Note 10 - Stockholders Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note J – Stockholders’ Equity

1. Preferred Stock

The Company has authorized 5.0 million preferred shares, of which 4,996,935 shares were undesignated and available for the issuance at the closing of the merger. As of September 30, 2013, the Company had no shares of preferred stock outstanding.

2. Founders Shares of Immune Ltd.

On August 25, 2013, in conjunction with the reverse merger, the Company issued 4,173,150 shares of its common stock to Daniel Teper in exchange for 6,750,000 founders shares of Immune Ltd.

3. Series A Preferred Shares of Immune Ltd.

On August 25, 2013, in conjunction with the reverse merger, the Company issued 1,563,964 shares of its common stock to certain shareholders in exchange for 2,529,685 Series A preferred shares of Immune Ltd.

4. Ordinary Shares of Immune Ltd.

On August 25, 2013, in conjunction with the reverse merger, the Company issued 4,752,976 shares of its common stock to certain shareholders in exchange for 7,675,360 ordinary shares of Immune Ltd.

During the first nine months of 2013, Immune Ltd. amended all of its outstanding warrants to purchase a total of 1,041,409 ordinary shares so that the warrants will not expire upon closing of the merger with the Company and the exercise price of each warrant will be equal to the price of the Company’s stock on the day of the closing of the merger. This amendment was considered a contingent modification and the fair value of the modification was to be recorded when the merger with the Company closed. In August 2013, these warrants were further amended so that the aggregate exercise price of the warrants shall remain unchanged. The merger with the Company closed on August 25, 2013, therefore Immune Ltd. booked a $0.7 million warrant amendment expense in the third quarter of 2013 in connection with this amendment.

During the first nine months of 2013, Immune Ltd. issued a total of 1,933,417 shares of its ordinary shares at $2.40 plus a total of 1,187,942 warrants to purchase ordinary shares for total gross proceeds of approximately $4.4 million. Immune Ltd. allocated the gross proceeds between the ordinary shares and the warrants based on their relative fair values. The fair value of the warrants was approximately $1.0 million determined using the Black-Sholes option pricing model (volatility-91.9%, risk free rates of 0.36%-0.42%, dividends-zero, weighted average life-3 years). The warrants meet the requirements, and have been accounted for, as equity in accordance with ASC 815-40.

A total of 268,000 additional shares of Immune Ltd.’s ordinary shares were issued as a result of anti-dilution provisions in the securities purchase agreements for certain investors, which was triggered when Immune Ltd. failed to close the merger with the Company prior to June 30, 2013. This resulted in a deemed dividend of $0.5 million being recorded in the second quarter 2013. An additional 257,381 additional shares of Immune Ltd.’s ordinary shares were issued as a result of anti-dilution provisions in the securities purchase agreements for certain investors, which was triggered when Immune Ltd. failed to close the merger with the Company at a price greater than 80% of the price per share of Immune Ltd. at the time of the merger. This resulted in a deemed dividend of $0.4 million being recorded in the third quarter 2013.

At various times during 2012, Immune Ltd. issued a total of 702,273 shares of its ordinary shares to private investors at per share prices ranging from $2.00 to $2.50 plus a total of 209,619 warrants to purchase ordinary shares for total gross proceeds of approximately $1.2 million. The warrants have a three year life and a weighted average exercise price of $2.50. Immune Ltd. allocated the gross proceeds between the ordinary shares and the warrants based on their relative fair values. The fair value of the warrants was approximately $0.1 million determined using the Black-Sholes option pricing model (volatility-76.8%, risk free rates of 0.3%-0.4%, dividends-zero, weighted average life-3 years). The warrants meet the requirements, and have been accounted for, as equity in accordance with ASC 815-40.

In November 2012, Immune Ltd. entered into a share buy-back agreement with two shareholders whereby Immune Ltd. agreed to purchase back all shares received in a share purchase agreement if the shareholder elected to do so prior to twelve months thereafter or the closing of an Initial Public Offering or Deemed Liquidation event. Immune Ltd. recorded a liability of $150,000 to account for the potential buy-back at December 31, 2012 which will be reversed and recorded in equity during the third quarter of 2013 when the buy-back commitment expired unexercised. The closing of the merger with the Company on August 25, 2013 qualified as a Deemed Liquidation event.

The anti-dilution provisions of Immune Ltd’s agreement with iCo resulted in the issuance of ordinary shares at various times during 2011, 2012 and 2013. See Note E [1] for details of shares issuable to iCo and accounting for the related derivative liability.

Immune Ltd. entered into an investment agreement in March 2011 that contained an anti-dilution provision which allowed the investor to maintain an ownership percentage of 6.67%, on a fully diluted basis, until such time that Immune Ltd. raised $3.0 million in equity financing. Immune Ltd.’s agreement with this investor resulted in the issuance of additional ordinary shares at various times between June and December 2011. In total 138,434 ordinary shares, with a fair value of approximately $0.2 million, were issued to this investor.

In June 2012, Immune Ltd. converted the balance outstanding of its loan from Immune Ltd’s Chief Executive Officer into 408,809 ordinary shares – see Note I. Additionally, in June 2012, Immune Ltd. redeemed 4,500,000 shares via the conversion into the same number of founder shares. In July 2012, Immune Ltd. redeemed 2,529,685 ordinary shares via an exchange for the same number of Series A Preferred.

At various times during 2011, Immune Ltd. issued a total of 1,814,740 ordinary shares to private investors at per share prices ranging from $1.00 to $2.00 plus a total of 626,540 warrants to purchase ordinary shares for total gross proceeds of $2,480,143. The warrants have a three year life and a weighted average exercise price of $1.83. Immune Ltd. allocated the gross proceeds between the ordinary shares and the warrants based on their relative fair values. The fair value of the warrants was $464,248 determined using the Black-Sholes option pricing model (volatility-101.1%, risk free rates of 0.4%-1.3%, dividends-zero, weighted average life-3 years). The warrants meet the requirements of, and have been accounted for as equity in accordance with ASC 815-40.

In December 2010, Immune Ltd. issued 1,000,000 ordinary shares to the founders of the Company for no consideration and 800,000 ordinary shares, with a fair value of approximately $0.7 million, for consulting services included in SG&A expense. In October 2010 Immune Ltd. issued 4,000,000 ordinary shares to the Chief Executive Officer for the contribution of his interest in Immune Pharmaceuticals USA Corp. to Immune . This transaction was between entities under common control and was recorded using the carry over basis of Immune Pharmaceuticals USA Corp.

5. Common Stock

The Company has authorized 225,000,000 shares of common stock, of which 13,276,037 shares were issued and outstanding at September 30, 2013.

On August 25, 2013, in conjunction with the reverse merger, the Company issued 10,490,090 shares of its common stock to shareholders of Immune Ltd.