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): February 3, 2016
CAPSTONE THERAPEUTICS CORP.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 000-21214 | 86-0585310 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 1275 West Washington Street, Suite 104 , Tempe, Arizona 85281 |
| (Address of Principal Executive Offices) (Zip Code) |
(602) 286-5520
(Registrant's telephone number, including area code)
(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)) | |
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Capstone Therapeutics Corp. ("we," our," "us" or the “Company”) reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2015, that the Company entered into a Securities Purchase Agreement (the “Agreement”) with Biotechnology Value Fund affiliated entities Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS, L.P., Investment 10, LLC, and MSI BVF SPV, LLC (the "Lenders"), to provide short-term funding for our operations. A portion of the funds will be advanced to LipimetiX Development, Inc., our 60% owned subsidiary, to initiate preclinical development activities for our lead commercial drug candidate, AEM-28-14. The Lenders currently own in the aggregate approximately 19% of our outstanding Common Stock, par value $.0005 per share ("Common Stock").
Pursuant to the Agreement, the Lenders funded an aggregate of $1,000,000 of loans to us, evidenced by Convertible Promissory Notes (the “Notes”) dated December 11, 2015 and due April 30, 2017. The Notes bear interest at 5% per annum and are secured by a security interest in all of our assets.
The unpaid principal amount of the Notes will convert automatically upon the closing of a Qualified Equity Financing, which is defined in the Agreement as an offering of equity securities with aggregate gross proceeds of at least $5,000,000 including the principal of any converted Notes. Such conversion will be into the same securities and on the same terms as provided for the other investors in the Qualified Equity Financing.
If a Qualified Equity Financing is not consummated by March 31, 2016, the unpaid principal amount of the Notes may be converted at the election of the Lenders into shares of Common Stock, at a conversion price (the "Optional Conversion Price") equal to the trailing 10-day weighted average trading price of the Common Stock, but not be less than $.135 or more than $.18 per share. Upon a change in control of the Company, the Lenders may elect to accelerate the Notes or convert them into Common Stock at a conversion price equal to the Optional Conversion Price.
Under the Agreement, the Lenders have the right to elect to acquire upon conversion of the Notes convertible preferred stock rather than Common Stock, such preferred stock to vote with the Common Stock and to be convertible into the equivalent number of shares of Common Stock as would have been originally issued if the Notes conversion had been into Common Stock. Such preferred shares would have no preferential liquidation or distribution rights and would not have any dividend or preferred return rights.
The Agreement grants Lenders an Exclusive Period, initially ending January 31, 2016, to propose terms of an additional investment of at least $7,500,000, but not to exceed $10,000,000, in the Company (the “Proposed Investment”). The Agreement provides that it is expected that the Proposed Investment will involve the issuance of units at a price of $.18 per unit, with each unit composed of one share of Common Stock and a five-year warrant to purchase one-half of a share of Common Stock at an exercise price equal to 125% of the unit price, and that the investors would be entitled to nominate a majority slate of directors. However, neither the Lenders nor we are obligated under the Agreement to proceed with a Proposed Investment, or to proceed with a Proposed Investment on these terms. The Lenders have the right to extend the Exclusive Period to March 31, 2016 by funding an additional $1,000,000 aggregate of bridge loans on the same terms as the initial advance pursuant to the Notes. We agreed that during the Exclusive Period, we will not consummate the offering contemplated in our pending Form S-1 registration statement initially filed with the Securities and Exchange Commission on June 26, 2015.
In connection with the transactions pursuant to the Agreement, we waived the application of our Tax Preservation Plan to any acquisitions of Common Stock by the Lenders. The Tax Preservation Plan, dated June 24, 2014, with Computershare Inc, as Rights Agent, was filed as Exhibit 4.1 to our Current report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2014, and was designed to reduce the risk that acquisitions of our Common Stock would adversely impact our available net operating loss carryforwards for tax purposes. At September 30, 2015 we had approximately $147 million in federal and $34 million in Arizona state net operating loss carryforwards. The availability of the net operating loss carryforwards to offset future taxable income could be limited in the event of a change in ownership, as defined in Section 382 of the Internal Revenue Code. Such a change in ownership may occur in connection with the Proposed Investment or other fundraising activities.
On January 29, 2016, Lenders notified the Company that they would not extend the Exclusive Period by loaning the Company an additional $1,000,000, nor submit a Proposed Transaction. The Exclusive Period expired January 29, 2016.
Item 7.01. Regulation FD Disclosure.
On February 3, 2016, we issued a press release relating to expiration of the Lenders Exclusive Period and the Lenders decision to not submit a Proposed Transaction as described in Item 2.03 above. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K.
The information in Item 7.01 of this Form 8-K and Exhibit 99.1 furnished herewith shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in any such filing.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits |
| Exhibit No. | Description |
| 99.1 | Press Release dated February 3, 2016 |
SIGNATURE
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.
| CAPSTONE THERAPEUTICS CORP. | ||
| Date: February 3, 2016 | By: | /s/ John M. Holliman, III |
| Name: John M. Holliman, III | ||
| Title: Executive Chairman and CEO | ||
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1* | Press Release dated February 03, 2016 |
* Furnished herewith.
EXHIBIT 99.1
Capstone Therapeutics Announces Existing Shareholder Decision Not to Extend Exclusive due Diligence Period
TEMPE, Ariz., Feb. 03, 2016 (GLOBE NEWSWIRE) -- Capstone Therapeutics Corp. (OTCQB:CAPS) (“the Company”) and LipimetiX Development, Inc., the Company’s 60% owned joint venture (“JV”) announced today that the Lenders, as defined in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission dated December 15, 2015, informed the Company that the Lenders would not exercise their option to extend the exclusive due diligence period through March 31, 2016 by loaning Capstone a second $1 million, under the terms of the previously-reported Securities Purchase Agreement. The Company believes that this decision by the Lenders is principally due to current developments in the financial markets and is not due to the outcome of the Lenders evaluation of the JV's AEM-28-14 development program.
The Company will hold an operating update conference call on Thursday, February 11, 2016 at 4:30 pm EST. The call may be accessed at 877-303-2908 (U.S.), 408-427-3860 (outside U.S.); accompanying slides may be viewed by logging onto the Investors section of the Company’s website, www.capstonethx.com. A replay will be available beginning February 11, 2016, at 7:30 pm EST until midnight February 13, 2016, and may be accessed at 855-859-2056 (U.S.) or 404-537-3406 (outside U.S.) with conference ID 45345417.
Chimeric Apolipoprotein E Mimetic Peptides
Apolipoprotein E (Apo E) is in a class of protein that occurs throughout the body. Apo E is essential for the normal metabolism of cholesterol and triglycerides. After a meal, the postprandial (or post-meal) lipid load is packaged in lipoproteins and secreted into the blood stream. Apo E targets cholesterol and triglyceride rich lipoproteins to specific receptors in the liver, decreasing the levels in the blood. Elevated plasma cholesterol and triglycerides are independent risk factors for atherosclerosis, the buildup of cholesterol rich lesions and plaques in the arteries. Atherosclerosis is the major cause of cardiovascular disease, peripheral artery disease and cerebral artery disease, and can cause heart attack, loss of limbs and stroke. Defective lipid metabolism also plays an important role in the development of adult onset diabetes mellitus (Type 2 diabetes), and diabetics are particularly vulnerable to atherosclerosis, heart and peripheral artery diseases.
The University of Alabama at Birmingham (“UAB”) scientists patented the first chimeric Apo E mimetic peptide in 1999, reducing the 299 amino acid native Apo E into a 28 amino acid, dual domain peptide that can be delivered therapeutically. One domain inserts into a lipoprotein surface and the second domain binds to the Apo E receptors in the liver. In 2010, our JV’s founding scientist, Dr. Dennis Goldberg, obtained worldwide right to patents for Apo E mimetic peptides from the UAB Research Foundation (“UABRF”). The JV has an Exclusive License Agreement with the University of Alabama at Birmingham Research Foundation for AEM-28 and its analogs.
Subject to continued favorable study results and funding availability, the JV may pursue regulatory approval of AEM-28-14 as treatment for Homozygous Familial Hypercholesterolemia, Acute Hypertriglyceridemic Pancreatitis and other orphan indications in hyperlipidemia. The JV may, in the future, possibly explore additional indications for its family of Apo E mimetic peptides including Acute Coronary Syndrome, Peripheral Artery Disease and other vascular diseases associated with Type 2 Diabetes and Metabolic Syndrome.
About Capstone Therapeutics
Capstone Therapeutics is a biotechnology company committed to developing novel therapeutic peptides aimed at helping patients with under-served medical conditions. The Company is focused on development and commercialization of Chimeric Apo E Mimetic Peptides through the LipimetiX Development, Inc. joint venture and currently owns 60% of the joint venture.
Capstone’s corporate headquarters are in Tempe, Arizona. For more information, please visit the Company's website: www.capstonethx.com. For more information on LipimetiX Development, please visit the JV’s website: www.lipimetix.com.
Statements in this press release or otherwise attributable to Capstone regarding our business that are not historical facts are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from predicted results. These risks include the factors discussed in our Form 10-K for the fiscal year ended December 31, 2014, and other documents we file with the U.S. Securities and Exchange Commission.
Editor’s Note: This press release is also available under the Investors section of the Company’s website at www.capstonethx.com.
FOR FURTHER INFORMATION:
Investor Relations
(602) 286-5250
investorinquiries@capstonethx.com