EPICEPT CORP (Form: 8-K, Received: 08/01/2013 06:05:26)

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

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of Earliest Event Reported):		July 31, 2013

EpiCept Corporation
__________________________________________
(Exact name of registrant as specified in its charter)


Delaware	000-51290	52-1841431
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

777 Old Saw Mill River Rd., Tarrytown, New York		10591
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


Registrant’s telephone number, including area code:		914-606-3500

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 1.01 Entry into a Material Definitive Agreement.

On July 31, 2013, EpiCept Corporation, (the "Company"), together with its wholly-owned subsidiaries Maxim Pharmaceuticals Inc. and Cytovia, Inc., entered in to a Second Amendment to Loan and Security Agreement (the "Amendment") with MidCap Funding III, LLC ("MidCap"), as agent for the lenders.

Under the Amendment, the Company will continue to make monthly payments of interest to the Lender as per the Loan and Security Agreement and one half of the cash that is subject to the security interest maintained by MidCap will be returned to the Company upon the favorable stockholder vote to approve the final conditions to the closing of the merger. Any past defaults under the loan agreement have been waived and principal payments on the loan are scheduled to begin September 1, 2013 unless a restructuring of the loan has been executed.

The foregoing is a summary of the terms of the Second Amendment to Loan and Security Agreement and is qualified in is entirety by reference to the full text of this document, a copy of which is filed as an exhibit to this Current Report.

Item 2.02 Results of Operations and Financial Condition.

On August 1, 2013, EpiCept Corporation (the "Registrant") issued a press release announcing its operating and financial results for the three and six months ended June 30, 2013. A copy of the press release is being furnished as Exhibit 99.1 to this Form 8-K.

This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

10.1 Second Amendment to Loan and Security Agreement with Midcap Funding III, LLC, dated July 31, 2013.

99.1 Press release of EpiCept Corporation, dated August 1, 2013, announcing the operating and financial results for the three and six months ended June 30, 2013.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	EpiCept Corporation

August 1, 2013	By:	/s/ Robert W. Cook

		Name: Robert W. Cook
		Title: Interim Chief Executive Officer

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Exhibit Index


Exhibit No.		Description

10.1		Second Amendment to Loan and Security Agreement with Midcap Funding III, LLC, dated July 31, 2013.
99.1		Press release, dated August 1, 2013.

SECOND AMENDMENT AND WAIVER TO LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDMENT AND WAIVER TO LOAN AND SECURITY AGREEMENT (this “ Agreement ”) is dated as of July 31, 2013, by and among EPICEPT CORPORATION , a Delaware corporation (“ EpiCept ”), MAXIM PHARMACEUTICALS INC. , a Delaware corporation (“ Maxim ”), CYTOVIA, INC. , a Delaware corporation (“ Cytovia ”, and collectively with EpiCept and Maxim, the “ Borrowers ”), MIDCAP FUNDING III, LLC , a Delaware limited liability company in its capacity as agent (“ Agent ”) for the lenders under the Loan Agreement (as defined below) (“ Lenders ”), and the Lenders.

W I T N E S S E T H:

WHEREAS , Borrowers, Lenders and Agent are parties to that certain Loan and Security Agreement, dated as of May 27, 2011, as amended by that certain First Amendment to Loan and Security Agreement, dated as of August 27, 2012 (the “ First Amendment ”, and as such Loan and Security Agreement may be further amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”; capitalized terms used herein have the meanings given to them in the Loan Agreement except as otherwise expressly defined herein), pursuant to which Lenders have agreed to provide to Borrowers certain loans and other extensions of credit in accordance with the terms and conditions thereof; and

WHEREAS , the Borrowers have requested that the Agent and Lenders amend the Loan Agreement in certain respects and the undersigned Lenders and the Agent are willing to make such amendment, all in accordance with, and subject to, the terms and conditions set forth in, this Agreement.

NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrowers, Lenders and Agent hereby agree as follows:

1. Acknowledgment of Obligations . Each Borrower acknowledges and agrees that as of the Second Amendment Effective Date, but without giving effect to this Agreement, the aggregate principal balance of the Term Loan is at least $4,070,967.80. The foregoing amount does not include interest, fees, expense and other amounts that are chargeable or otherwise reimbursable under the Loan Agreement and the other Loan Documents. Borrowers hereby acknowledge, confirm and agree that all Term Loans made prior to the date hereof, together with interest accrued and accruing thereon, and fees, costs, expenses and other charges owing by Borrowers to Agent and Lenders under the Loan Agreement and the other Loan Documents, are unconditionally owing by Borrowers to Agent and Lenders, without offset, defense or counterclaim of any kind, nature or description whatsoever except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditor’s rights generally.

2. Waiver of Existing Events of Default . Each Event of Default that has occurred prior to the Second Amendment Effective Date of which Agent has prior knowledge is hereby waived.

3. Amendments to the Loan Agreement . Subject to the terms and conditions of this Agreement, including without limitation fulfillment of the conditions to effectiveness specified in Section 9 below, the Loan Agreement is hereby amended as follows:

(a) Section 2.2(b) of the Loan Agreement shall be deleted in its entirety and the following revised Section 2.2(b) shall be substituted in lieu thereof:

“(b) Interest Payments and Repayment . Commencing on the first (1 ^st ) Payment Date following the Funding Date of Tranche One, and continuing on the Payment Date of each successive month thereafter through and including the Maturity Date, Borrower shall make monthly payments of interest to each Lender in accordance with its respective Pro Rata Share, in arrears, and calculated as set forth in Section 2.3. In addition to the interest payments in accordance with the immediately preceding sentence, Borrower shall make principal payments with respect to the Term Loans as follows: (i) commencing on the Amortization Date, and continuing on the Payment Date of each successive month thereafter through the First Amendment Effective Date, Borrower shall make consecutive monthly payments of principal to each Lender in accordance with its respective Pro Rata Share, as calculated by Agent based upon: (A) the amount of such Lender’s Term Loans and (B) a straight-line amortization schedule ending on the Maturity Date, (ii) on the First Amendment Effective Date, Borrower shall make a principal payment of $1,200,000, which payment shall be allocated and paid to each Lender in accordance with its Pro Rata Share, (iii) on September 1, 2013, and on each Payment Date thereafter through the Maturity Date, Borrower shall make principal payments of $277,419.35 on each such date, which payment shall be allocated and paid to each Lender in accordance with its Pro Rata Share and (iv) Borrower shall pay the remaining outstanding balance of the Term Loan on the Maturity Date. Without limiting the foregoing, all unpaid principal and accrued interest with respect to the Term Loans is due and payable in full on the Maturity Date. The Term Loans may be prepaid only in accordance with Sections 2.2(c) and 2.2(d).”

(b) Section 14 of the Loan Agreement shall be amended by adding thereto in appropriate alphabetical order the following definition:

“‘ Second Amendment Effective Date ’ means July 31, 2013.”

4. Final Payment Fee . Borrower acknowledges and agrees that, notwithstanding any of the amendments or other modifications set forth herein or in any other documentation or correspondence related to the Loan Agreement or Loan Documents, or any other action taken by Borrower, Agent or any Lender, the Final Payment remains due and payable, in full and without counterclaim or offset of any kind, on the Maturity Date.

5. Additional Covenants and Agreements . Until such time as Agent has indicated otherwise in writing, Borrower agrees as follows:

(a) Pursuit and Approval of Acceptable Sale or Partnering Transaction .

(i) Borrower shall, and shall cause each of its agents, representatives, officers, directors, employees and advisors, to use its best efforts to consummate an Acceptable Sale or Partnering Transaction (as defined below) as soon as practical but in any event no later than October 15, 2013. An “ Acceptable Sale or Partnering Transaction ” shall mean (i) a sale, merger or similar transaction with respect to Borrower and/or (ii) a partnering transaction in connection with the Borrower’s drug AmiKet (formerly known as EpiCept NP-1), in the case of either or both clause (i) and (ii) on terms and conditions and subject to documentation satisfactory to Agent in its sole discretion, which either (x) provides for the payment in full of the Obligations by not later than October 15, 2013 or (y) provides for the Loans and Loan Documents to remain outstanding on terms and conditions and pursuant to documentation satisfactory to Agent in its sole discretion; provided , that , nothing in this Agreement shall constitute Agent’s or any Lender’s consent to any such transaction or any documentation entered into in connection with any such transaction, all of which remains subject to future consent by Agent and the Lenders.

(ii) As of the Second Amendment Effective Date, the Specified Controlled Deposit Account (as defined in the First Amendment) contains $539,948.25 (the “ Designated Funds ”). Within three (3) Business Days of Agent’s receipt of evidence in form and substance satisfactory to Agent that the Borrower has received the requisite shareholder approval necessary to consummate an Acceptable Sale or Partnering Transaction, and so long as no new Default or Event of Default has occurred or is continuing or Agent becomes aware of the existence of an existing Event of Default that it was not previously aware of or notified about, Agent shall transfer $269,974.13 of the Designated Funds (as defined in the First Amendment) from the Specified Controlled Deposit Account to the Specified Controlled Operating Account (as defined in the First Amendment).

(b) Budget Matters . Section 4 of the First Amendment is hereby modified by deleting clause (c)(i)(C) of such section in its entirety and substituting in lieu thereof the following new clause (c)(i)(C) to read in its entirety as follows:

“(C) at least three (3) Business Days prior to any request made by Borrower for a transfer of the Specified Funds to the Specified Controlled Operating Account, deliver to Agent an operating budget in form, substance and methodology satisfactory to Agent, which shall reflect Borrower’s good faith projection of all cash receipts and disbursements on a week-by-week basis in connection with the operation of its business through the next sixty (60) days.”

(c) General Cooperation and Disclosure . Without limiting anything in clause (a) above or otherwise in this Agreement, Borrower shall, and shall cause its officers, directors, employees and advisors to, cooperate fully with Agent in furnishing information as and when reasonably requested by Agent or any other Lender regarding the Collateral, Borrower’s financial affairs, finances, financial condition, business and operations or any other matters related to the Borrower or otherwise contemplated in this Agreement. Borrower authorizes Agent to meet and/or have discussions with any of its officers, directors, employees and advisors from time to time as reasonably requested by Agent to discuss any matters regarding the Collateral, Borrower’s or any other Credit Party’s financial affairs, finances, financial condition, business and operations, or any other matters related to the Borrower or otherwise contemplated in this Agreement and shall direct and authorize all such persons and entities to fully disclose to Agent all information reasonably requested by Agent regarding the foregoing. Borrower waives and releases any such officer, director, employee and advisor from the operation and provisions of any confidentiality agreement with Borrower, as the case may be, such that such person or entity is not prohibited from providing any of the foregoing information to Agent or any Lender.

6. Additional Events of Default . Any of the following shall constitute an immediate Event of Default hereunder and under the Loan Agreement: (a) the failure by Borrower to comply with any term, condition or covenant set forth in this Agreement, (b) the failure of any representation or warranty made by Borrower under or in connection with this Agreement to be true, correct and complete as of the date when made or any other breach of any such representation or warranty, (c) the repudiation and/or assertion of any defense by any Borrower with respect to this Agreement or any Loan Document or the pursuit by Borrower or any person related to Borrower against the Agent or any Indemnified Person, or (d) a determination by Agent in its sole discretion that (i) discussions, negotiations or progress relating to any potential Acceptable Sale or Partnering Transaction have ceased or slowed or other circumstances or developments have arisen that make it unlikely that such sale or partnering transaction will be consummated or (ii) it is unlikely that Borrower shall be able to document or consummate an Acceptable Sale or Partnering Transaction by October 15, 2013.

7. No Other Amendments or Consents, Waivers, Etc.; Reservation of Rights . Except for the amendments and other modifications set forth and referred to in Sections 2 thru 6 above, the Loan Agreement and the other Loan Documents shall remain unchanged and in full force and effect. Nothing in this Agreement is intended, or shall be construed, to constitute a novation or an accord and satisfaction of any of Borrowers’ Obligations or to modify, affect or impair the perfection or continuity of Agent’s security interests in, security titles to or other liens, for the benefit of itself and the Lenders, on any Collateral for the Obligations. Without limiting the foregoing, except as expressly set forth herein, the execution, delivery and effectiveness of this Agreement shall not directly or indirectly (i) create any obligation to make any further loans, advances or other financial accommodations or to continue to defer any enforcement action after the occurrence of any Default or Event of Default, whether such Default or Event of Default has occurred or occurs in the future, (ii) constitute a consent or waiver of any past, present or future violations of any provisions of the Loan Agreement or any other Loan Documents nor constitute a novation of any of the Obligations under the Loan Agreement or other Loan Documents, (iii) amend, modify or operate as a waiver of any provision of the Loan Agreement or any other Loan Documents or any right, power or remedy of any Lender, (iv) constitute a consent to any merger or other transaction or to any sale, restructuring or refinancing transaction or (v) constitute a course of dealing or other basis for altering any Obligations or any other contract or instrument. Except as expressly set forth herein, each Lender reserves all of its rights, powers, and remedies under the Loan Agreement, the other Loan Documents and applicable law. All of the provisions of the Loan Agreement and the other Loan Documents, including, without limitation, the time of the essence provisions, are hereby reiterated, and if ever waived, are hereby reinstated.

8. Representations and Warranties . To induce Agent and Lenders to enter into this Agreement, each Borrower does hereby warrant, represent and covenant to Agent and Lenders that (i) each representation or warranty of Borrowers set forth in the Loan Agreement is hereby restated and reaffirmed as true and correct in all material respects on and as of the date hereof as if such representation or warranty were made on and as of the date hereof (except to the extent that any such representation or warranty expressly relates to a prior specific date or period) and (ii) each Borrower has the power and is duly authorized to enter into, deliver and perform this Agreement and this Agreement is the legal, valid and binding obligation of each Borrower enforceable against such Borrower in accordance with its terms.

9. Condition Precedent to Effectiveness of this Agreement . This Agreement shall become effective as of July 31, 2013 (the “ Second Amendment Effective Date ”) upon which Agent shall have received the following, each in form and, in form and substance satisfactory to Agent and Lenders:

(a) one or more counterparts of this Agreement duly executed and delivered by Borrowers, Agent and Lenders; and

(b) such other documents, instruments, agreements and opinions as the Agent shall request.

10. Release .

(a) In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Borrower, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent and each Lender and their respective successors and assigns, and their respective present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, Lenders and all such other persons being hereinafter referred to collectively as the “ Releasees ” and individually as a “ Releasee ”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a “ Claim ” and collectively, “ Claims ”) of every name and nature, known or unknown, suspected or unsuspected, both at law and in equity, which any Borrower or any of its successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the Second Amendment Effective Date, including, without limitation, for or on account of, or in relation to, or in any way in connection with the Loan Agreement or any of the other Loan Documents or transactions thereunder or related thereto.

(b) Each Borrower understands, acknowledges and agrees that its release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

(c) Each Borrower agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above.

11. Covenant Not To Sue . Each Borrower, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by Borrowers pursuant to Section 10 above. If any Borrower or any of its successors, assigns or other legal representatives violates the foregoing covenant, Borrowers, for themselves and their successors, assigns and legal representatives, agree to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by any Releasee as a result of such violation.

12. Indemnification . Borrower hereby agrees to indemnify, defend and hold harmless Agent and each Lender in accordance with Section 12.2 of the Loan Agreement, the terms of which are incorporated herein by reference.

13. Advice of Counsel . Each of the parties represents to each other party hereto that it has discussed this Agreement with its counsel.

14. Severability of Provisions . In case any provision of or obligation under this Agreement shall be invalid, illegal or unenforceable in any applicable jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

15. Counterparts . This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument.

16. GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MARYLAND APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS.

17. Entire Agreement . The Loan Agreement and the other Loan Documents as and when modified through this Agreement embody the entire agreement between the parties hereto relating to the subject matter thereof and supersede all prior agreements, representations and understandings, if any, relating to the subject matter thereof.

18. No Strict Construction, Etc. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. Time is of the essence for this Agreement.

19. Loan Document . For the avoidance of doubt, this Agreement constitutes a Loan Document.

20. Costs and Expenses . Each Borrower absolutely and unconditionally agrees to pay or reimburse upon demand for all reasonable fees, costs and expenses incurred by Agent and the Lenders that are Lenders on the Closing Date in connection with the preparation, negotiation, execution and delivery of this Agreement and any other Loan Documents or other agreements prepared, negotiated, executed or delivered in connection with this Agreement or transactions contemplated hereby.

[ Remainder of page intentionally blank; signature pages follow. ]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year specified at the beginning hereof.

BORROWERS :

EPICEPT CORPORATION

By:
Name:
Title:

MAXIM PHARMACEUTICALS INC.

By:
Name:
Title:

CYTOVIA, INC .

By:
Name:
Title:

AGENT AND LENDER :

MIDCAP FUNDING III, LLC

By:
Name:
Title: Authorized Signatory

Contacts


EpiCept Corporation:				Media Contact
777 Old Saw Mill River Road				Feinstein Kean Healthcare
Tarrytown, NY 10591				Greg Kelley
Robert W. Cook				(404) 836-2302
(914) 606-3500				gregory.kelley@fkhealth.com
rcook@epicept.com

EpiCept Reports Second Quarter 2013 Operating and Financial Results
Special August 6 Stockholder Meeting to Approve Final Conditions to Merger with Immune
Pharmaceuticals

TARRYTOWN, N.Y. (August 1, 2013) – EpiCept Corporation (Nasdaq OMX Stockholm Exchange and OTCQX: EPCT) today announced operating and financial results for the three and six months ended June 30, 2013, and provided an update on the Company’s upcoming merger with Immune Pharmaceuticals, Ltd. (Immune).

Robert Cook, Interim President and CEO of EpiCept, commented, “Our excitement about the merger between EpiCept and Immune is growing as we get closer to the stockholder vote on August 6 and to the closing of the merger transaction shortly after obtaining stockholder approval. We believe the combination of our companies will benefit both sets of shareholders and will in particular provide EpiCept’s stockholders with a great opportunity to participate in the antibody therapeutics sector, one of the most dynamic in the biotech industry. We look forward to our transition into a new company, Immune Pharmaceuticals, Inc, focused on these cutting-edge products.”

Mr. Cook added, “We are very pleased with the results of the vote to date with more than 93% of the votes cast so far in favor of the proposals. We fully anticipate that our Special Meeting of Stockholders on August 6 will result in our meeting the final conditions to the closing of this important transaction.”

Merger Update

In November 2012, following the approval of the companies’ respective boards of directors, EpiCept signed a merger agreement with Immune Pharmaceuticals Ltd., a private company based in Herzliya-Pituach, Israel and New York, NY. The terms of the merger agreement provide that, upon the closing of the transaction, EpiCept will issue shares of its common stock to Immune shareholders in exchange for all outstanding shares of Immune and issue options and warrants to purchase shares of its common stock in exchange for certain options and warrants to purchase shares of Immune. EpiCept stockholders will own approximately 19% of the combined company and Immune shareholders will own approximately 81%, calculated on an adjusted fully diluted basis. The merger ratio initially excludes the exercise or conversion of certain EpiCept options and warrants whose exercise/conversion prices equal or exceed $0.60 per EpiCept share.

EpiCept mailed a definitive proxy in June 2013 to its stockholders seeking approval for a reverse stock split of 1:40. The reverse split should cause an increase in the price per share of EpiCept’s common stock, and will support EpiCept’s near term goal of relisting its shares on a U.S. national securities exchange. EpiCept is also seeking approval for a change in the name of the company to Immune Pharmaceuticals, Inc. (IPI). The companies currently anticipate that following receipt of stockholder approval the merger transaction will close during August 2013.

Financial Condition

EpiCept had approximately $0.2 million in cash and cash equivalents as of June 30, 2013. In addition, EpiCept’s lender has restricted $0.6 million of the Company’s cash, with which EpiCept is required to make monthly interest payments on its senior secured term loan. The Company received $0.5 million of net cash from Immune during the first six months of 2013 through the issuance of approximately 3.8 million shares of EpiCept common stock and an additional $0.6 million by entering into a loan pursuant to the merger agreement with Immune.

Immune has raised $4.1 million since the beginning of 2013 in order to fund the associated merger costs and the on-going operations of both Immune and EpiCept through the merger closing. IPI intends to obtain funding to support approximately 18 months of operations.

EpiCept’s obligations under its outstanding loan with MidCap Financial LLC are expected to be assumed by IPI upon or shortly after the merger closing. EpiCept and Immune have agreed to indicative terms and conditions offered by MidCap Financial related to the loan’s restructure. In July 2013, EpiCept and MidCap executed a Second Amendment to the Loan and Security Agreement in which the parties agreed that interest payments will continue to be made monthly and one half of the cash escrow will be returned to EpiCept upon the favorable stockholder vote to approve the final conditions to the closing of the merger. Any past defaults under the loan agreement have been waived and principal payments on the existing loan will begin September 1, 2013 if the agreement restructuring the loan has not been completed.

Product Pipeline

Following the completion of the merger, IPI’s product portfolio will consist of the following products:

• Bertilimumab — a first in class monoclonal antibody (mAb) that targets eotaxin-1, a small protein that attracts and activates several sub-classes of immune cells, which are white blood cells that play a role in the development of several inflammatory diseases, including Crohn’s Disease, ulcerative colitis, severe asthma and bullous pemphigoid, a dermatological auto-immune orphan condition with high unmet medical need. Eotaxin-1 has been shown to correlate with the severity of those diseases, which allows for selection of patients based on eotaxin-1 levels, a major step toward treatment personalization. Immune is currently initiating a multi-national Phase II trial of bertilimumab for the treatment of ulcerative colitis, and plans to initiate in late 2013 a Phase II trial for the treatment of bullous pemphigoid. Data from these trials is expected to report during 2014.

• NanomAbs — an antibody drug conjugate (ADC) platform designed to deliver cancer drugs specifically to tumor cells thereby improving efficacy and reducing off-target undesirable effects. Immune intends to continue development of its own candidates as well as to enter into partnerships where it will incorporate the partner’s chemotherapeutic drug into the NanomAbs and/or power the partner’s antibody with a drug-loaded nano-particle.

• AmiKet™ — a prescription topical analgesic cream designed to provide long-term relief from the pain of peripheral neuropathies, which affects more than 15 million people in the U.S. IPI will continue EpiCept’s efforts to out license the product candidate for Phase III development and commercial marketing for the treatment of chemotherapy-induced peripheral neuropathic pain (CIPN) and possibly other peripheral neuropathies. AmiKet has obtained Fast Track status for the treatment of CIPN and is eligible for an FDA Special Protocol Assessment. AmiKet has also been granted orphan drug status for the treatment of post-herpetic neuralgia.

• Crolibulin — a vascular disruption agent that has demonstrated potent anti-tumor activity in both preclinical and early clinical studies. In December 2010 the National Cancer Institute initiated a Phase Ib/II trial for crolibulin to assess safety and efficacy in combination with cisplatin in patients with anaplastic thyroid cancer. The Phase I safety portion of the trial completed in early 2013, and the results were presented at the May 2013 ASCO meeting in Chicago. Immune believes that crolibulin may be a candidate for use with its NanomAb technology.

IPI will have dual headquarters in Herzliya-Pituach, Israel and in the New York City area, with research laboratories in Rehovot, Israel. Daniel Teper, PharmD, Chief Executive Officer of Immune Pharmaceuticals Ltd., will be IPI’s Chairman and CEO. Dr. David Sidransky, Director of Head and Neck Research Division, Professor of Oncology at the Johns Hopkins School of Medicine, and a former Vice Chairman of the Board of Directors of ImClone Systems, will be the Vice Chairman of the Board. The board of directors of the combined company will consist of Dr. Daniel Teper, Dr. David Sidransky, the remainder of the current board of directors of Immune, which consists of Herve de Kergrohen, Isaac Kobrin, Pierre Albouy and Ana Stancic, and Robert W. Cook, EpiCept’s current Interim President, Chief Executive Officer and Chief Financial Officer, who will also serve as the Chief Financial Officer of IPI. IPI plans to assume EpiCept’s common stock listings on the OTCQX and on the NASDAQ OMX Stockholm Exchange.

Financial and Operating Highlights

EpiCept’s net loss attributable to common stockholders for the second quarter of 2013 was $1.7 million, or $0.01 per share, compared with net income attributable to common stockholders of $2.2 million, or $0.03 per share, for the second quarter of 2012. The net income attributable to common stockholders for the second quarter of 2012 included $0.8 million of deemed dividends on convertible preferred stock. EpiCept’s net loss attributable to common stockholders for the six months ended June 30, 2013 was $2.8 million, or $0.03 per share, compared with a net loss attributable to common stockholders of $2.5 million, or $0.03 per share, for the six months ended June 30, 2012. The net loss attributable to common stockholders for the six months ended June 30, 2012 included $1.9 million of deemed dividends on convertible preferred stock.

Second Quarter and Six Months 2013 vs. Second Quarter and Six Months 2012

Revenue
The Company recognized revenue of $0.1 million and $6.6 million during the second quarters of 2013 and 2012, respectively. The Company recognized revenue of $0.5 million and $6.8 million during the six months ended June 30, 2013 and 2012, respectively. For the second quarter of 2013, revenue consisted primarily of the recognition of license fee payments previously received from the Company’s partners. For the second quarter of 2012, revenue consisted primarily of license fee payments and product revenue from the sale of the Company’s rights to Ceplene ^® to Meda AB.

Cost of Goods Sold
Cost of goods sold in the second quarter of 2013 and 2012 was zero and $0.4 million, respectively, consisting solely of the cost for Ceplene ^® inventory sold during the quarter.

Selling, General and Administrative (SG&A) Expense
SG&A expense in the second quarter of 2013 decreased by 36%, or $0.5 million, to $0.9 million from $1.4 million in the second quarter of 2012. The decrease was primarily attributable to lower salary and salary related expenses as the result of a reduction in staff and lower consulting expenses. SG&A expense in the six months ended June 30, 2013 decreased by 39%, or $1.1 million, to $1.7 million from $2.8 million in the six months ended June 30, 2012. The decrease was primarily attributable to lower salary and salary related expenses as the result of a reduction in staff and lower consulting expenses. The Company expects general and administrative expenses to remain at approximately current levels through the close of the merger with Immune.

Research and Development (R&D) Expense
R&D expense in the second quarter of 2013 decreased by 30%, or $0.3 million, to $0.7 million from $1.0 million in the second quarter of 2012. This decrease was primarily related to lower clinical trial expenses in connection with the sale of EpiCept’s rights to Ceplene ^® in Europe and certain Pacific Rim countries in June 2012. R&D expense in the six months ended June 30, 2013 decreased by 57%, or $1.3 million, to $1.0 million from $2.3 million in the six months ended June 30, 2012. This decrease was primarily related to lower clinical trial expenses in connection with the sale of EpiCept’s rights to Ceplene ^® in Europe and certain Pacific Rim countries in June 2012 and lower salary and salary related expenses as the result of a reduction in staff. The Company expects R&D expense to remain at approximately current levels through the close of the merger with Immune.

Other Income (Expense)
Other income (expense) in the second quarter of 2013 amounted to net expense of $0.2 million compared with net expense of $0.9 million in the second quarter of 2012. Other income (expense) in the six months ended June 30, 2013 amounted to net expense of $0.4 million compared with net expense of $1.9 million in the six months ended June 30, 2012. The primary component of other expense in 2013 was interest expense related primarily to the Company’s senior secured term loan. The primary components of other expense in 2012 were warrant amendment expense of $0.9 million, interest expense of $0.7 million related primarily to the Company’s senior secured term loan and a foreign exchange loss of $0.3 million. .

About EpiCept Corporation

EpiCept is focused on the development and commercialization of pharmaceutical products for the treatment of pain and cancer. The Company’s pain portfolio includes AmiKet™, a prescription topical analgesic cream in late-stage clinical development designed to provide effective long-term relief of pain associated with peripheral neuropathies. The Company’s product Ceplene ^® , when used concomitantly with low-dose IL-2, is intended as remission maintenance therapy in the treatment of AML for adult patients who are in their first complete remission. The Company sold all of its rights to Ceplene ^® in Europe and certain Pacific Rim countries and a portion of its remaining Ceplene ^® inventory to Meda AB in June 2012. Ceplene ^® is licensed to MegaPharm Ltd. to market and sell in Israel and EpiCept has retained its rights to Ceplene ^® in all other countries, including countries in North and South America. The Company has other oncology drug candidates in clinical development that were discovered using in-house technology and have been shown to act as vascular disruption agents in a variety of solid tumors.

About Immune Pharmaceuticals Ltd.

Immune Pharmaceuticals Ltd. is an Israel- and U.S.-based biopharmaceutical company focused on the development of next-generation antibody therapeutics to address unmet medical needs in the treatment of inflammatory diseases and cancer. Immune licensed worldwide rights for systemic indications of bertilimumab from iCo Therapeutics (TSX: ICO) in June 2011, while iCo retained rights to all ophthalmic indications. iCo originally licensed exclusive worldwide rights to bertilimumab in 2006 from MedImmune Limited (formerly known as Cambridge Antibody Technology Limited), the global biologics unit of AstraZeneca. Additionally, Immune has licensed from Yissum, the Technology Transfer Company of the Hebrew University of Jerusalem, injectable applications of the antibody nanoparticle conjugate technology (NanomAbs® ) developed by Prof. Shimon Benita. For more information, visit the Immune website at www.immunepharmaceuticals.com .

Forward-Looking Statements

This news release and any oral statements made with respect to the information contained in this news release contain forward-looking statements. You are urged to consider statements that include the words “may,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “anticipates,” “intends,” “continues,” “forecast,” “designed,” “goal” or the negative of those words or other comparable words to be uncertain and forward-looking. Such forward-looking statements include statements that express plans, anticipation, intent, contingency, goals, targets, future development and are otherwise not statements of historical fact. These statements are based on our current expectations and are subject to risks and uncertainties that could cause actual results or developments to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. Factors that may cause actual results or developments to differ materially include: the risk that we may be unable to complete the proposed merger transaction with Immune Pharmaceuticals Ltd.; the risks associated with the adequacy of our existing cash resources and our ability to continue as a going concern; the risks associated with our ability to continue to meet our obligations under our existing debt agreements; the risk that clinical trials for AmiKet™ or crolibulin™ will not be successful; the risk that AmiKet™, Azixa ^® or crolibulin™ will not receive regulatory approval or achieve significant commercial success; the risk that we will not be able to find a partner to help conduct the Phase III trials for AmiKet™ on attractive terms, a timely basis or at all; the risk that Ceplene ^® will not receive regulatory approval or marketing authorization in the United States or Canada; the risk that Ceplene ^® will not achieve significant commercial success; the risk that our other product candidates that appeared promising in early research and clinical trials do not demonstrate safety and/or efficacy in larger-scale or later-stage clinical trials; the risk that we will not obtain approval to market any of our product candidates; the risks associated with dependence upon key personnel; the risks associated with reliance on collaborative partners and others for further clinical trials, development, manufacturing and commercialization of our product candidates; the cost, delays and uncertainties associated with our scientific research, product development, clinical trials and regulatory approval process; our history of operating losses since our inception; the highly competitive nature of our business; risks associated with litigation; and risks associated with our ability to protect our intellectual property. These factors and other material risks are more fully discussed in our periodic reports, including our reports on Forms 8-K, 10-Q and 10-K and other filings with the U.S. Securities and Exchange Commission. You are urged to carefully review and consider the disclosures found in our filings which are available at www.sec.gov or at www.epicept.com . You are cautioned not to place undue reliance on any forward-looking statements, any of which could turn out to be wrong due to inaccurate assumptions, unknown risks or uncertainties or other risk factors.

Selected financial information follows:


EpiCept Corporation and Subsidiaries
(Unaudited)
Selected Consolidated Balance Sheet Data
(in $000s)
	June 30,			December 31,
	2013			2012
Cash and cash equivalents	$	200		$	172
Property and equipment, net		36			56
Total assets	$	960		$	1,328
Accounts payable and other accrued liabilities	$	4,801		$	3,512
Deferred revenue		7,662			7,810
Notes and loans payable		4,040			3,975
Total stockholders’ deficit		(16,181	)		(13,969	)
Total liabilities and stockholders’ deficit	$	960		$	1,328


EpiCept Corporation and Subsidiaries
(Unaudited)
Selected Consolidated Statement of Operations Data
(in $000s except share and per share data)
	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Product net revenues	$	—		$	577		$	283		$	583
Licensing and other revenues		99			6,025			192			6,260

Total revenue		99			6,602			475			6,843

Costs and expenses:
Cost of goods sold		—			396			143			396
Selling, general and administrative		927			1,384			1,737			2,815
Research and development		681			963			1,011			2,259

Total costs and expenses		1,608			2,743			2,891			5,470

Income (loss) from operations		(1,509	)		3,859			(2,416	)		1,373

Other income (expense):
Interest income		—			1			—			3
Foreign exchange loss		—			(521	)		—			(264	)
Warrant amendment expense		—			—			—			(936	)
Interest expense		(175	)		(380	)		(363	)		(743	)

Other income (expense), net		(175	)		(900	)		(363	)		(1,940	)

Net income (loss) before income taxes		(1,684	)		2,959			(2,779	)		(567	)
Income taxes		—			—			(5	)		(2	)

Net income (loss )	$	(1,684	)	$	2,959		$	(2,784	)	$	(569	)
Deemed dividends on convertible preferred stock		—			(750	)		—			(1,926	)

Income (loss) attributable to common stockholders	$	(1,684	)	$	2,209		$	(2,784	)	$	(2,495	)

Basic and diluted income (loss) per common share	$	(0.01	)	$	0.03		$	(0.03	)	$	(0.03	)

Weighted average shares — Basic		113,639,424			83,772,960			110,158,277			80,414,692
Weighted average shares — Diluted		113,639,424			91,591,893			110,158,277			80,414,692


EpiCept Corporation and Subsidiaries
(Unaudited)
Selected Consolidated Statement of Cash Flows Data
(in $000s)
	Six Months Ended June 30,
	2013			2012
Net cash used in operating activities	$	(1,402	)	$	(2,599	)
Net cash provided by investing activities		308			—
Net cash provided by financing activities		1,138			1,003
Effect of exchange rate changes on cash		(16	)		(9	)

Net increase (decrease) in cash and cash equivalents		28			(1,605	)
Cash and cash equivalents at beginning of period		172			6,378

Cash and cash equivalents at end of period	$	200		$	4,773


EpiCept Corporation and Subsidiaries
(Unaudited)
Selected Consolidated Statement of Stockholders’ Deficit Data
(in $000s)
	Six Months Ended June 30,
	2013			2012
Stockholders’ deficit at beginning of period	$	(13,969	)	$	(17,146	)
Net loss for the period		(2,784	)		(569	)
Stock-based compensation expense		88			404
Foreign currency translation adjustment		(16	)		257
Share and warrant issuance		500			2,833
Warrant amendment expense		—			936
Exercise of warrants		—			728

Stockholders’ deficit at end of period	$	(16,181	)	$	(12,557	)

As of July 31, 2013, EpiCept had 114,159,030 common shares outstanding .

EpiCept expects to report interim results for the three months ending September 30, 2013 on or about November 15, 2013

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