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NBS > SEC Filings for NBS > Form 8-K on 8-May-2014All Recent SEC Filings

Show all filings for NEOSTEM, INC.

Form 8-K for NEOSTEM, INC.


8-May-2014

Unregistered Sale of Equity Securities, Results of Operations and Financial Conditi


Item 3.02. Unregistered Sales of Equity Securities.

Closing of California Stem Cell Acquisition

On May 8, 2014 (the "Closing"), NeoStem, Inc., a Delaware corporation ("NeoStem" or the "Company") closed its acquisition (the "CSC Acquisition") of California Stem Cell, Inc., a Delaware corporation ("CSC"), pursuant to the terms of the previously-announced Agreement and Plan of Merger, dated as of April 11, 2014 (the "Merger Agreement"), by and among NeoStem, CSC, NBS Acquisition Sub I, Inc., a Delaware corporation and a wholly-owned subsidiary of NeoStem ("Subco"), NBS Acquisition Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of NeoStem ("Subco II"), and Jason Livingston, solely in his capacity as CSC stockholder representative (together with his permitted successors, the "CSC Representative"). At Closing, Fortis Advisors LLC succeeded to the duties of the CSC Representative pursuant to the Merger Agreement.

Pursuant to the Merger Agreement, on the Closing Date, (1) Subco was merged with and into CSC (the "First Merger") and (2) CSC was then merged with and into Subco II (the "Second Merger", and collectively with the First Merger, the "Mergers"), with Subco II surviving the Mergers as a wholly-owned subsidiary of NeoStem. At Closing, Subco II changed its legal name to NeoStem Oncology, LLC. In this Current Report on Form 8-K, we sometimes use the terms "CSC", "NeoStem Oncology, LLC" or "Surviving Company" to refer to the wholly-owned subsidiary of NeoStem which is the survivor of the Mergers.

CSC (which after the Mergers is known as NeoStem Oncology, LLC) is a biopharmaceutical company with deep expertise in stem cell biology that is engaged in the development of therapies using a patient's own, i.e., autologous, cells. To date, CSC's development efforts have been directed at immunotherapies for cancer, regenerative medicine for motor neuron replacement and dermatology. CSC's most advanced program is an immunotherapy, Melapuldencel-T, which uses patients' own tumor cells to maximize the ability of their immune system to identify and eliminate the cancer initiating (stem) cells that are capable of reconstituting or developing new tumors (i.e., "replicating cells"). The focus of that program is the treatment of metastatic melanoma. As a result of encouraging Phase 2 data, CSC expects to initiate a Phase 3 clinical trial later in 2014, for which it has received Special Protocol Assessment ("SPA") and Fast Track designation, as well as Orphan Drug designation. CSC maintains corporate offices and research facilities in Irvine, California. Further information with respect to CSC's business and the risk factors associated therewith appears below under the respective captions "Business of CSC" and "Risk Factors." Capitalized terms used but not otherwise defined in this Current Report on Form 8-K shall have the respective meanings ascribed to such terms in the Merger Agreement.
Aggregate Merger Consideration

Pursuant to the terms of the Merger Agreement, all shares of CSC common stock ("CSC Common Stock") and CSC preferred stock ("CSC Preferred Stock", and collectively with the CSC Common Stock, the "CSC Capital Stock") outstanding immediately prior to the Closing, were canceled and converted into the right to receive, in the aggregate (and giving effect to the liquidation preferences accorded to the CSC Preferred Stock):

(1) An aggregate of 5,329,593 shares of NeoStem common stock (subject to payment of nominal cash in lieu of fractional shares) (the "Closing Merger Consideration").

(2) If payable after the Closing, certain milestone payments in an amount of up to $90 million in the aggregate, payable in shares of NeoStem common stock or cash, in NeoStem's sole discretion, in the event of the successful completion of certain milestone events in connection with the CSC business acquired by NeoStem (the "Milestone Payments", and together with the Closing Merger Consideration, the "Merger Consideration"). The Milestone Payments that may become payable after Closing (including the relevant payment procedures) are described in greater particularity in NeoStem's Current Report on Form 8-K filed on April 14, 2014 under the caption "Aggregate Merger Consideration - Milestone Payments," which discussion is incorporated by reference herein.

The merger consideration as provided in the Merger Agreement was negotiated at arms' length between the parties.

Payment of Closing Merger Consideration

In accordance with the Merger Agreement, at the Closing and following payment by NeoStem of CSC's current transaction expenses in an aggregate amount of $1.8 million, NeoStem issued (or shall issue, following compliance with letter of transmittal procedures, as applicable) the shares of NeoStem common stock constituting the Closing Merger Consideration, subject to payment


of nominal cash in lieu of fractional shares, as follows (and giving effect to the liquidation preferences accorded to the CSC Preferred Stock):

(1) 3,744,740 shares of NeoStem restricted common stock shall be distributed to the former holders of CSC Common Stock and CSC Preferred Stock (collectively, the "CSC Securityholders"), following compliance with letter of transmittal procedures.

(2) 1,332,399 shares of NeoStem restricted common stock (the "Escrow Amount") were deposited with the escrow agent, who is initially NeoStem's transfer agent (the "Escrow Agent"), to be held on behalf of the former CSC Securityholders for a period of 15 months.

(3) 252,454 shares of NeoStem restricted common stock (the "CSC Expenses Escrow Amount") were deposited with the Escrow Agent, to be held on behalf of the former CSC Securityholders for a period of 12 months.

Escrow Agreement

In accordance with the Merger Agreement, NeoStem has deposited the shares of NeoStem common stock constituting the Escrow Amount and the CSC Expenses Escrow Amount with the Escrow Agent for eventual distribution to the former CSC Securityholders (subject to adjustment following the Closing in connection with any indemnification claims, all in accordance with the Merger Agreement). Pursuant to the Escrow Agreement entered into at Closing by and among NeoStem, CSC, the CSC Representative and the Escrow Agent (the "Escrow Agreement"), the escrow of the Escrow Amount and the CSC Expenses Escrow Amount will continue from Closing until the 15-month anniversary of the Closing and the 12-month anniversary of the Closing, respectively. The amount of shares ultimately released from escrow to the former CSC Securityholders may (i) in the case of the Escrow Amount, be less than the full Escrow Amount to the extent any portion thereof is required to be applied to cover indemnification claims and (ii) in the case of the CSC Expenses Escrow Amount, be less than the full CSC Expenses Escrow Amount in the event that 50% of the amount of certain offsetting funds received by CSC in the 12 months after Closing from the license of CSC technology, pursuant to grant programs on account of CSC technology or pursuant to donations related to any of CSC's clinical programs ("CSC Expenses Offset Payments") does not equal at least $1.8 million, in each case in accordance with the terms of the Merger Agreement. The terms of the escrow arrangements covering the escrowed portions of the Closing Merger Consideration are described in greater particularity in NeoStem's Current Report on Form 8-K filed on April 14, 2014 under the caption "Aggregate Merger Consideration - Escrow Agreement," which discussion is incorporated herein by reference. The foregoing description of the Escrow Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Escrow Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K.

Private Placement; Transfer Restrictions

The offer and sale of the shares of NeoStem common stock to be issued pursuant to the Merger Agreement (including the Closing Merger Consideration and any Milestone Payments made in shares) have been made in a private placement in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), for transactions by an issuer not involving a public offering, and/or Regulation D under the Securities Act. All certificates evidencing shares of NeoStem common stock issuable in connection with the transactions will bear a standard restrictive legend under the Securities Act. Any portions of the Closing Merger Consideration not deposited into escrow at Closing (the "Closing Share Consideration") may not be transferred, directly or indirectly, without the . . .



Item 2.02. Results of Operations and Financial Condition.
On May 8, 2014, NeoStem issued a press release relating to, among other things, the results of the Company's first quarter ended March 31, 2014. A copy of this press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated into this Item 2.02 by reference.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.



Item 7.01. Regulation FD Disclosure.

On May 8, 2014, NeoStem issued the press release referenced in Item 2.02 above, which also announced the Closing of the CSC Acquisition. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

In addition, NeoStem intends, from time to time, to present and/or distribute to the investment community and utilize at various industry and other conferences a slide presentation. The slide presentation is accessible on NeoStem's website at www.neostem.com and is attached hereto as Exhibit 99.2. NeoStem undertakes no obligation to update, supplement or amend the materials attached hereto as Exhibit 99.2.
NeoStem undertakes no obligation to update, supplement or amend the materials attached hereto as Exhibit 99.1 and Exhibit 99.2. In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed "filed" for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Exchange Act or the Securities Act, except as shall be expressly set forth by reference in such a filing.

Safe Harbor for Forward-Looking Statements

This Current Report on Form 8-K, including Exhibits 99.1 and 99.2 hereto, contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are typically preceded by words such as "believes," "expects," "anticipates," "intends," "will," "may," "should," or similar expressions. These forward-looking statements are subject to risks and uncertainties that may cause actual future experience and results to differ materially from those discussed in these forward-looking statements. Important factors that might cause such a difference include, but are not limited to, costs related to the CSC Acquisition; the inability to integrate NeoStem's and CSC's businesses successfully; any failure of NeoStem's stockholders to approve the issuance of greater than 20% of NeoStem's outstanding shares in connection with the Merger Agreement, should common stock representing 20% or more of NeoStem's outstanding shares become issuable as a result of Milestone Payments becoming payable pursuant to the Merger Agreement; the need for outside financing to meet capital requirements; NeoStem's ability to develop and grow its business; the successful development of cellular therapies, including with respect to NeoStem's research and development and clinical evaluation efforts in connection with the newly-acquired Melapuldencel-T product candidate, as well as NeoStem's CD34 Cell Program, T Regulatory Cell Program and other cell therapies; scientific and medical developments, including in connection with the development of NeoStem's product candidates and technologies; the future of the regenerative medicine industry and the role of stem cells and cellular therapy in that industry; regulatory issues, including intended applications and required approvals; the performance and planned expansion of the Company's contract development and manufacturing business; and other events and factors disclosed previously and from time to time in NeoStem's filings with the SEC, including in this Current Report on Form 8-K under the caption "Risk Factors", in NeoStem's


Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on March 13, 2014, and the other documents filed by NeoStem with the SEC from time to time. NeoStem does not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.



Item 9.01. Financial Statements and Exhibits.

The following financial statements and exhibits are filed with this Current Report on Form 8-K:

(a) Financial Statements of Businesses Acquired:

Financial Statements of California Stem Cell, Inc. and Subsidiaries for the Years Ended December 31, 2013 and 2012 (Audited) and for the Three Month Periods Ended March 31, 2014 and 2013 (Unaudited).

(b) Pro Forma Financial Information:

Unaudited Pro Forma Condensed Combined Financial Statements.

(c) Exhibits:

Exhibit No. Description
Agreement and Plan of Merger, dated as of April 11, 2014, by and among
2.1 NeoStem, Inc., California Stem Cell, Inc., NBS Acquisition Company I, Inc., NBS Acquisition Company II, LLC, and Jason Livingston, solely in his capacity as CSC stockholder representative(1)
10.1 Escrow Agreement, dated of May 8, 2014, by and among NeoStem, Inc., California Stem Cell, Inc., Fortis Advisors LLC, solely in its capacity as the CSC Representative, and Continental Stock Transfer &Trust Company.
23.1 Consent of McGladrey LLP
99.1 Press Release of NeoStem, Inc. dated May 8, 2014*
99.2 Slide presentation of NeoStem, Inc. dated May 2014*



(1) Incorporated by reference to Exhibit 2.1 to NeoStem's Current Report on Form 8-K filed with the SEC on April 14, 2014. The schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. NeoStem will furnish copies of any schedules to the SEC upon request.

* Exhibits 99.1 and 99.2 are furnished with this Current Report on Form 8-K.


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