UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): December 1, 2008
Artes Medical, Inc.
(Exact Name of Registrant as Specified in Charter)
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Delaware
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001-33205
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33-0870808 |
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(State or Other Jurisdiction
of Incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.) |
5870 Pacific Center Boulevard
San Diego, California 92121
(Address of Principal Executive Offices, with Zip Code)
(858) 550-9999
(Registrants telephone number, including area code)
n/a
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
TABLE OF CONTENTS
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Item 1.03. |
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Bankruptcy or Receivership. |
Artes Medical, Inc. (the Company) today announced that it has filed a voluntary petition for
relief under Chapter 7 of the United States Bankruptcy Code (the Bankruptcy Petition). The
Bankruptcy Petition was filed in the United States Bankruptcy Court in the Southern District of
California, Case No. 08-12317-7 (the Bankruptcy Court), on December 1, 2008. The Bankruptcy
Court assumed jurisdiction over the Company and its assets as of the date of the filing. The
Company has requested the appointment of an interim trustee or an interim trustee will be appointed
(the Chapter 7 Trustee).
On November 21, 2008, the Company reported that it was considering the orderly liquidation of
its business through a formal bankruptcy process. Prior to that date, the Company had engaged in
an extensive and protracted process to identify and secure additional equity capital to support its
long-term development and growth. The Company was forced to file the Bankruptcy Petition as a
result of decreasing consumer spending due to the severe economic downturn that resulted in the
Companys sales being significantly lower than it had forecasted for the second half of 2008, the
Companys difficulty in achieving conventional financing or completing a strategic alternative, and
its inability to negotiate a resolution with its existing lender, Cowen Healthcare Royalty
Partners, L.P. (CHRP), that would address the Companys ongoing and future liquidity issues
either through a forbearance or bridge loan.
In July 2008, the Company engaged two investment banking firms to identify and
explore potential strategic and financing opportunities for the Company, including mergers,
acquisitions, licensing and other strategic arrangements, financings or the sale of the Company.
Parallel with the commencement of the equity financing that raised approximately $2.4 million in
September 2008, the Company embarked on discussions with two investment banking
firms to structure and co-lead a larger equity raise upon the completion of the Companys Annual
Meeting of Stockholders in October 2008. With the delays in completing the Annual Meeting due to
the activities of a dissident investor group (as discussed below) and the rapid and sudden decline
in the equity markets due to economic factors and the credit crisis, it became apparent that the
Companys planned equity financing could not be completed in late-2008 or early-2009 as had been
previously planned.
In August 2008, a dissident investor group, led by Dr. H. Michael Shack (the Shack Group),
began soliciting stockholder votes on behalf of certain stockholder proposals for the Annual
Meeting. During the ensuing proxy contest, the Shack Group contacted the Company and represented
that they had an interest in making a substantial investment in the Company totaling up to $30
million. Following multiple informal discussions between the Companys directors and the Shack
Group, including a presentation to the Board of Directors on
November 5, 2008, the Company
initiated settlement negotiations with the Shack Group. When the Shack Group was unable to provide
evidence of any financing commitments, contrary to their representations to the Companys
stockholders and its Board of Directors, further negotiations ceased, and the Company was left to
file the Bankruptcy Petition.
Based on its current information, the Company believes that its assets will be insufficient to
satisfy the claims of all creditors and it is unlikely that the Companys stockholders will be
eligible to participate in any distributions of the Companys assets. Consistent with the filing
of the Bankruptcy Petition, the Company will cease operations and it is expected that the Chapter 7
Trustee, once appointed, will liquidate the Company and wind up its business. In accordance with
previous no-action letters issued by the Securities and Exchange Commission (see, Paiute Oil and
Mining Corp., 1987 SEC No-Act. LEXIS 2459), the Company expects that it will cease to file reports
under the Securities Exchange Act of 1934.
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Item 2.04. |
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Triggering Events that Accelerate or Increase a Direct Financial Obligation under an
Off-Balance Sheet Arrangement. |
On January 28, 2008, the Company entered into a financing arrangement with CHRP to raise $21.5
million. Under the Revenue Interest Financing and Warrant Purchase Agreement (the Revenue
Agreement), CHRP acquired the right to receive a revenue interest on the Companys U.S. net
product sales from October 2007 through December 2017. Under the terms of the Revenue Agreement,
the Companys filing of the Bankruptcy Petition may constitute a put option event, which if
enforced, would provide CHRP with the right to require the Company to
repurchase the revenue interest from CHRP for up to $22.5 million, less payments previously made by
the Company under the Revenue Agreement.
The Company also entered into a Note and Warrant Purchase Agreement with CHRP on January 28,
2008 (the Note and Warrant Agreement), pursuant to which the Company issued CHRP a 10% senior
secured note in the principal amount of $6,500,000 (the Note). Under the terms of the Note and
Warrant Agreement, CHRP can allege that by filing the Bankruptcy Petition, the Company is in
default under the Note which would entitle CHRP to accelerate and recover all principal and
interest owed under the Note, plus a prepayment penalty equal to 30% of the outstanding principal
on the Note.
Under the terms of the security agreements the Company entered into with CHRP as part of this
financing arrangement, the Company granted CHRP a first priority security interest in the Companys
assets, including its intellectual property.
Item 8.01.
Other Events.
On
December 1,2008, the Company received written notice from CHRP in which CHRP asserted that a
put option event under the terms of the Revenue Agreement and an event of default under the
Note had occurred. CHRP also notified the Company that it was exercising its rights under the
Revenue Agreement and the Note, and demanded payment of $ 21.7 million under the Revenue Agreement
and the payment of $ 8.0 million under the Note. CHRP further notified the Company that it was
taking actions to enforce its rights under the security agreements the Company had entered into
with CHRP.