UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
________________
FORM 10-Q
________________
(Mark One)
|
S QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For
the quarterly period ended March 31, 2015 |
or
|
£ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period
from ____________ to ____________ |
Commission
File Number: 0-15324
________________
ROCK CREEK
PHARMACEUTICALS, INC.
(Exact name
of registrant as specified in its charter)
________________
Delaware
(State
or other jurisdiction of
incorporation
or organization) |
52-1402131
(I.R.S.
Employer
Identification
No.) |
|
|
2040
Whitfield Ave., Ste. 300, Sarasota Florida 34240
(Address
of principal executive offices, including zip code) |
(844)
727-0727
(Registrant’s
telephone number, including area code) |
________________
Indicate by
check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
S No £
Indicate by
check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes S
No £
Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer £ |
Accelerated
filer S |
Non-accelerated filer £ |
Smaller reporting
company £ |
Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £
No S
As of May 7, 2015, 8,228,670 shares
of the registrant’s common stock, par value $0.0001 per share, were outstanding.
TABLE OF
CONTENTS
CERTAIN DEFINITIONS
Unless the
context requires otherwise, all references in this Quarterly Report on Form 10-Q, or this Report, to “Rock Creek,"
"Company,” “we,” “our,” “us,” “our company” and similar terms refer
to Rock Creek Pharmaceuticals, Inc. and its wholly owned subsidiaries, RCP Development, Inc., a Delaware corporation, and Star
Tobacco, Inc., a Virginia corporation, which also may be referred to in this Report as “RCP Development” and “Star
Tobacco,” respectively.
SPECIAL
NOTE REGARDING REVERSE STOCK SPLIT
Effective April
14, 2015, we completed a reverse stock split in which each twenty five (25) shares of our common stock were automatically combined
into and became one (1) share of our common stock, subject to cash being issued in lieu of fractional shares. As of the effective
date of the reverse stock split, the per share exercise price of, and the number of shares of common stock underlying, any stock
options, warrants and other derivative securities issued by us were automatically proportionally adjusted, based on the one-for-twenty-five
reverse split ratio, in accordance with the terms of such options, warrants or other derivative securities, as the case may be.
All share numbers, stock option numbers, warrant numbers, and exercise prices appearing in this Quarterly Report on Form 10-Q
have been adjusted to give effect to the reverse stock split, unless otherwise indicated or unless the context suggests otherwise.
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
Certain statements
in this Report other than purely historical information, including estimates, projections, statements relating to our business
plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have tried, whenever possible,
to identify these forward-looking statements using words such as “anticipates,” “believes,” “estimates,”
“continues,” “likely,” “may,” “opportunity,” “potential,” “projects,”
“will,” “expects,” “plans,” “intends” and similar expressions to identify forward-looking
statements, whether in the negative or the affirmative. These statements reflect our current beliefs and are based on information
currently available to us. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other
factors which could cause our actual results, performance or achievements to differ materially from those expressed in, or implied
by, such statements. These risks, uncertainties, factors and contingencies include, without limitation, the challenges inherent
in new product development initiatives, the effect of any competitive products, our ability to license and protect our intellectual
property, our ability to raise additional capital in the future that is necessary to maintain our business, changes in government
policy and/or regulation, potential litigation by or against us, any governmental review of our products or practices, the risks
and uncertainties related to the corporate transition matters (including our significant shift to focus on drug development) and
related items discussed herein. Forward-looking statements reflect our management’s expectations or predictions of future
conditions, events or results based on various assumptions and management’s estimates of trends and economic factors in
the markets in which we are active, as well as our business plans. They are not guarantees of future performance. By their nature,
forward-looking statements are subject to risks and uncertainties. Our actual results and financial condition may differ, possibly
materially, from the anticipated results and financial condition indicated in these forward-looking statements. There are a number
of factors that could cause actual conditions, events or results to differ materially from those described in the forward-looking
statements contained in this Report. A discussion of factors that could cause actual conditions, events or results to differ materially
from those expressed in any forward-looking statements appears in “Item 1A. Risk Factors” herein and in our Annual
Report on Form 10-K for the year ended December 31, 2014.
Readers are
cautioned not to place undue reliance on forward-looking statements in this Report or that we make from time to time, and to consider
carefully the factors discussed in “Item 1A. Risk Factors” herein and in our Annual Report on Form 10-K for the year
ended December 31, 2014 in evaluating these forward-looking statements. These forward-looking statements are representative only
as of the date they are made, and we undertake no obligation to update any forward-looking statement as a result of new information,
future events or otherwise.
PART I-FINANCIAL
INFORMATION
Item 1. Financial
Statements
ROCK CREEK
PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
($ in thousands
except share data)
| |
March
31, 2015 | | |
December
31, 2014 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash and cash
equivalents | |
$ | 91 | | |
$ | 395 | |
Insurance proceeds receivable | |
| 3,529 | | |
| 6,679 | |
Prepaid expenses and other
current assets | |
| 719 | | |
| 721 | |
Current
assets of discontinued operations | |
| 5 | | |
| 6 | |
Total current assets | |
| 4,344 | | |
| 7,801 | |
Property and equipment,
net | |
| 204 | | |
| 207 | |
Intangible assets, net | |
| 385 | | |
| 402 | |
MSA escrow funds | |
| 482 | | |
| 482 | |
Discontinued
operations assets | |
| 24 | | |
| 25 | |
Total
assets | |
$ | 5,439 | | |
$ | 8,917 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’
DEFICIT | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 4,359 | | |
$ | 3,211 | |
Accrued expenses | |
| 9,505 | | |
| 8,929 | |
Accrued settlement | |
| - | | |
| 6,679 | |
Due to stockholder | |
| 50 | | |
| 50 | |
Current liabilities of discontinued
operations | |
| 535 | | |
| 533 | |
Total current liabilities | |
| 14,449 | | |
| 19,402 | |
Long-term debt | |
| 350 | | |
| 350 | |
Total liabilities | |
| 14,799 | | |
| 19,752 | |
Commitments and contingencies (note 8) | |
| - | | |
| - | |
Stockholders’ deficit: | |
| | | |
| | |
Common stock (A) | |
| 1 | | |
| 1 | |
Additional paid-in capital | |
| 293,965 | | |
| 292,046 | |
Accumulated
deficit | |
| (303,326 | ) | |
| (302,882 | ) |
Total
stockholders’ deficit (B) | |
| (9,360 | ) | |
| (10,835 | ) |
Total liabilities and
stockholders’ deficit | |
$ | 5,439 | | |
$ | 8,917 | |
____________
| (A) | $0.0001 par value per share, 314,800,000
shares authorized, 8,111,700 and 7,721,889 shares issued and outstanding as of March
31, 2015 and December 31, 2014, respectively. |
| (B) | Class A, convertible, $.01
par value, 4,000 shares authorized, no shares issued or outstanding; Series B, convertible;
$.01 par value 15,000 shares authorized, no shares issued or outstanding. |
See
notes to condensed consolidated financial statements.
ROCK CREEK
PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands
except share and per share data)
| |
Three
Months Ended March 31, | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
(Unaudited) | |
| |
| | |
| |
Operating expenses: | |
| | | |
| | |
General and
administrative | |
$ | 3,346 | | |
$ | 8,993 | |
Research
and development | |
| 473 | | |
| 693 | |
Total
operating expenses | |
| 3,819 | | |
| 9,686 | |
Operating loss from operations | |
| (3,819 | ) | |
| (9,686 | ) |
Other
income (expense), net | |
| 3,522 | | |
| (9 | ) |
Loss from continuing operations
before income taxes | |
| (297 | ) | |
| (9,695 | ) |
Income
tax benefit (expense) | |
| - | | |
| - | |
Net loss from continuing
operations | |
| (297 | ) | |
| (9,695 | ) |
Loss
on discontinued operations | |
| (41 | ) | |
| (135 | ) |
Net
loss | |
$ | (338 | ) | |
$ | (9,830 | ) |
| |
| | | |
| | |
Loss per common share; basic
and diluted: | |
| | | |
| | |
Continuing operations | |
$ | (0.04 | ) | |
$ | (1.39 | ) |
Discontinued
operations | |
| (0.00 | ) | |
| (0.02 | ) |
| |
| | | |
| | |
Total
basic and diluted | |
$ | (0.04 | ) | |
$ | (1.41 | ) |
Weighted average shares
outstanding, basic and diluted | |
| 7,932,019 | | |
| 6,972,706 | |
See
notes to condensed consolidated financial statements.
ROCK CREEK
PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR THE THREE
MONTHS ENDED MARCH 31, 2015 (UNAUDITED)
($ and share
data in thousands)
| |
Common
stock | | |
Additional Paid-In | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Total | |
Balances, December 31, 2014 | |
| 7,722 | | |
$ | 1 | | |
$ | 292,046 | | |
$ | (302,882 | ) | |
$ | (10,835 | ) |
Stock issuance | |
| 256 | | |
| - | | |
| 879 | | |
| - | | |
| 879 | |
Warrant exercise | |
| 134 | | |
| - | | |
| 503 | | |
| - | | |
| 503 | |
Stock-based compensation | |
| - | | |
| - | | |
| 431 | | |
| - | | |
| 431 | |
Deemed dividend | |
| - | | |
| - | | |
| 106 | | |
| (106 | ) | |
| - | |
Net
deficit | |
| - | | |
| - | | |
| - | | |
| (338 | ) | |
| (338 | ) |
Balances, March 31,
2015 (unaudited) | |
| 8,112 | | |
$ | 1 | | |
$ | 293,965 | | |
$ | (303,326 | ) | |
$ | (9,360 | ) |
See notes to
condensed consolidated financial statements.
ROCK CREEK
PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
| |
Three
Months Ended March 31, | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
(Unaudited) | |
Operating activities: | |
| | | |
| | |
Net loss | |
$ | (338 | ) | |
$ | (9,830 | ) |
Adjustments to reconcile
net loss to net cash flows from operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 29 | | |
| 39 | |
Stock-based compensation | |
| 659 | | |
| 5,232 | |
Increase (decrease) in
cash resulting from changes in: | |
| | | |
| | |
Current assets | |
| 3,151 | | |
| 256 | |
Current
liabilities | |
| (5,183 | ) | |
| (162 | ) |
Net cash flows used in operating
activities | |
| (1,682 | ) | |
| (4,465 | ) |
Investing activities: | |
| | | |
| | |
Purchase of property and
equipment | |
| (8 | ) | |
| | |
Proceeds
from trademark licensing | |
| - | | |
| 9 | |
Net cash flows from (used
in) investing activities | |
| (8 | ) | |
| 9 | |
Financing activities: | |
| | | |
| | |
Proceeds from issuance of common stock | |
| 879 | | |
| 5,113 | |
Proceeds
from warrant exercise | |
| 503 | | |
| 4,168 | |
Net cash flows from financing
activities | |
| 1,382 | | |
| 9,281 | |
| |
| | | |
| | |
Cash increase (decrease)
from continuing operations | |
| (308 | ) | |
| 4,825 | |
Cash flows used in discontinued
operations: | |
| | | |
| | |
Net cash flows provided by (used in) operating
activities | |
| 4 | | |
| (327 | ) |
Net cash flows used in investing activities | |
| - | | |
| - | |
Net cash flows from financing
activities | |
| - | | |
| - | |
Net cash flows from discontinued
operations | |
| 4 | | |
| (327 | ) |
Decrease (increase) in
cash and cash equivalents | |
| (304 | ) | |
| 4,498 | |
Cash
and cash equivalents, beginning of period | |
| 395 | | |
| 3,881 | |
Cash
and cash equivalents, end of period | |
$ | 91 | | |
$ | 8,379 | |
| |
| | | |
| | |
Supplemental disclosure
of cash flow information: | |
| | | |
| | |
Cash paid during the quarter
for: | |
| | | |
| | |
Interest | |
$ | 11 | | |
| - | |
| |
| | | |
| | |
Supplemental Schedule of non-cash operating activities: | |
| | | |
| | |
During the three months ended March 31, 2015, the agreed upon settlement for the Securities Class Action Lawsuits were funded directly to an escrow account by insurers. | |
$ | 5,900 | | |
| | |
During the three months ended March 31, 2015, the obligation for the Securities Class Action Lawsuits was funded directly to an escrow account by insurers. | |
$ | (5,900 | ) | |
| | |
Supplemental schedule of non-cash investing and financing activities: | |
| | | |
| | |
During the three months ended March 31, 2015, some warrants were re-priced in a private placement transaction generating a deemed dividend. | |
$ | (106 | ) | |
| | |
See notes to
condensed consolidated financial statements.
ROCK CREEK
PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Preparation:
The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial
statements. The preparation of our financial statements requires us to make estimates and assumptions that affect, among other
areas, the reported amounts of assets, long-lived assets, impairment of long-lived assets, and accrued liabilities. These estimates
and assumptions also impact expenses and the disclosures in our condensed financial statements and the accompanying notes. Although
these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately
differ from these estimates and assumptions. In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included.
Operating results for the three months ended March 31, 2015 and 2014 are not necessarily indicative of the results that may be
expected for the fiscal year. The balance sheet at December 31, 2014 has been derived from the audited financial statements at
that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.
You should read
these condensed consolidated financial statements together with the historical consolidated financial statements of the Company
for the years ended December 31, 2014, 2013, and 2012 included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2014, filed with the Securities and Exchange Commission, or SEC, on March 12, 2015 (the “Annual Report”).
Adopted
Accounting Pronouncements
In April
2014, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”)
No. 2014-08, “Presentation of Financial Statements and Property, Plant and Equipment: Reporting Discontinued
Operations and Disclosures of Disposals of Components of and Entity” ("ASU 2014-08"). ASU 2014-08 is
effective for the first interim or annual period beginning on or after December 15, 2014 with early adoption permitted. ASU
2014-08 amends ASC Topic 205, Presentation of Financial Statements, and ASC Topic 360, Property, Plant and Equipment, to
improve the usefulness of results in the financial statements to users. The Company has adopted ASU 2014-08 on the
Company’s financial statement presentation and disclosures, there was no material impact to the financial statement or
disclosures.
Recently Issued Accounting Pronouncements
In February
2015, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”)
No. 2015-02, Consolidation: Amendments to the Consolidation Analysis ("FASB ASU 2015-02). FASB ASU 2015-02
amended the process that a reporting entity must perform to determine whether it should consolidate certain types of legal entities.
FASB ASU 2015-02 is effective for the annual period ending after December 15, 2015, and for annual periods and interim periods
thereafter. Early adoption is permitted, including adoption in an interim period. The adoption of FASB ASU 2015-02 is not expected
to have a material impact on the Company’s consolidated financial statements.
In January 2015,
the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (FASB ASU 2015-01). FASB ASU
2015-01 simplifies income statement presentation by eliminating the concept of extraordinary items. FASB ASU 2015-01 is effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply
the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented
in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal
year of adoption. The adoption of FASB ASU 2015-01 is not expected to have a material impact on the Company’s consolidated
financial statements.
In August 2014,
the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going
Concern (FASB ASU 2014-15).. FASB ASU 2014-15 provides guidance on determining when and how to disclose going-concern uncertainties
in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s
ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide
certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.
The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter,
with early adoption permitted. The adoption of FASB ASU 2014-15 is not expected to have a material impact on the Company’s
consolidated financial statements.
In May 2014,
the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU No. 2014-09 provides
comprehensive guidance on the recognition of revenue from customers arising from the transfer of goods and services. The ASU also
provides guidance on accounting for certain contract costs, and requires new disclosures. ASU No. 2014-09 is effective for annual
reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is
not permitted. The adoption of FASB ASU 2014-09 is not expected to have a material impact on the Company’s consolidated
financial statements.
| 2. | Liquidity
and Managements’ Plans: |
The Company has
been operating at a loss for the past twelve years. Its future prospects will depend on its ability to successfully pursue
its strategy of pharmaceutical development, manage overall operating expenses, and obtain additional capital necessary to
support its operations. Since its inception, the Company has generally funded its operations with revenues from sale of its
now-discontinued Anatabloc® and its other anatabine-based products, as well as private placements and sales under its At
Market Issuance Sales Agreement described below.
On
December 15, 2014, the Company entered into an At Market Issuance Sales Agreement, or sales agreement, with MLV & Co.
LLC, or MLV, relating to the sale of shares of its common stock offered under an S-3 Registration Statement that was filed
in December 2014 and was declared effective in February 2015. In accordance with the terms of the sales agreements, the
Company may offer and sell shares of its common stock, $0.0001 par value per share, having an aggregate offering price of up
to $16.5 million from time to time through MLV, acting as agent. Sales of the Company common stock under the sales agreement
will be made by any method permitted that is deemed an “at
the market offering” as defined in Rule 415 under the
Securities Act of 1933, as amended, or the Securities Act, including sales made directly on or through The Nasdaq Capital
Market, the existing trading market for its common stock, sales made to or through a market maker other than on an exchange
or otherwise, in negotiated transactions at market prices, or any other method permitted by law. MLV is not required to sell
any specific amount, but will act as the Company’s sales agent using commercially reasonable efforts consistent with
its normal trading and sales practices. There is no arrangement for funds to be received in any escrow, trust or similar
arrangement. MLV will be entitled to compensation at a commission rate equal to 3% of the gross sales price per share sold.
The Company began selling shares under the sales agreement on February 12, 2015, and through March 31, 2015, an aggregate of
187,134 shares were sold for net proceeds of $689 thousand. There have been no additional sales under the sales
agreement subsequent to March 25, 2015 as of the date of this filing.
On January 28, 2015, the
Company entered into a Securities Purchase and Registration Rights Agreement (the “Purchase Agreement”)
with seven accredited investors, pursuant to which 202,673 shares of its common stock were issued and sold, at a
purchase price of $3.75 per share, and warrants to purchase up to a total of 168,337 shares of common stock. The warrants,
which have an exercise price of $3.75 per share, are generally exercisable beginning on January 28, 2015, and expire on
January 27, 2022. An aggregate of 134,000 shares sold in the private placement were issued pursuant to, and as a condition
of, the exercise of previously issued warrants to purchase common stock held by certain of the investors at an amended
exercise price of $3.75 per share. An aggregate of $760,023 was raised in the private placement, including $300,000 of which
was paid to the Company as an advance on December 30, 2014. A resale registration statement covering the purchased shares issuable
pursuant to the granted warrants has been filed and declared effective with the SEC
On May 8, 2015, the Company entered
into a Securities Purchase Agreement with an accredited investor, pursuant to which a total of 77,590 shares of its common
stock were issued and sold, at a purchase price of $3.00 per share, and warrants to purchase up to a total of 69,831 shares
of common stock. The warrants, which have an exercise price of $3.00 per share, are generally exercisable beginning on May
8, 2019, and expire on May 8, 2022. An aggregate of 62,072 shares sold in the private placement were issued pursuant to, and
as a condition of, the exercise of previously issued warrants to purchase common stock held by the investor at an
amended exercise price of $3.00 per share. An aggregate of $232,770 was raised in the private placement, all of which was
paid to the Company as an advance in March 2015.
During the three months ended
March 31, 2015, the Company recognized $3.5 million gain on insurance proceeds related to settlement of litigation. The
Company received such insurance proceeds in April 2015. The proceeds are being used to partially satisfy outstanding legal
bills and indemnity payments relating to the Company’s class action and derivative litigation and other legal
matters and to pay essential operating expenses, provided that, as described below, the Company does not believe that such
proceeds (together with other capital resources) will support its operations beyond June 2015, and the insurance proceeds
will not be sufficient to fund all outstanding legal fees and expenses relating to its litigation, which was $5.1 million as
of March 31, 2015.
As of May 1, 2015 the Company
believes that its current cash resources (including the above-mentioned insurance proceeds but excluding any sales made under
the sales agreement after May 1, 2015, if any), are anticipated to be sufficient to support its operations only through
approximately June 2015. The Company will need to seek additional funding to support its
operations, whether through debt financing, additional equity offerings, through strategic transactions (such as licensing or
borrowing against intellectual property) or otherwise. The Company is currently exploring a variety of potential financing
options, including additional private placements and financing transactions that would leverage its intellectual property.
There can be no assurance that the Company will be successful in obtaining such additional funding on commercially favorable
terms, if at all. The Company will also likely continue to delay cash payment of various payables and outstanding obligations
in order to conserve cash until additional funding becomes available, and if it does not raise sufficient funding, it may be
forced to curtail clinical trials and product development activities and continue to defer such payments. To conserve cash
resources, its Chief Executive Officer and President elected to defer the payment of their salary earned with respect to the
period beginning December 2014 and continuing for the first quarter of 2015, and the members of the Board of Directors
elected to defer their board fees and compensation through the end of the first quarter of 2015. The Company anticipates that
deferred salary and fees will be paid as follows: deferred salary for our Chief Executive Officer and President will be paid
in shares of our common stock under our equity incentive plan, and deferred board fees will be paid in cash. In April 2015,
the Company has resumed the payment in cash of executive salaries and partially paid deferred board fees for continuing board
members in cash. One board member who resigned was paid in full for all deferred board fees. If the Company is unable to
raise additional capital (including through the exercise of outstanding warrants or through private placements of its
securities, each of which has been a primary source of our financing in the past), its operations will be materially
adversely affected, its scope of operations may need to be materially reduced, and its clinical trials may need to be
delayed. Any equity financing will be dilutive to its existing shareholders.
The Company does not have enough cash
or other capital resources to sustain its operations beyond June 2015 based on its current operating plan, and, therefore,
there is substantial doubt about the Company’s ability to
continue to be a going concern. The Company’s continuation as a going concern depends upon its ability to obtain
additional financing to provide cash to meet its obligations as may be required, and ultimately to attain profitable
operations and positive cash flows. The Company has no commercial products on the market at this time, and no associated
revenues due to exiting the dietary supplement market in the U.S.. While the Company is evaluating overseas
market opportunities through possible licensing arrangements, it has not yet entered into any such licensing arrangements.
| 3. | Insurance
Proceeds Receivable: |
At December 31, 2014 insurance
proceeds receivable consisted of a $5.9 million escrow funding requirement as part of the securities class action
litigation that will paid directly to an Escrow account by insurance carriers and $778 thousand to be paid directly to the
Company. The $5.9 million escrow funding of the settlement by insurers occurred in March, 2015.
At March
31, 2015 a receivable for $3.5 million which includes $778 thousand disclosed above, was recorded as other income. Funds will
be received directly from insurers for costs incurred arising from various legal proceedings. The funds were
subsequently received in April, 2015.
| 4. | Discontinued
Operations: |
In August 2014,
the Company suspended all sales of its Anatabloc® products in response to correspondence received from the FDA pertaining
to the Company’s filing on a New Dietary Ingredient Notification (NDIN) with respect to Anatabloc®. Upon further discussion
and analysis, the Company decided to permanently exit the dietary supplement market for all Anatabloc® and CigRx® products.
Information pertaining to components of discontinued operations included in these condensed consolidated financial statements
is included below.
Assets and liabilities
of discontinued dietary supplement operations consisted of the following as of:
$ thousands | |
March 31, 2015 | | |
December 31, 2014 | |
| |
(Unaudited) | | |
| |
Assets: | |
| | |
| |
Prepaid expenses | |
| 5 | | |
| 6 | |
Machinery and equipment | |
| 24 | | |
| 25 | |
Total assets | |
$ | 29 | | |
$ | 31 | |
| |
| | | |
| | |
Liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 458 | | |
$ | 412 | |
Accrued expenses | |
| 77 | | |
| 121 | |
Total current liabilities | |
$ | 535 | | |
$ | 533 | |
Results of discontinued
operations for the period were:
$ thousand
(unaudited) | |
March 31, 2015 | | |
March 31, 2014 | |
| |
Unaudited | | |
Unaudited | |
Net sales | |
$ | - | | |
$ | 1,123 | |
Cost of goods sold | |
| - | | |
| (401 | ) |
Gross margin | |
| - | | |
| 722 | |
Operating expenses | |
| (41 | ) | |
| (857 | ) |
Operating loss from discontinued
operations | |
$ | (41 | ) | |
$ | (135 | ) |
As of March 31, 2015
and December 31, 2014, accrued expenses included the following:
$ thousands | |
2015 | | |
2014 | |
| |
Unaudited | | |
| |
Accrued Expenses: | |
| | | |
| | |
Accrued restructuring charges | |
$ | 3,185 | | |
$ | 3,391 | |
Accrued payroll and related expenses | |
| 3,482 | | |
| 3,132 | |
Accrued legal | |
| 2,542 | | |
| 2,242 | |
Accrued expenses | |
| 296 | | |
| 164 | |
Total current liabilities | |
$ | 9,505 | | |
$ | 8,929 | |
As disclosed
in the historical consolidated financial statements of the Company for the years ended December 31, 2014, 2013, and 2012 included
in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange
Commission, or “SEC,” on March 12, 2015 (the “Annual Report”), the Company has focused the business on
pharmaceutical drug development. As part of the refocused business transformation, the Company has consolidated offices in Sarasota,
Florida and exited the dietary supplement and cosmetic business. As a result, a number of personnel were not retained and left
the company throughout 2014. The Company has entered into severance agreements with the former employees and the Company has accrued
the costs of the severance agreements as they were executed. All costs related to the closure of the Gloucester, Massachusetts,
Washington, D.C. and Glen Allen, Virginia offices have been accrued as well.
For the three
months ended March 31, 2015, we incurred no restructuring charges, compared to $481 thousand for involuntary termination charges
for the same period in 2014.
For the three
months ended March 31, 2015, we paid $206 thousand related to restructuring costs, of which $185 thousand was related to involuntary
termination costs and $21 thousand was related to office closure in Glen Allen, Virginia. For the same period in 2014, we paid
$76 thousand related to involuntary termination costs.
Deemed Dividend
In connection with the January 28, 2015 private
placement transaction, some executed warrants were re-priced. The non-cash financial impact of $106 thousand relating to the
repricing of warrants has been recorded as a deemed dividend in the accompanying financial statements.
Stock Option Plans
Prior to
2008, the Company adopted a 1998 Stock Option Plan and a 2000 Equity Incentive Plan, and in September 2008, it adopted a 2008
Incentive Award Plan (collectively, the “Plans”). The Plans provide for the award of options to purchase common
stock, restricted shares of common stock and certain other equity and equity-based awards to directors, officers, employees
and consultants or advisors of the Company and certain affiliated entities. In the aggregate, as of March 31, 2015 the Plans
provide for grants of both qualified and non-qualified stock options, as well as other equity-based awards, with respect to
up to 1,808,000 shares in the aggregate.
As of
March 31, 2015, there were 1,019,000 options issued and outstanding with a weighted average exercise price of $52.93 per share.
A summary of
the status of the Company’s unvested stock options at March 31, 2015, and changes during the three months then ended, is
presented below.
Non-Vested Stock Options
(unaudited) | |
Shares | | |
Weighted
Average
Grant-Date Fair
Value | |
Non-Vested at December 31, 2014 | |
| 313,000 | | |
$ | 22.44 | |
Granted | |
| | | |
| | |
Vested | |
| (6,000 | ) | |
| (10.50 | ) |
Forfeited | |
| | | |
| | |
Non-Vested at March
31, 2015 | |
| 307,000 | | |
$ | 22.67 | |
As of March
31, 2015, there was $1.3 million of unrecognized compensation cost related to unvested share-based compensation arrangements under
the Plans.
During
the three months ended March 31, 2015, no stock options were granted or exercised.
The outstanding
stock options as of March 31, 2015 had no intrinsic value.
Warrant activity
During the three
months ended March 31, 2015, 134,000 warrants were exercised resulting in gross proceeds to the Company of $0.5 million. There
was nominal intrinsic value of the warrants exercised.
During the three
months ended March 31, 2015, 168,337 warrants with an exercise price of $3.75 were issued as a part of a private placement that
the Company completed in January 2015.
As of March
31, 2015, the Company had 1,119,840 warrants outstanding with a weighted average exercise price of $29.20 per share. The intrinsic
value of the exercisable warrants at March 31, 2015 was zero.
Net Loss
Basic and Diluted Per Common Share
Due to
the Company’s net losses, total basic and diluted loss per share was $(0.04) and $(1.41) for the three months ended
March 31, 2015 and March 31, 2014, respectively. An aggregate of 2,138,840 at March 31, 2015 and 1,636,903 at March 31, 2014
of stock options and warrants outstanding were excluded from this computation because they would have had an
anti-dilutive effect.
| 8. | Commitments,
Contingencies and Other Matters: |
Litigation
Securities Class Action Settlement
On Monday,
March 2, 2015, the United States District Court for the Eastern District of Virginia, preliminary approved the Company’s
securities class action settlement in the amount of $5.9 million. The settlement stipulates that the amount of $5.9 million,
which includes litigation costs, will be paid from certain Rock Creek Pharmaceuticals, Inc. (f/k/a Star Scientific, Inc.)
D&O insurance policies. The funding of the settlement by insurers occurred in March, 2015. In addition notice is to be
furnished to the class, and a final approval hearing will be held on or before June 11, 2015
On May 4, 2015, the court entered an order setting a meeting with the court’s
mediator, Magistrate Judge Novak, regarding an indemnification issue related to the settlement.
Derivative Action Lawsuits
Four individuals,
David C. Inloes, William Skillman, Harold Z. Levine and Louis Lim, filed separate, but similar derivative actions naming all or
most of the Company’s then current directors, several officers of the Company and, in one case, one former director as defendants.
Two of the actions were filed in the United States District Court for the Eastern District of Virginia, Alexandria Division (the
“Alexandria Actions”). The first Alexandria Action, William Skillman v. Jonnie R. Williams et al., was filed
on May 2, 2013. The second Alexandria Action, David C. Inloes v. Jonnie R. Williams et. al., was filed on May 3, 2013. The
Alexandria Actions have been consolidated and co-lead counsel appointed by the Court. Pursuant to a court order, plaintiffs
filed a consolidated amended complaint on January 13, 2014 and a motion to dismiss was filed on February 3, 2014 on behalf of
all of the defendants. Also, on February 3, 2014, the Company, as nominal defendant, moved to stay or dismiss this action
pending a resolution of the securities class action litigation pending in Federal Court in Richmond, Virginia. Separately, on
January 29, 2014, the United States moved to stay discovery in the case pending the completion or other disposition of the criminal
trial of former Governor McDonnell and his wife. That motion was granted by the Court on January 30, 2014. On February
28, 2014, the Court granted the Company’s motion to stay the case, ruling that the case would be stayed for all purposes
pending further order of the Court and ordering the Company, within ten days of the dismissal or resolution of the Richmond securities
class action or the trial court's verdict in the McDonnell case, whichever occurs first, to file a report indicating what action,
if any, it intends to take with regard to this case, including specifically, without limitation, whether it intends to pursue
or seek dismissal of the claims asserted against each of the named individual defendants.
The third derivative
action, Harold Z. Levine v. Jonnie R. Williams, et. al., was filed on July 8, 2013, in the Circuit Court for the City of Richmond
(the “Levine Action”), and the fourth case, Louis Lim v. Christopher C. Chapman, et. al., was filed in the Circuit
Court for Henrico County on July 11, 2013 (the “Lim Action”). In general, the complaints collectively allege
that the Company’s directors and officers breached their fiduciary duties by causing the Company to issue false and misleading
statements regarding its past and future prospects and certain scientific data relating to its products, as well as engaging in
certain unspecified private placements and related party transactions since 2006. On July 1, 2013 and August 1, 2013, stipulations
were filed in each of the state court actions that stayed the period for defendants to respond to the complaints. These stipulations
were later entered by the Courts. In May 2014, the parties to both state court derivative actions filed further stipulations subsequently
endorsed by the Courts that provided for the transfer of the Lim Action to the Circuit Court for the City of Richmond, the consolidation
of the Lim Action with the Levine Action, and a further stay of the deadline for a response to the complaint. Under the current
schedule, the parties will meet and confer telephonically following the report required in the Alexandria Actions. Unless the
parties agree to a different timeline at that conference, the deadline for a response to the complaint will be either 21 days
from the designation of one of the current complaints as the operative complaint or 35 days from the service of a consolidated
amended complaint.
A mediation
session relating to the derivative actions was held on October 29, 2014, and the parties later reached an agreement in principle
regarding the material terms of a proposed settlement that would address the derivative actions. The parties concluded a stipulation
of settlement as of approximately January 27, 2015, and plaintiffs thereafter filed a motion for approval of the settlement. The
settlement provides for the implementation of certain corporate governance reforms and contemplates payment by the Company of
certain attorney’s fees to plaintiffs’ counsel in an amount that has yet to be determined. A hearing on the motion
for preliminary approval was held on March 6, 2015. The judge requested additional information to be submitted within 14 days.
At this time, the Company cannot predict the probable outcome of the derivative actions and/or claims against the Company for
attorney’s fees. Accordingly, no amounts have been accrued in the consolidated financial statements.
On March 27,
2015, the parties filed a joint submission setting forth additional information responsive to the Court’s order. On March
31, 2015, the Court entered orders preliminarily approving the proposed settlement and setting a further settlement hearing for
July 10, 2015. At this time, the Company cannot predict the probable outcome of the claims against the Company for attorney’s
fees. Accordingly, no amounts have been accrued in the consolidated financial statements.
Consumer Class Action
On January 27,
2014, Howard T. Baldwin filed a purported class action naming the Company, Rock Creek Pharmaceuticals, Inc. and GNC Holding, Inc.,
or “GNC,” as defendants. The case was filed in the United States District Court for the Northern District
of Illinois. Generally, the complaint alleged that claims made for the Company’s Anatabloc®
product have not been proven and that individuals purchased the product based on alleged misstatements regarding characteristics,
uses, benefits, quality and intended purposes of the product. The complaint purported to allege claims for violation of
state consumer protection laws, breach of express and implied warranties and unjust enrichment. The Company has agreed to
indemnify and defend GNC pursuant to the terms of the purchasing agreement between RCP Development and GNC. Consistent with that
commitment, the Company has agreed to assume the defense of this matter on its own behalf as well as on behalf of GNC. The defendants
filed a motion to dismiss the complaint on March 24, 2014. On January 13, 2015, the Court entered an order dismissing the complaint
in its entirety without prejudice.
On February
10, 2015, Mr. Baldwin filed an Amended Complaint against Rock Creek Pharmaceuticals, Inc. f/k/a Star Scientific, Inc., RCP Development,
Inc. f/k/a Rock Creek Pharmaceuticals, Inc. and GNC Holdings, Inc. (collectively “Defendants”). The Amended Complaint
also includes an additional named plaintiff, Jerry Van Norman, who alleges that he is a citizen of Parkville, Missouri. The Amended
Complaint requests certification of an “Illinois Class” consisting of “[a]ll persons who paid, in whole or in
part, for Anatabloc® dietary supplement in Illinois between
August 1, 2011 and the present for personal, family or household uses,” and a “Missouri Class” consisting of
“[a]ll persons who paid, in whole or in part, for Anatabloc®
dietary supplement in Missouri between August 1, 2011 and the present for personal, family or household uses.” The
Amended Complaint is pleaded in seven counts: (1) violation of the Consumer Fraud and Deceptive Business Practices Act of Illinois;
(2) violation of the Missouri Merchandising Practice Act; (3) breach of express warranty under Illinois law; (4) breach of express
warranty under Missouri law; (5) breach of implied warranty of merchantability under Illinois law; (6) breach of implied warranty
of merchantability under Missouri law; and (7) unjust enrichment.
Like the original
Complaint, the Amended Complaint alleges that Defendants manufactured, marketed and/or sold Anatabloc®,
a dietary supplement purportedly derived from an anatabine alkaloid and promoted Anatabloc®
as a “wonder drug” with a number of medical benefits and uses, from treating excessive inflammation (associated
with arthritis) to Alzheimer’s disease, traumatic brain injury (or concussions), diabetes and multiple sclerosis. Plaintiffs
allege that Defendants have never proven any of these claims in clinical trials or received U.S. Food and Drug Administration
approval for Anatabloc®, and that Anatabloc®
“was never the ‘wonder drug’ it claimed to be.” Plaintiffs allege that they purchased Anatabloc®
based upon claims that it provides “anti-inflammatory support.” Mr. Baldwin alleges that he purchased Anatabloc®
to “reduce inflammation and pain in his joints,” and Mr. Van Norman alleges that he “suffers back and
knee problems, as well as arthritis, and expected Anatabloc®
to be effective in treating these symptoms and purchased Anatabloc®
to help alleviate his symptoms.” Both plaintiffs allege that Anatabloc®
did not provide the relief promised by the Defendants.
Although the
Amended Complaint does not include claims based on the consumer protection laws and breach of warranty laws of several additional
states like the original Complaint, on February 10, 2015, counsel for plaintiffs also served a “Notice pursuant to: Alabama
Code § 8-19-10(e); Alaska Statutes §45.50.535; California Civil Code § 1782; Georgia Code § 10-1-399; Indiana
Code § 24-5-0.5-5(a); Maine Revised Statutes, Title 5, § 50-634(g); Massachusetts General Laws Chapter 93A, § 9(3);
Texas Business & Commercial Code § 17.505; West Virginia Code § 46A-6-106(b); and, Wyoming Statutes § 40-12-109
as well as state warranty statutes,” which purports to give notice to Defendants on behalf of the named plaintiffs and a
“class of similarly situated individuals” that Defendants have “violated state warranty statutes and engaged
in consumer fraud and deceptive practices in connection with its sale of Anatabloc®,”
and demanding that “Defendants correct or otherwise rectify the damage caused by such unfair trade practices and warranty
breaches and return all monies paid by putative class members.”
The
Defendants timely moved to dismiss the Amended Complaint on March 10, 2015. Plaintiffs filed a memorandum in response to the
motion to dismiss on April 9, 2015, and Defendants filed their reply memorandum on April 22, 2015. On April 28, 2015,
the Court entered an order lifting the stay of discovery that had been in place in the case and scheduled a status hearing on
June 25, 2015. No discovery requests have been served by any party as of May 7, 2015.
Action by Iroquois Master Fund,
Ltd. and American Capital Management, LLC
On
February 19, 2015, the Company became aware of a complaint filed on February 18, 2015, in New York Supreme Court for New York
County in which the Company and its Chief Executive Officer, Dr. Michael J. Mullan, are named as a defendants. The complaint
was filed by Iroquois Master Fund, Ltd. and American Capital Management, LLC, who were investors in a private placement of
the Company’s securities completed in March 2014 (the “Private Placement Transaction”). The complaint also
names as a defendant John J. McKeon, a shareholder of the Company. Iroquois and American Capital are seeking $4.2 million, in
the aggregate, in damages or, alternatively, rescission of the Private Placement Transaction, premised on allegations that
the Company entered into a “sham” loan agreement with Mr. McKeon to provide the Company with a $5.8 million line
of credit in order to fraudulently induce Iroquois and American Capital to acquire the Company’s securities. On April
29, 2015, the Company filed a motion to dismiss the complaint because (i) plaintiffs did not register to do business with the
New York Secretary of State, and thus lack the capacity to sue in New York, and (ii) the court lacks personal jurisdiction
over the company and Dr. Mullan because the defendants were not present in New York in connection with the Private Placement
Transaction, or did the critical events relating to it take place in New York. Although the Company believes that the
material allegations are without merit and intends to vigorously defend the litigation, no assurances can be given with
respect to the outcome of the litigation.
We have been
notified by our insurance carrier that its position is that legal costs incurred for the Iroquois Master Fund, Ltd. and American
Capital Management, LLC action is not covered under our policy, although any legal costs incurred on behalf of the Company and
our Chief Executive Officer, Dr. Michael J. Mullan, would be jointly shared by the Company and insurer. All legal costs incurred
to date for this action through March 31, 2015 have been recorded in the accompanying financial statements accordingly.
Claims Dr. Christopher C. Chapman
On or around
March 27, 2015, Dr. Christopher C. Chapman, our President and a Director of our Company, delivered a letter to the Company asserting
that, after consulting with his attorneys, he has been advised that he has claims against the Company for breach of employment
contract and discrimination. In his letter, Dr. Chapman alleges that the Company has breached his employment contract by failing
to pay him his base salary, and he alleges that the Company has engaged in racially motivated actions to undermine his oversight
responsibilities and product development actions, including by, among other things, allegedly redirecting funding for anatabine
citrate trials. In response to Dr. Chapman’s letter, the
Company has engaged independent counsel to conduct an independent investigation into Dr. Chapman’s
allegations. The investigation is pending as of the date of this filing, and to the Company’s
knowledge, Dr. Chapman has not filed any legal action against the Company as of the date of this filing. Simultaneous with such
investigation, the Company has also engaged independent counsel to conduct an independent inquiry into a premature IND clinical
hold response filing made in February 2015 at the direction of Dr. Chapman, and pending the completion of that inquiry, Dr. Chapman
is on paid administrative leave from the Company.
Email from Counsel to Jonnie
R. Williams
On March 25, 2015, the Company
received an email from an attorney representing Jonnie R. Williams, a former director of the Company and the Company’s
former Chief Executive Officer, stating that Mr. Williams is contractually entitled to severance compensation. In such email,
the attorney requested that the Company immediately contact the attorney to discuss such alleged severance entitlement. The Company
did not contact the attorney, and the Company has not received any further communications from the attorney. Mr. Williams
voluntarily resigned from the Company in August 2014, and the Company is not aware of any basis, whether under Mr. Williams’
prior employment agreement or otherwise, on which Mr. Williams would be contractually entitled to severance compensation.
In the March 2015 email, Mr. Williams’ attorney did not
identify any specific contractual provisions that would entitle Mr. Williams to severance compensation. There is no assurance
that Mr. Williams or an attorney acting on behalf of him will not in the future seek to pursue some sort of contractual severance
compensation claim in the future.
Commitments
The Company
had research and development and other contracted commitments totaling $1.0 million as of March 31, 2015.
On April 10,
2015, the Company’s shareholders approved an increase in
the number of shares for the 2008 Incentive Award Plan of 600,000 shares.
Effective April
14, 2015, the Company completed a reverse stock split in which each twenty five (25) shares of the Company’s
common stock were automatically combined into and became one (1) share of Company common stock, subject to cash being issued in
lieu of fractional shares. As of the effective date of the reverse stock split, the per share exercise price of, and the number
of shares of common stock underlying, any stock options, warrants and other derivative securities issued by us were automatically
proportionally adjusted, based on the one-for-twenty-five reverse split ratio, in accordance with the terms of such options, warrants
or other derivative securities, as the case may be. All share numbers, stock option numbers, warrant numbers, and exercise prices
appearing in these financial statements and the notes thereto have been adjusted to give effect to the reverse stock split, unless
otherwise indicated or unless the context suggests otherwise.
Insurance proceeds of $3.5 million
were received in April, 2015.
On May 8,
2015, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company
issued and sold a total of 77,590 shares of its common stock, at a purchase price of $3.00 per share, and warrants to
purchase up to a total of 69,831 shares of common stock. The warrants, which have an exercise price of $3.00 per share, are
generally exercisable beginning on May 8, 2019, and expire on May 8, 2022. An aggregate of 62,072 shares sold in the private
placement were issued pursuant to, and as a condition of, the exercise of previously issued warrants to purchase common stock
held by the investor at an amended exercise price of $3.00 per share. An aggregate of $232 thousand was raised in the private
placement, all of which was paid to the Company as an advance in March 2015.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In preparing
the discussion and analysis contained in this Item 2, we presume that persons reviewing this Item have read or have access to
the discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 2014, which was filed
with the Securities and Exchange Commission (or “SEC”) on March 12, 2015 and our Definitive Proxy Statement,
which was filed on March 12, 2015. In addition, persons reviewing this Report should read the discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated financial statements and related notes included elsewhere
in this Report. The following results of operations include a discussion of the three months ended March 31, 2015 as compared
to the three months ended March 31, 2014.
Overview
We are a pharmaceutical
development company focused on the discovery, development, and commercialization of therapies for chronic inflammatory disease,
neurologic disorders, and behavioral health utilizing our proprietary compounds. Our development activities are currently focused
on our lead compound, anatabine citrate, which we believe, based on our accumulated data, demonstrates anti-inflammatory properties.
Prior to September 2014, we marketed and sold an anatabine-based dietary supplement under the name Anatabloc®,
together with other anatabine-based products, but we discontinued the marketing and sale of such products in September 2014 and
have narrowed the focus of our company to pharmaceutical development activities centered primarily on anatabine citrate as a lead
drug candidate. Our strategy is to leverage the underlying science and clinical data accumulated by us in relation to our prior
anatabine-based products to advance our pharmaceutical development program. In February 2015, we commenced a Phase I clinical
trial in the United Kingdom to determine the pharmacokinetic profiles of selected modified release formulation prototypes of anatabine
and to evaluate their safety and tolerability in healthy subjects.
Prior to December
2013, our business strategy focused on selling anatabine-based nutraceutical dietary supplements that provided anti-inflammatory
support and decreased the urge to smoke. We also sold an associated line of cosmetic products, pursued research and development
of related dietary supplements and pharmaceutical products, and to a much lesser degree sought to license our low-TSNA curing
technology and related products.
In late 2013,
our senior management and Board of Directors undertook certain significant corporate changes in order to position the company
to develop U.S. Federal Food and Drug Administration (FDA) approved products that would present grater long-term revenue prospects,
and in December 2013, our stockholders approved various matters necessary to effect the corporate transition. As part of the corporate
transition, Michael J. Mullan, MBBS (MD), PhD was appointed our Chief Executive Officer and Chairman of our Board of Directors,
and Christopher C. Chapman, MD was appointed our President. In addition to these significant management changes, our shareholders
elected a new Board of Directors consisting of five new directors (including Dr. Mullan) and one existing director (Dr. Chapman).
Our company’s corporate transition continued during 2014, during which we consolidated our company’s offices to a
single location in Sarasota, Florida, substantially reduced our employee headcount, and changed the name of the company from Star
Scientific, Inc. to Rock Creek Pharmaceuticals, Inc. In September 2014, we completed the transition by discontinuing the company’s
historical business of marketing and selling anatabine-based nutritional supplements and other products.
Restructuring
In 2014, we
were successful in consolidating our offices from three locations to one location in Sarasota, Florida. We also decreased the
number of full time dedicated employees from twenty-five to ten. We believe our first quarter results reflect significant cost
savings due to the restructuring. Our general and administrative expenses have declined by approximately $5.6 million or 62.8%
for the three months ended March 31, 2015 compared to the same period in 2014. For additional details, please see Management Discussion
and Analysis.
Prospects for Our Operations
The recurring
losses generated by our business continue to impose significant demands on our liquidity. Our future prospects will be highly
dependent on our ability to successfully implement our current strategy to better take advantage of the potential opportunities
in the area of pharmaceutical products, including the development of products approved by the FDA and other regulatory agencies.
Our ability to manage overall operating expenses, as well as raise additional capital necessary to support our operations, will
be key to future operations and financial condition (particularly given the capital intensive nature of drug development).
We have and will continue to seek to generate revenues through royalties from the patented tobacco curing process to which we
are the exclusive licensee and for our related tobacco products (operations discontinued in December 2012). Royalty revenues have
been insignificant to date.
At Market Issuance (“ATM”)
Agreement
On
December 15, 2014, we entered into an At Market Issuance Sales Agreement, or sales agreement, with MLV & Co. LLC, or MLV,
relating to the sale of shares of our common stock offered under an S-3 Registration Statement that we filed in December 2014
and was declared effective in February 2015. In accordance with the terms of the sales agreement, we may offer and sell
shares of our common stock, $0.0001 par value per share, having an aggregate offering price of up to $16.5 million from time
to time through MLV, acting as agent. Sales of our common stock under the sales agreement will be made by any method
permitted that is deemed an “at the market
offering” as defined in Rule 415 under the
Securities Act of 1933, as amended, or the Securities Act, including sales made directly on or through The Nasdaq Capital
Market, the existing trading market for our common stock, sales made to or through a market maker other than on an exchange
or otherwise, in negotiated transactions at market prices, or any other method permitted by law. MLV is not required to sell
any specific amount, but will act as our sales agent using commercially reasonable efforts consistent with its normal trading
and sales practices. There is no arrangement for funds to be received in any escrow, trust or similar arrangement. MLV will
be entitled to compensation at a commission rate equal to 3% of the gross sales price per share sold. We began selling shares
under the sales agreement on February 12, 2015, and through March 31, 2015, we sold an aggregate of 187,134 shares for net
proceeds to our company of $689 thousand. There have been no additional sales under the sales agreement subsequent to March 25,
2015 as of the date of this filing.
Off-Balance Sheet Arrangements
None.
April 2015 Reverse Stock Split
Effective April
14, 2015, we completed a reverse stock split in which each twenty five (25) shares of our common stock were automatically combined
into and became one (1) share of our common stock, subject to cash being issued in lieu of fractional shares. As of the effective
date of the reverse stock split, the per share exercise price of, and the number of shares of common stock underlying, any stock
options, warrants and other derivative securities issued by us were automatically proportionally adjusted, based on the one-for-twenty-five
reverse split ratio, in accordance with the terms of such options, warrants or other derivative securities, as the case may be.
All share numbers, stock option numbers, warrant numbers, and exercise prices appearing in this discussion and analysis have been
adjusted to give effect to the reverse stock split, unless otherwise indicated or unless the context suggests otherwise.
Results of Operations
Our
company’s unaudited condensed consolidated results for the three month periods ended March 31, 2015 and 2014 are
summarized in the following table:
$ in thousands
(except share and per share data) | |
Three
Months Ended March 31, | |
| |
2015 Unaudited | | |
2014 Unaudited | |
| |
| | |
| |
Total operating
expenses | |
$ | 3,819 | | |
$ | 9,686 | |
Operating loss from operations | |
| (3,819 | ) | |
| (9,686 | ) |
Other income (expense), net | |
| 3,522 | | |
| (9 | ) |
Net loss from continuing operations | |
| (297 | ) | |
| (9,695 | ) |
Net (loss) gain from discontinued
operations | |
| (41 | ) | |
| (135 | ) |
Net loss | |
$ | (338 | ) | |
$ | (9,830 | ) |
Three Months Ended March 31,
2015 Compared to Three Months Ended March 31, 2014
Net
Sales. We had no sales in the three months ended March 31, 2015 due to exiting the market for all Anatabloc® and
CigRx®, or “dietary supplement,” products
in 2014. In accordance with GAAP, all discontinued operations have been reclassified as discontinued operations for comparative purposes.
Gross Profit.
As we exited the market for sales of all dietary supplement products, we have no gross profit to report for the three months
ended March 31, 2015. Activity for the three months ended March 31, 2014 has been reclassified as discontinued operations in accordance
with GAAP for comparative purposes.
Total Operating
Expenses. Total operating expenses (comprised of general and administrative and research and development expenses) were approximately
$3.8 million for the three months ended March 31, 2015, a decrease of approximately $5.9 million, or 60.8%, from approximately
$9.7 million for the same period in 2014. General and administrative expenses decreased by approximately $5.7 million, and research
and development costs decreased by approximately $0.2 million.
General
and Administrative Expenses. General and administrative expenses were approximately $3.3 million for the three
months ended March 31, 2015, a decrease of approximately $5.7 million, or 63.3%, from approximately $9.0 million for the same
period in 2014. For the three months ended March 31, 2015, we had decreased legal expenses of $0.2 million primarily due to
the completion of the Department of Justice (DOJ) investigation and settlement of the securities class action litigation; a
decrease of non-cash charges of $4.3 million related to stock based compensation; a decrease in salaries, rents, travel,
phone, computer expenses of $1.3 million due to completion of restructuring that was undertaken in 2014; and various other
net decreases of expenses of $0.3 million. We also incurred an increase of business insurance premiums of approximately
$0.4 million.
Research
and Development Expenses. We expended approximately $0.5 million on research and development in the three months
ended March 31, 2015, compared to approximately $0.7 million in the comparable period in 2014. The research and development
costs in the three months ended March 31, 2015 were directed principally toward ongoing expenses related to a clinical trial
in Europe, along with drug development initiatives. Our research and development costs for the three months ended March 31,
2014 were primarily in support of preparing for our Investigational New Drug (IND) submission, which occurred later in 2014.
For the three months ended March 31, 2015, we incurred no expenses related to the Research and Royalty Agreement with Roskamp
Institute due to no further sales of Anatabloc® products, compared to $38 thousand for the three months ended
March 31, 2014 which have been reclassified to discontinued operations in accordance with GAAP. See “Item
1. Business—Our Current Drug Development Program—Our Relationship with the Roskamp Institute” in our 2014
Form 10-K for more information relating to the Roskamp Institute.
Other Income
and Expense, net. For the three months ended March 31, 2015, we had other income of $3.5 million primarily due to
insurance proceeds related to completion of the ongoing litigation. For the same period in 2014, we had interest
income of $6 thousand due to a higher cash balance and miscellaneous expense of $15 thousand.
Discontinued
Operations, net. Loss on discontinued operations was $41 thousand for the three months ended March 31, 2015, compared to $135
thousand for the same period in 2014, a decrease of $94 thousand, or 69.6%. For the three months ended March 31, 2015, we incurred
$41 thousand of expenses related to exiting the dietary supplement market, primarily related to insurance and disposal costs.
For the same period in 2014, net activity of sales, cost of sales, marketing and selling expenses was a loss of $135 thousand.
Net Loss.
We had a net loss of approximately $0.3 million for the three months ended March 31, 2015, compared to a net loss of approximately
$9.8 million for the same period in 2014. The decreased net loss for the three months ended March 31, 2015 was primarily due to
cost savings in relation to restructuring, a decrease in non-cash expenditures related to stock based compensation, and recognition
of a non-recurring gain from insurance proceeds.
Liquidity and Capital Resources
We have been
operating at a loss for the past twelve years. Our future prospects will depend on our ability to successfully pursue our strategy
of pharmaceutical development, manage overall operating expenses, and obtain additional capital necessary to support our operations.
Since our inception, we have generally funded our operations with revenues from sale of our now-discontinued Anatabloc® and
our other anatabine-based products, as well as private placements and sales under our At Market Issuance Sales Agreement described
below.
On
December 15, 2014, we entered into an At Market Issuance Sales Agreement (ATM), or sales agreement, with MLV & Co. LLC, or
MLV, relating to the sale of shares of our common stock offered under an S-3 Registration Statement that we filed in December
2014 and was declared effective in February 2015. In accordance with the terms of the sales agreement, we may offer and sell shares
of our common stock, $0.0001 par value per share, having an aggregate offering price of up to $16.5 million from time to time
through MLV, acting as agent. Sales of our common stock under the sales agreement will be made by any method permitted that is
deemed an “at the market offering”
as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act, including sales made directly
on or through The Nasdaq Capital Market, the existing trading market for our common stock, sales made to or through a market maker
other than on an exchange or otherwise, in negotiated transactions at market prices, or any other method permitted by law. MLV
is not required to sell any specific amount, but will act as our sales agent using commercially reasonable efforts consistent
with its normal trading and sales practices. There is no arrangement for funds to be received in any escrow, trust or similar
arrangement. MLV will be entitled to compensation at a commission rate equal to 3% of the gross sales price per share sold. We
began selling shares under the sales agreement on February 12, 2015, and through March 31, 2015, we sold an aggregate of 187,134
shares for net proceeds to our company of $689 thousand. There have been no additional sales under the sales agreement subsequent
to March 25, 2015 as of the date of this filing.
On January 28,
2015, we entered into a Securities Purchase and Registration Rights Agreement (the “Purchase Agreement”) with seven
accredited investors, pursuant to which we issued and sold a total of 202,673 shares of our common stock, at a purchase price
of $3.75 per share, and warrants to purchase up to a total of 168,337 shares of common stock. The warrants, which have an exercise
price of $3.75 per share, are generally exercisable beginning on January 28, 2015, and expire on January 27, 2022. An aggregate
of 134,000 shares sold in the private placement were issued pursuant to, and as a condition of, the exercise of previously issued
warrants to purchase common stock held by certain of the investors at an amended exercise price of $3.75 per share. An aggregate
of $760 thousand was raised in the private placement, including $300 thousand of which was paid to us as an advance on December
30, 2014. A resale registration statement covering the purchased shares issuable pursuant to the granted warrants has been filed
and declared effective with the SEC.
On May 8,
2015, we entered into a Securities Purchase Agreement with an accredited investor, pursuant to which we issued and sold a
total of 77,590 shares of our common stock, at a purchase price of $3.00 per share, and warrants to purchase up to a total of
69,831 shares of common stock. The warrants, which have an exercise price of $3.00 per share, are generally exercisable
beginning on May 8, 2019, and expire on May 8, 2022. An aggregate of 62,072 shares sold in the private placement were issued
pursuant to, and as a condition of, the exercise of previously issued warrants to purchase common stock held by the investor
at an amended exercise price of $3.00 per share. An aggregate of $232 thousand was raised in the private placement, all of which
was paid to us as an advance in March 2015.
During the
three months ended March 31, 2015, we recognized $3.5 million gain on insurance proceeds related to settlement of litigation.
We received such insurance proceeds in April 2015. We are using the proceeds to partially satisfy outstanding legal bills and
indemnity payments relating to our class action and derivative litigation and other legal matters and to pay essential
operating expenses, provided that, as described below, we do not believe that such proceeds (together with other capital
resources) will support our operations beyond June 2015, and the insurance proceeds will not be sufficient to fund all
outstanding legal fees and expenses relating to our litigation, which was $5.1 million as of March 31, 2015.
As of May
1, 2015 we believe that our current cash resources (including the above-mentioned insurance proceeds but excluding any sales
made under the sales agreement after May 1, 2015, if any), are anticipated to be sufficient to support our operations only
through approximately June 2015. We will need to seek additional funding to support our operations, whether through debt
financing, additional equity offerings, through strategic transactions (such as licensing or borrowing against intellectual
property) or otherwise. We are currently exploring a variety of potential financing options, including additional private
placements and financing transactions that would leverage our intellectual property. There can be no assurance that we will
be successful in obtaining such additional funding on commercially favorable terms, if at all. We will also likely continue
to delay cash payment of various payables and outstanding obligations in order to conserve cash until additional funding
becomes available, and if we do not raise sufficient funding, we may be forced to curtail clinical trials and product
development activities and continue to defer such payments. To conserve cash resources, our Chief Executive Officer and
President elected to defer the payment of their salary earned with respect to the period beginning December 2014 and
continuing for the first quarter of 2015, and the members of the Board of Directors elected to defer their board fees
and compensation through the end of the first quarter of 2015. The Company anticipates that deferred salary and fees will be
paid as follows: deferred salary for our Chief Executive Officer and President will be paid in shares of our common stock
under our equity incentive plan, and deferred board fees will be paid in cash. In April 2015, the Company has resumed the
payment in cash of executive salaries and partially paid deferred board fees to continuing board members in cash. One board
member who resigned was paid in full for all deferred board fees. If we are unable to raise additional capital (including
through the exercise of outstanding warrants or through private placements of our securities, each of which has been a
primary source of our financing in the past), our operations will be materially adversely affected, our scope of
operations may need to be materially reduced, and our clinical trials may need to be delayed. Any equity financing will be
dilutive to our existing shareholders.
We do not have
enough cash or other capital resources to sustain our company beyond June 2015 based on our current operating plan, and, therefore,
there is substantial doubt about our company’s ability to continue to be a going concern. Our continuation as a going concern
depends upon our ability to obtain additional financing to provide cash to meet our obligations as may be required, and ultimately
to attain profitable operations and positive cash flows. We have no commercial products on the market at this time, and no associated
revenues due to exiting the dietary supplement market in the U.S.. While we are evaluating overseas market opportunities through
possible licensing arrangements, we have not yet entered into any such licensing arrangements.
Summary of Balances and Recent
Sources and Uses
As of March
31, 2015, we had negative working capital of approximately $10.1 million, which included cash of approximately $0.09 million in
current assets. We had cash and cash equivalents of approximately $0.4 million at December 31, 2014.
Net Cash
From Operating Activities. During the three months ended March 31, 2015, approximately $1.7 million of cash was used in operating
activities compared to approximately $4.5 million of cash used in operating activities during the same period in 2014. Cash used
in operations was approximately $2.8 million lower during the three months ended March 31, 2015 as compared to the same period
in 2014. Removing the impact of an increase in the amount due from insurers at March 31, 2015, the net decrease in cash used from
March 31, 2015 compared to March 31, 2014 was $5.5 million lower, due primarily to decreases in general and administrative expenses
due to restructuring and slightly lower research and development costs, coupled with deferred payment of many corporate obligations
due to the Company’s cash position.
Net Cash
From Investing Activities. During the three months ended March 31, 2015, we utilized $8 thousand for investing activities
for the purchase of fixed assets. During the same period last year, we generated $9 thousand from investing activities, as we
received payments from trademark licensing agreements.
Net Cash
From Financing Activities. During the three months ended March 31, 2015, we generated net cash from financing activities of
$1.4 million through the exercise of warrants for $0.5 million and the sale of common stock for gross proceeds of $0.9 million.
During the same period in 2014, we generated net cash from financing activities of approximately $9.3 million through the exercise
of warrants for $4.2 million and the sale of common stock for gross proceeds of $5.1 million.
Cash Demands on Operations
During the three
months ended March 31, 2015, we had losses from continuing operations that totaled $(297) thousand. See “Overview”
and “Results of Operations” above for a discussion of our decreased operating expenses and deferral of payments that
resulted in decreased use of cash during the first quarter of 2015.
Contingent Liabilities and Cash
Demands
Product Liability.
Prior to the introduction of our dietary supplements and cosmetics, we obtained product liability insurance for each of our
products. This insurance covers claims arising from product defects or claims arising out of the sale, distribution and marketing
of these products. There have been no claims asserted with respect to any injury arising from the manufacture, sale or use of
our dietary supplements or cosmetics to date. If any such claims are asserted in the future and ultimately result in liability
that exceeds the limits of our insurance coverage, we would be liable for any such excess amount.
In 2014, a purported
class action was filed with respect to the purchase of our Anatabloc®
product. In that case, plaintiff seeks a refund on behalf of all persons purchasing our dietary supplement on the
basis that the product was not effective for claims allegedly asserted by our company. We have been advised by our insurance carrier
that there is no coverage for the claims asserted in this case. See “Part II-OTHER INFORMATION Item 1. Legal Proceedings”
in this report for an update on the original action and the amended complaint filed in February 2015.
In the past,
we maintained product liability insurance only with respect to claims that tobacco products manufactured by or for us contained
any foreign object (i.e., any object that was not intended to be included in the manufactured product). The product liability
insurance previously maintained did not cover health-related claims such as those that have been made against the major manufacturers
of tobacco products. We do not believe that insurance for health-related claims can currently be obtained. Although we ceased
selling cigarettes in 2007 and exited from the tobacco business as of December 31, 2012, we may be named as a defendant in such
cases in the future. However, we believe that we have conducted our business in a manner that decreases the risk of liability
in a lawsuit of the type described above, because we have attempted to consistently present to the public the most current information
regarding the health risks of long-term smoking and tobacco use generally, have always acknowledged the addictive nature of nicotine
and have never targeted adolescent or young persons as customers.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk
We have not
entered into any transactions using derivative financial instruments or derivative commodity instruments and believe that our
exposure to market risk associated with other financial instruments (such as investments and borrowings) and interest rate risk
is not material.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls
and Procedures
The Company’s management,
including its principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end
of the period covered by this Form 10-Q. Based on this evaluation, the Company’s principal executive officer and principal
financial officer have concluded that the Company’s disclosure controls and procedures were not effective as of March 31,
2015, because of a material weakness in internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) described below.
Previously Disclosed Material
Weakness
Management previously
reported a material weakness in the Company's internal control over financial reporting in the Company’s 2014 Form 10-K.
This material weakness was due to the Company’s failure to timely accrue a litigation liability and offsetting asset as of
December 31, 2014. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements
will not be prevented or detected on a timely basis.
Management continues
to evaluate the material weakness identified and to establish internal procedures to avoid future occurrences and to ensure timely
review and analysis of all settlement agreements and information.
Changes in Internal Control Over
Financial Reporting
Other than the
remedial steps described above, there were no changes in internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) that occurred during the first quarter of 2015 that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over financial reporting.
Because of its
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluations of the effectiveness to future periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PART II-OTHER
INFORMATION
Item 1. Legal
Proceedings
Securities Class Action Settlement
On Monday,
March 2, 2015, the United States District Court for the Eastern District of Virginia, preliminary approved the Company’s
securities class action settlement in the amount of $5.9 million. The settlement stipulates that the amount of $5.9 million,
which includes litigation costs, will be paid from certain Rock Creek Pharmaceuticals, Inc. (f/k/a Star Scientific, Inc.)
D&O insurance policies. The funding of the settlement by insurers occurred in March, 2015. In addition notice is to be
furnished to the class, and a final approval hearing will be held on or before June 11, 2015
On May 4, 2015, the court entered an order setting a meeting with the court’s
mediator, Magistrate Judge Novak, regarding an indemnification issue related to the settlement.
Derivative Action Lawsuits
Four individuals,
David C. Inloes, William Skillman, Harold Z. Levine and Louis Lim, filed separate, but similar derivative actions naming all or
most of the Company’s then current directors, several officers of the Company and, in one case, one former director as defendants.
Two of the actions were filed in the United States District Court for the Eastern District of Virginia, Alexandria Division (the
“Alexandria Actions”). The first Alexandria Action, William Skillman v. Jonnie R. Williams et al., was filed
on May 2, 2013. The second Alexandria Action, David C. Inloes v. Jonnie R. Williams et. al., was filed on May 3, 2013. The
Alexandria Actions have been consolidated and co-lead counsel appointed by the Court. Pursuant to a court order, plaintiffs
filed a consolidated amended complaint on January 13, 2014 and a motion to dismiss was filed on February 3, 2014 on behalf of
all of the defendants. Also, on February 3, 2014, the Company, as nominal defendant, moved to stay or dismiss this action
pending a resolution of the securities class action litigation pending in Federal Court in Richmond, Virginia. Separately, on
January 29, 2014, the United States moved to stay discovery in the case pending the completion or other disposition of the criminal
trial of former Governor McDonnell and his wife. That motion was granted by the Court on January 30, 2014. On February
28, 2014, the Court granted the Company’s motion to stay the case, ruling that the case would be stayed for all purposes
pending further order of the Court and ordering the Company, within ten days of the dismissal or resolution of the Richmond securities
class action or the trial court's verdict in the McDonnell case, whichever occurs first, to file a report indicating what action,
if any, it intends to take with regard to this case, including specifically, without limitation, whether it intends to pursue
or seek dismissal of the claims asserted against each of the named individual defendants.
The third derivative
action, Harold Z. Levine v. Jonnie R. Williams, et. al., was filed on July 8, 2013, in the Circuit Court for the City of Richmond
(the “Levine Action”), and the fourth case, Louis Lim v. Christopher C. Chapman, et. al., was filed in the Circuit
Court for Henrico County on July 11, 2013 (the “Lim Action”). In general, the complaints collectively allege
that the Company’s directors and officers breached their fiduciary duties by causing the Company to issue false and misleading
statements regarding its past and future prospects and certain scientific data relating to its products, as well as engaging in
certain unspecified private placements and related party transactions since 2006. On July 1, 2013 and August 1, 2013, stipulations
were filed in each of the state court actions that stayed the period for defendants to respond to the complaints. These stipulations
were later entered by the Courts. In May 2014, the parties to both state court derivative actions filed further stipulations subsequently
endorsed by the Courts that provided for the transfer of the Lim Action to the Circuit Court for the City of Richmond, the consolidation
of the Lim Action with the Levine Action, and a further stay of the deadline for a response to the complaint. Under the current
schedule, the parties will meet and confer telephonically following the report required in the Alexandria Actions. Unless the
parties agree to a different timeline at that conference, the deadline for a response to the complaint will be either 21 days
from the designation of one of the current complaints as the operative complaint or 35 days from the service of a consolidated
amended complaint.
A mediation
session relating to the derivative actions was held on October 29, 2014, and the parties later reached an agreement in principle
regarding the material terms of a proposed settlement that would address the derivative actions. The parties concluded a stipulation
of settlement as of approximately January 27, 2015, and plaintiffs thereafter filed a motion for approval of the settlement. The
settlement provides for the implementation of certain corporate governance reforms and contemplates payment by the Company of
certain attorney’s fees to plaintiffs’ counsel in an amount that has yet to be determined. A hearing on the motion
for preliminary approval was held on March 6, 2015. The judge requested additional information to be submitted within 14 days.
At this time, the Company cannot predict the probable outcome of the derivative actions and/or claims against the Company for
attorney’s fees. Accordingly, no amounts have been accrued in the consolidated financial statements.
On March 27,
2015, the parties filed a joint submission setting forth additional information responsive to the Court’s order. On March
31, 2015, the Court entered orders preliminarily approving the proposed settlement and setting a further settlement hearing for
July 10, 2015. At this time, the Company cannot predict the probable outcome of the claims against the Company for attorney’s
fees. Accordingly, no amounts have been accrued in the consolidated financial statements.
Consumer Class Action
On January 27,
2014, Howard T. Baldwin filed a purported class action naming the Company, Rock Creek Pharmaceuticals, Inc. and GNC Holding, Inc.,
or “GNC,” as defendants. The case was filed in the United States District Court for the Northern District
of Illinois. Generally, the complaint alleged that claims made for the Company’s Anatabloc®
product have not been proven and that individuals purchased the product based on alleged misstatements regarding characteristics,
uses, benefits, quality and intended purposes of the product. The complaint purported to allege claims for violation of
state consumer protection laws, breach of express and implied warranties and unjust enrichment. The Company has agreed to
indemnify and defend GNC pursuant to the terms of the purchasing agreement between RCP Development and GNC. Consistent with that
commitment, the Company has agreed to assume the defense of this matter on its own behalf as well as on behalf of GNC. The defendants
filed a motion to dismiss the complaint on March 24, 2014. On January 13, 2015, the Court entered an order dismissing the complaint
in its entirety without prejudice.
On February
10, 2015, Mr. Baldwin filed an Amended Complaint against Rock Creek Pharmaceuticals, Inc. f/k/a Star Scientific, Inc., RCP Development,
Inc. f/k/a Rock Creek Pharmaceuticals, Inc. and GNC Holdings, Inc. (collectively “Defendants”). The Amended Complaint
also includes an additional named plaintiff, Jerry Van Norman, who alleges that he is a citizen of Parkville, Missouri. The Amended
Complaint requests certification of an “Illinois Class” consisting of “[a]ll persons who paid, in whole or in
part, for Anatabloc® dietary supplement in Illinois between
August 1, 2011 and the present for personal, family or household uses,” and a “Missouri Class” consisting of
“[a]ll persons who paid, in whole or in part, for Anatabloc®
dietary supplement in Missouri between August 1, 2011 and the present for personal, family or household uses.” The
Amended Complaint is pleaded in seven counts: (1) violation of the Consumer Fraud and Deceptive Business Practices Act of Illinois;
(2) violation of the Missouri Merchandising Practice Act; (3) breach of express warranty under Illinois law; (4) breach of express
warranty under Missouri law; (5) breach of implied warranty of merchantability under Illinois law; (6) breach of implied warranty
of merchantability under Missouri law; and (7) unjust enrichment.
Like the original
Complaint, the Amended Complaint alleges that Defendants manufactured, marketed and/or sold Anatabloc®,
a dietary supplement purportedly derived from an anatabine alkaloid and promoted Anatabloc®
as a “wonder drug” with a number of medical benefits and uses, from treating excessive inflammation (associated
with arthritis) to Alzheimer’s disease, traumatic brain injury (or concussions), diabetes and multiple sclerosis. Plaintiffs
allege that Defendants have never proven any of these claims in clinical trials or received U.S. Food and Drug Administration
approval for Anatabloc®, and that Anatabloc®
“was never the ‘wonder drug’ it claimed to be.” Plaintiffs allege that they purchased Anatabloc®
based upon claims that it provides “anti-inflammatory support.” Mr. Baldwin alleges that he purchased Anatabloc®
to “reduce inflammation and pain in his joints,” and Mr. Van Norman alleges that he “suffers back and
knee problems, as well as arthritis, and expected Anatabloc®
to be effective in treating these symptoms and purchased Anatabloc®
to help alleviate his symptoms.” Both plaintiffs allege that Anatabloc®
did not provide the relief promised by the Defendants.
Although the
Amended Complaint does not include claims based on the consumer protection laws and breach of warranty laws of several additional
states like the original Complaint, on February 10, 2015, counsel for plaintiffs also served a “Notice pursuant to: Alabama
Code § 8-19-10(e); Alaska Statutes §45.50.535; California Civil Code § 1782; Georgia Code § 10-1-399; Indiana
Code § 24-5-0.5-5(a); Maine Revised Statutes, Title 5, § 50-634(g); Massachusetts General Laws Chapter 93A, § 9(3);
Texas Business & Commercial Code § 17.505; West Virginia Code § 46A-6-106(b); and, Wyoming Statutes § 40-12-109
as well as state warranty statutes,” which purports to give notice to Defendants on behalf of the named plaintiffs and a
“class of similarly situated individuals” that Defendants have “violated state warranty statutes and engaged
in consumer fraud and deceptive practices in connection with its sale of Anatabloc®,”
and demanding that “Defendants correct or otherwise rectify the damage caused by such unfair trade practices and warranty
breaches and return all monies paid by putative class members.”
The
Defendants timely moved to dismiss the Amended Complaint on March 10, 2015. Plaintiffs filed a memorandum in response to the
motion to dismiss on April 9, 2015, and Defendants filed their reply memorandum on April 22, 2015. On April 28, 2015,
the Court entered an order lifting the stay of discovery that had been in place in the case and scheduled a status hearing on
June 25, 2015. No discovery requests have been served by any party as of May 7, 2015.
Action by Iroquois Master Fund,
Ltd. and American Capital Management, LLC
On
February 19, 2015, the Company became aware of a complaint filed on February 18, 2015, in New York Supreme Court for New York
County in which the Company and its Chief Executive Officer, Dr. Michael J. Mullan, are named as a defendants. The complaint
was filed by Iroquois Master Fund, Ltd. and American Capital Management, LLC, who were investors in a private placement of
the Company’s securities completed in March 2014 (the “Private Placement Transaction”). The complaint also
names as a defendant John J. McKeon, a shareholder of the Company. Iroquois and American Capital are seeking $4.2 million, in
the aggregate, in damages or, alternatively, rescission of the Private Placement Transaction, premised on allegations that
the Company entered into a “sham” loan agreement with Mr. McKeon to provide the Company with a $5.8 million line
of credit in order to fraudulently induce Iroquois and American Capital to acquire the Company’s securities. On April
29, 2015, the Company filed a motion to dismiss the complaint because (i) plaintiffs did not register to do business with the
New York Secretary of State, and thus lack the capacity to sue in New York, and (ii) the court lacks personal jurisdiction
over the company and Dr. Mullan because the defendants were not present in New York in connection with the Private Placement
Transaction, or did the critical events relating to it take place in New York. Although the Company believes that the
material allegations are without merit and intends to vigorously defend the litigation, no assurances can be given with
respect to the outcome of the litigation.
We have been
notified by our insurance carrier that its position is that legal costs incurred for the Iroquois Master Fund, Ltd. and American
Capital Management, LLC action is not covered under our policy, although any legal costs incurred on behalf of the Company and
our Chief Executive Officer, Dr. Michael J. Mullan, would be jointly shared by the Company and insurer. All legal costs incurred
to date for this action through March 31, 2015 have been recorded in the accompanying financial statements accordingly.
Claims Dr. Christopher C. Chapman
On or around
March 27, 2015, Dr. Christopher C. Chapman, our President and a Director of our Company, delivered a letter to the Company asserting
that, after consulting with his attorneys, he has been advised that he has claims against the Company for breach of employment
contract and discrimination. In his letter, Dr. Chapman alleges that the Company has breached his employment contract by failing
to pay him his base salary, and he alleges that the Company has engaged in racially motivated actions to undermine his oversight
responsibilities and product development actions, including by, among other things, allegedly redirecting funding for anatabine
citrate trials. In response to Dr. Chapman’s letter, the
Company has engaged independent counsel to conduct an independent investigation into Dr. Chapman’s
allegations. The investigation is pending as of the date of this filing, and to the Company’s
knowledge, Dr. Chapman has not filed any legal action against the Company as of the date of this filing. Simultaneous with such
investigation, the Company has also engaged independent counsel to conduct an independent inquiry into a premature IND clinical
hold response filing made in February 2015 at the direction of Dr. Chapman, and pending the completion of that inquiry, Dr. Chapman
is on paid administrative leave from the Company.
Email from Counsel to Jonnie
R. Williams
On March 25, 2015, the Company
received an email from an attorney representing Jonnie R. Williams, a former director of the Company and the Company’s
former Chief Executive Officer, stating that Mr. Williams is contractually entitled to severance compensation. In such email,
the attorney requested that the Company immediately contact the attorney to discuss such alleged severance entitlement. The Company
did not contact the attorney, and the Company has not received any further communications from the attorney. Mr. Williams
voluntarily resigned from the Company in August 2014, and the Company is not aware of any basis, whether under Mr. Williams’
prior employment agreement or otherwise, on which Mr. Williams would be contractually entitled to severance compensation.
In the March 2015 email, Mr. Williams’ attorney did not
identify any specific contractual provisions that would entitle Mr. Williams to severance compensation. There is no assurance
that Mr. Williams or an attorney acting on behalf of him will not in the future seek to pursue some sort of contractual severance
compensation claim in the future.
Item 1A. Risk Factors
There have been
no material changes to the risk factors previously disclosed in “Part
I - Item 1A. Risk Factors” of our 2014 Form 10-K.
Item 5. Other
Information.
On
May 8, 2015, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the
Company issued and sold a total of 77,590 shares of its common stock, at a purchase price of $3.00 per share, and warrants to
purchase up to a total of 69,831 shares of common stock. The warrants, which have an exercise price of $3.00 per share, are
generally exercisable beginning on May 8, 2019, and expire on May 8, 2022. An aggregate of 62,072 shares sold in the private
placement were issued pursuant to, and as a condition of, the exercise of previously issued warrants to purchase common stock
held by the investor at an amended exercise price of $3.00 per share. An aggregate of $232 thousand was raised in the private
placement, all of which was paid to the Company as an advance in March 2015. The issuance and sale of the shares of common
stock and warrants to the investor under the Securities Purchase Agreement is exempt from the registration requirements of
the Securities Act of 1933, as amended (the “Securities
Act”), pursuant to the exemption for transactions by
an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D
promulgated under the Securities Act (“Regulation
D”). The Company made this determination based on the
representations of the investor that such investor is an “accredited
investor” within the meaning of Rule 501 of Regulation
D and has access to information about the Company and an investment in the Company.
Item 6. Exhibits.
The following exhibits are filed herewith or incorporated by reference herein:
Exhibit
No. |
|
Description |
3.1 |
|
Tenth Amended and Restated Certificate of Incorporation
of Rock Creek Pharmaceuticals, Inc., as amended. |
|
|
|
4.1 |
|
Form of Common Stock Purchase Warrant, dated
January 28, 2015, issued by Rock Creek Pharmaceuticals, Inc. to Investors under the Securities Purchase and Registration Rights
Agreement dated January 28, 2015 (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on January
30, 2015). |
|
|
|
4.2 |
|
Common Stock Purchase Warrant, dated May 8,
2015, issued by Rock Creek Pharmaceuticals, Inc. to Feehan Partners, LP under the Securities Purchase Agreement dated May
8, 2015 |
10.1 |
|
Securities Purchase and Registration Rights
Agreement, dated January 28, 2015, among Rock Creek Pharmaceuticals, Inc. and the Investors listed on Schedule I attached
thereto (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on January 30, 2015). |
|
|
|
10.2 |
|
Amendment to the Third Amended and Restated
Rock Creek Pharmaceuticals, Inc. 2008 Incentive Award Plan (Incorporated by reference to Exhibit 10.1 to the Current Report
on Form 8-K filed on April 13, 2015). |
|
|
|
10.3 |
|
Securities Purchase Agreement, dated May 8,
2015, between Rock Creek Pharmaceuticals, Inc. and Feehan Partners, LP |
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1 |
|
Certification of the Chief Executive Officer
pursuant to 18 U.S.C. § 1350, as created by Section 906
of the Sarbanes-Oxley Act of 2002.(1) |
|
|
|
32.2 |
|
Certification of the Chief Financial Officer
pursuant to 18 U.S.C. §1350, as created by Section 906
of the Sarbanes-Oxley Act of 2002.(1) |
|
|
|
EX-101.INS |
|
XBRL Instance Document |
|
|
|
EX-101.SCH |
|
XBRL Taxonomy Extension Schema |
|
|
|
EX-101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase |
|
|
|
EX-101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase |
|
|
|
EX-101.LAB |
|
XBRL Taxonomy Extension Label Linkbase |
|
|
|
EX-101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase |
___________
(1) |
This certificate
is being furnished solely to accompany the report pursuant to 18 U.S.C. §1350 and is not being filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing
of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
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
thereunto duly authorized.
|
ROCK CREEK PHARMACEUTICALS,
INC. |
|
|
|
|
Date: May 12, 2015 |
/s/
Benjamin M. Dent |
|
|
Benjamin M. Dent
Authorized Signatory and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) |
|
Exhibit 3.1
CERTIFICATE OF AMENDMENT
TO THE
TENTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ROCK CREEK PHARMACEUTICALS, INC.
Rock Creek Pharmaceuticals,
Inc. (the “Corporation”), organized and existing under and by virtue of the General Corporation Law of the State
of Delaware (the “DGCL”), hereby certifies as follows:
1.
The original name of the Corporation was Eye Technology, Inc. and the original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on June 24, 1985, and amended and restated on June 22, 1988, May
19, 1992, September 24, 2001, December 14, 2007, December 7, 2009, December 10, 2010, December 16, 2011, December 14, 2012, December
27, 2013, June 2, 2014, and November 25, 2014 (as amended, the “Original Certificate”).
2. This Certificate
of Amendment to the Tenth Amended and Restated Certificate of Incorporation of the Corporation (this “Amendment”)
further amends the Original Certificate. The amendment of the Original Certificate herein certified has been duly adopted by the
stockholders of the Corporation and the Board of Directors of the Corporation in accordance with the provisions of Sections 228
and 242 of the DGCL.
3. Article
“FOURTH” of the Original Certificate shall be and is hereby amended by adding the following paragraphs to the end thereof:
“Stock
Split. Without regard to any other provision of this Restated Certificate of Incorporation, effective at 12:01 a.m., eastern
time, on April 14, 2015 (the “Split Effective Time”), the shares of Common Stock issued and outstanding immediately
prior to the Split Effective Time and the shares of Common Stock issued and held in the treasury of the Corporation immediately
prior to the Split Effective Time are reclassified into a smaller number of shares such that each twenty-five (25) shares of issued
Common Stock immediately prior to the Split Effective Time is reclassified into one (1) share of Common Stock. Notwithstanding
the immediately preceding sentence, no fractional shares shall be issued and, in lieu thereof, upon surrender after the Split Effective
Time of a certificate which formerly represented shares of Common Stock that were issued and outstanding immediately prior to the
Split Effective Time, any person who would otherwise be entitled to a fractional share of Common Stock as a result of the reclassification,
following the Split Effective Time, shall be entitled to receive a cash payment equal to the product of the closing sales price
of the Common Stock on the Nasdaq Capital Market on April 14, 2015 and the amount of the fractional share.
Each stock certificate that, immediately
prior to the Split Effective Time, represented shares of Common Stock that were issued and outstanding immediately prior to the
Split Effective Time shall, from and after the Split Effective Time, automatically and without the necessity of presenting the
same for exchange, represent the number of whole shares of Common Stock after the Split Effective Time into which the shares of
Common Stock formerly represented by such certificate shall have been reclassified (as well as the right to receive cash in lieu
of a fractional share of Common Stock), provided, however, that each person of record holding a certificate that represented shares
of Common Stock that were issued and outstanding immediately prior to the Split Effective Time shall receive, upon surrender of
such certificate, a new certificate evidencing and representing the number of whole shares of Common Stock after the Split Effective
Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified.”
4. Except as specifically
set forth herein, the remainder of the Original Certificate will not be amended, modified or otherwise altered.
[signature page follows]
IN WITNESS WHEREOF, the
Corporation has caused this Certificate of Amendment to the Tenth Amended and Restated Certificate of Incorporation to be executed
by the undersigned duly authorized officer of the Corporation this 10th day of April, 2015.
|
ROCK CREEK PHARMACEUTICALS, INC. |
|
|
|
|
|
|
|
By: |
/s/ Michael J. Mullan |
|
Name: |
Michael
J. Mullan, MBBS (M.D.) Ph.D. |
|
Title: |
Chief Executive Officer |
CERTIFICATE OF AMENDMENT
TO THE
TENTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ROCK CREEK PHARMACEUTICALS, INC.
Rock Creek Pharmaceuticals,
Inc. (the “Corporation”), organized and existing under and by virtue of the General Corporation Law of the State
of Delaware (the “DGCL”), hereby certifies as follows:
1. The original name of the Corporation was Eye Technology, Inc. and the original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on June 24, 1985, and amended and restated on June 22, 1988, May
19, 1992, September 24, 2001, December 14, 2007, December 7, 2009, December 10, 2010, December 16, 2011, December 14, 2012, December
27, 2013, and June 2, 2014 (as amended, the “Original Certificate”).
2. This Certificate
of Amendment to the Tenth Amended and Restated Certificate of Incorporation of the Corporation (this “Amendment”)
further amends the Original Certificate. The amendment of the Original Certificate herein certified has been duly adopted by the
stockholders of the Corporation and the Board of Directors of the Corporation in accordance with the provisions of Sections 228
and 242 of the DGCL.
3. The Original Certificate
is hereby amended as follows:
| (a) | Article FOURTH is hereby deleted in its entirety and
is replaced with the following: |
“FOURTH:
The total number of shares of stock which the Corporation has the authority to issue is 314,800,000 shares of Common Stock having
a par value of one thousandth of one cent ($0.0001) per share (hereinafter called “Common Stock”) and One Hundred Thousand
(100,000) shares of Preferred Stock having a par value of one thousandth of one cent ($0.0001) per share (hereafter called “Preferred
Stock”), making a total of 314,900,000 shares of stock.
Common Stock.
The shares of authorized Common Stock of the Corporation shall be identical in all respects and shall have equal rights and privileges.
Each share of Common Stock shall entitle the holder thereof to one vote.
Preferred Stock.
The Board of Directors shall have authority to issue the shares of Preferred Stock from time to time on such terms it may determine,
and to divide the Preferred Stock into one or more classes or series and in connection with the creation of any such class or series
to fix by resolution or resolutions providing for the issue of shares thereof, the designation, preferences, powers and relative
participating optional, or other special rights of such class or series, and the qualifications, limitations, or restrictions thereof,
to the full extent now or hereafter permitted by law. A copy of such resolution shall be set forth in a Certificate made, executed,
acknowledged, filed and recorded in the manner required by the laws of the State of Delaware in order to make the same effective.”
4. Except as specifically
set forth herein, the remainder of the Original Certificate will not be amended, modified or otherwise altered.
[signature page follows]
IN WITNESS WHEREOF, the
Corporation has caused this Certificate of Amendment to the Tenth Amended and Restated Certificate of Incorporation to be executed
by the undersigned duly authorized officer of the Corporation this 25th day of November, 2014.
|
ROCK CREEK PHARMACEUTICALS, INC. |
|
|
|
|
|
|
|
By: |
/s/ Michael
J. Mullan |
|
|
|
|
Name: |
Michael
J. Mullan, MBBS (M.D.) Ph.D. |
|
|
|
|
Title: |
Chief Executive Officer |
TENTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
STAR SCIENTIFIC, INC.
(formerly Eye Technology, Inc.)
The undersigned, a natural person, for
the purpose of amending and restating, the Certificate of Incorporation of Star Scientific, Inc., as originally filed on June 24,
1985, and as amended and restated on June 22, 1988, May 19, 1992, September 24, 2001, December 14, 2007, December 7, 2009, December
10, 2010, December 16, 2011, December 14, 2012 and December 27, 2013 under the provisions and subject to the requirements of the
laws of the State of Delaware, particularly Chapter 1, Title 8, of the Delaware Code and the acts amendatory thereof and supplemental
thereto and known, identified and, referred to as the “General Corporation Law of the State of Delaware,” and sections
242 and 245 thereof, hereby certifies that effective as of 12:01 a.m. on June 4, 2014:
FIRST: The name of the corporation
(hereinafter called the “Corporation”), is
ROCK CREEK PHARMACEUTICALS, INC.
SECOND: The address, including
street, number, city, and county, of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road,
Suite 400, in Wilmington, DE 19808, County of New Castle and the name of the registered agent of the Corporation in the State of
Delaware at such address is Corporation Service Company.
THIRD: The nature of the
business and of the purposes to be conducted and promoted by the Corporation are to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number
of shares of stock which the Corporation has the authority to issue is 274,800,000 shares of Common Stock having a par value of
one thousandth of one cent ($0.0001) per share (hereinafter called “Common Stock”) and One Hundred Thousand (100,000)
shares of Preferred Stock having a par value of one thousandth of one cent ($0.0001) per share (hereafter called “Preferred
Stock”), making a total of 274,900,000 shares of stock.
Common Stock.
The shares of authorized Common Stock of the Corporation shall be identical in all respects and shall have equal rights and privileges.
Each share of Common Stock shall entitle the holder thereof to one vote.
Preferred Stock.
The Board of Directors shall have authority to issue the shares of Preferred Stock from time to time on such terms it may determine,
and to divide the Preferred Stock into one or more classes or series and in connection with the creation of any such class or series
to fix by resolution or resolutions providing for the issue of shares thereof, the designation, preferences, powers and relative
participating optional, or other special rights of such class or series, and the qualifications, limitations, or restrictions thereof,
to the full extent now or hereafter permitted by law. A copy of such resolution shall be set forth in a Certificate made, executed,
acknowledged, filed and recorded in the manner required by the laws of the State of Delaware in order to make the same effective.
FIFTH: The name and the mailing
address of the incorporator are as follows:
Name |
|
Mailing Address |
R. G. Dickerson |
|
229 South State Street, Dover, Delaware |
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise
or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and
its stockholders or any class of them, any court of equitable jurisdictions within the State of Delaware may, on the application
in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers
appointed for this Corporation under the provisions of section 291 of Title 9 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of
this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation,
as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders
or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
EIGHTH:
For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation
and regulation of the powers of the Corporation and of its directors and of its stockholders, or any class thereto as the case
may be, it is further provided:
1. Number, election
and term. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of
Directors. The phrase “whole Board” and the phrase “total number of directors” shall be deemed to have
the same meaning, to wit: the total number of directors which the Corporation would have if there were no vacancies. No election
of directors need to be by written ballot. The number of directors of the Corporation shall be fixed from time to time by or pursuant
to the By-Laws of the Corporation.
2. Newly created
directorships and vacancies. Newly created directorships resulting from any increase in the number of directors and any vacancies
on the Board of Directors resulting from, death, resignation, disqualification, removal or other cause shall be filled by the affirmative
vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office until the next annual meeting of the stockholders of the Corporation
and until such director’s successor shall have been elected and qualified. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
3. Removal.
Any director or the entire board of directors may be removed from office, with or without cause, only by the affirmative vote of
the holders of a majority of the shares of stock then entitled to vote generally in the election of directors, voting together
as a single class.
NINTH: The Board of Directors
shall have power to make, alter, amend and repeal the By-Laws of the Corporation. Any By-Law made by the directors under the powers
conferred hereby may be altered, amended or repealed by the directors or by the stockholders.
TENTH:
1. The Corporation
shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may
be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against
any and all of the expenses, liabilities or other matters referred to in or covered by said action, and the indemnification provided
for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent
and inure to the benefit of the heirs, executors and administrators of such a person.
2. No director shall
be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director
as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i)
for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, (iii), pursuant to Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction which the director derived an improper personal benefit. No amendment to or repeal
of this Article TENTH apply to or have any effect on the liability or alleged liability of any director of the Corporation for
or with respect to any acts or omissions of such director occurring prior to such amendment.
ELEVENTH: The Corporation
shall not be governed by or be subject to the provisions contained in Delaware General Corporation Law Section 203-Business Combinations
with Interested Stockholders, as amended from time to time.
TWELFTH: From time to time
any of the provisions of this Restated Certificate of Incorporation may be amended, altered or repealed and other provisions authorized
by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by
said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Restated Certificate of Incorporation
are granted subject to the provisions of this Article TWELFTH.
IN WITNESS WHEREOF, the
undersigned officer of the Corporation has executed this certificate as of the 2nd day of June, 2014.
Star Scientific,
Inc.
By: /s/ Park A. Dodd, III
Name: Park A. Dodd, III
Title: Chief Financial Officer
Exhibit 4.2
THIS WARRANT AND THE SECURITIES REPRESENTED
BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND UPON DELIVERY
OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM THE SECURITIES ACT OR THAT THE PROSPECTUS
DELIVERY REQUIREMENTS HAVE BEEN MET.
COMMON STOCK PURCHASE WARRANT
To purchase shares of common stock, $0.0001
par value, of
Rock Creek Pharmaceuticals, Inc.
THIS COMMON STOCK PURCHASE WARRANT (the
“Warrant”) certifies that, for value received, Feehan Partners, L.P. (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after May
8, 2019 (the “Initial Exercise Date”) and on or prior to the close of business on May 8, 2022 (the “Termination
Date”) but not thereafter (the “Exercise Period”), to subscribe for and purchase from Rock Creek Pharmaceuticals,
Inc., a Delaware corporation (the “Company”), up to 69,831 shares (the “Warrant Shares”)
of common stock, par value $0.0001 per share, of the Company (the “Common Stock”). The purchase price of one
share of Common Stock (the “Exercise Price”) under this Warrant shall be $3.00, subject to adjustment hereunder.
The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided
herein. The term “Holder” shall refer to the Holder identified above or any subsequent transferee of this Warrant.
Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Securities Purchase Agreement,
dated May 8, 2015, between the Company and the Holder (the “Purchase Agreement”).
1. Authorization of Warrant Shares. The Company represents and warrants that all Warrant Shares which may be issued
upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by
this Warrant, be duly authorized, validly issued, fully paid and nonassessable.
(a) Except as provided
in Section 3 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or
after the Initial Exercise Date and on or prior to the close of business on the Termination Date by (i) surrendering this Warrant,
with the Notice of Exercise Form attached hereto completed and duly executed, to the offices of the Company (or such other office
or agency (including the transfer agent, if applicable) of the Company as it may designate by notice in writing to the registered
Holder at the address of such Holder appearing on the books of the Company), and (ii) (A) delivering to the Company payment of
the Exercise Price of the shares thereby purchased by wire transfer of immediately available funds or cashier’s check drawn
on a United States bank, or (B) if the provisions of Section 2(c) are applicable, by notifying the Company that this Warrant
is being exercised pursuant to a Cashless Exercise (as defined in Section 2(c) below). The Holder exercising his, her or
its purchase rights in accordance with the preceding sentence shall be entitled to receive a certificate for the number of Warrant
Shares so purchased, which certificate will bear a legend substantially similar to the legend set forth on this Warrant. Certificates
for shares purchased hereunder shall be issued and delivered to the Holder within five (5) Trading Days (as defined below) after
the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and
such certificate or certificates shall be deemed to have been issued, and the Holder shall be deemed to no longer hold this Warrant
with respect to such shares and to have become a holder of record of such shares for all purposes, in each case (i) if the exercise
is not a Cashless Exercise, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price for such
shares and all taxes required to be paid by the Holder, if any, pursuant to Section 4 prior to the issuance of such shares,
have been paid, or (ii) if the exercise is a Cashless Exercise, as of the date the Warrant has been exercised with respect to such
shares, the Company has been notified that the Warrant is being exercised pursuant to a Cashless Exercise, and all taxes required
to be paid by the Holder, if any, pursuant to Section 4 prior to the issuance of such shares, have been paid.
(b)
In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such
Warrant Shares for which this Warrant is exercised and/or surrendered, and the Company, if requested by the Holder and at his,
her or its expense, shall within ten (10) Trading Days issue and deliver to the Holder a new Warrant of like tenor in the name
of the Holder or as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, reflecting such adjusted
Warrant Shares.
(c)
Notwithstanding anything herein to the contrary, if a registration statement covering the resale of the Warrant Shares that
are the subject of a completed and executed Notice of Exercise Form is not available for the resale of any or all Warrant Shares
(the “Unavailable Warrant Shares”), the Holder may, in his, her or its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of
shares of Common Stock determined according to the following formula (a “Cashless Exercise”):
Net Number
= (A x B) - (A x C)
D
For purposes
of the foregoing formula:
| A= | the total number of shares with respect to which this
Warrant is then being exercised. |
| B= | the arithmetic average of the VWAPs (as defined below)
of the Common Stock for the five (5) consecutive Trading Days (as defined below) ending on the date immediately preceding the
date of the Notice of Exercise Form. |
| C= | the Exercise Price then in effect for the applicable
Warrant Shares at the time of such exercise. |
| D= | the Closing Sale Price (as defined below) of the Common
Stock on the date of the Notice of Exercise Form. |
For purposes of Rule 144(d) promulgated
under the Securities Act, as in effect on the date hereof, it is intended that the Warrant Shares issued in a Cashless Exercise
shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced,
on the date this Warrant was originally issued pursuant to the Purchase Agreement.
(d)
Notwithstanding anything herein to the contrary, this Warrant shall not be exercisable, and the Company shall not issue
to the Holder any shares of Common Stock underlying this Warrant, until such time when such shares (including shares issuable upon
exercise of the Warrants) proposed to be issued, when aggregated with all other shares then owned beneficially (as calculated pursuant
to (i) Section 13(d) of the Securities Exchange Act of 1934 and Rule 13d-3 promulgated thereunder and (ii) the rules and regulations
of the NASDAQ Stock Market) by the Holder, would not result in the beneficial ownership by the Holder of more than 9.99% of the
then issued and outstanding shares of Common Stock (the “Ownership Cap”), without the prior written consent
of the Holder. The Ownership Cap shall be appropriately adjusted for any stock dividend, stock split, reverse stock split or similar
transaction.
(e)
For purposes of this Warrant, the following terms shall have the following meanings:
(i) “Closing
Sale Price” means, for any security as of any date, the last closing trade price for such security on the Principal Market
(as defined below), as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does
not designate the closing trade price, then the last trade price of such security prior to 4:00:00 p.m., New York time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last
trade price of such security on the principal securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if no last trade price is reported for such security
by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported
in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Sale Price
cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security
on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations shall
be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction
during the applicable calculation period.
(ii) “Trading
Day” shall mean a day on which there is trading on the Principal Market or such other market or exchange on which the
Common Stock is then principally traded.
(iii) “Principal
Market” means the Nasdaq Capital Market.
(iv) “VWAP”
means, for any security as of any date, the dollar volume-weighted average price for such security on the NASDAQ Stock Market (or,
if the NASDAQ Stock Market is not the principal trading market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending
at 4:00:00 p.m., New York time, as reported by Bloomberg through its “Volume at Price” function. If VWAP cannot be
calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved in accordance with the procedures hereunder. All such determinations
shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such
period.
3.
No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such
exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price.
4.
Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder
for any issue tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall
be paid by the Company, and such certificates shall be issued in the name of the Holder; provided, however, that the Holder
shall pay any applicable transfer taxes.
5.
Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.
6.
Division and Combination.
(a)
This Warrant may be divided or combined with other Warrants upon presentation hereof (and thereof, as applicable) at the
aforesaid office of the Company, together with a written notice specifying the denominations in which new Warrants are to be issued,
signed by the Holder or his, her or its agent or attorney. The Company shall execute and deliver a new Warrant or Warrants in exchange
for the Warrant or Warrants to be divided or combined in accordance with such notice.
(b)
The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants
under this Section 6.
7.
No Rights as Stockholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights
as a stockholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and, if the exercise is not a
Cashless Exercise, the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued
to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment,
and this Warrant shall no longer be issuable with respect to such Warrant Shares.
8.
Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that, upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in the case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and
upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant
or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
9.
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of
any right required or granted herein shall be a Saturday, Sunday or legal holiday, then such action may be taken or such right
may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.
10.
Adjustments and Termination of Rights. The purchase price per Warrant Share and the number of Warrant Shares purchasable
hereunder are subject to adjustment from time to time as follows:
(a)
Reclassification, Recapitalization, etc. If the Company at any time shall, by reclassification of securities, recapitalization,
automatic conversion, or other similar event affecting the number or character of outstanding shares of Common Stock, or otherwise,
change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities
of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities
as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights
under this Warrant immediately prior to such reclassification or other change.
(b)
Split, Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase rights under this Warrant exist, the Exercise Price
shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination.
(c)
Stock Dividends. If the Company at any time while this Warrant is outstanding and unexpired shall pay a dividend
with respect to Common Stock payable in shares of Common Stock, or make any other distribution with respect to Common Stock of
shares of Common Stock, then the Exercise Price shall be adjusted, from and after the date of determination of the shareholders
entitled to receive such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend or distribution.
(d)
Adjustment of Number of Warrant Shares. Upon each adjustment in the Exercise Price pursuant to Sections 10(b)
or 10(c) hereof, the number of Warrant Shares purchasable hereunder shall be adjusted to the product obtained by multiplying
the number of Warrant Shares purchasable immediately prior to such adjustment in the Exercise Price by a fraction (i) the
numerator of which shall be the Exercise Price immediately prior to such adjustment, and (ii) the denominator of which shall
be the Exercise Price immediately after such adjustment.
(e)
Other Action Affecting Shares. In case the Company shall take any action to which the provisions hereof are not strictly
applicable but are of the type contemplated by the provisions of this Section 10, then the Company’s board of directors
shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant Shares (if
applicable) so as to protect the rights of the Holder.
11.
Notice of Adjustments, Notices. If the Exercise Price or number or type of securities issuable hereunder shall be
adjusted pursuant to Section 10 hereof, the Company shall issue and provide to the Holder, as holder of this Warrant,
a certificate signed by an officer of the Company setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated and the Exercise Price and number of Warrant Shares
purchasable hereunder after giving effect to such adjustment.
12.
Authorized Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to ensure
that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation.
Except as and to the
extent waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate
of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will
at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary
or appropriate to protect the rights of the Holder as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon
such exercise immediately prior to such increase in par value and (b) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant.
13.
Call Right. At any time and from time to time, the Company shall have the right, upon 10 Trading Days’ prior
written notice to the Holder (a “Call Notice”), to call (require Holder to exercise) all or any portion of this
Warrant at the Exercise Price provided that (i) the Warrant Shares are registered for resale pursuant to the Securities Act and
have been for at least the 10-Trading Day period preceding the Call Notice, (ii) the Prospectus has not been suspended at any time
during the 10-Trading Day period preceding the Call Notice, (iii) the Common Stock is currently listed (and is not suspended from
trading) on the Principal Market as of the date the Call Notice is delivered to the Holder through the effective date of such call,
(iv) the Company is not in default (or taken any action or failure to act which through the passage of time would result in a default)
under the Purchase Agreement, (v) exercise of the Warrant under the Call Notice will not cause the Holder to exceed the limitations
set forth in Section 3(d) hereof, (vi) the VWAP of the Common Stock on the Principal Market is equal to or greater than
$18.00 (subject to adjustment to reflect forward or reverse stock splits, stock dividends, recapitalizations and the like) (the
“Threshold Price”) for at least 10 consecutive Trading Days, and (vii) the Call Notice is delivered within 3
Trading Days’ of the most recent day in the previous clause and that the Common Stock reached the Threshold Price. At any
time prior to the effective date of such call, the Holder shall have the right to exercise this Warrant in accordance with its
terms.
14.
Miscellaneous.
(a)
Jurisdiction. This Warrant shall constitute a contract under the laws of the State of New York, without regard to
its conflict of law, principles or rules.
(b)
Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant will have
restrictions upon resale imposed by state and federal securities laws and/or as set forth in the Purchase Agreement.
(c)
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part
of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, provided,
however, that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with
any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing
any of his, her or its rights, powers or remedies hereunder.
(d)
Notices. All notices, requests, consents and other communications provided for herein shall be in writing and shall
be effective upon delivery in person or five business days after being mailed by certified or registered mail, return receipt requested,
postage pre-paid, addressed as follows:
Feehan Partners, L.P.
3 Harbor Drive, Suite 213
Sausalito, CA 94965
Attn: Robert Scannell
Phone: ______________________
or to the address of the Holder as shown on the books of the
Company; or
Rock Creek Pharmaceuticals, Inc.
2040 Whitfield Avenue, Suite 300
Sarasota, Florida 34243
Telephone: (844) 727-0727
Attention: Chief Financial Officer
with a copy to:
Foley & Lardner LLP
Attn: Curt P. Creely, Esq.
100 N. Tampa Street, Suite 2700
Tampa, Florida 33602
Telephone: (813) 225-4122
or at such other address as the
Holder or the Company, as applicable, may hereafter provide to the other in accordance with the provisions of this paragraph.
(e)
Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise
this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability
is asserted by the Company or by creditors of the Company.
(f)
Successors and Assigns; No Assignment. This Warrant and the rights and obligations evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company, provided that neither the Company (except in connection with
a sale of the Company or substantially all of the assets of the Company or a merger involving the Company) nor the Holder may assign
this Warrant without the prior written consent of the other party.
(g)
Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the
Company and the Holder.
(h)
Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
(i)
Headings. The headings used in this Warrant are for convenience of reference only and shall not, for any purpose,
be deemed a part of this Warrant.
[Signature page follows.]
IN WITNESS WHEREOF,
the Company has caused this Warrant to be executed by its officer thereunto duly authorized.
Dated: May 8, 2015
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ROCK CREEK PHARMACEUTICALS, INC. |
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By: |
/s/ Michael J. Mullan |
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Name: Michael J. Mullan |
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Title: Chairman and Chief Executive Officer |
NOTICE OF EXERCISE
To: Rock Creek Pharmaceuticals, Inc.
(1) The undersigned
hereby elects to purchase ______________ Warrant Shares of Rock Creek Pharmaceuticals, Inc. pursuant to the terms of the attached
Warrant. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the attached Warrant.
(2) The undersigned
intends that payment of the Exercise Price shall be made as:
| £ | a “Cash Exercise” with respect to ______________ Warrant Shares; and/or |
| £ | a “Cashless Exercise” pursuant to Section 2(c) of the Warrant with respect to
______________ Warrant Shares (only if permitted pursuant to Section 2(c)). |
(3) In the event
that the undersigned has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto,
the undersigned tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. Payment
shall take the form of lawful money of the United States.
(4) Please issue a
certificate or certificates representing said Warrant Shares in the name of the undersigned. The Warrant Shares shall be delivered
to the following:
_______________________________
_______________________________
_______________________________
(5) Accredited Investor/Qualified
Institutional Buyer. The undersigned is an “accredited investor” as defined in Regulation D under the Securities Act
of 1933, as amended.
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PURCHASER |
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By: |
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Name: |
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Title: |
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Dated: |
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Exhibit 10.3
SECURITIES PURCHASE AGREEMENT
Between
ROCK CREEK
PHARMACEUTICALS, INC.,
as
Issuer,
And
FEEHAN PARTNERS,
LP,
as
Investor.
Dated: May 8, 2015
This SECURITIES PURCHASE
AGREEMENT (this “Agreement”) is entered into and effective as of May 8, 2015, between Rock Creek Pharmaceuticals,
Inc., a Delaware corporation (the “Company”), and Feehan Partners, LP (“Investor”).
WHEREAS, Investor has
previously entered into one or more securities purchase and registration rights agreements with the Company (each, a “Prior
Agreement” and collectively, the “Prior Agreements”), whereby the Company sold to Investor, and Investor
purchased from the Company, among other securities, one or more warrants (in each case, a “Prior Warrant” and
collectively, the “Prior Warrants”), to purchase shares (“Prior Warrant Shares”) of the Company’s
common stock, par value $0.0001 per share (“Common Stock”); and
WHEREAS, the Company
and Investor desire that, upon the terms and conditions set forth in this Agreement: (i) Investor will exercise the Prior Warrants
described in Column 1 of Schedule I, thereby purchasing the related Prior Warrant Shares, at an amended exercise price of
$3.00 per share (the “Amended Exercise Price”), and the Company will issue to Investor the number of Prior Warrant
Shares indicated in Column 2 of Schedule I; (ii) Investor will also purchase from the Company, and the Company will issue
and sell to Investor, the number of shares of the Company’s Common Stock set forth in Column 3 of Schedule I (the
“Shares”), for a purchase price equal to $3.00 per share (the “Purchase Price Per Share”);
and (iii) Investor will acquire from the Company, and the Company will grant and issue to Investor, a warrant, substantially in
the form attached hereto as Exhibit A (the “Warrant”), to purchase the number of shares of the Company’s
Common Stock set forth in Column 7 of Schedule I (the “Warrant Shares”), at an initial exercise price
of $3.00 per share.
NOW, THEREFORE, in
consideration of the foregoing premises and the covenants contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Agreement
to Sell and Purchase the Prior Warrant Shares, the Shares, and the Warrant. At the Closing (as defined below), the Company
will sell to Investor, and Investor will purchase from the Company, upon the terms and subject to the conditions hereinafter set
forth, the Prior Warrant Shares, the Shares, and the Warrant in the amounts set forth on Schedule I for the aggregate purchase
price set forth under the heading “Aggregate Purchase Price” on Schedule I. Effective as of the Closing Date
(as defined below), Investor and the Company hereby acknowledge and agree that the Prior Warrants described on Schedule I
shall be deemed exercised as of the Closing Date, the “Exercise Price” of the Prior Warrants shall be the Amended Exercise
Price, and this Agreement shall be in lieu of any “notice of exercise” or similar document as may be required with
respect to the exercise of the Prior Warrants.
2. Delivery
of the Prior Warrant Shares, the Shares, and the Warrant at Closing.
(a) The completion
of the purchase, sale and issuance of the Prior Warrant Shares, the Shares, and the Warrant (the “Closing”)
shall occur on the date of this Agreement or on such other date as the Company and Investor shall agree (the “Closing
Date”), at the offices of the Company’s counsel. At the Closing, the Company shall issue to Investor: (i) one or
more stock certificates, registered in Investor’s name and address as set forth on Schedule I attached hereto, representing
the Prior Warrant Shares and the Shares, and (ii) the Warrant issued in the name of Investor.
The Company’s
obligation to issue the Prior Warrant Shares, the Shares, and the Warrant to Investor shall be subject to the following conditions,
any one or more of which may be waived by the Company: (i) receipt by the Company of a wire transfer of immediately available funds
to an account designated in writing by the Company, in the full amount of the total purchase price payable by Investor for the
Prior Warrant Shares, the Shares, and the Warrant that Investor is hereby agreeing to purchase, as set forth under the heading
“Aggregate Purchase Price” on Schedule I; and (ii) the accuracy, in all material respects, of the representations
and warranties made by Investor and the fulfillment, in all material respects, of those undertakings of Investor to be fulfilled
prior to the Closing.
Investor’s obligation
to purchase the Prior Warrant Shares, the Shares, and the Warrant shall be subject to the following conditions, any one or more
of which may be waived by Investor (provided that no such waiver shall be deemed given unless in writing and executed by Investor):
(i) receipt by Investor of a counter-signed copy of this Agreement executed by the Company; (ii) receipt by Investor of a copy
of the Warrant; (iii) receipt by Investor of evidence of irrevocable instructions issued by the Company to the Company’s
transfer agent instructing the transfer agent to issue to Investor a stock certificate representing Investor’s Prior Warrant
Shares and Shares (subject to full satisfaction of the conditions to Closing set forth in this Section 2); and (iv) the
accuracy, in all material respects, of the representations and warranties made by the Company and the fulfillment, in all material
respects, of those undertakings of the Company to be fulfilled prior to the Closing.
(b) The Company shall
not issue to Investor any Shares or Warrant Shares under this Agreement until such time when such shares proposed to be issued,
when aggregated with all other shares then owned beneficially (as calculated pursuant to (i) Section 13(d) of the Securities Exchange
Act of 1934 and Rule 13d-3 promulgated thereunder and (ii) the rules and regulations of the NASDAQ Stock Market) by Investor would
not result in the beneficial ownership by Investor of more than 9.99% of the then issued and outstanding shares of Common Stock
(the “Ownership Cap”), without the prior written consent of Investor. The Ownership Cap shall be appropriately
adjusted for any stock dividend, stock split, reverse stock split or similar transaction.
3. Representations,
Warranties and Covenants of the Company. The Company hereby represents and warrants to, and covenants with, Investor as follows
as of the date of this Agreement and as of the Closing Date:
3.1. Organization.
Each of the Company and its Subsidiaries (as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities
Act”)) is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization.
Each of the Company and its Subsidiaries has full power and authority to own, operate and occupy its properties and to conduct
its business as presently conducted and is registered or qualified to do business and in good standing in each jurisdiction in
which it owns or leases property or transacts business and where the failure to be so qualified would have a material adverse effect
upon the financial condition or business, operations, assets or prospects of the Company and its Subsidiaries, taken as a whole
(a “Material Adverse Effect”).
3.2. Due Authorization.
The Company has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and the
Warrant, and has taken all necessary corporate action to enter into and perform this Agreement, to issue the Prior Warrant Shares
and the Shares in accordance with the terms of this Agreement, to enter into and perform the Warrant, and to issue the Warrant
Shares in accordance with the terms of the Warrant. This Agreement has been, and upon the Closing in accordance with the terms
of this Agreement, the Warrant will be, duly authorized, validly executed and delivered by the Company and constitute, or will
constitute, legal, valid and binding agreements of the Company enforceable against the Company in accordance with their terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles
of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Upon their issuance in
accordance with the terms of this Agreement and the Prior Warrants (as applicable), the Shares and the Prior Warrant Shares will
be duly authorized, validly issued, fully paid and non-assessable, the Warrant will be duly authorized and validly issued, and
the Warrant Shares, upon exercise of the Warrant in accordance with its terms, will be duly authorized.
3.3. Non-Contravention.
Except as would not reasonably be expected to have a Material Adverse Effect, the execution and delivery of this Agreement, the
issuance and sale of the Prior Warrant Shares, the Shares, and the Warrant under this Agreement, the fulfillment of the terms of
this Agreement and the consummation of the transactions contemplated hereby will not (i) conflict with or constitute a violation
of, or default (with or without the giving of notice or the passage of time or both) under, (A) any material bond, debenture, note
or other evidence of indebtedness, or under any material lease, indenture, mortgage, deed of trust, loan agreement, joint venture
or other agreement or instrument to which the Company or any Subsidiary is a party or by which it or any of its Subsidiaries or
their respective properties are bound, (B) the charter, by-laws or other organizational documents of the Company or any Subsidiary,
or (C) any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority
applicable to the Company or any Subsidiary or their respective properties, or (ii) result in the creation or imposition of any
lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company
or any Subsidiary or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material
bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement
or instrument to which the Company or any Subsidiary is a party or by which any of them is bound or to which any of the property
or assets of the Company or any Subsidiary is subject. No consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, self-regulatory organization, stock exchange or market,
or other governmental body in the United States is required for the execution and delivery of this Agreement or the valid issuance
and sale of the Prior Warrant Shares, the Shares, and the Warrant pursuant to this Agreement, other than such as have been or will
be made or obtained, and except for any securities filings required to be made under federal or state securities laws.
3.4. SEC Filings.
Since January 1, 2014, the Company and its Subsidiaries have filed all reports, schedules, forms, statements and other documents
required to be filed by them with the Securities and Exchange Commission (the “Commission”) pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (such reports,
including exhibits thereto and documents incorporated by reference therein, collectively, the “SEC Documents”).
To the best of the Company’s knowledge, as of their respective filing dates, none of the SEC Documents contained an untrue
statement of material fact or omitted to state a material fact required to be stated therein or necessary in order to make the
statements made therein, in the light and circumstances under which they were made, not misleading, except to the extent corrected
by subsequently filed or furnished SEC Documents.
3.5. Absence of
Certain Changes. Except as disclosed in the SEC Documents or otherwise publicly disclosed by the Company, since January 1,
2014, there has been no adverse change or adverse development in the business, properties, assets, operations, financial condition,
prospects, liabilities or results of operations of the Company or its Subsidiaries which, to the knowledge of the Company, would
reasonably be expected to have a Material Adverse Effect.
3.6. Capitalization.
As of May 7, 2015, the authorized capital stock of the Company consists of (i) 314,800,000 shares of Common Stock, of which 8,228,670
shares are issued and outstanding and 2,264,840 shares are issuable and reserved for issuance pursuant to the Company’s stock
option plans or securities exercisable or exchangeable for, or convertible into, shares of Common Stock, and (ii) 100,000 shares
of preferred stock, of which, as of the date hereof, no shares are issued. All of such outstanding shares have been, or upon issuance
will be, validly issued, fully paid and nonassessable. Except as disclosed in the SEC Documents, as of the date hereof, (i) no
shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) other than the January 2015 Note and Warrant, there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible
into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements
by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iii)
there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may
become bound to redeem a security of the Company or any of its Subsidiaries, and (iv) the Company does not have any stock appreciation
rights or “phantom stock” plans or agreements or any similar plan or agreement. The Company disclosed in its SEC Documents
or has furnished to Investor true and correct copies of the Company’s Tenth Amended and Restated Certificate of Incorporation,
as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s
By-laws, as amended and as in effect on the date hereof (the “By-laws”). For purposes hereof, the term “January
2015 Note and Warrant” means the (a) a Convertible Promissory Note of the Company issued or issuable in January 2015
payable to John J. McKeon in the original principal amount of $350,000, convertible into shares of common stock at a conversion
price of $1.00 per share (subject to adjustments for stock splits, reverse stock splits, and the like), plus (b) a Common Stock
Purchase Warrant of like date thereof granted to John J. McKeon and representing the right to purchase 350,000 shares of Common
Stock at an exercise price of $1.00 per share (subject to adjustments for stock splits, reverse stock splits, and the like).
3.7. Broker.
The Company has taken no action which would give rise to any claim by any person for brokerage commissions, finder’s fees
or similar payments by the Company or Investor relating to this Agreement or the transactions contemplated hereby.
3.8. Certain Proceedings.
The Company is not the subject of a voluntary bankruptcy or solvency action, has not made a general assignment for the benefit
of creditors, and has not taken any corporate action to authorize any of the foregoing.
4. Representations,
Warranties and Covenants of Investor. Investor represents and warrants to, and covenants with, the Company as follows as of
the date of this Agreement and as of the Closing Date:
4.1. Due Authorization;
Organization. Investor has all requisite power, authority and capacity to execute, deliver and perform its obligations under
this Agreement, and has taken all necessary corporate, company, partnership or individual action, as the case may be, to enter
into and perform this Agreement. This Agreement has been duly authorized and validly executed and delivered by Investor and constitutes
a legal, valid and binding agreement of Investor enforceable against Investor in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at law).
4.2. Non-Contravention.
The execution and delivery of this Agreement, the purchase of the Prior Warrant Shares, the Shares, and the Warrant under this
Agreement, the fulfillment of the terms of this Agreement and the consummation of the transactions contemplated hereby will not
(i) conflict with or constitute a violation of, or default (with or without the giving of notice or the passage of time or both)
under, (A) any material bond, debenture, note or other evidence of indebtedness, or under any material lease, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or instrument to which Investor is a party, (B) the charter, by-laws
or other organizational documents of Investor, as applicable, or (C) any law, administrative regulation, ordinance or order of
any court or governmental agency, arbitration panel or authority applicable to Investor or its property, or (ii) result in the
creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties
or assets of Investor or an acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any material
bond, debenture, note or any other evidence of indebtedness or any material indenture, mortgage, deed of trust or any other agreement
or instrument to which Investor is a party or by which Investor is bound or to which any of the property or assets of Investor
is subject. No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory
body, administrative agency, self-regulatory organization, stock exchange or market, or other governmental body in the United States
is required for the execution and delivery of this Agreement and the purchase of the Prior Warrant Shares, the Shares, and the
Warrant by Investor, other than such as have been made or obtained.
4.3. Private Placement.
Investor represents and warrants to, and covenants with, the Company that Investor is acquiring the Prior Warrant Shares, the Shares,
and the Warrant for its own account for investment only and with no present intention of distributing any of the Prior Warrant
Shares, the Shares, the Warrant, or the Warrant Shares in violation of the applicable securities laws, or pursuant to any arrangement
or understanding with any other persons regarding the distribution of the Prior Warrant Shares, the Shares, the Warrant, or the
Warrant Shares. Investor has been advised and understands that none of the Shares, the Warrant, or the Warrant Shares have been
registered under the Securities Act or under the “blue sky” or similar laws of any jurisdiction and that they may be
resold only if registered pursuant to the provisions of the Securities Act and such other laws, if applicable, or, subject to the
terms and conditions of this Agreement, if an exemption from registration is available. Investor has been advised and understands
that the Company, in issuing the Prior Warrant Shares, the Shares, and the Warrant, is relying upon, among other things, the representations
and warranties of Investor herein in concluding that such issuance is a “private offering” and is exempt from the registration
provisions of the Securities Act.
4.4. Certain Trading
Activities. Neither Investor nor any of its affiliates has directly or indirectly, nor has any person acting on behalf of or
pursuant to any understanding with Investor, engaged in any purchase or sale of Common Stock (including, without limitation, any
Short Sales (as defined below) involving the Company’s securities) since the date that Investor first became aware of the
transactions contemplated hereby. For the purposes of this Section 4.4, “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 of Regulation SHO adopted under the Exchange Act and all types
of direct and indirect stock pledges, forward sales contracts, options, puts, calls, short sales and other transactions through
non-US broker-dealers or foreign regulated brokers having the effect of hedging the securities of the Company or the investment
contemplated under this Agreement. Investor covenants that neither it, nor any person acting on its behalf or pursuant to any understanding
with it, will engage in any transaction in the securities of the Company (including short sales) prior to the filing of a Current
Report on Form 8-K, Annual Report on Form 10-K, press release, or other applicable Exchange Act report reporting this transaction.
4.5. No Advice.
Investor understands that nothing in this Agreement or any other materials presented to Investor in connection with the purchase
and sale of the Prior Warrant Shares, the Shares, and the Warrant constitutes legal, tax or investment advice. Investor has consulted
such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its
purchase of the Prior Warrant Shares, the Shares, and the Warrant.
4.6. Accredited
Investor; Big Boy. Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
under the Securities Act and is able to bear the risk of its investment in the Prior Warrant Shares, the Shares, the Warrant, and
the Warrant Shares. Investor has such knowledge and experience in financial and business matters that it is capable of evaluating
the merits and risks of the purchase of the Prior Warrant Shares, the Shares, the Warrant, and the Warrant Shares. Investor acknowledges
that it does not have any material non-public information relating to the Company. Investor further acknowledges that the Company
and its agents, officers, directors and affiliates possess material non-public information not known to Investor regarding or relating
to the Company and/or the securities being offered hereby, including, but not limited to, information concerning the business,
financial condition, results of operations, legal matters associated with ongoing or past litigation matters, investigations, the
Company’s corporate transition matters (including transactions related to the corporate transition matters and amounts that
become payable by the Company), prospects and other plans of the Company. Investor acknowledges that any material non-public information
may be indicative of a value of the securities being offered hereby that is substantially less than the purchase price paid by
Investor, or may be otherwise adverse to Investor, and such material non-public information, if known to Investor, could be material
to Investor’s decision to acquire the securities being offered hereby. Accordingly, Investor understands and accepts that
there is an information disparity between Investor and the Company, confirms that the Company is not obligated to disclose, and
consistent with Investor’s instructions, has not disclosed, material non-public information to Investor, and acknowledges
and agrees that the Company has no liability arising from such non-disclosure. Investor acknowledges that neither the Company nor
any of its agents, officers, directors, or affiliates has delivered any information or made any representations to Investor, except
as expressly set forth herein.
4.7. Limited Representations.
Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of
the Company and its Subsidiaries and all materials relating to the offer and sale of the Prior Warrant Shares, the Shares, the
Warrant, and the Warrant Shares, in each case that have been requested by Investor. Investor and its advisors, if any, have been
afforded the opportunity to ask such questions of the Company as they deem appropriate for purposes of the investment contemplated
hereby. Investor acknowledges and agrees that the most recent disclosure of the Company’s results is for the year ended on,
and the most recent disclosure of the Company’s financial condition is at, December 31, 2014, as reported on the Company’s
Annual Report on Form 10-K, filed with the Commission on March 12, 2015, and that, except as disclosed in the SEC Documents, no
information more recent than such date has been provided to or requested by Investor as to the Company’s results, operations,
financial condition, business or prospects. Investor understands that its purchase of the Prior Warrant Shares, the Shares, the
Warrant, and, if applicable, the Warrant Shares involves a high degree of risk and that Investor may lose its entire investment
in the Prior Warrant Shares, the Shares, the Warrant, and, if applicable, the Warrant Shares, and Investor further acknowledges
and agrees that it can afford to do so without material adverse consequences to its financial condition. Investor is not relying
on, and does not have, any information provided by the Company and its Subsidiaries, except to the extent provided in Section
3 herein.
4.8. No Recommendation.
Investor understands that no United States federal or state agency or any other government or governmental agency has passed on
or made any recommendation or endorsement of the Prior Warrant Shares, the Shares, the Warrant, or the Warrant Shares or the fairness
or suitability of an investment in the Prior Warrant Shares, the Shares, the Warrant, or the Warrant Shares nor have such authorities
passed upon or endorsed the merits thereof.
4.9. Restrictive
Legend. The Company shall issue the Warrant and certificates for the Prior Warrant Shares, the Shares and, if applicable, the
Warrant Shares to Investor with the legends described in Section 5 below.
4.10. Residence.
Investor is a resident of, or is organized under the laws of, the jurisdiction set forth on Schedule I attached hereto.
4.11. No
Market. Investor understands that the Prior Warrant Shares and the Shares are and, upon exercise of the Warrant, the Warrant
Shares will be restricted securities, that there is no public trading market for the Warrant and that none is expected to develop,
and that the Prior Warrant Shares, the Shares, the Warrant, and the Warrant Shares must be held indefinitely unless and until the
resale of such Prior Warrant Shares, Shares, Warrant, or Warrant Shares is registered under the Securities Act or subject to the
terms and conditions of this Agreement and the applicable securities laws, an exemption from registration is available. Investor
has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act.
4.12. No
Commissions. Investor has taken no action which would give rise to any claim by any person for brokerage commissions, finder’s
fees or similar payments by the Company or Investor relating to this Agreement or the transactions contemplated hereby.
4.13. Transactional
Exemption. Investor understands that the Prior Warrant Shares, the Shares, the Warrant, and the Warrant Shares are being offered
and sold in reliance on a transactional exemption from the registration requirements of federal and state securities laws and that
the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings
of Investor set forth herein in order to determine the applicability of such exemptions and the suitability of Investor to acquire
the Prior Warrant Shares, the Shares, the Warrant, and the Warrant Shares.
4.14. Investor
Undertaking. Investor understands that (i) none of the Shares, the Warrant, or the Warrant Shares may be offered for sale,
sold, assigned or transferred unless (A) subsequently registered under the Securities Act, (B) Investor shall have delivered to
the Company (if requested by the Company) an opinion of counsel to Investor, in a form reasonably acceptable to the Company, to
the effect that such Shares, Warrant, or Warrant Shares, as applicable, to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) Investor provides the Company with reasonable assurance
that such Shares, Warrant, or Warrant Shares, as applicable, can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule 144”); and
(ii) any sale of the Shares, the Warrant, or the Warrant Shares, as applicable, made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of such Shares, Warrant, or Warrant
Shares, as applicable, under circumstances in which the seller (or the Person (as defined below) through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the Commission promulgated thereunder.
4.15. Disclosure
of Transactions. On or before 5:30 p.m., New York time, on the fourth (4th) business day following the date of this
Agreement, the Company shall file a Current Report on Form 8-K (or other form permitted under the federal securities law) disclosing
the material terms and conditions of the transactions contemplated by this Agreement and the Warrant, in compliance with the requirements
of Form 8-K (or such other form), unless such disclosure is first provided in the Company’s Quarterly Report on Form 10-Q.
5. Stock Legend.
Upon payment therefor as provided in this Agreement and/or the Warrant (as applicable), the Company will issue to Investor the
Prior Warrant Shares, the Shares, and the Warrant Shares purchased by Investor.
Any certificate representing
the Prior Warrant Shares or the Shares shall be stamped or otherwise imprinted with a legend in substantially the following form:
THESE SECURITIES
HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND AFTER RECEIPT
BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OR THAT THE PROSPECTUS DELIVERY REQUIREMENTS HAVE BEEN MET.
Any certificate representing
the Warrant Shares issued by the Company shall also be stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES
REPRESENTED HEREBY ARE SUBJECT TO THE RIGHTS AND OBLIGATIONS SET FORTH IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF MAY 8, 2015,
BY AND BETWEEN ROCK CREEK PHARMACEUTICALS, INC. AND THE INVESTOR NAMED THEREIN, AS SUCH MAY BE AMENDED FROM TIME TO TIME.
The Warrant shall be
imprinted with the legends set forth in the form of Warrant attached hereto as Exhibit A.
The Company agrees to
issue the Shares, the Prior Warrant Shares issued upon exercise of the Prior Warrants, and the Warrant Shares issued upon exercise
of the Warrant, as applicable, without the legends set forth above at such time as the Holder thereof is (i) permitted to transfer
such Shares, Prior Warrant Shares, or Warrant Shares, as applicable, without restriction pursuant to Rule 144 under the Securities
Act, and upon such transfer or (ii) at such time such securities have been registered for resale under the Securities Act, upon
such resale, and subject to the undertakings in Section 4.14 hereof by Investor.
6. Use of Proceeds.
The proceeds from the sale of Prior Warrant Shares, Shares, and Warrant Shares pursuant to this Agreement shall be used for general
corporate purposes.
7. Survival of
Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company and Investor herein shall survive the execution of this Agreement,
the delivery to Investor of the Prior Warrant Shares, the Shares, and the Warrant being purchased, and the payment therefor.
8. Notices.
All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed (i) if within the domestic
United States, by first-class registered or certified mail, or nationally recognized overnight express courier, postage prepaid,
or by facsimile, or (ii) if delivered from outside the United States, by International Federal Express or facsimile, and shall
be deemed given (A) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (B)
if delivered by nationally recognized overnight carrier, one business day after so mailed, (C) if delivered by International Federal
Express, two business days after so mailed, and (D) if delivered by facsimile, upon electric confirmation of receipt and shall
be delivered as addressed as follows:
(a) if to
the Company, to:
Rock Creek Pharmaceuticals, Inc.
2040 Whitfield Avenue, Suite 300
Sarasota, Florida 34243
Telephone: (844) 727-0727
Facsimile: __________________
Attention: Chief Financial Officer
with copies to:
Foley & Lardner LLP
Attn: Curt P. Creely, Esq.
100 N. Tampa Street, Suite 2700
Tampa, Florida 33602
Telephone: (813) 225-4122
Facsimile: (813) 221-4210
(b) if to
Investor, at its address set forth on Schedule I attached hereto, or at such other address or addresses as may have been
furnished to the Company in writing.
9. Changes.
This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and Investor.
10. Headings.
The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed
to be part of this Agreement.
11. Severability.
In the event that any provision contained in this Agreement is found by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not
in any way be affected or impaired thereby.
12. Governing
Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without
giving effect to the principles of conflicts of law.
13. Entire Agreement.
This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and
all other written or oral agreements relating to such subject matter are expressly cancelled.
14. Finders Fees.
Neither the Company nor Investor nor any affiliate thereof has incurred any obligation which will result in the obligation of another
party to pay any finder’s fee or commission in connection with this transaction.
15. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute one instrument, and shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other parties.
16. Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company
and Investor. Investor shall not assign any rights or obligations under this Agreement other than, solely with respect to any Prior
Warrant Shares, Shares, Warrant, or Warrant Shares transferred in accordance with this Agreement, including the legends described
herein, to any permitted transferee of such Prior Warrant Shares, Shares, Warrant, or Warrant Shares, provided, however,
that no such assignment shall relieve Investor of its obligations under this Agreement.
17. Expenses.
Each of the Company and Investor shall bear its own expenses in connection with the preparation and negotiation of this Agreement.
18. Pronouns.
All pronouns or any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
19. Press Release.
The Company shall not use Investor’s name in any press release issued by the Company related to this Agreement or the transactions
contemplated hereby without the consent of Investor.
[Signature pages follow]
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed as of the date first above written.
|
ROCK CREEK PHARMACEUTICALS, INC. |
|
|
|
|
By: |
/s/ Michael J. Mullan |
|
Name: |
Michael J. Mullan |
|
Title: |
Chairman and Chief Executive Officer |
Signature Page to Securities Purchase
Agreement
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed as of the date first above written.
|
FEEHAN PARTNERS, LP |
|
|
|
|
By: |
/s/ Robert W. Scannell |
|
Name: |
Robert W. Scannell |
|
Title: |
General Partner |
Signature Page to Securities Purchase
Agreement
Schedule I
|
1. |
2. |
3. |
4. |
5. |
6. |
7. |
8. |
Name and Address
|
Date and Number of Prior Warrants Being Exercised |
Number of Shares Being Purchased Through Exercise of Prior Warrants |
Number of Shares Being Purchased (other than Prior Warrant Shares) |
Total Number of Shares Being Purchased |
Number of New Warrants Being Issued Through Exercise of Prior Warrants |
Number of Warrants Issued (other than through Exercise of Prior Warrants) |
Total Number of Warrants Issuable |
Aggregate
Purchase
Price |
Feehan Partners, LP
3 Harbor Drive, Suite 213
Sausalito, CA 94964 |
7,000 – 8/8/2014
33,333 – 11/8/2010
21,739 – 3/14/2011 |
62,072 shares |
15,518 shares |
77,590 shares |
62,072 |
7,759 |
69,831 |
$232,770 |
Exhibit A
Form of Common Stock
Purchase Warrant
Exhibit
31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
I, Michael J. Mullan, certify that:
1. I have reviewed this quarterly report
on Form 10-Q of Rock Creek Pharmaceuticals, Inc.;
2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a) designed such disclosure controls and
procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) designed such internal control over
financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change
in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: May 12, 2015 |
/s/ Michael J. Mullan |
|
Michael J. Mullan |
|
Chief Executive Officer
(Principal Executive Officer) |
Exhibit
31.2
Certification
of Chief Financial Officer
Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
I,
Benjamin M. Dent, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Rock Creek Pharmaceuticals, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: May 12, 2015 |
/s/ Benjamin
M. Dent |
|
Benjamin M. Dent
|
|
Chief
Financial Officer
(Principal
Financial Officer and Principal Accounting Officer) |
Exhibit
32.1
Certification
of Chief Executive Officer
Pursuant
to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Rock Creek Pharmaceuticals,
Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:
(i)
the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2015 (the “Report”)
fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934,
as amended; and
(ii)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Dated: May 12, 2015 |
By: |
/s/ Michael
J. Mullan |
|
|
Michael J. Mullan |
|
|
Chief Executive Officer |
The
foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being
filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference
into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language
in such filing.
A
signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit
32.2
Certification
of Chief Financial Officer
Pursuant
to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Rock Creek Pharmaceuticals,
Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:
(i)
the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2015 (the “Report”)
fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934,
as amended; and
(ii)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Dated: May 12, 2015 |
By: |
/s/ Benjamin
M. Dent |
|
|
Benjamin M. Dent
|
|
|
Chief Financial Officer |
The
foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being
filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference
into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language
in such filing.
A
signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
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