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(1)

Includes 67,688 shares issuable upon the exercise of stock options that are exercisable within the next 60 days and warrants to purchase 1,388 shares of our common stock that are exercisable within the next 60 days.

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(2)

Consists of 7,667 shares issuable upon the exercise of stock options that are exercisable within the next 60 days.

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(3)

Consists of 30,750 shares issuable upon the exercise of stock options that are exercisable within the next 60 days, warrants to purchase 11,242 shares of our common stock that are exercisable within the next 60 days.

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(4)

Consists of 28,250 shares issuable upon the exercise of stock options that are exercisable within the next 60 days.

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(5)

Consists of 105,750 shares issuable upon the exercise of stock options that are exercisable within the next 60 days.

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(6)

Consists of 25,750 shares issuable upon the exercise of stock options that are exercisable within the next 60 days.

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(7)

Includes 25,750 shares issuable upon the exercise of stock options that are exercisable within the next 60 days granted as a Director of the Company. Also includes 3,000 options granted in connection with a consulting agreement prior to becoming a Director of the Company that are fully vested.

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(8)

See footnotes 1 through 7.

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DESCRIPTION OF SECURITIES WE ARE OFFERING

Description of Units

15,000 units, each unit consisting of one (1) share of our Series E Preferred Stock and Warrants to purchase shares of common stock, at an initial exercise price of  $       per share, at a public offering price of $1,000 per unit. The number of Warrants included in each unit shall be equal to the number of shares of common stock issuable upon conversion of the Series E Preferred Stock at the Set Price. Assuming a Set Price of  $1.60 per share, the closing price of our common stock on the NASDAQ Capital Market on October 13, 2017, each unit shall consist of one (1) share of our Series E Preferred Stock and Warrants to purchase 675 shares of our common stock.

The securities of which the units are composed (the “underlying securities”) are being sold in this offering only as part of the units. However, the units will not be certificated and the underlying securities comprising the units are immediately separable. Each underlying security purchased in this offering will be issued independent of each other underlying security and not as part of a unit. Upon issuance, each underlying security may be transferred independent of any other underlying security, subject to applicable law and transfer restrictions.

Description of Series E Preferred Stock Included in the Units

The material terms and provisions of the shares of Series E Convertible Preferred Stock (“Series E Preferred Stock”) being offered pursuant to this prospectus supplement are summarized below. This summary of some provisions of the Series E Preferred Stock is not complete. For the complete terms of the Series E Preferred Stock, you should refer to the Certificate of Designation (the “Series E Certificate of Designation”) filed as an exhibit to the Current Report on Form 8-K to be filed with the SEC in connection with this offering.

Amount of Preferred Shares.

Our board of directors plans to designate 20,000 shares of our preferred stock as Series E Preferred Stock, none of which are currently issued and outstanding. Pursuant to a transfer agency agreement between us and VStock Transfer LLC, as transfer agent, the Series E Preferred Stock will be issued in book-entry form and will initially be represented only by one or more global certificates deposited with The Depository Trust Company, or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.

Ranking of Preferred Shares.

The Series E Preferred Stock will rank senior to our common stock and other classes of capital stock with respect to dividend and redemption, unless the holders of a majority of the outstanding shares of Series E Preferred Stock consent to the creation of parity stock or senior preferred stock.

Conversion.

Each Series E Preferred Share is convertible at any time at the holder’s option at the Conversion Price (as defined below). Notwithstanding the foregoing, the Series E Certificate of Designation further provides that we may not effect any conversion of Series E Preferred Shares, with certain exceptions, to the extent that, after giving effect to an attempted conversion, the holder of Series E Preferred Shares (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of common stock in excess of 4.99% (or, at the election of the holder, 9.99%) of the shares of our common stock then outstanding after giving effect to such exercise (the “Preferred Stock Beneficial Ownership Limitation”); provided, however, that upon notice to the Company, the holder may increase or decrease the Preferred Stock Beneficial Ownership Limitation, provided that in no event may the Preferred Stock Beneficial Ownership Limitation exceed 9.99% and any increase in the Preferred Stock Beneficial Ownership Limitation will not be effective until 61 days following notice of such increase from the holder to us.

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Conversion Price.

The Preferred Stock is convertible into shares of Common Stock by dividing the stated value of the Preferred Stock ($1,080) by the conversion price (the “Conversion Price”). For the first 40 trading days following the closing of this offering, the Conversion Price is equal to $    per share of Common Stock, referred to as the “Set Price,” subject to certain adjustments. After such 40 trading days, the conversion price is equal to the lesser of  (a) the Set Price and (b) 87.5% of the lowest volume weighted average price for our Common Stock as reported at the close of trading on the market reporting trade prices for the Common Stock during the five trading days prior to the date of the notice of conversion, subject to adjustment as provided for in the Certificate of Designation. The conversion price is subject to a floor of $      , except in the event of anti-dilution adjustments.

The Set Price is subject to adjustment for stock splits, stock dividends, distributions of Common Stock or securities convertible, exercisable or exchangeable for Common Stock, subdivisions, combinations and reclassifications. Further, the Set Price is subject to full ratchet adjustment if we issue or are deemed to issue additional shares of our Common Stock at a price per share less than the then effective Set Price.

Subject to certain exclusions contained in the Certificate of Designations, if the Company in any manner grants or sells any rights, warrants or options and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such option or upon conversion, exercise or exchange of any Common Stock Equivalents (as defined in the Series E Certificate of Designation) issuable upon exercise of any such option, exercise or exchange of any Common Stock Equivalent issuable upon the exercise of such option or otherwise pursuant to the terms thereof is less than the Conversion Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such option for such price per share. For purposes of this paragraph only, the “lowest price per share for which one share of Common Stock is issuable upon the exercise of any such options or upon conversion, exercise or exchange of any Common Stock Equivalent issuable upon exercise of any such option or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of  (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of such option, upon exercise of such option and upon conversion, exercise or exchange of any Common Stock Equivalents issuable upon exercise of such option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such option for which one share of Common Stock is issuable upon the exercise of any such options or upon conversion, exercise or exchange of any Common Stock Equivalents issuable upon exercise of any such option or otherwise pursuant to the terms thereof. Except as contemplated by the terms of the Series E Certificate of Designations, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock or of such convertible securities upon the exercise of such options or otherwise pursuant to the terms of or upon the actual issuance of such Common Stock Equivalents (as defined in the Series E Certificate of Designations).

If the Company in any manner issues or sells any Common Stock Equivalents and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Conversion Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such convertible securities for such price per share. For purposes of this paragraph only, the “lowest price per share for which one share of Common Stock is issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of  (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the Common Stock Equivalent and upon conversion, exercise or exchange of such convertible security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such convertible security for which one share of Common Stock is issuable upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Common Stock Equivalent (or any other person) upon the issuance or sale of such Common Stock Equivalent plus the value of any other consideration received or receivable by, or benefit conferred on, the holder of such Common Stock Equivalent (or any other person). Except as contemplated by the terms of the Series E Certificate of Designation, no further adjustment of the Conversion Price shall be made upon

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the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Common Stock Equivalents is made upon exercise of any options for which adjustment of the Conversion Price has been or is to be made, except as contemplated by the terms of the Series E Certificate of Designations, no further adjustment of the Conversion Price shall be made by reason of such issuance or sale.

If the purchase or exercise price provided for in any options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any convertible securities, or the rate at which any convertible securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion or exercise prices, as applicable, in connection with stock dividends, splits or combination of outstanding Common Stock) the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such options or convertible securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. If the terms of any option or convertible security that was outstanding as of the date of issuance of the Preferred Stock and related Warrants are increased or decreased in the manner described in the immediately preceding sentence, then such option or convertible security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

If any option and/or convertible security and/or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the holder of Preferred Stock, the “Primary Security”, and such option and/or convertible security and/or Adjustment Right (as defined below), the “Secondary Securities” and together with the Primary Security, each a “unit”), together comprising one integrated transaction, the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to be the lower of  (x) the purchase price of such unit, (y) if such Primary Security is an option and/or convertible security, the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise or conversion of the Primary Security in accordance with the paragraphs above and (z) the lowest volume-weighted average price of the Common Stock on any trading day during the four trading day period immediately following the public announcement of such dilutive issuance. If any shares of Common Stock, options or convertible securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, options or convertible securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the volume-weighted average prices of such security for each of the five (5) trading days immediately preceding the date of receipt. If any shares of Common Stock, options or convertible securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, options or convertible securities (as the case may be). The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) trading days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holder.

“Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with the paragraph above) of shares of Common Stock that could result in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).

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Dividends on Preferred Shares.

Holders of Preferred Stock are entitled to receive cumulative dividends at the rate of 8.0% per annum, payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first such date after the original issue date and continuing for a period of twenty four (24) months thereafter. The form of dividend payments to each holder shall be determined in the following order of priority: (i) if funds are legally available for the payment of dividends and certain equity conditions (as described in the Certificate of Designation, the “Equity Conditions”) have not been met, in cash only, (ii) if funds are legally available for the payment of dividends and the Equity Conditions have been met, at our sole election, in cash or shares of Common Stock, (iii) if funds are not legally available for the payment of dividends and the Equity Conditions have been met, in shares of Common Stock, (iv) if funds are not legally available for the payment of dividends and the Equity Condition relating to an effective registration statement has been waived by such holder, as to such holder only, in unregistered shares of Common Stock, and (v) if funds are not legally available for the payment of dividends and the Equity Conditions have not been met, then, at the election of such holder, such dividends accrete to and increase the outstanding stated value of the Preferred Stock and will be considered fully paid and no longer accrued and unpaid dividends. If we pay such dividends in a number of shares of Common Stock, we will do so at a conversion rate equal to 87.5% of the lowest volume weighted average price for our Common Stock as reported at the close of trading on the market reporting trade prices for the Common Stock during the five trading days ending on such dividend date.

Liquidation.

In the event of a liquidation, the holders of Series E Preferred Shares are entitled to participate on an as-converted-to-common stock basis with holders of the common stock in any distribution of assets of the Company to the holders of the common stock. The Series E Certificate of Designation provides, among other things, that we will not pay any dividends on shares of common stock (other than dividends in the form of common stock) unless and until such time as we pay dividends on each Series E Preferred Share on an as-converted basis. Other than as set forth in the previous sentence, the Series E Certificate of Designation provides that no other dividends will be paid on Series E Preferred Shares and that we will pay no dividends (other than dividends in the form of common stock) on shares of common stock unless we simultaneously comply with the previous sentence. The Series E Certificate of Designation does not provide for any restriction on the repurchase of Series E Preferred Shares by us while there is any arrearage in the payment of dividends on the Series E Preferred Shares. There are no sinking fund provisions applicable to the Series E Preferred Shares.

Fundamental Transactions.

In the event of any fundamental transaction, as described in the Certificate of Designations and generally including any merger with or into another entity, sale of all or substantially all of our assets, tender offer or exchange offer, or reclassification of our common stock, then upon any subsequent conversion of the Preferred Stock, the holder will have the right to receive as alternative consideration, for each share of our Common Stock that would have been issuable upon such conversion immediately prior to the occurrence of such fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of our company, if it is the surviving corporation, and any additional consideration receivable upon or as a result of such transaction by a holder of the number of shares of our Common Stock for which the Preferred Stock is convertible immediately prior to such event.

Voting Rights.

With certain exceptions, as described in the Series E Certificate of Designation, the Series E Preferred Shares have no voting rights. However, as long as any shares of Series E Preferred Shares remain outstanding, the Series E Certificate of Designation provides that we may not, without the affirmative vote of holders of a majority of the then-outstanding Series E Preferred Shares, (a) alter or change adversely the powers, preferences or rights given to the Series E Preferred Shares or alter or amend the Series E Certificate of Designation, (b) increase the number of authorized shares of Series E Preferred Shares or (c) amend our Certificate of Incorporation or other charter documents in any manner that adversely affects any rights of holders of Series E Preferred Shares.

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Market and Exchange Listing.

We have not applied, and do not intend to apply, for listing of the Series E Preferred Shares on any securities exchange or other trading system.

Description of Warrants Included in the Units

The material terms and provisions of the warrants being offered pursuant to this prospectus supplement (the “Warrants”) are summarized below. This summary of some provisions of the Warrants is not complete. For the complete terms of the Warrants, you should refer to the form of Warrant filed as an exhibit to the Current Report on Form 8-K to be filed with the SEC in connection with this offering.

Pursuant to a warrant agency agreement between us and VStock Transfer LLC, as warrant agent, the Warrants will be issued in book-entry form and will initially be represented only by one or more global Warrants deposited with the warrant agent, as custodian on behalf of The Depository Trust Company, or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.

Exercisability, Exercise Price and Term.

Each unit issued in this offering includes Warrants to purchase shares of our Common Stock at an exercise price of  $       per share. The number of Warrants included in each unit shall be equal to the number of shares of common stock issuable upon conversion of the Series E Preferred Stock at the Set Price. Assuming a Set Price of  $1.60 per share, the closing price of our common stock on the NASDAQ Capital Market on October 13, 2017, each unit shall consist of Warrants to purchase 675 shares of our common stock. The Warrants will be exercisable immediately and will expire on the seven-year anniversary of the issuance date. The holder of a Warrant will not be deemed a holder of our underlying common stock until the Warrant is exercised, except as set forth in the Warrants.

The exercise price and the number of shares issuable upon exercise of the Warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our common stock. The exercise price is also subject to adjustment in the event that we sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents (as defined in the Warrants), at an effective price per share less than the exercise price then in effect. The Warrant holders must pay the exercise price in cash upon exercise of the Warrants, unless such Warrant holders are utilizing the cashless exercise provision of the Warrants, which is only available in certain circumstances such as if the underlying shares are not registered with the SEC pursuant to an effective registration statement. We intend to use commercially reasonable efforts to have the registration statement of which this prospectus supplement forms a part, effective when the Warrants are exercised.

Fundamental Transactions.

In addition, in the event we consummate a merger or consolidation with or into another person or other reorganization event in which our common shares are converted or exchanged for securities, cash or other property, or we sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of our assets or we or another person acquire 50% or more of our outstanding shares of common stock (a “fundamental transaction”), then following such event, the holders of the Warrants will be entitled to receive upon exercise of the Warrants the same kind and amount of securities, cash or property which the holders would have received had they exercised the Warrants immediately prior to such fundamental transaction. Any successor to us or surviving entity is required to assume the obligations under the warrants. Notwithstanding the foregoing, in the event of a fundamental transaction, the holders will have the option, which may be exercised within 30 days after the consummation of the fundamental transaction, to require the company or the successor entity purchase the Warrant from the holder by paying to the holder an amount of cash equal to the Black Scholes value of the remaining unexercised portion of the warrant on the date of the consummation of the fundamental transaction. However, if the fundamental transaction is not within the company’s control, including not approved by the company’s Board of Directors or the consideration is not in all stock of the successor entity, the holder will only be entitled to

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receive from the company or any successor entity, as of the date of consummation of such fundamental transaction, the same type or form of consideration (and in the same proportion), at the Black Scholes value of the unexercised portion of the Warrant, that is being offered and paid to the holders of common stock of the company in connection with the fundamental transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of common stock are given the choice to receive from among alternative forms of consideration in connection with the fundamental transaction.

Upon the holder’s exercise of a Warrant, we will issue the shares of common stock issuable upon exercise of the Warrant within three trading days following our receipt of a notice of exercise, provided that payment of the exercise price has been made (unless exercised via the “cashless” exercise provision).

Prior to the exercise of any Warrants to purchase common stock, holders of the Warrants will not have any of the rights of holders of the common stock purchasable upon exercise, including the right to vote, except as set forth therein.

Warrant holders may exercise the Warrants only if the issuance of the shares of common stock upon exercise of the Warrants is covered by an effective registration statement, or an exemption from registration is available under the Securities Act and the securities laws of the state in which the holder resides. We intend to use commercially reasonable efforts to have the registration statement of which this prospectus supplement forms a part effective when the Warrants are exercised. The Warrant holders must pay the exercise price in cash upon exercise of the Warrants unless there is not an effective registration statement or, if required, there is not an effective state law registration or exemption covering the issuance of the shares underlying the Warrants (in which case, the warrants may only be exercised via a “cashless” exercise provision).

Cashless Exercise.

If a Warrant is exercised via the “cashless” exercise provision, the holder will receive the number of shares equal to the quotient obtained by dividing (i) the difference between the VWAP (as determined pursuant to the terms of the Warrants) and the exercise price of the Warrant multiplied by the number of shares issuable under the Warrant by (ii) the VWAP.

Market and Exchange Listing.

We have not applied, and do not intend to apply, for listing of the Warrants on any securities exchange or other trading system.

Description of Capital Stock

The following description of our common stock summarizes the material terms and provisions of the common stock that we may issue in connection with this offering. It may not contain all the information that is important to you. For the complete terms of our common stock, please refer to our Certificate of Incorporation and our Bylaws, which are filed as exhibits to the registration statement which includes this prospectus. The Delaware General Corporation Law (“DGCL”) may also affect the terms of these securities.

Common Stock

On January 14, 2010, we filed a certificate of amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware to increase the number of authorized shares to 225,000,000 shares of common stock, par value $0.0001 per share and 5,000,000 shares of preferred stock, par value $0.0001 per share. Additionally, on April 12, 2017, we filed a certificate of amendment to our Certificate of Incorporation to effectuate a one-for-ten reverse split of our issued and outstanding common stock. At the effective time of the reverse split, every 10 shares of common stock issued and outstanding were automatically combined into one share of issued and outstanding common stock, without any change in the par value per share. 13,676,961 shares of our common stock were outstanding as of October 10, 2017.

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The following is qualified in its entirety by reference to our Certificate of Incorporation and amendments thereto and our Bylaws, and by the provisions of applicable law. A copy of our Certificate of Incorporation and our amended and Bylaws are included as exhibits to our most recent Annual Report on Form 10-K which is incorporated herein by reference.

Holders of our common stock are entitled to one vote for each share on all matters submitted to a vote of stockholders, and do not have cumulative voting rights. Generally, in matters other than the election of directors, the affirmative vote of a majority of the votes cast authorizes such an action, except where Delaware General Corporation Law prescribes a different percentage of votes or a different exercise of voting power. For the election of directors, directors are elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote. Holders of our common stock are entitled to receive, as, when and if declared by our Board of directors from time to time, such dividends and other distributions in cash, stock or property from our assets or funds legally available for such purposes, subject to any preferential dividend or other rights of any then outstanding preferred stock.

No preemptive, conversion, or other subscription rights apply to our common stock. All outstanding shares of our common stock are fully paid and non-assessable. In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in the assets available for distribution, subject to any preferential or other rights of any then outstanding preferred stock. The voting, dividend and liquidation rights of the holders of our common stock are subject to and qualified by the rights of the holders of the preferred stock.

Preferred Stock

In addition to the shares of Series E Preferred Stock being offered pursuant to this prospectus supplement, our board of directors is authorized, subject to limitations prescribed by Delaware law, to issue up to 5,000,000 shares preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions. Our board of directors can also increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with financings, possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, discouraging or preventing a change in control of our company, may adversely affect the market price of our common stock and the voting and other rights of the holders of common stock, and may reduce the likelihood that common stockholders will receive dividend payments and payments upon liquidation.

Other Warrants

As of October 10, 2017, there were warrants outstanding to purchase a total of 715,413 shares of our common stock, which expire between December 31, 2017 and October 10, 2022. Each of these warrants entitles the holder to purchase one share of common stock at prices ranging from $4.00 to $200.00 per common share, with a weighted average exercise price of  $50.40 per share. Certain of these warrants have a net exercise provision under which its holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of our common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. Certain of these warrants also contain provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the warrant in the event of dividends, share splits, reorganizations and reclassifications and consolidations. Certain of these warrants contain a provision requiring a reduction to the exercise price in the event we issue common stock, or securities convertible into or exercisable for common stock, at a price per share lower than the warrant exercise price.

Anti-Takeover Effects of Provisions of Our Charter Documents

Our Certificate of Incorporation provides for our Board to be divided into three classes serving staggered terms, Class I, Class II, and Class III. Elliot Maza, our Chief Executive Officer, and Dr. Cameron Durrant, our lead independent director, both of whom being Class II directors, were reelected at the

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Company’s Annual Meeting of Stockholders held on December 9, 2015, to serve on the Company’s Board of Directors until the Company’s 2018 annual meeting of stockholders. Dr. Daniel Teper and John Neczesny, both of whom being Class III directors, were reelected at the Company’s Annual Meeting of Stockholders held on December 20, 2016, to serve on the Company’s Board of Directors until the Company’s 2019 annual meeting of stockholders.

Approximately one-third of our Board will be elected each year. The provision for a classified board could prevent a party who acquires control of a majority of the outstanding voting stock from obtaining control of the Board until the second annual stockholders meeting following the date the acquirer obtains the controlling stock interest. The classified Board provision could discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of Immune and could increase the likelihood that incumbent directors will retain their positions. Our Certificate of Incorporation provides that directors may be removed only with cause by the affirmative vote of the holders of at least 75% of the shares of capital stock of the Company issued and outstanding and entitled to vote generally in the election of directors.

Our Certificate of Incorporation requires that certain amendments to the Certificate of Incorporation and amendments by the stockholders of our Bylaws require the affirmative vote of at least 75% of the shares of capital stock of the Company issued and outstanding and entitled to vote generally in the election of directors. These provisions could discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company and could delay changes in management.

Our Bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual stockholders meeting, including proposed nominations of persons for election to our Board. At an annual stockholders meeting, stockholders may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our Board. Stockholders may also consider a proposal or nomination by a person who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to the Secretary of the Company timely written notice, in proper form, of his or her intention to bring that business before the annual stockholders meeting. Our Bylaws do not give our Board the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting of the stockholders. However, our Bylaws may have the effect of precluding the conduct of business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

Our Bylaws provide that only our Board, the chairperson of the board, the President or the Chief Executive Officer may call a special meeting of stockholders. Because our stockholders do not have the right to call a special meeting, a stockholder could not force stockholder consideration of a proposal over the opposition of our Board by calling a special meeting of stockholders prior to such time as a majority of our Board, the chairperson of the board, the President or the Chief Executive Officer believed the matter should be considered or until the next annual meeting provided that the requestor met the notice requirements. The restriction on the ability of stockholders to call a special meeting means that a proposal to replace the board also could be delayed until the next annual stockholders meeting.

Our Certificate of Incorporation does not allow stockholders to act by written consent without a meeting if a class of capital stock is registered under Section 12 of the Exchange Act. Without the availability of stockholder’s actions by written consent, a holder controlling a majority of our capital stock would not be able to amend our Bylaws or remove directors without holding a stockholders’ meeting.

Anti-Takeover Effects of Provisions of Delaware Law

We are subject to the provisions of Section 203 of the DGCL, or Section 203. Under Section 203, we would generally be prohibited from engaging in any business combination with any interested stockholder for a period of three years following the time that this stockholder became an interested stockholder unless:

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prior to this time, our Board approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

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•

upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers, and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

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at or subsequent to such time, the business combination is approved by our Board and authorized at a special or annual stockholders meeting, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.

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Under Section 203, a “business combination” includes:

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any merger or consolidation involving the corporation and the interested stockholder;

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any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;

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any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder, subject to limited exceptions;

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any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or

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the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

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In general, Section 203 defines an interested stockholder as an entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by such entity or person.

Limitation of Liability and Indemnification

Our Certificate of Incorporation provides that our directors shall not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability for breach of the director’s duty of loyalty to us or our stockholders, for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, for payment of dividends or approval of stock purchases or redemptions that are prohibited by the DGCL, or for any transaction from which the director derived an improper personal benefit.

Under the DGCL, our directors have a fiduciary duty to us that is not eliminated by this provision of our Certificate of Incorporation and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available. This provision also does not affect our directors’ responsibilities under any other laws, such as federal securities laws or state or federal environmental laws.

Section 145 of the DGCL empowers a corporation to indemnify its directors and officers against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by them in connection with any action, suit or proceeding brought by third parties by reason of the fact that they were or are directors or officers of the corporation, if they acted in good faith, in a manner, they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe that their conduct was unlawful. The DGCL provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation’s bylaws, any agreement, a vote of stockholders or otherwise. Our Certificate of Incorporation provides that, to the fullest extent permitted by Section 145 of the DGCL, we shall indemnify any person who is or was a director or officer of us, or is or was serving at our request as a director, officer or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against the expenses, liabilities or other matters referred to in or covered by Section 145 of the DGCL. Our Bylaws provide that we will indemnify any person who was or is a party or threatened to be made a party to any

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proceeding by reason of the fact that such person is or was a director or officer of us or is or was serving at our request as a director, officer or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise to the fullest extent permitted by the DGCL.

In addition, we have entered into indemnification agreements with each of our directors and our executive officers. Pursuant to the indemnification agreements, we have agreed to indemnify and hold harmless these directors and officers to the fullest extent permitted by the DGCL. The agreements generally cover expenses that a director or officer incurs or amounts that a director or officer becomes obligated to pay because of any proceeding to which he or she is made or threatened to be made a party or participant by reason of his or her service as a current or former director, officer, employee or agent of the Company. The agreements also provide for the advancement of expenses to the directors and officers subject to specified conditions. There are certain exceptions to our obligation to indemnify the directors and officers, including any intentional malfeasance or act where the director or officer did not in good faith believe he or she was acting in our best interests, with respect to “short-swing” profit claims under Section 16(b) of the 1934 Act and, with certain exceptions, with respect to proceedings that he or she initiates.

Section 145 of the DGCL also empowers a corporation to purchase insurance for its officers and directors for such liabilities. We maintain liability insurance for our officers and directors.

Listing on the NASDAQ Capital Market

Our common stock is listed on the NASDAQ Capital Market under the symbol “IMNP.” We do not intend to list the Series E Preferred Stock or Warrants on the NASDAQ Capital Market, any other national securities exchange or any other nationally recognized trading system. Without an active trading market, the liquidity of the Series E Preferred Stock and Warrants will be limited.

Transfer Agent and Registrar.

The transfer agent and registrar for our common stock is VStock Transfer, LLC. Its address is 18 Lafayette Pl, Woodmere, NY 11598.

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SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of our common stock in the public market, including shares issued upon exercise of outstanding warrants or upon conversion of shares of Series E Preferred Stock, or the anticipation of these sales, could adversely affect prevailing market prices from time to time and could impair our ability to raise equity capital in the future.

Based on the number of shares of common stock outstanding as of October 10, 2017, after giving effect to the closing of this offering we will have (a) 13,676,961 shares of common stock outstanding assuming (1) no conversion of outstanding convertible debentures and (2) no exercise of outstanding warrants or options and (b) 15,000 shares of Series E Preferred Stock, convertible into              shares of common stock. Of those shares, all of the shares sold in this offering will be freely tradable, except that any shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, or Rule 144, may only be sold in compliance with the limitations described below.

Rule 144

In general, under Rule 144, any person who is not our affiliate and has held their shares for at least six months, including the holding period of any prior owner other than one of our affiliates, may sell shares without restriction, subject to the availability of current public information about us. In addition, under Rule 144, any person who is not an affiliate of ours and has held their shares for at least one year, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of shares without regard to whether current public information about us is available. A person who is our affiliate or who was our affiliate at any time during the preceding three months, and who has beneficially owned restricted securities for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of shares within any three-month period that does not exceed the greater of:

•

1% of the number of shares of our common stock then outstanding;

​

•

the average weekly trading volume of our common stock on the NASDAQ; Capital Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

​

Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements, and to the availability of current public information about us.

Warrants

As of October 10, 2017, warrants to purchase a total of 715,413 shares of common stock were outstanding of which at a weighted average exercise price of  $50.40. Upon the exercise of outstanding warrants, such shares will become eligible for sale subject to Rule 144.

Lock-Up Agreements

Our directors and executive officers and certain stockholders have agreed with the underwriters that for a period of days after the date of this prospectus, except with the prior written consent of the representatives and subject to specified exceptions, we or they will not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock. Following the expiration of the lock-up agreements, shares will become eligible for sale subject to Rule 144.

42

UNDERWRITING

We have entered into an underwriting agreement with Maxim Group LLC with respect to the Units subject to this offering. Subject to certain conditions, we have agreed to sell to the underwriter, and the underwriter has agreed to purchase, the number of Units provided below opposite its name.

The underwriter is offering the Units subject to its acceptance of the Units from us and subject to prior sale. The underwriting agreement provides that the obligations of the underwriter to pay for and accept delivery of the Units offered by this prospectus are subject to the approval of certain legal matters by its counsel and to certain other conditions. The underwriter is obligated to take and pay for all of the Units if any such Units are taken.

The underwriter has advised us that it proposes to offer the Units to the public at the respective public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of  $       per Unit. After this offering, the public offering price and concession to dealers may be changed by the representative. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The Units are offered by the underwriter as stated herein, subject to receipt and acceptance by it and subject to its right to reject any order in whole or in part. The underwriter has informed us that it does not intend to confirm sales to any accounts over which it exercises discretionary authority.

Underwriting Discounts and Expenses

The following table summarizes the public offering price, underwriting discount and proceeds before expenses to us:

In addition, we have agreed to reimburse the underwriters for reasonable out-of-pocket expenses, including the fees of legal counsel, not to exceed $80,000 in the aggregate. We estimate that total expenses payable by us in connection with this offering, other than the underwriting discount referred to above, will be approximately $130,000.

Determination of Offering Price

Our common stock is currently traded on the NASDAQ Capital Market under the symbol “IMNP” On October 13, 2017, the closing price of our common stock was $1.60 per share.

The public offering price of the securities offered by this prospectus will be determined by negotiation between us and the underwriter. Among the factors considered in determining the public offering price of the shares were:

•

our history and our prospects;

​

•

the industry in which we operate;

​

•

our past and present operating results;

​

•

the previous experience of our executive officers; and

​

•

the general condition of the securities markets at the time of this offering.

​

43

The offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the securities sold in this offering. That price is subject to change as a result of market conditions and other factors and we cannot assure you that the securities sold in this offering can be resold at or above the public offering price.

Our Relationships with the Underwriters

The underwriters and their affiliates have engaged, and may in the future engage, in investment banking transactions and other commercial dealings in the ordinary course of business with us or our affiliates. The underwriters and their affiliates have received, or may in the future receive, customary fees and commissions for these transactions. Maxim Group LLC acted as the placement agent in connection with the Company’s placement with certain institutional investors for the sale of up to $3.4 million of original issue discount convertible and nonconvertible debentures of the Company completed on May 4, 2017. In its role as placement agent, Maxim Group LLC received an aggregate of  $0.1 million in placement agent fees. Additionally, in connection with the offering, we granted Maxim Group LLC a right of first refusal to act as lead managing underwriter and book runner for any and all future public and private equity and debt offerings of ours or of our subsidiaries for a period of twelve (12) months from the closing of the offering ending on May 4, 2018.

In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Right of First Refusal

Additionally, in connection with this offering, we granted Maxim Group LLC a right of first refusal to act as lead managing underwriter and book runner for any and all future public and private equity, equity-linked and debt offerings (excluding equity line financings) of ours for a period of eleven (11) months from the commencement of sales of this offering.

Indemnification

We have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act of 1933, as amended or to contribute to payments that the underwriter may be required to make for these liabilities.

Lock-up Agreements

We, our officers, directors and certain of our stockholders have agreed, subject to limited exceptions, for a period of 90 days after the date of the underwriting agreement, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, directly or indirectly any shares of common stock or any securities convertible into or exchangeable for our common stock either owned as of the date of the underwriting agreement or thereafter acquired without the prior written consent of the underwriter. The foregoing restrictions will not apply to shares that may be sold by our officers and directors pursuant to trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, that are in place as of the date of this prospectus. The underwriter may, in its sole discretion and at any time or from time to time before the termination of the lock-up period, without notice, release all or any portion of the securities subject to lock-up agreements.

Price Stabilization, Short Positions and Penalty Bids

The underwriter has advised us that it does not intend to conduct any stabilization or over-allotment activities in connection with this Offering.

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Electronic Distribution

This prospectus in electronic format may be made available on websites or through other online services maintained by the underwriter, or by its affiliates. Other than this prospectus in electronic format, the information on the underwriter’s website and any information contained in any other website maintained by the underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter, and should not be relied upon by investors.

Other

From time to time, the underwriter and/or its affiliates have provided, and may in the future provide, various investment banking and other financial services for us for which services it has received and, may in the future receive, customary fees.

Except for the services provided in connection with this offering, the underwriter has not provided any investment banking or other financial services during the 180-day period preceding the date of this prospectus and we do not expect to retain the underwriter to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.

Offers outside the United States

Other than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Notice to Prospective Investors in Canada

This prospectus constitutes an “exempt offering document” as defined in and for the purposes of applicable Canadian securities laws. No prospectus has been filed with any securities commission or similar regulatory authority in Canada in connection with the offer and sale of the shares. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this prospectus or on the merits of the shares and any representation to the contrary is an offence.

Canadian investors are advised that this prospectus has been prepared in reliance on section 3A.3 of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”). Pursuant to section 3A.3 of NI 33-105, this prospectus is exempt from the requirement that the Company and the underwriter(s) provide Canadian investors with certain conflicts of interest disclosure pertaining to “connected issuer” and/or “related issuer” relationships that may exist between the Company and the underwriter(s) as would otherwise be required pursuant to subsection 2.1(1) of NI 33-105.

Resale Restrictions

The offer and sale of the shares in Canada is being made on a private placement basis only and is exempt from the requirement that the Company prepares and files a prospectus under applicable Canadian securities laws. Any resale of shares acquired by a Canadian investor in this offering must be made in accordance with applicable Canadian securities laws, which may vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with Canadian prospectus requirements, pursuant to a statutory exemption from the prospectus requirements, in a transaction exempt from the prospectus requirements or otherwise under a discretionary exemption from the prospectus requirements granted by the applicable local Canadian securities regulatory authority. These resale restrictions may under certain circumstances apply to resales of the shares outside of Canada.

45

Representations of Purchasers

Each Canadian investor who purchases shares will be deemed to have represented to the Company, the underwriters and to each dealer from whom a purchase confirmation is received, as applicable, that the investor is (i) purchasing as principal, or is deemed to be purchasing as principal in accordance with applicable Canadian securities laws, for investment only and not with a view to resale or redistribution; (ii) an “accredited investor” as such term is defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions or, in Ontario, as such term is defined in section 73.3(1) of the Securities Act (Ontario); and (iii) is a “permitted client” as such term is defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

Taxation and Eligibility for Investment

Any discussion of taxation and related matters contained in this prospectus does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a Canadian investor when deciding to purchase the shares and, in particular, does not address any Canadian tax considerations. No representation or warranty is hereby made as to the tax consequences to a resident, or deemed resident, of Canada of an investment in the shares or with respect to the eligibility of the shares for investment by such investor under relevant Canadian federal and provincial legislation and regulations.

Rights of Action for Damages or Rescission

Securities legislation in certain of the Canadian jurisdictions provides certain purchasers of securities pursuant to an offering memorandum (such as this prospectus), including where the distribution involves an “eligible foreign security” as such term is defined in Ontario Securities Commission Rule 45-501 Ontario Prospectus and Registration Exemptions and in Multilateral Instrument 45-107 Listing Representation and Statutory Rights of Action Disclosure Exemptions, as applicable, with a remedy for damages or rescission, or both, in addition to any other rights they may have at law, where the offering memorandum, or other offering document that constitutes an offering memorandum, and any amendment thereto, contains a “misrepresentation” as defined under applicable Canadian securities laws. These remedies, or notice with respect to these remedies, must be exercised or delivered, as the case may be, by the purchaser within the time limits prescribed under, and are subject to limitations and defences under, applicable Canadian securities legislation. In addition, these remedies are in addition to and without derogation from any other right or remedy available at law to the investor.

Language of Documents

Upon receipt of this document, each Canadian investor hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only. Par la réception de ce document, chaque investisseur canadien confirme par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.

LEGAL MATTERS

Unless otherwise indicated, Sheppard, Mullin, Richter & Hampton LLP, New York, New York, will pass upon the validity of the securities to be sold in this offering. The underwriter is being represented by Ellenoff Grossman & Schole LLP of New York, New York in connection with the offering.

EXPERTS

The financial statements as of December 31, 2016 and 2015 and for each of the two years in the period ended December 31, 2016 included in this Prospectus have been so included in reliance on the report of BDO USA, LLP, an independent registered public accounting firm (the report on the financial statements contains an explanatory paragraph regarding the Company’s ability to continue as a going concern), appearing elsewhere herein, given on the authority of said firm as experts in auditing and accounting.

46

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the SEC covering the securities we are offering by this prospectus. This prospectus does not include all of the information contained in the registration statement. You should refer to the registration statement and its exhibits for additional information. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete and you should refer to the exhibits filed as part of the registration statement for copies of the actual contract, agreement or another document.

We file annual, quarterly and other periodic reports, proxy statements and other information with the Securities and Exchange Commission. You can read our Securities and Exchange Commission filings, including this registration statement, over the Internet at the Securities and Exchange Commission’s website at www.sec.gov. You may also read and copy any document we file with the Securities and Exchange Commission at its public reference facilities at 100 F Street NE, Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the Securities and Exchange Commission at 100 F Street NE, Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

Our Internet address is www.immunepharma.com. There we make available free of charge, on or through the investor relations section of our website, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission. The information found on our website is not part of this prospectus and investors should not rely on any such information in deciding whether to invest.

47

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

We have elected to incorporate the following documents into this prospectus, together with all exhibits filed therewith or incorporated therein by reference, to the extent not otherwise amended or superseded by the contents of this prospectus:

•

Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, as filed with the SEC on August 18, 2017;

​

•

Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017, as filed with the SEC on June 14, 2017;

​

•

Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on May 17, 2017;

​

•

Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 30, 2016, as amended by our Annual Report on Form 10-K/A for the year ended December 31, 2015, filed with the SEC on April 29, 2016;

​

•

Current Reports on Form 8-K filed with the SEC on January 7, 2016, January 11, 2016, January 15, 2016, February 4, 2016, February 29, 2016, April 20, 2016, June 13, 2016, July 1, 2016, July 6, 2016, July 19, 2016, August 3, 2016, September 7, 2016, September 16, 2016, November 8, 2016, November 22, 2016, December 16, 2016, December 20, 2016, December 22, 2016, January 9, 2017, January 19, 2017, February 1, 2017, February 3, 2017 and February 15, 2017, March 13, 2017, March 23, 2017, April 19, 2017, April 24, 2017, April 27, 2017, May 10, 2017, May 15, 2017, May 16, 2017, May 26, 2017 June 13, 2017 and June 21, 2017, a second 8-K on June 21, 2017, July 10, 2017, July 12, 2017, July 18, 2017. August 18, 2017, August 24, 2017, August 29, 2017, September 8, 2017 and October 3, 2017.

​

Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for all purposes to the extent that a statement contained in this prospectus, or in any other subsequently filed document which is also incorporated or deemed to be incorporated by reference, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus. You may request a copy of these filings (other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing) at no cost by writing or telephoning us at the following address or telephone number: Immune Pharmaceuticals Inc. 550 Sylvan Avenue, Suite 101, Englewood Cliffs, NJ 07632, telephone (201) 464-2677.

Copies of these filings are also available through the “Investors” section of our website at www.immunepharma.com. For other ways to obtain a copy of these filings, please refer to “Prospectus Summary — Available Information.”

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INDEX TO FINANCIAL STATEMENTS

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Immune Pharmaceuticals Inc.
New York, New York

We have audited the accompanying balance sheets of Immune Pharmaceuticals Inc. as of December 31, 2016 and 2015, and the related statements of operations, stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Immune Pharmaceuticals Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has negative working capital, an accumulated deficit, recurring losses from operations and expects continuing future losses that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 2 to the consolidated financial statements, on April 12, 2017, the Company approved a reverse stock split with a ratio of 1-for-20. As a result, common stock share amounts included in these consolidated financial statements have been retrospectively adjusted.

/s/ BDO USA, LLP

New York, New York
May 17, 2017

F-2

Immune Pharmaceuticals Inc. and Subsidiaries

Consolidated Balance Sheets
($ in thousands, except share and per share amounts)

The accompanying notes are an integral part of the consolidated financial statements.

F-3

Immune Pharmaceuticals Inc. and Subsidiaries

Consolidated Statements of Operations
($ in thousands, except share and per share amounts)

The accompanying notes are an integral part of the consolidated financial statements.

F-4

Consolidated Statement of Stockholders’ Equity

For the Years Ended December 31, 2016 and 2015
($ in thousands, except share amounts)

The accompanying notes are an integral part of the consolidated financial statements.

F-5

Immune Pharmaceuticals Inc. and Subsidiaries

Consolidated Statements of Cash Flows
($ in thousands)

The accompanying notes are an integral part of the consolidated financial statements.

F-6

Immune Pharmaceuticals Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note 1.   Business Description

Immune Pharmaceuticals Inc., together with its subsidiaries (collectively, “Immune” or the “Company”), is a clinical stage biopharmaceutical company specializing in the development of novel targeted therapeutic agents in the fields of immuno-inflammation, dermatology and immuno-oncology. The Company’s leading product candidate is bertilimumab, a clinical-stage, first-in-class, fully human antibody, which targets eotaxin-1, a key regulator of immuno-inflammation. The Company’s asset portfolio includes NanoCyclo, a topical nanocapsule formulation of cyclosporine-A, for the treatment of atopic dermatitis and psoriasis. The Company’s immuno-oncology pipeline includes Ceplene, which is effective for the maintenance of remission in patients with Acute Myeloid Leukemia (“AML”) and Azixa and crolibulin, two clinical-stage, vascular disrupting agents (“VDA”), which have demonstrated encouraging preliminary proof of concept study results. In addition, the Company has two immuno-oncology platform assets, consisting of a bispecific antibody platform and a nanotechnology combination platform, which it refers to as “NanomAbs”.

The Company’s core business strategy is to build a portfolio of novel immunotherapies and compounds with the potential to treat or prevent severe inflammatory diseases in dermatology, gastroenterology and cancer, develop each compound to pre-determined milestones, and license the compounds to pharmaceutical companies for advanced development and commercialization. Additionally, we may seek to acquire commercial stage drugs in the field of immuno-oncology. The Company intends to obtain revenues from licensing fees, milestone payments, development fees, royalties and/or sales related to the use of our drug candidates or intellectual property for specific therapeutic indications or applications.

As of December 31, 2016, the Company did not have any self-developed or licensed products approved for sale by the U.S. Food and Drug Administration (“FDA”). There can be no assurance that the Company’s research and development efforts will be successful, that any of its products will obtain necessary government regulatory approval or that any approved products will be commercially viable.

On April 12, 2017, the Company announced a reverse stock split of its shares of common stock at a ratio of 1-for-20. Beginning with the opening of trading on April 13, 2017, the common stock began trading on a post-split basis on the Nasdaq Capital Market (“NASDAQ”) under the symbol IMNP. All share and per share amounts in this Form 10-K have been reflected on a post-split basis (see Note 16).

History — Reverse Merger.   On August 25, 2013, Immune Pharmaceuticals Inc. (formerly known as, EpiCept Corporation), a Delaware corporation, or Immune, closed a merger transaction (the “Merger”) with Immune Pharmaceuticals Ltd., a privately held Israeli company (“Immune Ltd.”), pursuant to a definitive Merger Agreement and Plan of Reorganization, dated as of November 7, 2012, as amended (the “Merger Agreement”) by and among Immune, EpiCept Israel Ltd., an Israeli company and a wholly-owned subsidiary (“Merger Sub”) and Immune Ltd. Pursuant to the Merger Agreement, Merger Sub merged with and into Immune Ltd., following which Immune Ltd. became a wholly-owned subsidiary of Immune and the former stockholders of Immune Ltd. received shares of Immune that constituted a majority of the outstanding shares of Immune.

Note 2.   Going Concern

These consolidated financial statements are presented on the basis that the Company will continue as a going concern. The going concern concept contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a “going concern” despite insufficient available cash as of the date of this filing to fund the anticipated level of operations for at least the next 12 months is dependent on the Company’s ability to raise capital and monetize assets through sale or licensing of drug candidates under development.

The Company has limited capital resources and its operations have been funded by the proceeds of equity and debt offerings. The Company has devoted substantially all of its cash resources to research and development (“R&D”) programs and incurred significant general and administrative expenses to enable it

F-7

to finance and grow its business and operations. To date, the Company has not generated any significant revenue and may not generate any revenue for a number of years, if at all. If the Company is unable to raise additional funds in the future on acceptable terms, or at all, it may be forced to curtail its development activities or cease operations.

The Company has generated losses from operations since inception and it anticipates that it will continue to generate significant losses from operations for the foreseeable future. As of December 31, 2016, the Company had negative working capital of approximately $8.5 million and its accumulated deficit was $95.6 million. The Company’s net loss was $32.7 million and $17.2 million for the fiscal years ended December 31, 2016 and 2015, respectively. The Company’s cash used in operations was $12.3 million and $13.9 million for the years ended December 31, 2016 and 2015, respectively.

The Company has limited capital resources and operations, and since inception have been funded with the proceeds from equity and debt financings and license fee arrangements. As of December 31, 2016, the Company had approximately $0.3 million in cash.

The Company will require additional financing in fiscal 2017 to continue at its expected level of operations. If the Company fails to obtain the needed capital, it will be forced to delay, scale back, sell or out-license or eliminate some or all of its R&D programs. There is no assurance that the Company will be successful in any capital-raising efforts that it may undertake to fund operations during 2017. The Company anticipates that it will continue to issue equity and/or debt securities as a source of liquidity, until it begins to generate positive cash flow to support its operations. Any future sales of securities to finance operations will dilute existing stockholders’ ownership. The Company cannot guarantee when or if it will generate positive cash flow.

The Company’s available cash as of the date of this filing will not be sufficient to fund its anticipated level of operations for the next 12 months. If the Company fails to raise additional capital or obtain substantial cash inflows from potential partners within the next few months, it may be forced to curtail or cease operations. The Company cannot provide any assurance that financing will be available in a timely manner, on favorable terms or at all. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern

The Company has adopted Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements — Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. This ASU requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable) and provide related disclosures.

Note 3.   Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Immune and its subsidiaries: Immune Pharmaceuticals Ltd. (“Immune Ltd.”), Immune Pharmaceuticals USA Corp., Maxim Pharmaceuticals, Inc., Cytovia, Inc., Immune Oncology Pharmaceuticals Inc. and EpiCept GmbH (closed January 2015). All material inter-company transactions and balances have been eliminated in consolidation.

The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and instructions to Form 10-K.

Use of Estimates

In preparing consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and expenses during the

F-8

reported periods. Significant estimates include impairment of long lived assets (including intangible assets and In-Process R&D (“IPR&D”), amortization period of intangible assets, fair value of stock based compensation, fair value of warrants and derivative liabilities and valuation of uncertain tax position. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers investments with original maturities of three months or less to be cash equivalents. Restricted cash primarily represents cash not available for immediate and general use by the Company. The Company maintains cash and cash equivalents with certain major financial institutions in the United States and Israel. At certain times during the year cash may exceed U.S. federally insured limits.

Intangible Assets

The Company accounts for the purchases of intangible assets in accordance with the provisions of Accounting Standards Classification (“ASC”) 350, Intangibles. Intangible assets are recognized based on their acquisition cost. Intangible assets determined to have indefinite lives are not amortized, but rather tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying amount may no longer be recoverable. If any of the Company’s intangible assets are considered to be impaired, the amount of impairment to be recognized is the excess of the carrying amount of the assets over its fair value. Intangible assets with definitive lives are also reviewed for impairment only if indicators exist in accordance with ASC 360, Property, Plant and Equipment, and are amortized or depreciated over the shorter of their estimated useful lives or the statutory or contractual term, and in the case of patents on a straight-line basis.

The Company performs an analysis annually to determine whether an impairment of intangible assets has occurred. In particular, the Company evaluated the AmiKet IPR&D as of December 31, 2016 for impairment and determined that it is more likely than not that the AmiKet IPR&D is impaired. See In-Process Research and Development below for a further discussion of the Company’s determination that an impairment has occurred.

Property and Equipment

Property and equipment are carried at cost, less accumulated depreciation. Depreciation is recognized using the straight-line method over the useful live of the related asset. Expenditures for maintenance and repairs, which do not improve or extend the expected useful life of the assets, are expensed to operations while major repairs are capitalized.

Property and equipment consisted of the following ($ in thousands):

Depreciation expense amounted to $88,000 and $26,000 for the years ended December 31, 2016 and 2015, respectively.

F-9

In-Process Research and Development

IPR&D represents the estimated fair value assigned to R&D projects acquired in a purchased business combination that have not been completed at the date of acquisition and which have no alternative future use. IPR&D assets acquired in a business combination are capitalized as indefinite-lived intangible assets. These assets remain indefinite-lived until the completion or abandonment of the associated R&D efforts. During the period prior to completion or abandonment, these acquired indefinite-lived assets are not amortized but are tested for impairment annually, or more frequently, if events or changes in circumstances indicate that the asset might be impaired.

The Company recorded an asset, IPR&D, with an initial book value of  $27.5 million, related to the acquisition of AmiKet in August 2013 as part of the merger with Epicept. Management completed an impairment analysis of the IPR&D as of December 31, 2016 and concluded that the following factors indicate that the IPR&D asset was impaired: a decision by management to delay any further development of AmiKet; the failure to sell or license AmiKet to a third party; and in consideration of the Company’s market capitalization. For the year ended December 31, 2016, the Company recorded an impairment charge of  $12.5 million in its consolidated statement of operations, which represents the excess of the IPR&D asset’s carrying value over its estimated fair value. The estimated fair value of the IPR&D asset is based upon the value ascribed to AmiKet in an arm’s length agreement negotiated by the Company with an unrelated third party.

Segment Information

The Company operates in one reportable segment: acquiring, developing and commercializing prescription drug products. Accordingly, the Company reports the accompanying consolidated financial statements in the aggregate, including all of its activities in one reportable segment. As of December 31, 2016, and 2015, approximately 9% and 8%, respectively, of the Company’s assets were located outside of the U.S.

Research and Development

R&D expenses consist primarily of the cost of the Company’s development and operations personnel, the cost of its clinical trials, manufacturing costs, as well as the cost of outsourced services and are expensed as incurred.

Translation into U.S. dollars

The Company’s functional currency is the U.S. dollar. The Company conducts certain transactions in foreign currencies, particularly, the Israeli Shekel and the Euro, which are recorded at the exchange rate as of the transaction date. All exchange gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected as non-operating income or expense in the statement of operations, as they arise.

Stock-based Compensation

The Company recognizes compensation expense for all equity-based payments. Stock based compensation issued to employees is accounted for under ASC 718, Compensation — Share Compensation (“ASC 718”). The Company utilizes the Black-Scholes valuation method to recognize compensation expense over the vesting period. Certain assumptions need to be made with respect to utilizing the Black-Scholes valuation model, including the expected life, volatility, risk-free interest rate and anticipated forfeiture of the stock options. The expected life of the stock options were calculated using the short cut method per the provisions of ASC 718. The risk-free interest rate is based on the rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of the options. As the Company’s common stock does not have an adequate length of trading history, coupled with significant changes to the business since the Merger, the expected stock price volatility for the Company’s common stock was estimated by taking the average historical price volatility for industry peers combined with the Company’s historical data based on daily price observations. Estimates of pre-vesting option forfeitures are based on the Company’s experience. The Company adjusts its estimate of forfeitures over the requisite service period

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based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment in the period of change and also impacts the amount of compensation expense to be recognized in future periods.

The Company accounts for stock-based transactions with non-employees in which services are received in exchange for equity instruments based upon the fair value of the equity instruments issued, in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Factors that most significantly affect the expense related to equity-based payments to non-employees include the estimated fair market value of the common stock underlying the stock options and the estimated volatility of such fair market value. The value of such options is re-measured every quarter until performance is complete and income or expense is recognized during the vesting terms. Accounting for equity-based payments to non-employees granted by the Company requires fair value estimates of the equity instrument grant. When stock-based grants are granted in exchange for the receipt of services, the Company estimates the value of the stock-based compensation based upon the value of its common stock at the date of grant.

Reverse Stock Split

On April 12, 2017, the Company effected a one-for-twenty reverse stock split (the “Reverse Split”) of its issued and outstanding shares of common stock (“Common Stock”). Every twenty shares of issued and outstanding Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change in the par value per share of Common Stock. All share and per share amounts in the financial statements have been retroactively adjusted for all periods presented to give effect to the reverse split, including reclassifying an amount equal to the reduction in par value to additional paid-in capital.

The Reverse Split affected all issued and outstanding shares of Common Stock, as well as Common Stock underlying stock options, warrants and convertible instruments outstanding immediately prior to the effectiveness of the Reverse Split. The Reverse Split reduced the total number of shares of Common Stock outstanding from approximately 194.3 million to approximately 9.7 million.

No fractional shares were issued in connection with the Reverse Split. Any fractional share of common stock that would otherwise have resulted from the reverse stock split was rounded up to the nearest whole share.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740 “Income Taxes.” The Company is required to file income tax returns in the appropriate U.S. federal, state and local jurisdictions, including New York State and New York City and in Israel. Since the Company had losses in the past, all prior years that generated net operating loss carry-forwards are open and subject to audit examination.

Income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized based upon the differences arising from carrying amounts of the Company’s assets and liabilities for tax and financial reporting purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in the period when the change in tax rates is enacted. A valuation allowance is established when it is determined that it is more likely than not that some portion or all of the deferred tax assets will not be realized. A full valuation allowance has been applied against the Company’s net deferred tax assets as of December 31, 2016 and 2015, due to projected losses and because it is not more likely than not that the Company will realize future benefits associated with these deferred tax assets. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. ASC 740 prescribes how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return. Additionally, for tax positions to qualify for deferred tax benefit recognition under ASC 740, the position must have at least a “more likely than not” chance of being sustained upon challenge by the respective taxing authorities, which criteria is a matter of significant judgment. The Company had gross liabilities recorded of  $60,000 and $50,000 for the years ended December 31, 2016 and 2015, respectively, to account for potential state income tax exposure. The

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Company’s policy is to record interest and penalty related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision, of which such amounts were immaterial for the years ended December 2016 and 2015.

Patents

The Company expenses external costs, such as filing fees and associated attorney fees, incurred to obtain issued patents and patent applications pending. The Company also expenses costs associated with maintaining and defending patents subsequent to their issuance in the period incurred.

Clinical Trial Accruals

The Company’s preclinical and clinical trials are performed by third party contract research organizations (CROs) and/or clinical investigators, and clinical supplies are manufactured by contract manufacturing organizations (CMOs). Invoicing from these third parties may be monthly based upon services performed or based upon milestones achieved. The Company accrues these expenses based upon its assessment of the status of each clinical trial and the work completed, and upon information obtained from the CROs and CMOs. The Company’s estimates are dependent upon the timeliness and accuracy of data provided by the CROs and CMOs regarding the status and cost of the studies, and may not match the actual services performed by the organizations. This could result in adjustments to the Company’s research and development expenses in future periods. To date the Company has had no significant adjustments.

Recently Issued Accounting Pronouncements

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash. The amendments of ASU No. 2016-18 were issued to address the diversity in classification and presentation of changes in restricted cash and restricted cash equivalents on the statement of cash flows which is currently not addressed under Topic 230. The ASU would require an entity to include amounts generally described as restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning of period and end of period total amounts on the statement of cash flows. The ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted and the adoption of the ASU should be applied retrospectively. The Company is evaluating the impact of the standard on the Company’s statement of cash flows.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory. The ASU was issued to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current U.S. GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party which has resulted in diversity in practice and increased complexity within financial reporting. The ASU would require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted and the adoption of the ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is not early adopting and is evaluating the impact of the standard on the Company’s financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The ASU was issued to address eight specific cash flow issues for which stakeholders have indicated to the FASB that a diversity in practice existed in how entities were presenting and classifying these items in the statement of cash flows. The ASU is effective for public entities for fiscal years beginning after December 15, 2017 and interim periods in those fiscal years. Early adoption is permitted, including adoption in an interim fiscal period with all amendments adopted in the same period. The adoption of the ASU is required to be applied retrospectively. The Company is evaluating the impact of the standard on the Company’s statement of cash flows.

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In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share Based Payment Accounting (“ASU 2016-09”) as part of the FASB simplification initiative. The new standard provides for changes to accounting for stock compensation including 1) excess tax benefits and tax deficiencies related to share based payment awards will be recognized as income tax expense in the reporting period in which they occur; 2) excess tax benefits will be classified as an operating activity in the statement of cash flows; 3) the option to elect to estimate forfeitures or account for them when they occur; and 4) increase tax withholding requirements threshold to qualify for equity classification. The ASU is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2016, and early adoption is permitted. The Company is evaluating the impact of the standard on the Company’s financial statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is evaluating the impact of the standard on its consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for public companies for interim and annual periods beginning after December 15, 2017. The Company is evaluating the impact that the standard will have on its consolidated financial statements.

Note 4.   Derivative Financial Instruments

The Company accounts for derivative financial instruments in accordance with ASC 815-40, “Derivative and Hedging — Contracts in Entity’s Own Equity” (“ASC 815-40”), instruments that do not have fixed settlement provisions are deemed to be derivative instruments.

Hercules Warrants

On July 29, 2015, the Company and Immune Pharmaceuticals USA Corp., a wholly-owned subsidiary of the Company entered into a Loan and Security Agreement (“Loan Agreement”) with Hercules Capital (“Hercules”) pursuant to which Hercules agreed to lend $4.5 million to the Company with an option to borrow an additional $5.0 million prior to June 15, 2016, subject to the achievement of certain clinical milestones and satisfaction of certain other conditions. As of June 15, 2016, the Company had not met certain of the milestones as defined in the Hercules agreement in order to draw down upon the additional $5.0 million and as a result the option expired. In connection with the execution of the Loan Agreement, the Company has issued to Hercules a five-year warrant (“Hercules Warrant”) to purchase an aggregate of 10,743 shares of its common stock at an exercise price of  $34.00 per share, subject to certain adjustments, including, if lower, the effective price of any financing occurring six months after the issuance date (the “Hercules Warrants”).

The Company determined the fair value of the Hercules Warrants to be $0.3 million on July 29, 2015 using the Binomial Lattice pricing model and recorded that amount as part of debt discount in its consolidated balance sheets since the Hercules Warrant was considered part of the cost of the financing and is being amortized over the life of the Hercules Loan Agreement using the effective interest method. The Hercules Warrants were re-measured at each balance sheet date until the expiration of the anti-dilution provision on January 29, 2016. For the year ended December 31, 2016 and 2015, the Company recorded a gain on the change in the estimated fair value of the Hercules Warrants of  $38,000 and $0.2 million, respectively, which was recorded as non-operating expense in its consolidated statements of operations. Upon the expiration of the anti-dilution provision on January 29, 2016, the remaining balance of  $46,000 of the derivative liability associated with the Hercules Warrant was reclassified to additional paid-in-capital in the Company’s consolidated balance sheets (see Note 5).

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Discover Series D Convertible Preferred Stock

In 2015, the Company issued Series D Redeemable Convertible Preferred Stock (“Series D Preferred Stock”) to Discover Growth Fund (“Discover”), with a conversion price of  $50.00 per share. The Company received total gross proceeds of  $12.0 million in connection with the issuance of the Series D Preferred Stock to Discover after taking into account a 5% original issue discount. Discover could convert at any time and at conversion Discover receives a conversion premium equal to the amount of dividends it would have received with respect to the Series D Preferred Stock if the Series D Preferred Stock had been held to the term of agreement of 6.5 years. The Series D Preferred Stock dividend rate included an adjustment feature that fluctuated inversely to the changes in the value of the Company’s common stock price. The conversion premium and dividends are redeemed upon conversion of the Series D Preferred Stock. The Company determined that the conversion premium and dividends with the features described above required liability accounting. Accordingly, the conversion premium and the dividend feature were bifurcated from the Series D Preferred Stock on the Company’s consolidated balance sheet and were recorded as a derivative liability at fair value. Changes in the fair value of the derivative liability are recognized in the Company’s consolidated statement of operations for each reporting period. For the year ended December 31, 2016, Discover converted its remaining 963 shares of the Company’s Series D Preferred Stock outstanding. For the year ended December 31, 2015, Discover converted 300 shares of the Company’s Series D Preferred Stock. For the years ended December 31, 2016 and 2015, the Company recorded a loss of  $8.7 million and $0.3 million, respectively, on the change in the estimated fair value of the Discover derivative liability, which was recorded as a non-operating expense in the Company’s consolidated statements of operations. The fair value of the Discover derivative liability as of December 31, 2016 and 2015 was $0 and $6.5 million, respectively (see Notes 5 and 11).

Note 5.   Fair Value Measurements

Financial Instruments and Fair Value

The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

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Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

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Level 2 — Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

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Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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The financial instruments recorded in the Company’s consolidated balance sheets consist primarily of cash, restricted cash, current debt and accounts payable. The carrying amounts of the Company’s cash and accounts payable approximate fair value due to their short-term nature. The fair value of the Company’s long-term debt approximates its gross carrying value of approximately $1.9 million (which has been presented net of issuance costs) due to its remaining maturity of less than two years. In estimating the fair value of the Company’s derivative liabilities associated with the Hercules Warrant and the Series D Preferred Stock issued to Discover, the Company used the Binomial Lattice options pricing model at inception and on each subsequent valuation date. Based on the fair value hierarchy, the Company classified the derivative liability associated with the Hercules Warrant and the Series D Preferred Stock issued to Discover within Level 3 as of December 31, 2015. The Company had no other financial liabilities or assets that were measured at fair value as of December 31, 2016.

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The following table presents the Company’s liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of December 31, 2015 ($ in thousands).

Hercules Warrants

The following table sets forth a summary of changes in the estimated fair value of the Company’s Hercules Warrant derivative liability for the periods presented ($ in thousands):

Series D Preferred Stock

The following table sets forth a summary of changes in the estimated fair value of the Company’s Series D Preferred Stock derivative liability for the periods presented ($ in thousands):

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Note 6.   Licensing Agreements

BioNanoSim Ltd — Nano Cyclosporine-A

In January 2016, the Company through its wholly owned subsidiary, Immune Ltd. entered into a definitive research and license agreement with BioNanoSim Ltd. (“BNS”). The license was entered into pursuant to an existing Memorandum of Understanding, dated June 10, 2015, by and between the Company and Yissum. Under the license, the Company obtained from BNS an exclusive, worldwide sublicense, with a right to further sublicense, for the development, manufacturing and commercialization of certain inventions and research results regarding Yissum’s patents in connection with nanoparticles for topical delivery of cyclosporine-A (Nanocyclo), for all topical skin indications. In consideration for the License, the Company will pay BNS the following payments throughout the term of the License:

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an annual maintenance fee of  $30,000, commencing on January 1, 2021, which maintenance fee is subject to an increase by 30% each year, up to a maximum annual maintenance fee of  $0.1 million, and may be credited against royalties or milestone payments payable in the same calendar year;

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a license fee in the amount of  $0.5 million, to be paid in four equal installments to be made between January 4, 2016 and October 1, 2016;

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royalties on net sales of products (as such term is defined in the License) by the Company in the amount of up to 5%, subject to certain possible reductions in certain jurisdictions;

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Sublicense fees in the amount of 18% of any non-sales related consideration received by the Company from a sublicense or an option to receive a sublicense for the products and/or the licensed technology (as such terms are defined in the license); and milestones payments of up to approximately $4.5 million and 12,500 shares of the Company’s common stock upon the achievement of certain regulatory, clinical development and commercialization milestones, though in the event that the Company receives consideration from a sublicensee for any such milestones, the Company will pay to BNS the higher of either (a) the amount of the particular milestone payment or (b) the amount of the sublicense fees that are due for such sublicensee consideration paid to the Company. In addition, the Company shall reimburse BNS within 60 days for expenses relating to patent fees and will sponsor a 12-month research program to prepare the program for investigational new drug (“IND”) submission. For the year ended December 31, 2016, the Company paid $0.5 million for the license fee and paid $0.2 million related to research fees.

Yissum Research Development Company of the Hebrew University of Jerusalem Ltd. — AmiKet Nano

On June 25, 2015, the Company entered into a definitive research and license agreement with Yissum Research Development Company of the Hebrew University of Jerusalem Ltd. (“Yissum”). Under the license, the Company has obtained an exclusive, worldwide license from Yissum, with certain sublicensing rights, to make commercial use of certain of Yissum’s patents and know-how in connection with a topical nano-formulated delivery of AmiKet for the development, manufacturing, marketing, distribution and commercialization of products based on the technology. In consideration for the license, the Company will pay Yissum the following payments throughout the term of the license:

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an annual maintenance fee of  $30,000 commencing on June 25, 2020, which maintenance fee shall increase by 30% each year, up to a maximum annual maintenance fee of  $0.1 million and may be credited against royalties or milestone payments payable in the same calendar year;

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royalties on net sales of products (as such term is defined in the license) by the Company in the amount of up to 3%, subject to certain possible reductions in certain jurisdictions;

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milestones payments of up to approximately $4.5 million upon the achievement of certain regulatory, clinical development and commercialization milestone; and

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reimbursement of related patent fees.

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Furthermore, the Company will fund an annual research program in the amount of approximately $0.4 million annually, plus VAT and any applicable taxes, commencing on October 1, 2015 (or such other time as mutually agreed between the parties). The results of the research, including any patents or patent applications shall automatically be licensed to the Company. During the year ended December 31, 2015, the

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Company recorded an expense for the research fee of  $0.2 million, which was paid in 2016. For the year ended December 31, 2016, no expense related to the research fee had been accrued as the parties could not mutually agreed on the next phase of the research studies.

Atlante Biotech SAS

On December 28, 2015, the Company entered into an exclusive license with Atlante Biotech SAS (“Atlante”), to the patents and know-how for a new format of bispecific antibodies. The R&D work on the bispecific antibodies will be performed at the Company’s recently established Immunology R&D unit at the Alexandria Center for Life Sciences in New York City, under the leadership of Dr. Boris Shor, Executive Director of R&D of Immune. In recently presented data, the platform prototype bispecific antibody was shown to retain effector functions and mediate redirect killing of target cells by cytokine induced killer T cells. The bispecific antibody demonstrated direct anti-cancer effects in vitro, as well as in vivo anti-tumor activity and improved survival in a mouse xenograft model of disseminated leukemia. A collaborative European consortium led by Dr. Kadouche and funded by a European grant developed the novel platform for production of tetravalent IgG1-like bispecific antibodies. During the year ended December 31, 2016, the Company paid approximately $0.1 million in license fees to Atlante.

Dr. Jean Kadouche and Alan Razafindrastita

In March 2011, Dr. Jean Kadouche, a related party, sold, assigned and transferred to Immune the entire right, title and interest for all countries, in and to any and all patents and inventions related to mice producing human antibodies and a method of preparation of human antibodies, collectively, the Human Antibody Production Technology Platform. Immune Ltd paid Dr. Kadouche and Alan Razafindrastita total consideration of: (i) $20,000 in cash and (ii) 40,000 ordinary shares of Immune Ltd, which were valued at approximately $0.7 million. Through the Human Antibody Production Technology Platform and additional laboratory work, human immune systems and specific cell lines are introduced in mice, enabling them to produce human monoclonal antibodies.

Endo Pharmaceuticals Inc.

On July 7, 2015, the Company amended its 2003 Licensing Agreement with Endo Pharmaceuticals Inc. (“Endo”). As a result, Immune transferred to Endo its previously licensed patents related to the use of topical lidocaine in acute and chronic back pain and Endo granted to Immune a royalty-free, non-exclusive, fully transferable license to those patents. Endo will make undisclosed milestone payments to Immune if Endo receives a back-pain indication for a lidocaine-based product, as per the original 2003 Licensing Agreement. The Company re-gained full exclusive rights to develop, commercialize and license LidoPAIN. The Company is assessing strategic alternatives for this non-core asset.

Dalhousie University

In connection with the Merger, the Company entered into a direct license agreement with Dalhousie University (“Dalhousie”) under which the Company has an exclusive license to certain patents for the topical use of tricyclic anti-depressants and N-methyl-D-aspartate (“NMDA”) receptor antagonists as topical analgesics for neuralgia. These, and other patents, cover the combination treatment consisting of amitriptyline and ketamine in AmiKet.

The Company has been granted worldwide rights to make, use, develop, sell and market products utilizing the licensed technology in connection with passive dermal applications. The Company is obligated to make payments to Dalhousie upon achievement of specified milestones and to pay royalties based on annual net sales derived from the products incorporating the licensed technology. The Company is further obligated to pay Dalhousie an annual maintenance fee until the license agreement expires or is terminated, or a New Drug Application (“NDA”) for AmiKet is filed with the FDA, or Dalhousie will have the option to terminate the agreement. The license agreement with Dalhousie terminates upon the expiration of the last to expire licensed patent. On April 3, 2014, the Company entered into a Waiver and Amendment to the license agreement pursuant to which Dalhousie agreed to irrevocably waive the Company’s obligation to pay the $0.5 million maintenance fee that was due on August 27, 2012 and August 27, 2013 and in any subsequent year. In addition, the Company has agreed to pay Dalhousie royalties of 5% of net sales of

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licensed technology in countries in which patent coverage is available and 3% of net sales in countries in which data protection is available. The parties have also agreed to amend the timing and increase the amounts of the milestone payments payable under the license agreement. As of December 31, 2016 and 2015, no amounts were due to Dalhousie. Additional milestones payments will become due upon sub licensing and receipt of certain approvals, none of which have yet been met or received.

Shire BioChem Inc.

In connection with the Merger, the Company acquired a license agreement for the rights to the MX2105 series of apoptosis inducer anti-cancer compounds from Shire BioChem Inc. (“Shire”) (formerly known as BioChem Pharma, Inc.). Under the agreement, the Company is required to provide Shire BioChem a portion of any sublicensing payments the Company receives, if the Company relicenses the series of compounds or make milestone payments to Shire BioChem totaling up to $26.0 million assuming the successful commercialization of the compounds by the Company for the treatment of a cancer indication, as well as pay a royalty on product sales. As of December 31, 2016 and 2015, no amounts were due to Shire.

Lonza Sales AG

On May 2, 2012, Lonza Sales AG (“Lonza”) granted the Company a sub-licensable, non-exclusive worldwide license under certain know-how and patent rights to use, develop, manufacture, market, sell, offer, distribute, import and export bertilimumab, as it is produced through the use of Lonza’s system of cell lines, vectors and know-how. The Company is not obligated to manufacture bertilimumab through the use of Lonza’s system.

The Company agreed to pay Lonza (i) a royalty of 1% of the net selling price of bertilimumab manufactured by Lonza; or (ii) an annual payment of approximately $0.1 million (first payable upon commencement of Phase II clinical trials) plus a royalty of 1.5% of the net selling price of bertilimumab if it is manufactured by the Company or one of its strategic partners; or (iii) an annual payment of approximately $0.5 million (first payable upon commencement of the relevant sublicense) plus a royalty of 2% of the net selling price of bertilimumab if it is manufactured by any party other than Lonza, the Company or one of its strategic partners. The royalties are subject to a 50% reduction based on the lack of certain patent protections, including the expiration of patents, on a country-by-country basis. Unless earlier terminated (including, but not limited to, the reasons set forth below), the license agreement continues until the expiration of the last enforceable valid claim to the licensed patent rights, which began to expire in 2014 and will continue to expire between 2015 and 2016, or for so long as the System Know How (as defined in the License) is identified and remains secret and substantial, whichever is later. As of December 31, 2016 and 2015, no amounts were due under the license agreement.

MabLife SAS

In March 2012, Immune Ltd. acquired from MabLife SAS (“MabLife”), through an assignment agreement, all rights, titles and interests in and to the patent rights, technology and deliverables related to the anti-Ferritin mAb, AMB8LK, including its nucleotide and protein sequences, its ability to recognize human acid and basic ferritins, or a part of its ability to recognize human acid and basic ferritins The consideration was as follows: (i) $0.6 million payable in six equal installments of which $0.2 million had been paid through December 31, 2016; and (ii) royalties of 0.6% of net sales of any product containing AMB8LK or the manufacture, use, sale, offering or importation of which would infringe on the patent rights with respect to AMB8LK. The Company is required to assign the foregoing rights back to MabLife if it fails to make any of the required payments, are declared insolvent or bankrupt or terminate the agreement. In February 2014, the Company acquired from MabLife, through an irrevocable, exclusive, assignment of all rights, titles and interests in and to the secondary patent rights to (i) the use of anti-ferritin monoclonal antibodies in the treatment of some cancers, (ii) nucleotide and protein sequences of an antibody directed against an epitope common to human acidic, and (iii) basic ferritins, monoclonal antibodies or antibody-like molecules comprising these sequences for $0.1 million (see Notes 7 and 9).

During 2015, MabLife informed the Company that it had filed for bankruptcy. As of December 31, 2016, the bankruptcy had no impact on the Company’s Anti-ferritin Antibody intangible asset.

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iCo Therapeutics Inc.

In December 2010, iCo Therapeutics Inc. (“iCo”) granted Immune Ltd. an option to sub-license the use of bertilimumab from iCo, which obtained certain exclusive license rights to intellectual property relating to bertilimumab pursuant to a license agreement with Cambridge Antibody Technology Group Plc, and to which Immune became a party. In June 2011, Immune exercised its option and obtained a worldwide license from iCo for the use and development of bertilimumab for all human indications, other than ocular indications, pursuant to a product sub-license agreement. iCo retained the worldwide exclusive right to the use of bertilimumab for all ocular applications. Under the agreement, Immune Ltd. paid an initial consideration of  $1.7 million comprised of  (i) $0.5 million in cash, (ii) 30,000 ordinary shares, which were valued at approximately $1.0 million and (iii) 10,000 warrants, which were valued at approximately $0.2 million. In addition to this consideration, iCo received anti-dilution rights equal to 6.14% of the Company’s issued and outstanding share capital on a fully diluted basis. As of December 31, 2016, and 2015, iCo held 32,724 shares and 6,182 of the Company’s common stock and warrants, respectively.

iCo may receive from Immune up to $32.0 million in milestone payments plus royalties. These milestones include the first dosing in a Phase III clinical trial, filing a Biologics License Application/​Marketing Authorization Application, (“BLA/MMA”), approval of a BLA/MAA and the achievement of $100 million in aggregate sales of licensed products. The term of the license lasts until the expiration of all payment obligations on a country-by-country basis, at which point the license will be deemed fully paid, perpetual and irrevocable with respect to that country. As of December 31, 2016, and 2015, no milestones requiring payments had been reached.

Note 7.   Intangible Assets

The value of the Company’s amortizable intangible assets including gross asset value and carrying value is summarized below ($ in thousands):

See Note 6 for a discussion of specific rights acquired in connection with the purchase of each intangible asset.

The Company’s amortizable intangible assets above were determined by its management to have a useful life between 6 and 14 years. Amortization expense amounted to $0.3 million each for the years ended December 31, 2016 and 2015.

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Estimated amortization expense for each of the five succeeding years, based upon the Company’s intangible assets owned at December 31, 2016 is as follows ($ in thousands):

Note 8.   Accrued Expenses

Accrued expenses consist of the following ($ in thousands):

Note 9.   Notes and Loans Payable

The Company is party to loan agreements as follows ($ in thousands):

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Repayments under the Company’s existing debt agreements consist of the following ($ in thousands):

Loan and Security Agreement (1)

On July 29, 2015, the Company and Immune Pharmaceuticals USA Corp., a wholly-owned subsidiary of the Company, entered into a Loan and Security Agreement (“Loan Agreement”) pursuant to which Hercules agreed to lend $4.5 million to the Company with an option to borrow an additional $5.0 million prior to June 15, 2016, subject to the achievement of certain clinical milestones and other conditions. As of June 15, 2016, the Company had not met certain of the milestones described in the Loan Agreement required in order to borrow an additional $5.0 million and as a result the option expired. The Loan Agreement is collateralized by a first priority perfected security interest in all tangible and intangible assets of the Company and its subsidiaries. The Loan Agreement is senior in priority to all other Company indebtedness. The interest rate on the Hercules Loan is calculated at the greater of 10% or the prime rate plus 5.25%. The Company may prepay the Hercules Loan at any time, subject to certain prepayment penalties. Hercules may optionally convert up to $1.0 million of the unpaid principal balance of the loan in any subsequent institutionally led Company financing on the same terms, conditions and pricing applicable to such subsequent financing. This option to convert the loan to equity would be at the then fair value of the Company’s equity. Because the option to convert will be at the same terms and pricing as the new investors will be paying in the subsequent Company financing, the option is deemed to have minimal value for financial reporting purposes. The Hercules Loan’s matures on September 1, 2018 and includes an interest-only payment period for the first nine months following initial funding of the loan, after which escalating principal payments of  $0.1 million per month began on April 1, 2016. Interest expense for the years ended December 31, 2016 and 2015 was $0.4 million and $0.2 million, respectively. As of December 31, 2016, the Company had made $1.2 million in principal repayments.

The Loan Agreement includes an end of term charge of  $0.5 million payable on the earliest to occur of (i) the Term Loan Maturity Date, (ii) the date that Borrower prepays the outstanding secured obligations under the Loan Agreement in full, or (iii) the date that the secured obligations under the Loan Agreement become due and payable in full (as described in the Loan Agreement). The Company accrues a portion of the end of term charge for each reporting period and will accrue up to the full $0.5 million charge over the 37-month term of the Hercules Loan because this charge is deemed a cost of the debt. For the years ended December 31, 2016 and 2015, the Company had recorded a charge of approximately $0.2 million and $0.1 million, respectively, in interest expense in its consolidated statements of operations related to the Loan Agreement.

The Company recorded $1.3 million in debt issuance costs relating to placement agent fees, legal fees, closing costs and the fair value of the placement agent warrants in its consolidated balance sheets upon execution of the Loan Agreement. The Company early adopted ASU 2015-03 Simplifying the Presentation of Debt Issuance Costs, ASU 2015-03 amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. The Company will amortize the debt issuance costs over the term of the Loan Agreement, which matures on September 1, 2018. For the years ended December 31, 2016 and 2015, the Company recorded $0.6 million and $0.3 million, respectively, in interest expense related to the amortization of the debt issuance costs. At December 31, 2016 and 2015, the Company had approximately $0.4 million and $1.0 million, respectively, in debt issuance costs remaining to be amortized which is presented net of the debt balance in its consolidated balance sheets.

On July 21, 2016, Hercules, the Company and the holders of certain promissory notes entered into a Subordination Agreement to the Loan Agreement whereby the holders of such promissory notes agreed that their debt shall be subordinated to the Loan Agreement with respect to any security interest or lien that such creditors may have in any assets of the Company (see Note 15).

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Convertible Notes Payable (2)

On November 17, 2016, the Company entered into a securities purchase agreement with HLHW IV, LLC (“HLHW”), pursuant to which HLHW purchased an aggregate principal amount of  $1,050,000 of Subordinated Convertible Notes for an aggregate purchase price of  $1,000,000 (“Convertible Notes”), representing a principal amount of the Notes of  $1,000,000 plus an original issue discount of 5% which is $50,000.

The Convertible Notes bear interest at a rate of 7.0% per annum, payable in arrears on the maturity date of November 17, 2017. The Notes are convertible into shares of the Company’s common stock at any time from the date of issuance of the Notes, at a conversion price equal to eighty percent (80%) of the lowest intraday bid price on the date of conversion (“conversion date”); provided the lowest intraday bid price on such conversion date is above the lowest closing bid price on the closing date (“Market Price”). In the event on the conversion date, the lowest intraday bid price is less than the Market Price, then in that instance, the conversion price on that conversion date will be equal to the lowest intraday bid price.

On the maturity date, the Company has the option to pay the amount being redeemed; including accrued but unpaid interest, in cash, shares or any combination of cash and shares of the Company’s common stock. In addition, if at any time the lowest intraday bid price falls below $5.00 per share, the holder may elect to redeem up to $350,000 of the outstanding principal, interest and any amounts due under the Notes; provided, however, the Company may only use the proceeds from the sale of common stock pursuant to the terms of the Common Stock Purchase Agreement, dated November 17, 2016 (“CS Purchase Agreement”) entered into with HLHW to redeem the Notes. The Notes are subordinated to the Loan Agreement with Hercules Capital. This redemption process may be repeated once every five business days, at the election of Holder, until the Notes are fully satisfied. The foregoing notwithstanding, HLHW may convert any or all of these Notes into shares of the Company’s common stock at any time.

The Convertible Note Agreement also includes certain of events of defaults which at any time after HLHW becomes aware of may require the redemption of all or any portion of the Notes by delivery of a written notice to the Company. Each portion of the Notes subject to redemption shall be redeemed at a price equal to the greater of 18% per annum or the maximum rate permitted under applicable law of the conversion amount being redeemed, together with liquidated damages of  $250,000. As part of the agreement, the Company paid approximately $0.1 million in debt issuance costs and discount.

On December 16, 2016, the Company entered into Amendment No. 1 with HLHW, effective as of December 5, 2016 as indicated in the Note Amendment, which amends the Convertible Note Agreement to provide that in no circumstance shall the conversion price be lower than $0.10 per share of the Company’s common stock. As of December 31, 2016, the principal outstanding on the notes was approximately $1.0 million. The Company incurred $0.1 million in transaction costs. For the year ended December 31, 2016, the Company recognized $25,000 in interest expense, amortization of debt discount and debt issuance costs which was recorded in interest expense in the Company’s consolidated statement of operations.

In January 2017, Immune paid HLHW $0.3 million in liquidated damages paid for not filing the Convertible Note Registration Statement within 10 days per the Convertible Note Agreement. On February 3, 2017, the Company entered into Amendment No. 2 with HLHW in which HLHW redeemed the Note for $1.35 million in cash which included redemption at 120% of the principal balance per the Convertible Note agreement plus accrued interest. Subsequent to December 31, 2016, Immune repaid the Convertible Note using the proceeds from the November 2016 Agreement.

MabLife Notes Payable (3)

In March 2012, the Company acquired from MabLife SAS (“MabLife”) through an assignment agreement, all rights, titles and interests in and to the patent rights, technology and deliverables related to the anti-Ferritin mAb, AMB8LK, including its nucleotide and protein sequences and its ability to recognize human acid and basic ferritins. The consideration was as follows: (i) $0.6 million payable in six annual installments (one of such installments being an upfront payment made upon execution of the agreement), and (ii) royalties of 0.6% of net sales of any product containing AMB8LK or the manufacture, use, sale, offering or importation of which would infringe on the patent rights with respect to AMB8LK. The Company is required to assign the foregoing rights back to MabLife, if it fails to make any of the required

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payments, is declared insolvent or bankrupt or terminates the agreement. In February 2014, the parties revised the payment arrangement for the purchase of the original assignment rights. Pursuant to the amendment to the assignment agreement, remaining payments of  $0.1 million per year are due each year in 2016 and 2017.

In February 2014, the Company acquired from MabLife, through an irrevocable, exclusive, assignment of all rights, titles and interests in and to the secondary patent rights related to the use of anti-ferritin monoclonal antibodies in the treatment of some cancers, nucleotide and protein sequences of an antibody directed against an epitope common to human acidic and basic ferritins, monoclonal antibodies or antibody-like molecules comprising these sequences. As full consideration for the secondary patent rights, the Company will pay a total of  $150,000 of which $15,000 and $25,000 was paid in 2014 and 2013, respectively, and $25,000 will be paid on the second through fourth anniversary of the agreement and an additional $35,000 on the fifth anniversary of the agreement.

During the first quarter of 2015, MabLife informed the Company that it has filed for bankruptcy. For the years ended December 31, 2016 and 2015, the Company recorded $49,000 and $0, respectively, in interest expense. The Company has not paid any amounts to MabLife since the time it received notification of the MabLife bankruptcy.

Revolving Line of Credit

In April 2014, the Company entered into a three-year, $5.0 million revolving line of credit with Melini Capital Corp. (“Melini”), an existing stockholder who is related to Daniel Kazado, who was the Company’s Chairman of the Board until October 19, 2016 and is a member of the Company’s Board of Directors. Borrowings under the revolving line of credit will incur interest at a rate of 12% per year, payable quarterly. The revolving line of credit is unsecured and subordinated to the Hercules Loan Agreement. On November 30, 2016, the revolving line of credit expired and no amounts have been drawn under the revolving line of credit (see Note 15).

Note 10.   Stockholders’ Equity

(a) Stock options and stock award activity

The following table illustrates the common stock options granted for the years ended December 31, 2016 and 2015:

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The following table illustrates the stock awards granted for the years ended December 31, 2016 and 2015:

The following table summarizes information about stock option activity for the years ended December 31, 2016 and 2015: