Capstone Therapeutics Corp. (Form: S-1, Received: 06/26/2015 15:50:56)

As filed with the Securities and Exchange Commission on June 26, 2015

Registration No. _______________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM S-1

REGISTRATION STATEMENT

Under The Securities Act of 1933

__________________

CAPSTONE THERAPEUTICS CORP.

(Exact name of registrant as specified in its charter)

________________

DELAWARE	2834	86-0585310
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

________________

1275 West Washington Street, Suite 104

Tempe, Arizona 85281

(602) 286-5520

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

________________

John M. Holliman, III, Chairman

and Principal Executive Officer

Capstone Therapeutics Corp.

1275 West Washington Street, Suite 104

Tempe, Arizona 85281

(602) 286-5520

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

________________

Copy to:

Steven P. Emerick

Quarles & Brady LLP

One Renaissance Square, Two North Central Avenue

Phoenix, Arizona 85004

(602) 230-5517

_______________

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. X

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  _______________

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  _______________

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  _______________

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 “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer:  Accelerated filer:  Non-accelerated filer  Smaller reporting company: X

CALCULATION OF REGISTRATION FEE

Title of each class of Securities to be Registered (1)	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee (2)
Units consisting of Common Stock and Warrants (3)	$10,000,000	$1,162.00
Common Stock Issuable Upon Exercise of Warrants in the Units (3)
Warrants to be issued to Placement Agent (4) (5)	-	-
Common Stock Issuable Upon Exercise of Placement Agent Warrants (3)
Total		$1,162.00

(1)	Any additional shares of common stock to be issued as a result of stock splits, stock dividends, or similar transactions shall be covered by this registration statement as provided in Rule 416.

(2)	Calculated pursuant to Rule 457(o) of the Securities Act of 1933, as amended, based upon estimate of proposed maximum offering price.

(3)

Pursuant to the Tax Benefit Preservation Plan (“Benefit Plan”), dated as of June 24, 2014, between the Company and Computershare Inc., each share of common stock has an attached right that entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A Preferred Stock, par value $0.0005 per share (the “Preferred Shares”), of the Company at an exercise price of $5.00 per one-hundredth of a Preferred Share, subject to adjustment, on the terms set forth in the Benefit Plan. At June 24, 2015, the rights are not exercisable and trade only with shares of the Company’s common stock.

(4)	No fee required pursuant to Rule 457 under the Securities Act of 1933, as amended. See “Plan of Distribution”.

(5)	Estimated pursuant to Rule 457(g) of the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee.

__________________

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities or the solicitation of an offer to buy these securities in any state in which such offer, solicitation, or sale is not permitted.


PRELIMINARY PROSPECTUS		SUBJECT TO COMPLETION		DATED JUNE 26, 2015

PROSPECTUS

CAPSTONE THERAPEUTICS CORP.

Units, each consisting of one share of Common Stock and one-half Warrant to purchase one share of Common Stock

We are offering up to Units (the “Units”), each consisting of one share of common stock and one-half of a warrant to purchase one share of common stock. The shares of common stock and warrants will immediately separate after purchase and will be issued separately. The warrants are exercisable for a five-year period at an exercise price of $ , which is 150% of the offering price for each Unit. Our common stock currently is quoted on the OTCQB Market under the symbol “CAPS.” The last reported sale price of our common stock on the OTCQB Market on June 24 was $.23 per share.

Investing in our securities involves risks. See “Risk Factors” beginning on Page 7 of this prospectus.

	Per Unit	Total
Offering price per Unit
Placement agent’s fees (1)
Offering proceeds, before expenses, to Capstone

(1) We have also agreed to issue to Wainwright warrants to purchase up to a number of shares of common stock equal to 5% of the aggregate number of shares included in the units sold in this offering (or 2.5% of the aggregate number of shares included in the units sold to the reduced fee investors in this offering) and to reimburse Wainwright for its out-of-pocket expenses in an amount equal to the greater of 1% of the aggregate gross proceeds raised in this offering or $50,000. See the “Plan of Distribution” section of this prospectus for more information on the placement agent arrangements.

H.C. Wainwright & Co., LLC (“Wainwright”) is acting as the exclusive placement agent for this offering. The placement agent will not purchase or sell any Units in this offering, nor will it be required to arrange for the purchase and sale of any specific number or dollar amount of Units, other than to use its “reasonable best efforts” to arrange for the sale of Units by us. We have agreed to pay Wainwright a cash fee equal to 7.25% of the aggregate gross proceeds from this offering, provided that such fee will equal to 4% of the aggregate gross proceeds from sales to certain specified insiders and current stockholders of the company (the “reduced fee investors”) in this offering. Wainwright may engage one or more sub-agents or selected dealers in connection with this offering. There is no minimum number of Units required to be purchased in this offering. There is no arrangement to place the funds from this offering in an escrow, trust or similar account, which means these funds will be immediately available for use by us. We currently expect the offering to end not later than , 2015.

We have also agreed to indemnify Wainwright for any claim related to or resulting from the activities on our behalf, except for any claim finally judicially determined to have resulted from the indemnitee’s gross negligence or willful misconduct.

Investing in the Units involves a high degree of risk. Before buying any Units, you should carefully read the discussion of material risks of investing in our securities under the heading “Risk Factors and Forward-Looking Statements” beginning on page 7 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of the disclosures in this prospectus. Any representation to the contrary is a criminal offense.

We expect to deliver the Units to investors against payment therefor from time to time, commencing on or about , 2015.

-------------------------

H.C. Wainwright & Co.

The date of this prospectus is , 2015.

TABLE OF CONTENTS

Page

ABOUT THIS PROSPECTUS	1

PROSPECTUS SUMMARY	1

RISK FACTORS AND FORWARD LOOKING STATEMENTS	7

PLAN OF DISTRIBUTION	15

INFORMATION WITH RESPECT TO THE COMPANY	16

COMPETITION	20

DESCRIPTION OF PROPERTY	24

LEGAL PROCEEDINGS	24

OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	24

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25

DIRECTORS AND EXECUTIVE OFFICERS	31

TRANSACTIONS WITH RELATED PERSONS	39

DESCRIPTION OF OUR CAPITAL STOCK	39

LEGAL MATTERS	43

EXPERTS	43

WHERE YOU CAN FIND MORE INFORMATION	43

ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. No one is making offers to sell or seeking offers to buy these securities in any jurisdiction where the offer, solicitation or sale is not permitted. You should assume that the information contained in this prospectus is accurate as of the date on the front of this prospectus only, regardless of the time of delivery of this prospectus or any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

The information in this prospectus may not contain all of the information that may be important to you. You should read the entire prospectus before making an investment decision. To obtain additional information that may be important to you, you should also read the exhibits to the registration statement of which this prospectus is a part and the additional information described below under the heading “Where You Can Find More Information.”

When used in this prospectus, the terms “Capstone,” OrthoLogic,” “we,” “our,” “us” and the “Company” refer to Capstone Therapeutics Corp. References to our joint venture or “JV” or “LipimetiX” refer to LipimetiX Development, Inc.

The address and telephone number of our principal executive offices are 1275 West Washington Street, Suite 104, Tempe, Arizona 85281; telephone (602) 286-5520.

PROSPECTUS SUMMARY

This summary highlights selected information from this prospectus and does not contain all of the information that you need to consider in making your investment decision. You should carefully read the entire prospectus, including the risks of investing discussed under “Risk Factors and Forward-Looking Statements” beginning on page 7 of this prospectus, and the exhibits to the registration statement of which this prospectus is a part.

We are a biopharmaceutical company primarily focused on the development of a family of Apolipoprotein E (“ApoE”) mimetic peptides to serve a variety of therapeutic indications in reducing plasma cholesterol and triglycerides. We embrace the capital-efficient business model of virtual pharmaceutical development pursuant to which we have minimized the number of full-time employees and outsource various aspects of pre-clinical, regulatory and clinical development.

All of our current development activities are conducted through our majority-owned joint venture, LipimetiX Development, Inc., which was formed to develop an Apo E mimetic peptide molecule, AEM-28 (“AEM-28”), and its analogs. We own 60% of the outstanding common shares of the JV and all of the outstanding preferred shares. We have entered into a Stockholders Agreement pursuant to which certain of our JV partners have the right to appoint a majority of the JV’s board of directors unless certain triggering events occur, and pursuant to which we have consent rights over a broad spectrum of business decisions including annual budgets. Our JV is managed under contract by Benu BioPharma Inc., which is composed of three individuals who are the principal minority stockholders in our JV. For additional information, see the “Ownership, Management and Governance of our JV” section of this prospectus.

Concurrent with the development activities for AEM-28, the JV has performed limited pre-clinical studies that have identified analogs of AEM-28, including one referred to as AEM-28-02, that have the potential of equivalent efficacy, higher human dose toleration and an extended composition of matter patent life. The JV has a development plan to pursue regulatory approval and commercialization of AEM-28, or one or more of its analogs, as treatment in orphan (rare disease) indications, including acute pancreatitis (“AP”) and homozygous familial hypercholesterolemia (“HoFH”), and potentially in acute coronary syndrome, peripheral artery disease and metabolic syndrome. HoFH as been designated by the FDA as an orphan indication. We believe that AP should also qualify for orphan indication designation.

Most of the proceeds of this offering will be made available to our JV to fund the continued development of AEM-28 and its analogs and the remainder will be used to fund our continuing operations. If all of the Units offered hereby are sold, we believe that we will have sufficient funds for our JV to complete the preclinical development and possibly Phase 1a and Phase1b/2a clinical trials as well for AEM 28-02, but we cannot predict the total cost of these efforts which depends on, among other things, successful and timely outcomes in our preclinical and clinical studies. In any event, our JV will require substantial additional capital, and/or a development partner, to complete the clinical trials and supporting research and production efforts necessary to obtain FDA or comparable foreign agencies’ approval, if any, for our JV’s product candidates. We may seek to obtain the necessary additional funding through the issuance of debt and/or equity securities by us or our JV in one or more private or public offerings in the future (which could include bridge financing from certain of our significant existing stockholders), through a strategic partner arrangement or otherwise. In addition, our JV currently is exploring potential sub-licensing of AEM-28 and/or its analogs for development in indications not being actively pursued by the joint venture.

Apolipoprotein E (Apo E)

Apo E is in a class of protein, called an apolipoprotein, that occurs throughout the body. Apo E is essential for the normal metabolism of cholesterol and triglycerides. After a meal, especially high fat meals, like pizza with beer, the postprandial (or post-meal) lipid load is packaged in lipoproteins and secreted into the blood stream. The apolipoproteins, including Apo E, function to help transport the lipids and cholesterol to various organs in the body and assist in the conversion of these lipids to various fats, sugars and cholesterol that serve as key component of all cell membranes and as the basis of all steroid hormones. Specific receptors on the liver help clear the excess cholesterol and lipid rich lipoproteins from the blood. A certain amount of cholesterol content is essential for human life, but too much lipid content decreases the liver’s ability to clear lipoproteins, which can lead to atherosclerosis, the buildup of cholesterol rich lesions and plaques in the arteries. Atherosclerosis is the major cause of cardiovascular disease, peripheral artery disease and cerebral artery disease, and can cause heart attack, loss of limbs and stroke. Defective lipid metabolism plays an important role in the development of adult onset diabetes mellitus (Type 2 diabetes), and diabetics are particularly vulnerable to atherosclerosis, heart and peripheral artery diseases. Apo E is naturally occurring and is a public domain molecule that has been extensively researched since the 1980’s. The importance of Apo E as a key mediator of lipid and cholesterol metabolism is illustrated by the fact that the liver has a specific class of receptors that bind only Apo E. More recent research has demonstrated that Apo E has unique protective effects on the artery wall. One of the leading lipid/atherosclerosis laboratories in the U.S. is at the University of Alabama at Birmingham (“UAB”). In 2010, our JV’s founding scientist, Dr. Dennis Goldberg, licensed a group of Apo E molecules for commercial development from UAB. Specifically, these molecules are classed as Apo E mimetic peptides. The UAB scientists engineered the 299 amino acid native Apo E into a smaller 28 amino acid molecule that can be delivered therapeutically. Our lead peptide, AEM-28, contains an amino acid sequence that anchors into a lipoprotein surface while also providing the human binding domain to the Apo E receptor in the liver. In effect, AEM-28 acts like a docking system, attaching itself to lipids in the blood stream while its other binding domain seeks heparan sulfate proteoglycan (Apo E) receptors in the liver. The liver then processes these excess lipids and excretes them from the body. This sequence is part of a process called “reverse cholesterol transport” and is the body’s natural mechanism for reducing cardiovascular risk.

Description of Current Peptide Product Candidates

In December 2014, we announced the completion and results of the investigational Phase 1b/2a human clinical trial for AEM-28 in cholesterol and triglyceride reduction. The top-line data from the Phase 1a (reported on September 2, 2014) and Phase 1b/2a blended protocol was statistically analyzed. The Medical Safety Committee, in reviewing safety-related aspects of the clinical trial, observed a generally acceptable safety profile. Analysis of biomarker data from the human studies showed what we believe is a statistically significant reduction of Very Low Density Lipiprotein (“VLDL”) cholesterol and triglycerides of approximately 70% each in fasted patients at one hour post-treatment. In particular, efficacy measurements analyzing pharmacodynamics yielded statistical significance in the pooled dataset favoring AEM-28 versus placebo in multiple lipid biomarker endpoints, which included:

· p < 0.05 favoring AEM-28 vs. placebo within the first 12 hours post infusion at the highest dose tested of 3.54mg/kg in VLDL, equating to a maximum 76% drop in VLDL vs. baseline and a 56% net maximum reduction of VLDL vs. placebo;

· p < 0.05 favoring AEM-28 vs. placebo within the first 12 hours post infusion at the 2 mg/kg dose in VLDL, equating to a maximum 70% drop in VLDL vs. baseline and a 41% net maximum reduction of VLDL vs. placebo;

· p < 0.025 favoring AEM-28 vs. placebo within the first 12 hours post infusion at the highest dose tested of 3.54 mg/kg in triglycerides, equating to a maximum 74% drop in triglycerides vs. baseline and a 55% average net maximum reduction of triglycerides vs. placebo; and

· p < 0.025 favoring AEM-28 vs. placebo within the first 12 hours post infusion at the 2 mg/kg dose in triglycerides, equating to a 71% drop in triglycerides vs. baseline and a 45% net maximum reduction of triglycerides vs. placebo.

VLDL and Triglycerides. The combination of Low Density Lipoprotein (“LDL”) and VLDL cholesterol are termed Non- High Density Lipoprotein (“Non-HDL”) cholesterol. These Non-HDL lipoproteins are a combination of proteins and lipids which allow fat and cholesterol to move around the body so they may be taken up by target cells. Triglycerides (“TGs”) are found in VLDL and chylomicron remnants in blood plasma. TGs play an important role in metabolism as energy sources while VLDL and chylomicron remnants serve as transporters of dietary fat. When the amount of VLDL and TGs is properly regulated by the body’s natural systems, the vascular and metabolic systems are in sync and functioning well. However, problems develop when these lipoproteins and lipids get out of balance, often leading to severe cardiovascular and endocrinal diseases. When in overabundance in blood plasma, these large, buoyant molecules are a primary contributor to atherosclerosis, or arterial plaque, which can unpredictably create an arterial occlusion and cause a heart attack .

Acute Pancreatitis with High Triglycerides. In 2015, we retained a consultancy to conduct a market assessment study for AEM-28 in acute pancreatitis (“AP”) with high triglycerides. The consultancy’s report concluded that the AP indication represents a significant unmet clinical need for a therapeutic that could rapidly reduce TGs. The schedule that follows below discusses the epidemiology and etiology of AP. There are an estimated 74,000 hospitalizations for all types of AP in the U.S. each year with approximately 45,000 presenting with severe levels of TG equal to or greater than 1,000 mg/dL. This patient population is possibly an ideal fit for AEM-28 as a therapeutic agent.

ETIOLOGY / EPIDEMIOLOGY	≈ % (1)			U.S. Patients		Severe TGs ≥ 1,000 mg/dL
Gallbladder/Stones		25	%		18,500	No
Alcohol		50	%		37,000	Yes
Genetic/Familial		7	%		5,698	Yes
Other/Idiopathic (Diabetes/Obesity/Pregnancy)		18	%		13,320	Yes
TOTAL HOSPITALIZATIONS		100	%		74,000	45,000 (2)

(1)

JOP.J. Pancreas, 11/9/2011, “Controversies in Etiology of Acute Pancreatitis, A. Khan et al.

(2)

Fletcher Spaght, 3/17/2015, “Market Assessment for Acute Pancreatitis”, M. Hoult et al.

Whereas we anticipate that AP with high TGs will qualify as an orphan indication (since the patient population is below 200,000 in the U.S.), we believe that it is nonetheless a sizable orphan market. Clinicians often treat these patients with fibrates or fish oil to reduce TGs, but fibrates and fish oil take weeks if not longer to have an effect in reducing TGs. A drug that rapidly reduces TGs could diminish the severity of AP (especially if administered at early onset) and could offer a significant economic savings to the healthcare system from faster discharge. If clinical trials are successful and regulatory approval is granted, we believe that AEM-28 could potentially be added to the AP treatment protocol in the emergency room for patients with elevated TGs.

Based on our consultant’s report, we also believe that a market of 110,000 refractory hypertriglyceridemics exists in the U.S. These patients are at high risk for AP and other TG-related indications and could be candidates for a weekly infusion of a TG-reducing therapeutic such as AEM-28. We believe that this chronic market, at a projected 5.7 million doses annually, represents another significant market opportunity, albeit requiring successful clinical outcomes studies.

Given the above, we plan to prioritize AP with high TGs as our JV’s indication of choice for AEM-28 (and analogs) commercialization. Because AEM-28 has previously received orphan drug designation (see below), we believe that the new analogs will also be so designated by the FDA for AP. As a result, the clinical/regulatory pathway for AP should require less expensive clinical trials according to orphan regulatory precedent.

Homozygous Familial Hypercholesterolemia (HoFH) . In 2012, AEM-28 received orphan designation from FDA for a rare disease indication, called homozygous familial hypercholesterolemia (“HoFH”). This is a very small global population of individuals who are born with no LDL receptors in the liver and are unable to clear LDL (the “bad” cholesterol) through a natural pathway. Historically, these patients have experienced cardiovascular complications in their teens and twenties often leading to early death. Standard of care therapy was a process called apheresis, which is a mechanical filtering of the lipid fat from the patient’s entire blood volume, akin to the kidney dialysis process. In 2013, two pharmaceutical therapies were approved in the U.S., Aegerion’s Juxtapid and Sanofi-Genzyme’s Kynamro. Juxtapid has proven the market with an impressive revenue ramp while revenue data for Kynamro is not publicly available. We believe that AEM-28, or the new analogs, if approved, could compete favorably with these other drugs due to potentially equivalent efficacy and fewer and less severe side effects.

AEM-28-02 and Analogs

Although AEM-28 is well researched by scientists at our academic research partner, The University of Alabama at Birmingham Research Foundation (“UABRF”), it has a relatively short remaining patent life (to 2020). If AEM-28 were approved by the FDA as an orphan drug in the U.S., it would have seven years of marketing exclusivity after registration. Accordingly, AEM-28 remains a potentially valuable commercial asset, but only in orphan indications.

Collaboration with UABRF under an exclusive license agreement (see “Patents, Licenses and Proprietary Rights”, below) has resulted in the discovery of new Apo E mimetic peptides. Recently, our joint venture has been testing an analog of AEM-28, which we refer to as AEM-28-02. Early preclinical testing has yielded encouraging results suggesting that AEM-28-02 may be more tolerable and more efficacious than AEM-28. In July 2014, our joint venture filed a patent application for AEM-28-02 seeking 21 years of composition of matter patent protection.

AEM-28-02 and the other analogs are significant in that their potential 21-year patent life could allow our joint venture and/or its potential future strategic partners to develop AEM-28-02 for “clinical outcomes” indications that typically require very large, lengthy clinical trials. These markets include acute coronary syndrome, peripheral artery disease and metabolic syndrome, each of which currently represents a multi-billion dollar annual market for drug therapies. Now, with AEM-28-02, we believe that our JV has a product candidate that not only may serve sizable orphan markets, but also may serve much larger markets for chronic indications.

The JV filed for additional patent protection in October 2014 for a new and proprietary formulation to increase safe delivery of AEM-28, AEM-28-02 and analogs to humans. In the Australia clinical trials, at the highest tested dose of 3.54 mg/kg, some cases of mild venous irritation and infusion site reaction were observed. The JV has tested the new formulation with AEM-28-02 in multiple animal models, resulting in an approximate 6X increase in maximum tolerated dose (MTD) and what appears to be an improved tolerability profile. AEM-28-02 (or analogs) combined with the new formulation may allow safe delivery at higher doses than those previously tested in humans.

Business Matters

Legal. In June 2015, we settled our long-pending qui tam lawsuit for a one-time payment of $50,000. The lawsuit had been filed under seal in March 2005 in the U.S. District Court for the District of Massachusetts against us and substantially all other companies that sold bone growth stimulation devices during the period 1998-2003. The complaint asserted a variety of claims, including False Claims Act violations. We sold our bone growth stimulation device business in 2003 and first learned of this lawsuit in September 2009.

Net Operating Loss. We have accumulated approximately $146 million in federal and $33 million in state net operating loss carry forwards as of December 31, 2014, which are presently eligible to offset some future tax liability. At the maximum U.S. corporate tax rate, the potential tax benefit could be as high as $51 million, or $1.25 per share (based on 40,885,411 shares outstanding at June 24, 2015), provided we generate income in sufficient amounts prior to the expiration of these carry forwards, which expire beginning in 2023 for federal and 2015 for state net operating loss carry forwards. We view our net operating losses and other tax attributes (collectively, “Tax Benefits”) as potentially valuable assets. However, if we experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code (the “Code”), whether as a result of this offering or otherwise, our ability to use the Tax Benefits could be severely limited, and the timing of the usage of the Tax Benefits could be substantially delayed, which could significantly impair the value of the Tax Benefits even if we subsequently generate taxable income. In June 2014, our Board adopted a Tax Benefit Preservation Plan intended to act as a deterrent to any person effecting certain transactions that would constitute such an “ownership change” without the approval of our Board. See, "Description of Our Capital Stock" below, for a description of the Tax Benefit Preservation Plan.

The Offering

Issuer	Capstone Therapeutics Corp.
Issuer	Capstone Therapeutics Corp.
Securities offered	Up to Units. Each Unit will consist of one share of common stock and one-half of a warrant to purchase one share of common stock. The shares of common stock and warrants will immediately separate after purchase and will be issued separately.
Offering price	We will offer and sell the Units at a price of $ per Unit which will be fixed for the duration of the offering.
Description of the warrants	The warrants are exercisable for a five-year period at an exercise price of $ , which is 150% of the offering price for each Unit.
Common stock outstanding before this offering	The number of shares of our common stock outstanding immediately before this offering is 40,885,411, excluding the following: • Options to purchase 4,062,706 shares of our common stock, the exercise price of which range from $0.16 per share to $5.39 per share as follows: - Options to purchase 1,245,000 shares at exercise prices of $.16 to $.22 per share - Options to purchase 598,000 shares at exercise prices of $.24 to $.45 per share - Options to purchase 620,000 shares at an exercise price of $.25 per share - Options to purchase 504,000 shares at exercise prices of $.58 to $.82 per share - Options to purchase 914,706 shares at exercise prices of $1.02 to $1.75 per share - Options to purchase 181,000 shares at exercise prices of $4.90 to $5.39 per share • Warrants outstanding to purchase 46,706 shares of our common stock with an exercise price of $6.39 per share, and warrants outstanding to purchase 117,423 shares of our common stock with an exercise price of $1.91 per share.
Common stock to be outstanding after this offering	Assuming the purchase of all of the Units offered in this prospectus, the number of shares of our common stock outstanding immediately after this offering will be ( if one-half of the number of Units offered in this prospectus are purchased). The amounts above do not include: • Shares of common stock issuable upon exercise of the warrants included in the Units ( shares if all of the Units offered in this prospectus are purchased, and shares if one-half of the Units offered in this prospectus are purchased). • Shares of common stock issuable upon exercise of the warrants issued to H.C. Wainwright in conjunction with this sale of securities ( shares if all of the Units offered in this prospectus are purchased, and shares if one-half of the Units offered in this prospectus are purchased) • 4,226,835 shares of common stock issuable upon the exercise of the outstanding stock options and warrants described above. In addition, we have reserved 1,000,000 shares of our common stock for issuance pursuant to our 2015 Equity Incentive Plan, for which options to purchase 620,000 shares are outstanding as of June 24, 2015. As of June 24, 2015, we have 3,442,706 shares of our common stock reserved for issuance under our 2005 Equity Incentive Plan, which expired in April 2015.

Use of proceeds	Assuming the sale of all of the Units offered in this prospectus, we will receive net proceeds, after deducting the cash fee payable to the placement agent equal to 7.25% of aggregate gross proceeds (and assuming that no investors in this offering are Reduced Fee Investors, for which a reduced placement agent fee of 4% is applicable), and estimated expenses of the offering of $ , as follows: • $ from the sale of the Units; and • Up to $ from the future exercise of warrants included in the Units. This is a best efforts offering and we may sell all, some or none of the Units offered. We intend to use the net proceeds of this offering for research and development activities, principally through our JV, to which we will transfer the funds on terms to be negotiated , and for our working capital and general corporate purposes. See “Use of Proceeds” for additional information.
Risk factors	You should read the “Risk Factors” section of, and all of the other information set forth in, or incorporated by reference in, this prospectus to consider carefully before deciding whether to invest in the Units offered by this prospectus.
OTCQB Market symbol	CAPS

RISK FACTORS AND FORWARD LOOKING STATEMENTS

Safe Harbor

We may from time to time make written or oral forward-looking statements, including statements contained in our filings with the SEC and our reports to stockholders. The safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 protects companies from liability for their forward looking statements if they comply with the requirements of that Act. This prospectus contains forward-looking statements made pursuant to that safe harbor. These forward-looking statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect actual results, levels of activity, performance or achievements. Factors that may cause actual results to differ materially from current expectations, which we describe in more detail below include, but are not limited to:

the impact of our actions to preserve cash, including implementation of a virtual operating model;

unfavorable results of product candidate development efforts, including through our joint venture;

unfavorable results of pre-clinical or clinical testing, including through our joint venture;

delays in obtaining, or failure to obtain FDA or comparable foreign agency approvals;

increased regulation by the FDA or comparable foreign agencies;

the introduction of competitive products;

impairment of license, patent or other proprietary rights;

the impact of present and future joint venture, collaborative or partnering agreements or the lack thereof;

failure to successfully implement our drug development strategy for AEM-28 and its analogs; and

failure to obtain additional funds required to complete clinical trials and supporting research and production efforts necessary to obtain FDA or comparable foreign agency approval for product candidates or secure development agreements with pharmaceutical manufacturers.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement you read in this prospectus reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, business strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Risks Related to Our Business and Industry

We are a biopharmaceutical company with no revenue generating operations and high investment costs. Therefore, we will require additional funding to realize revenue from any of our JV’s product candidates, and we may never realize any revenue if our JV’s product candidates cannot be commercialized.

Our current level of funds is not sufficient to support continued research to develop our JV’s product candidates, and the proceeds of this offering will not be sufficient to fund all the research expenses necessary to achieve commercialization of any of our JV’s product candidates. We currently have no pharmaceutical products being sold or ready for sale and do not expect to be able to introduce any pharmaceutical products or generate any revenue for at least several years. We expect to incur losses for at least the next several years.

We will require substantial additional capital, and/or a development partner, to complete the clinical trials and supporting research and production efforts necessary to obtain FDA or comparable foreign agencies’ approval, if any, for our JV’s product candidates. Our cash reserves are the primary source of our working capital. The audit opinion from our independent accounting firm, Moss Adams, LLC, on our December 31, 2014 financial statements, included in our Form 10-K filed with the SEC on March 16, 2015 includes a “subject to going concern” qualification.

We may not receive any revenue from our JV’s product candidates until we receive regulatory approval and begin commercialization of our JV’s product candidates. We cannot predict whether, or when, that might occur.

This offering is a best efforts offering and there is no minimum offering amount. Accordingly, we may sell all, some or none of the Units offered. We can give no assurances regarding the amount of proceeds that will be generated from this offering or how much further development of our JV’s product candidates the proceeds will fund before more funding is necessary. To the extent we sell less than all of the Units in this offering, we will need to seek additional funding sooner than otherwise would be the case. There is no assurance that we can obtain needed funding from third parties on terms acceptable to us, or at all. New sources of funds, including raising capital through the sales of our debt or equity securities, joint venture or other forms of joint development arrangements, sales of development rights, or licensing agreements, may not be available or may only be available on terms that would have a material adverse impact on our existing stockholders’ interests.

We caution that our future cash expenditure levels are difficult to forecast because the forecast is based on assumptions about the level of future operations, including the number of research projects we pursue, the pace at which we pursue them, the quality of the data collected and the requests of the FDA or comparable foreign agencies to expand, narrow or conduct additional clinical trials and analyze data. Changes in any of these assumptions can change significantly our estimated cash expenditure levels.

Our JV partners have significant rights as minority-interest stockholders of our JV. Although we own 60% of the outstanding shares of our JV’s common stock, the minority stockholders of the JV have the right to appoint a majority of the JV’s board of directors.

Pursuant to a Stockholders Agreement among all the stockholders of our JV, we have agreed that the board of directors of the JV will be composed of three individuals designated by the minority stockholders and two individuals designated by us. Consequently, our JV partners’ designees, and not our designees, control the JV’s board of directors. If the JV fails to operate substantially in accordance with its annual budget, including the milestones specified therein, or fails to comply with its obligations under the Stockholders Agreement, we will thereafter have the right to appoint a majority of the members of the JV’s board of directors.

Under the Stockholders Agreement, the consent of stockholders acting by a majority in interest is required for a broad range of actions, including annual budgets and operational milestones. Because we are the majority stockholder, these consent rights protect our interests in the JV. However, there is a risk that these consent rights may be insufficient to protect our interests or may result in impasses with respect to the JV’s management and operation, the resolution of which might result in actions, agreements or consequences that we might view as suboptimal. There is no assurance that the minority stockholders of the JV will share the same economic, business or legal interests or goals that we have for the JV's business. See “Ownership, Management and Governance of our JV” below.

Our business is subject to stringent regulation, and if we do not obtain regulatory approval for our JV's product candidates, we will not be able to generate revenue.

Our JV’s research, development, pre-clinical and clinical trial activities and the manufacture and marketing of any products that it may successfully develop are subject to an extensive regulatory approval process by the FDA and other regulatory agencies in the United States and abroad. The process of obtaining required regulatory approvals for pharmaceutical products is lengthy, expensive and uncertain, and any such regulatory approvals may entail limitations on the indicated usage of a product, which may reduce the product’s market potential.

None of our JV's product candidates has been approved for sale. In order to obtain FDA or comparable foreign agency approval to commercialize any product candidate, a New Drug Application (NDA) (or comparable foreign agency form) must be submitted demonstrating, among other things, that the product candidate is safe and effective for use in humans for each target indication. Our or our JV’s regulatory submissions may be delayed, or we or our JV may cancel plans to make submissions for product candidates for many reasons, including unfavorable results from or delays in preclinical or clinical trials and lack of sufficient available funding.

If we experience delays in our JV’s clinical trials, we will incur additional costs and our opportunities to monetize product candidates will be deferred. Delays could occur for many reasons, including the following:

the FDA or other health regulatory authorities, or institutional review boards, do not approve a clinical study protocol or place a clinical study on hold;

suitable patients do not enroll in a clinical study in sufficient numbers or at the expected rate, or data is adversely affected by trial conduct or patient drop out;

patients experience serious adverse events, including adverse side effects of our JV’s product candidates;

patients in the placebo or untreated control group exhibit greater than expected improvements or fewer than expected adverse events;

third-party clinical investigators do not perform the clinical studies on the anticipated schedule or consistent with the clinical study protocol and good clinical practices, or other third-party organizations do not perform data collection and analysis in a timely or accurate manner;

service providers, collaborators or co-sponsors do not adequately perform their obligations in relation to the clinical study or cause the study to be delayed or terminated;

we experience difficulties in obtaining sufficient quantities of the particular product candidate or any other components needed for pre-clinical testing or clinical trials;

regulatory inspections of manufacturing facilities, which may, among other things, require us or a co-sponsor to undertake corrective action or suspend the clinical studies;

the interim results of the clinical study are inconclusive or negative;

the clinical study, although approved and completed, generates data that is not considered by the FDA or others to be sufficient to demonstrate safety and efficacy;

changes in governmental regulations or administrative actions affect the conduct of the clinical trial or the interpretation of its result;

there is a change in the focus of our JV’s development efforts or a re-evaluation of its clinical development strategy; and

we lack of sufficient funds to pay for development costs.

Consequently, we cannot assure that we or our JV will make submissions to the FDA or comparable foreign agencies in the timeframe that we have planned, or at all, or that our and our JV’s submissions will be approved by the FDA or comparable foreign agencies. Even if regulatory clearance is obtained, post-market evaluation of our JV’s future products, if required, could result in restrictions on a product’s marketing or withdrawal of a product from the market as well as possible civil and criminal sanctions.

If our JV’s product candidates do not gain market acceptance or our competitors develop and market products that are more effective than our JV’s product candidates, our commercial opportunities will be reduced or eliminated.

Even if our JV brings one or more products to market, there is no assurance that our JV will be able to successfully manufacture or market the products or that potential customers will buy them. Market acceptance will depend on our ability to demonstrate to physicians and patients the benefits of the future products in terms of safety, efficacy, and convenience, ease of administration and cost effectiveness, as well as on our JV’s ability to continue to develop product candidates to respond to competitive and technological changes. In addition, we believe that market acceptance depends on the effectiveness of our marketing strategy, the pricing of our JV’s future products and the reimbursement policies of government and third-party payors. Physicians may not prescribe our JV’s future products, and patients may determine, for any reason, that our JV’s product is not useful to them. Insurance companies and other third party payors may determine not to reimburse for the cost of the product.

Competition in the pharmaceutical and biotechnology industries is intense and is expected to increase. Several biotechnology and pharmaceutical companies, as well as academic laboratories, universities and other research institutions, are involved in research and/or product development for indications targeted for use by AEM-28 and its analogs. Most of our competitors have significantly greater research and development capabilities, experience in obtaining regulatory approvals and manufacturing, marketing, financial and managerial resources than we have.

Our competitors may succeed in developing products that are more effective than the ones we have under development or that render our proposed products or technologies noncompetitive or obsolete. In addition, certain of our competitors may achieve product commercialization before we do. If any of our competitors develops a product that is more effective than one that our JV is developing or plans to develop, or is able to obtain FDA or comparable foreign agencies’ approval for commercialization before we do, we may not be able to achieve significant market acceptance for certain of our JV’s products, which would have a material adverse effect on our JV’s business.

For a summary of the competitive conditions relating to indications which we are currently considering for AEM-28 and its analogs, see “Competition” in this prospectus.

If we cannot protect our joint venture’s AEM-28 and other patents, or our JV’s intellectual property generally, our JV’s ability to develop and commercialize its future products will be severely limited.

Our success will depend in part on our joint venture’s ability to maintain and enforce patent protection for AEM-28 and its analogs and each resulting product. Without patent protection, other companies could offer substantially identical products for sale without incurring the sizable discovery, development and licensing costs that our joint venture has incurred. Our JV’s ability to recover these expenditures and realize profits upon the sale of products would then be diminished.

AEM-28 is patented and patent applications for the AEM-28 analogs have be filed. There have been no successful challenges to the patents. However, if there were to be a challenge to these patents or any of the patents for product candidates, a court may determine that the patents are invalid or unenforceable. Even if the validity or enforceability of a patent is upheld by a court, a court may not prevent alleged infringement on the grounds that such activity is not covered by the patent claims. Any litigation to enforce our JV’s rights to use its or its licensors’ patents will be costly, time consuming and may distract management from other important tasks.

As is commonplace in the biotechnology and pharmaceutical industries, we employ, or engage as consultants, individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. To the extent our employees are involved in research areas which are similar to those areas in which they were involved at their former employers, we may be subject to claims that such employees and/or we have inadvertently or otherwise used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against such claims, which could result in substantial costs and be a distraction to management and which may have a material adverse effect on us, even if we are successful in defending such claims.

We also rely on trade secrets, know-how and other proprietary information. We seek to protect this information, in part, through the use of confidentiality agreements with employees, consultants, advisors and others. Nonetheless, we cannot assure that those agreements will provide adequate protection for our trade secrets, know-how or other proprietary information and prevent their unauthorized use or disclosure. The risk that other parties may breach confidentiality agreements or that our trade secrets become known or independently discovered by competitors, could adversely affect us by enabling our competitors, who may have greater experience and financial resources, to copy or use our trade secrets and other proprietary information in the advancement of their products, methods or technologies.

Our success also depends on our JV’s ability to operate and commercialize products without infringing on the patents or proprietary rights of others.

Third parties may claim that our JV or its licensors or suppliers are infringing their patents or are misappropriating their proprietary information. In the event of a successful claim against our JV or its licensors or suppliers for infringement of the patents or proprietary rights of others, our JV may be required to, among other things:

· pay substantial damages;

· stop using our JV’s technologies;

· stop certain research and development efforts;

· develop non-infringing products or methods; and

· obtain one or more licenses from third parties.

A license required under any such patents or proprietary rights may not be available to our JV, or may not be available on acceptable terms. If our JV or its licensors or suppliers are sued for infringement, our JV could encounter substantial delays in, or be prohibited from, developing, manufacturing and commercializing its product candidates.

Our reliance on third party clinical research organizations and other consultants could have a material effect on our JV’s ability to conduct clinical trials and perform research and development. Product development costs to our JV and our JV’s potential collaborators will increase, and our JV’s business may be negatively impacted, if we experience delays in testing or approvals or if our JV needs to perform more or larger clinical trials than planned.

To obtain regulatory approvals for new products, our JV must, among other things, initiate and successfully complete multiple clinical trials demonstrating to the satisfaction of the FDA or other regulatory authority that our JV’s product candidates are sufficiently safe and effective for a particular indication. We currently rely on third party clinical research organizations and other consultants to assist our JV in designing, administering and assessing the results of those trials and to perform research and development with respect to product candidates. In relying on those third parties, we are dependent upon them to timely and accurately perform their services. If third party organizations do not accurately collect and assess the trial data, our JV may discontinue development of viable product candidates or continue allocating resources to the development and marketing of product candidates that are not efficacious. Either outcome could result in significant financial harm to us.

The loss of key management and scientific personnel may hinder our JV’s ability to execute our business plan.

As a small company our success depends on the continuing contributions of our management team and scientific consultants, and maintaining relationships with the network of medical and academic centers in the United States and centers that conduct our clinical trials. We have reduced our staff to two administrative employees and utilize consultants to perform a variety of administrative, regulatory or research tasks. We have entered into consulting agreements with various former key employees, but there is no assurance that these persons will be available in the future to the extent their services may be needed.

If we are not successful in retaining the services of former key employees it could materially adversely affect our business prospects, including our ability to explore partnering or development activities.

Our joint venture is managed under contract by Benu BioPharma Inc., which is comprised of three individuals (Dennis I. Goldberg, Ph.D., Phillip M. Friden, Ph.D., and Eric M. Morrel, Ph.D.). These individuals are minority stockholders in our JV.

Although there is a services contract with Benu BioPharma Inc., there is no direct agreement with these individuals for continued services and they are under no legal obligation to remain with Benu BioPharma Inc. We can give no assurance that all or any of these individuals will continue to provide services to our joint venture. Should any of these individuals not continue to provide services to our joint venture, it could have a material adverse effect on our joint venture’s ability or cost to develop AEM-28 and its analogs.

Possible side effects of our JV’s product candidates may be serious and life threatening. If one of our JV’s product candidates reveals safety or fundamental efficacy issues in clinical trials, it could adversely impact the development path for our JV’s other current product candidates for that peptide. We face an inherent risk of liability in the event that the use or misuse of our JV’s future products results in personal injury or death.

The occurrence of any unacceptable side effects during or after pre-clinical and clinical testing of our JV’s product candidates, or the perception or possibility that our JV’s product candidates cause or could cause such side effects, could delay or prevent approval of our JV’s products and negatively impact its business. The use of our JV’s product candidates in clinical trials may expose us and our JV to product liability claims, which could result in financial losses. Our clinical liability insurance coverage may not be sufficient to cover claims that may be made against us or our JV. In addition, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts or scope to protect us and our JV against losses. Any claims against us or our JV, regardless of their merit, could severely harm our financial condition, strain our management and other resources and adversely impact or eliminate the prospects for commercialization of the product which is the subject of any such claim.

Risks Related to our Common Stock

The trading volume in our common stock is limited and our stock price is volatile, and therefore stockholders may not be able to sell their shares in desired amounts at the reported trading prices.

The trading price for our common stock, which is traded in the over-the-counter market, has varied significantly in the past (from a high of $9.32 to a low of $0.12 during the period of January 1, 2004 through December 31, 2014) and may vary in the future due to a number of factors, including:

·	announcement of the results of, or delays in, preclinical and clinical studies;

·	fluctuations in our operating results;

·	developments in litigation to which we or a competitor is subject;

·	announcements and timing of potential partnering, development collaboration or licensing transactions, merger, acquisitions, divestitures, capital raising activities or issuance of preferred stock;

·	announcements of technological innovations or new products by us or our competitors;

·	FDA and other regulatory actions;

·	developments with respect to our or our competitors’ patents or proprietary rights;

·	public concern as to the safety of products developed by us or others; and

·	changes in stock market analyst recommendations regarding us, other drug development companies or the pharmaceutical industry generally.

Our common stock is thinly traded, in part because over-the-counter trading volumes are generally significantly lower than those on stock exchanges. The trading volume for our common stock often varies widely from day to day. Because of the low trading volume, a relatively small amount of trading may greatly affect the trading price, the trading price may be subject to amplified decreases upon the occurrence of events affecting our business, and investors should not consider an investment in our common stock to be liquid. In addition, the broader stock market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies, and these broad market fluctuations may be even more pronounced for our thinly traded stock.

We have not agreed with our JV regarding the manner in which offering proceeds will be made available to the JV. To the extent that our JV partners do not experience dilution from the deployment of offering proceeds to the JV, the value of our investment in the JV will be negatively impacted.

Most of the proceeds of this offering will be made available to our JV to fund the continued development of AEM-28 and its analogs. There is currently no agreement between the JV and us regarding the manner in which the proceeds of this offering will be deployed to the JV. Although we own 60% of the outstanding shares of our JV’s common stock, the JV’s board of directors is controlled by individuals designated by the JV's minority stockholders, and therefore any agreement regarding the manner in which the offering proceeds are made available to the JV will require the approval of directors designated by the minority stockholders of the JV. Proceeds from the offering could be made available through loans or equity contributions by us to the JV, or in some combination of debt and equity. To the extent that offering proceeds are made available to the JV as a loan, which has no dilutive effect on our JV partners, any increase in the valuation of the JV resulting from the JV’s use of the offering proceeds to continue product development would be realized by our JV partners to the extent of their collective equity ownership of the JV. If offering proceeds are made available to the JV as equity, then we and the JV will need to agree as to the dilutive effect that any such equity contribution will have on our JV partners' collective equity ownership of the JV.

Future share issuances may have dilutive and other material effects on our stockholders.

We are authorized to issue 150,000,000 shares of common stock. As of June 24, 2015, there were 40,885,411 shares of common stock issued and outstanding. However, the total number of shares of our common stock issued and outstanding does not include shares reserved in anticipation of the exercise of options, warrants or additional investment rights. As of June 24, 2015, we had options outstanding to purchase approximately 4,062,706 shares of our common stock, the exercise price of which ranges between $0.16 per share to $5.39 per share, warrants outstanding to purchase 46,706 shares of our common stock with an exercise price of $6.39 per share, and warrants outstanding to purchase 117,423 shares of our common stock with an exercise price of $1.91 per share, and we have reserved shares of our common stock for issuance in connection with the potential exercise thereof. To the extent additional options are granted and exercised or additional stock is issued, the holders of our common stock will experience further dilution. At June 24, 2015, 380,000 shares remain available to grant under the 2015 Equity Incentive Plan.

In addition, in the event that any future financing or consideration for a future acquisition should be in the form of, be convertible into or exchangeable for, equity securities, investors will experience additional dilution.

Certain provisions of our certificate of incorporation and bylaws will make it difficult for stockholders to change the composition of our board of directors(“Board”) and may discourage takeover attempts that some of our stockholders may consider beneficial.

Certain provisions of our certificate of incorporation and bylaws may have the effect of delaying or preventing changes in control if our Board determines that such changes in control are not in the best interests of the Company and our stockholders. These provisions include, among other things, the following:

a classified Board with three-year staggered terms;

advance notice procedures for stockholder proposals to be considered at stockholders’ meetings;

the ability of our Board to fill vacancies on the board;

a prohibition against stockholders taking action by written consent;

supermajority voting requirements for the stockholders to modify or amend our bylaws and specified provisions of our certificate of incorporation, and

the ability of our Board to issue up to 2,000,000 shares of preferred stock without stockholder approval.

These provisions are not intended to prevent a takeover, but are intended to protect and maximize the value of our stockholders’ interests. While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our Board, they could enable our Board to prevent a transaction that some, or a majority, of our stockholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors. In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which prohibits business combinations with interested stockholders. Interested stockholders do not include stockholders whose acquisition of our securities is pre-approved by our Board under Section 203.

In June 2014, our Board adopted a Tax Benefit Preservation Plan (“Benefit Plan”) with Computershare, pursuant to which each outstanding share of our common stock has attached one preferred stock purchase right. Each share of our common stock subsequently issued prior to the expiration of the Benefit Plan will likewise have attached one right. Under specified circumstances involving an “ownership change,” as defined in Section 382 of the Internal Revenue Code (the “Code”), the right under the Benefit Plan that attaches to each share of our common stock will entitle the holder thereof to purchase 1/100 of a share of our Series A preferred stock for a purchase price of $5.00 (subject to adjustment), and to receive, upon exercise, shares of our common stock having a value equal to two times the exercise price of the right.

By adopting the Benefit Plan, our Board sough to protect our ability to use our net operating losses and other tax attributes (collectively, “Tax Benefits”). We view our Tax Benefits as highly valuable assets that are likely to inure to our benefit and the benefit of our stockholders. However, if we experience an “ownership change,” our ability to use the Tax Benefits could be substantially limited, and the timing of the usage of the Tax Benefits could be substantially delayed, which could significantly impair the value of the Tax Benefits. The Benefit Plan is intended to act as a deterrent to any person effecting an “ownership change” without the approval of our Board. The Benefit Plan expires June 24, 2016.

We may issue additional shares of preferred stock that have greater rights than our common stock and also have dilutive and anti-takeover effects.

We have 2,000,000 shares of authorized preferred stock, the terms of which may be fixed by our Board. We presently have no outstanding shares of preferred stock. Our Board has the authority, without stockholder approval, to create and issue one or more series of such preferred stock and to determine the voting, dividend and other rights of holders of such preferred stock. If we raise additional funds to continue development of AEM-28 and its analogs, or operations, we may issue preferred stock. The issuance of any of such series of preferred stock may have an adverse effect on the holders of common stock.

In connection with the Benefit Plan, our Board approved the designation of 1,000,000 shares of Series A Preferred Stock. The Benefit Plan and the exercise of rights to purchase Series A Preferred Stock, pursuant to the terms thereof, may delay, defer or prevent a change in control without the approval of the Board. In addition to the anti-takeover effects of the rights granted under the Benefit Plan, the issuance of preferred stock, generally, could have a dilutive effect on our stockholders. The Benefit Plan expires June 24, 2016.

We have not previously paid dividends on our common stock and we do not anticipate doing so in the foreseeable future.

We have not in the past paid any dividends on our common stock and do not anticipate that we will pay any dividends on our common stock in the foreseeable future. Any future decision to pay a dividend on our common stock and the amount of any dividend paid, if permitted, will be made at the discretion of our Board.

USE OF PROCEEDS

The following table sets forth the net proceeds that we may receive in this offering based upon our current estimate of expenses.

	If all of the Units offered in this offering are sold:	If one-half of the Units offered in this offering are sold:
Gross proceeds from Units sold in this offering
Gross proceeds from exercise of warrants sold in this offering
Total gross proceeds
Less placement agent fees (1)
Less other expenses (2)
Net proceeds

(1) Cash fee payable to the placement agent equal to 7.25% of aggregate gross proceeds (assuming that no investors in this offering are Reduced Fee Investors, for which a reduced placement agent fee of 4% is applicable).

(2) For additional information on other expenses, see the “Other Expenses of Issuance and Distribution” section in this prospectus.

We intend to use most of the net proceeds we receive from the sale of securities to extend the development of AEM-28 and its analogs, and the remainder for other general corporate purposes, including working capital needs. In particular, planned uses by the JV of the net proceeds from the offering, to the extent such proceeds are sufficient, include:

pre-clinical (toxicology and pharmacokinetic) studies to support an IND filing or an equivalent thereof for AEM-28-02 or another of the new analogs;

CRO oversight of human clinical trials and preparation of clinical study reports;

Phase 1/2 human studies of AEM-28 or its analogs in normal healthy volunteers and patients with high fasted triglycerides;

management fees to the JV’s management company, Benu Biopharma, Inc., for turn-key project management; and

formulation, CMC and GMP drug material manufacturing.

In addition, we expect to use a portion of the proceeds to fund the approximately $1,500,000 in annual administrative, accounting and legal costs associated with maintaining a publicly-held corporation subject to SEC periodic reporting.

If all of the Units offered hereby are sold, we believe that we will have sufficient funds for our JV to complete the preclinical development and possibly Phase 1a and Phase1b/2a clinical trials as well for AEM 28-02, but we cannot predict the total cost of these efforts which depends on, among other things, successful and timely outcomes in our preclinical and clinical studies. In any event, our JV will require substantial additional capital, and/or a development partner, to complete the clinical trials and supporting research and production efforts necessary to obtain FDA or comparable foreign agencies’ approval, if any, for our JV’s product candidates. We may seek to obtain the necessary additional funding through the issuance of debt and/or equity securities by us or our JV in one or more private or public offerings in the future (which could include bridge financing from certain of our significant existing stockholders), through a strategic partner arrangement or otherwise. In addition, our JV currently is exploring potential sub-licensing of AEM-28 and/or its analogs for development in indications not being actively pursued by the joint venture.

We have not agreed with our JV regarding the manner in which offering proceeds will be made available to the JV. For additional discussion regarding risks related to this uncertainty, see the risk factor “ We have not agreed with our JV regarding the manner in which offering proceeds will be made available to the JV. To the extent that our JV partners do not experience dilution from the deployment of offering proceeds to the JV, the value of our investment in the JV will be negatively impacted ” in the “Risk Factors” section in this prospectus.

This is a best efforts offering with no minimum. Accordingly, we may sell all, some or none of the offered Units and the ultimate amount of net proceeds cannot be predicted.

PLAN OF DISTRIBUTION

We are offering up to Units, each consisting of one share of common stock and one-half of a warrant to purchase one share of common stock, for an offering price of $ per Unit. Pursuant to an engagement letter agreement, dated as of June 16, 2015, we have engaged H.C. Wainwright & Co., LLC (“Wainwright” or the “placement agent”) as our placement agent for this offering. Wainwright is not purchasing or selling any Units in this offering, nor are they required to arrange for the purchase and sale of any specific number or dollar amount of Units, other than to use its “reasonable best efforts” to arrange for the sale of Units by us. Therefore, we may not sell the entire amount of Units being offered. Wainwright may retain one or more sub-agents or selected dealers in connection with the offering.

Upon the closing of this offering, we will pay Wainwright a cash fee equal to seven and one-quarter percent (7.25%) of the aggregate gross proceeds to us from the sale of the Units in the offering, provided that such cash fee will be four percent (4%) of aggregate gross proceeds on any sales of Units to certain specified insiders and current stockholders of the company (the “reduced fee investors”) in this offering. In addition, we will pay Wainwright a cash fee of 7.25%, which fee will be 4% in connection with exercises by the reduced fee investors, of the aggregate gross proceeds to us from the exercise of warrants issued to the investors in this offering We will also reimburse Wainwright for its non-accountable expenses in an amount equal to the greater of one percent (1%) of the aggregate gross proceeds in the offering or $50,000.

As additional compensation, we will issue to Wainwright warrants to purchase a number of shares of common stock equal to five percent (5%) (or two and one half percent (2.5%) of the number of shares of common stock included in the Units sold to the reduced fee investors) of the number of shares of common stock included in the Units sold in this offering (excluding the shares of common stock that may be issued upon exercise of the warrants included in the Units) (the “placement agent warrants”). The placement agent warrants will have the same terms as the warrants issued to purchasers in the offering, provided that the placement agent warrants will not have anti-dilution protection pursuant to FINRA Rule 5110(f)(2)(G)(vi). Pursuant to FINRA Rule 5110(g)(1), neither the placement agent warrants nor any shares of common stock issued upon exercise of the placement agent warrants may be sold, transferred, assigned, pledged, or hypothecated, or be subject to any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of such securities by any person for a period of 180 days immediately following the date of effectiveness or commencement of sales of this offering, except the transfer of any security (i) by operation of law or by reason of reorganization, (ii) to any FINRA member firm participating in the offering and the officers and partners thereof, if all securities so transferred remain subject to the lock-up restriction described above for the remainder of the time period, (iii) if the aggregate amount of our securities held by the holder of the placement agent warrants or related person does not exceed 1% of the securities being offered, (iv) that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise directs investments by the fund, and participating members in the aggregate do not own more than 10% of the equity in the fund, or (v) the exercise or conversion of any security, if all securities received remain subject to the lock-up restriction set forth above for the remainder of the time period.

Subject to certain exceptions, until twelve months after the consummation of this offering, the placement agent has a right of first refusal to act as lead underwriter, placement agent, manager, or agent for any public or private equity or debt offerings in which we may engage during that period. The foregoing right will not apply to any offering of equity or debt securities by Lipimetix Development, Inc.

The placement agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”), and any commissions received by it and any profit realized on the sale of the securities by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. The placement agent will be required to comply with the requirements of the Securities Act and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of shares of common stock and warrants to purchase shares of common stock by the placement agent. Under these rules and regulations, the placement agent may not (i) engage in any stabilization activity in connection with our securities; and (ii) bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until they have completed their participation in the distribution.

The engagement letter agreement provides that we will indemnify the placement agent for any claim (including claims under the Securities Act) related to or resulting from the activities on our behalf, except for any claim finally judicially determined to have resulted from the indemnitee’s gross negligence or willful misconduct. We have been advised that, in the opinion of the SEC, indemnification for liabilities under the Securities Act is against public policy as expressed in the Securities Act and is therefore unenforceable.

State Blue Sky Information

We intend to offer and sell the securities offered hereby to institutional investors in certain states. However, we will not make any offer of these securities in any jurisdiction where the offer is not permitted or exempted.

INFORMATION WITH RESPECT TO THE COMPANY

The Company

We are a biopharmaceutical company primarily focused on the development of a family of ApoE mimetic peptides to serve a variety of therapeutic indications in reducing plasma cholesterol and triglycerides. We embrace the capital-efficient business model of virtual pharmaceutical development pursuant to which we have minimized the number of full-time employees and outsource various aspects of pre-clinical, regulatory and clinical development.

All of our current development activities are conducted through our majority-owned joint venture, LipimetiX Development, Inc., which was formed to develop an Apo E mimetic peptide molecule, AEM-28, and its analogs. We own 60% of the outstanding common shares of the JV and all of the outstanding preferred shares. We have entered into a Stockholders Agreement pursuant to which certain of our JV partners have the right to appoint a majority of the JV’s board of directors unless certain triggering events occur, and pursuant to which we have consent rights over a broad spectrum of business decisions including annual budgets. Our JV is managed under contract by Benu BioPharma Inc., which is comprised of three individuals (Dennis I. Goldberg, Ph.D., Phillip M. Friden, Ph.D., and Eric M. Morrel, Ph.D.) who are principal minority stockholders in our JV. For additional information, see the “Ownership, Management and Governance of our JV” section of this prospectus.

Concurrent with the development activities for AEM-28, the JV has performed limited pre-clinical studies that have identified analogs of AEM-28, including one referred to as AEM-28-02, that have the potential of equivalent efficacy, higher human dose toleration and an extended composition of matter patent life. The JV has a development plan to pursue regulatory approval and commercialization of AEM-28, or one or more of its analogs, as treatment in orphan (rare disease) indications, including AP and HoFH, and potentially in acute coronary syndrome, peripheral artery disease and metabolic syndrome. HoFH as been designated by the FDA as an orphan indication. We believe that AP should also qualify for orphan indication designation.

Our JV received allowance from regulatory authorities in Australia permitting our JV to proceed with the recently completed clinical trials. The Phase 1a clinical trial commenced in Australia in April 2014 and the Phase 1b/2a clinical trial commenced in Australia in June 2014. The clinical trials for AEM-28 were randomized, double-blinded, placebo-controlled studies to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of six escalating single doses (Phase 1a in healthy patients with elevated cholesterol) and multiple ascending doses of the three highest doses from Phase 1a (Phase 1b/2a in patients with hypercholesterolemia and healthy subjects with elevated cholesterol and high Body Mass Index). The Phase 1a clinical trial consisted of 36 patients and the Phase 1b/2a consisted of 15 patients. Both clinical trials were completed in 2014 and the Medical Safety Committee, reviewing all safety-related aspects of the clinical trials, observed a generally acceptable safety profile. As first-in-man studies, the primary endpoint was safety; yet efficacy measurements analyzing pharmacodynamics yielded statistical significance in the pooled dataset favoring AEM-28 versus placebo in multiple lipid biomarker endpoints.

We and our JV do not have sufficient funding as of June 24, 2015 to continue additional material development activities of AEM-28 and its analogs.

We intend to continue limiting our internal operations to a virtual operating model while monitoring and participating in the management of our JV’s AEM-28 and analogs development activities.

Company History

Prior to November 26, 2003, we developed, manufactured and marketed proprietary, technologically advanced orthopedic products designed to promote the healing of musculoskeletal bone and tissue, with particular emphasis on fracture healing and spine repair. Our product lines, which included bone growth stimulation and fracture fixation devices, are referred to as our “Bone Device Business.” In November 2003, we sold our Bone Device Business.

In August 2004, we purchased substantially all of the assets and intellectual property of Chrysalis Biotechnology, Inc., including its exclusive worldwide license for Chrysalin for all medical indications. Subsequently, our efforts were focused on research and development of Chrysalin with the goal of commercializing our products in fresh fracture healing. (In March 2012, we returned all rights to the Chrysalin intellectual property and no longer have any interest in, or rights to Chrysalin.)

In February 2006, we purchased certain assets and assumed certain liabilities of AzERx, Inc. Under the terms of the transaction, we acquired an exclusive license for the core intellectual property relating to AZX100, an anti-fibrotic peptide. In 2014, we terminated the license agreement with AzTE for the core intellectual property relating to AZX100 and returned all interest in and rights to the AZX100 intellectual property to the licensor.

In August 2012, we entered into our joint venture with LipimetiX, LLC to develop the Apo E mimetic molecule AEM-28 and its analogs. We contributed $6 million to our JV and we have loaned up to $700,000 in a revolving line of credit. Our cash contribution to our joint venture represents a substantial proportion of our available cash.

We were incorporated as a Delaware corporation in July 1987 as IatroMed, Inc. We changed our name to OrthoLogic Corp. in July 1991. Effective October 1, 2008, OrthoLogic Corp. commenced doing business under the trade name of Capstone Therapeutics, and we formally changed our name to Capstone Therapeutics Corp. on May 21, 2010.

Ownership, Management and Governance of our JV

Our JV was formed in August 2012 as a Delaware limited liability company under the name LipimetiX Development, LLC. In June 2015, the JV converted to a Delaware corporation and changed its name to LipimetiX Development, Inc.

Ownership of our JV

The authorized shares of our JV’s capital stock consist of (i) 2,000,000 shares of common stock, which is designated as either Class A-1 Common Stock or Class A-2 Common Stock (collectively, the “JV Common Stock”), of which 1,000,000 shares are currently outstanding, and (ii) 10,000,000 shares of preferred stock, all of which is designated as Series A Preferred Stock (the “JV Preferred Stock”), of which 5,000,000 shares are currently outstanding.

The rights and preferences of the Class A-1 Common Stock and the Class A-2 Common Stock are identical, except that the amount of dividends and distributions, if any, that would otherwise be payable to UABRF as the sole holder of Class A-2 Common, is reduced by any amounts paid to UABRF in excess of $100,000 pursuant to certain provisions of the Exclusive License Agreement with UABRF.

The Series A Preferred Stock is non-voting, non-convertible and non-participating. There are no mandatory dividends payable in respect of the Series A Preferred Stock. Prior to our JV declaring or paying dividends on the JV Common Stock, or making any liquidating distributions to the holders of the JV Common Stock, the holders of the Series A Preferred Stock are entitled to receive an amount per share of Series A Preferred Stock at least equal to the original issue price of the Series A Preferred Stock, which is $1 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock). Once the original issue price has been paid in full, the holders of the Series A Preferred Stock are not entitled to receive any further dividends or liquidating distributions from the JV.

The following table sets forth the percentages of the outstanding shares of JV Common Stock and JV Preferred Stock held by us and the other stockholders. The other stockholders of our JV are sometimes referred to as our “JV partners” in this prospectus. The minority stockholders of the JV other than UABRF are sometimes referred to as the “LX Minority Stockholders” in this prospectus.

Stockholder	JV Common Stock (1)	JV Preferred Stock
Capstone Therapeutics Corp.	60%	100%
LX Minority Stockholders (2)	32%	-
UABRF	8%	-
Total	100%	100%

(1)	All of the JV Common Stock held by us and by the LX Minority Stockholders is Class A-1 Common Stock. All of the JV Common Stock held by UABRF is Class A-2 Common Stock.

(2)	Consists of all stockholders of the JV other than Capstone and UABRF.

The LX Minority Stockholders include Dennis I. Goldberg, Ph.D., Phillip M. Friden, Ph.D. and Eric M. Morrel, Ph.D. (the “Benu Principals”), who are the principals of Benu BioPharma Inc. (“Benu”), which manages the JV pursuant to the management contract described below. The Benu Principals collectively own 24% of the outstanding JV Common Stock, which represents 75% of all shares held by the LX Minority Stockholders.

Management and Governance of our JV

Our JV is managed by Benu pursuant to a Management Agreement among the JV, Benu and the Benu Principals. Pursuant to the Management Agreement, Benu provides all management and operational personnel to perform the day-to-day management of the JV (other than certain accounting and finance services that we provide pursuant to an Accounting Services Agreement between us and the JV). These management services include business development, research and development, regulatory affairs, product development, technical operations, assisting in intellectual property strategy and management, and developing and managing clinical trials. Pursuant to the Management Agreement, all services provided by Benu are rendered by or under the direction of Dr. Goldberg. The Benu Principals are also the officers of the JV (Dr. Goldberg is President, Dr. Friden is Vice President, Product Development and Dr. Morrel is Vice President, Clinical Research).

Pursuant to the Management Agreement, Benu is required to cause the Benu Principals to devote their full business time and effort, as needed, to the performance of the services under the Management Agreement. However, there is no direct agreement with the individual Benu Principals for continued services and they are under no legal obligation to remain with Benu. For additional discussion regarding risks related to the loss of the Benu Principals, see the risk factor “ The loss of key management and scientific personnel may hinder our JV’s ability to execute our business plan” in the “Risk Factors” section in this prospectus.

The JV paid to Benu a management fee of approximately $63,000 per month during the initial 27 months of the term ending in October 2014. Commencing in November 2014 and ending in March 2015, Benu received a reduced management fee in the amount of $35,000 per month. We currently receive an accounting services fee from the JV of $1,000 per month pursuant to the Accounting Services Agreement.

Pursuant to a Stockholders Agreement among all the stockholders of the JV, we have agreed that the board of directors of the JV will be composed of three individuals designated by the LX Minority Stockholders, acting by a majority in interest, and two individuals designated by us. Consequently, the LX Minority Stockholders’ designees, and not our designees, control the JV’s board of directors. Because the Benu Principals collectively own 75% of the outstanding JV Common Shares held by the LX Minority Stockholders, the Benu Principals have the power to control the JV’s board of directors. The JV board of directors currently is composed of the following persons:

LipimetiX Development Board of Directors

Dennis I. Goldberg, Ph.D. (1)

Phillip M. Friden, Ph.D. (1)

Eric M. Morrel, Ph.D. (1)

John M. Holliman, III (our Executive Chairman and Principal Executive Officer) (2)

Randolph C. Steer, MD, Ph.D. (our Chief Medical Officer) (2)

___________________________

(1) Designee of LX Minority Stockholders.

(2) Designee of Capstone.

If the JV fails to operate substantially in accordance with its annual budget (which must be approved by stockholders holding at least a majority of the outstanding shares of the JV’s voting stock), including the milestones in the budget, or fails to comply with any of its obligations under the Stockholders Agreement, the stockholders of the JV, acting by a majority in interest, thereafter would be entitled to appoint a majority of the members of the board of directors.

The Stockholders Agreement provides that certain actions require the consent of stockholders, acting by a majority in interest. These actions include:

Issuing any shares of capital stock;

Making dividends or distributions;

Entering into or amending any sale, license or partnering agreements relating to AEM-28 or any other compound then under development by the JV, including the Exclusive License Agreement with UABRF;

Incurring indebtedness other than trade payables incurred in the ordinary course of business or as may otherwise be set forth in the JV’s budget;

Entering into, amending or terminating any related party transaction or agreement, including the management agreement with Benu BioPharma Inc.;

Entering into or amending any material contract outside the ordinary course of business;

Effecting a sale of the JV, whether through a merger, consolidation or sale of assets; and

Amending the certificate of incorporation or bylaws.

Additionally, pursuant to the Stockholders Agreement, the JV may not be liquidated or dissolved without the consent of stockholders holding at least 75% of the outstanding shares of JV Common Stock. The JV’s annual budget, including the operational and other milestones contained therein, also must be approved by stockholders holding at least a majority of the outstanding shares of the JV’s voting stock. Because we do not have the right to appoint a majority of the members of the JV’s board of directors, these stockholder consent rights are necessary to protect our interests in the JV. However, there is a risk that these consent rights may be insufficient to protect our interests or may result in impasses with respect to the JV’s management and operation, the resolution of which might result in actions, agreements or consequences that we might view as suboptimal.

Competition

The biopharmaceutical industry is characterized by intense competition and confidentiality. Well known cardiovascular drug classes include the statins and PCSK9s (currently in regulatory approval process). Our drug candidates, if approved, would not compete directly for the same patient population as statins and PCSK9s. In the orphan indication of HoFH, two drugs received FDA approval in 2013 and are currently being marketed: Juxtapid from Aegerion and Kynamro from Sanofi/Genzyme. In the AP indication, the standard of care drugs for reducing triglycerides include fish oil and fibrates, both of which usually take weeks to show an effect. We are currently unaware of any other drugs approved or in development for reducing triglycerides in AP. We may not be aware of the other biotechnology, pharmaceutical companies or public institutions that are developing pharmaceuticals or devices that may compete with our potential products. We also may not be aware of all the other competing products our known competitors are pursuing. In addition, these biotechnology companies and public institutions compete with us in recruiting for research personnel and subjects, which may affect our ability to complete our research studies. For additional discussion regarding the risks associated with our competition, see the risk factor “If our JV’s product candidates do not gain market acceptance or our competitors develop and market products that are more effective than our JV’s product candidates, our commercial opportunities will be reduced or eliminated” in the “Risk Factors” section in this prospectus.

Description of Current Peptide Product Candidates.

Apo E is a 299 amino acid protein that plays an important role in lipoprotein metabolism. AEM-28 is a 28 amino acid mimetic of Apo E and AEM-28-02 (an analog of AEM-28) is a 28 amino acid mimetic of Apo E (with an aminohexanoic acid group) and both contain a domain that anchors into a lipoprotein surface while also providing the Apo E receptor binding domain, which allows clearance through the heparan sulfate proteoglycan (HSPG) receptors (Syndecan-1) in the liver.

VLDL and Triglycerides

The combination of Low Density Lipoprotein (“LDL”) and Very Low Density Lipoprotein (“VLDL”) cholesterol are termed Non- High Density Lipoprotein (“Non-HDL”) cholesterol. These Non-HDL lipoproteins are a combination of proteins and lipids which allow fat and cholesterol to move around the body so they may be taken up by target cells. Triglycerides (TGs) are found in VLDL and chylomicron remnants in blood plasma. TGs play an important role in metabolism as energy sources while VLDL and chylomicron remnants serve as transporters of dietary fat. When the amount of VLDL and TGs is properly regulated by the body’s natural systems, the vascular and metabolic systems are in sync and functioning well. However, problems develop when these lipoproteins and lipids get out of balance, often leading to severe cardiovascular and endocrinal diseases. When in overabundance in blood plasma, these large, buoyant molecules are a primary contributor to atherosclerosis, or arterial plaque, which can unpredictably create an arterial occlusion and cause a heart attack .

In December 2014, we and our joint venture, LipimetiX Development, Inc., announced the completion and results of the investigational Phase 1b/2a human clinical trial for its lead Apo E mimetic peptide molecule, AEM-28, in cholesterol and triglyceride reduction. The top-line data from the Phase 1a (reported on September 2, 2014) and Phase 1b/2a blended protocol was statistically analyzed. The Medical Safety Committee, in reviewing safety-related aspects of the clinical trial, observed a generally acceptable safety profile. Analysis of biomarker data from the human studies showed what we believe is a statistically significant reduction of VLDL cholesterol and triglycerides of approximately 70% each in fasted patients at one hour post-treatment. In particular, efficacy measurements analyzing pharmacodynamics yielded statistical significance in the pooled dataset favoring AEM-28 versus placebo in multiple lipid biomarker endpoints, which included:

Acute Pancreatitis with High Triglycerides

In 2015, our JV retained a consultancy to conduct a market assessment study for AEM-28 in acute pancreatitis (“AP”) with high triglycerides. The consultancy’s report concluded that the AP indication represents a significant unmet clinical need for a therapeutic that could rapidly reduce triglycerides. The schedule that follows below discusses the epidemiology and etiology of AP. There are an estimated 74,000 hospitalizations for all types of AP in the U.S. each year with approximately 45,000 presenting with severe TGs equal to or greater than 1,000 mg/dL. This patient population is possibly an ideal fit for AEM-28 as a therapeutic agent.

ETIOLOGY/EPIDEMIOLOGY	≈ % (1)			U.S. Patients		Severe TGs ≥ 1,000 mg/dL
Gallbladder/Stones		25	%		18,500	No
Alcohol		50	%		37,000	Yes
Genetic/Familial		7	%		5,698	Yes
Other/Idiopathic (Diabetes/Obesity/Pregnancy)		18	%		13,320	Yes
TOTAL HOSPITALIZATIONS		100	%		74,000	45,000 (2)

(1) JOP.J. Pancreas, 11/9/2011, “Controversies in Etiology of Acute Pancreatitis, A. Khan et al.

(2) Fletcher Spaght, 3/17/2015, “Market Assessment for Acute Pancreatitis”, M. Hoult et al.

Given the above, we plan to prioritize AP with high TGs as our JV’s indication of choice for AEM-28-02 commercialization. Because AEM-28 has previously received orphan drug designation (see below), we believe that the new analogs will also be so designated by the FDA for AP. As a result, the clinical/regulatory pathway for AP should require shorter, less expensive clinical trials according to orphan regulatory precedent.

Homozygous Familial Hypercholesterolemia (HoFH)

In 2012, AEM-28 received orphan designation from FDA for a rare disease indication, called homozygous familial hypercholesterolemia (“HoFH”). This is a very small global population of individuals who are born with no LDL receptors in the liver and are unable to clear LDL (the “bad” cholesterol) through a natural pathway. Historically, these patients have experienced cardiovascular complications in their teens and twenties often leading to early death. Standard of care therapy was a process called apheresis, which is a mechanical filtering of the lipid fat from the patient’s entire blood volume, akin to the kidney dialysis process. In 2013, two pharmaceutical therapies were approved in the U.S., Aegerion’s Juxtapid and Sanofi-Genzyme’s Kynamro. Juxtapid has proven the market with an impressive revenue ramp while revenue data for Kynamro is not publicly available. We believe that AEM-28, or the new analogs, if approved, could compete favorably with these other drugs due to potentially equivalent efficacy and fewer and less severe side effects.

AEM-28-02 and Analogs

Although AEM-28 is well researched and characterized by scientists at our academic research partner, The University of Alabama at Birmingham Research Foundation, it has a relatively short remaining patent life (to 2020). If AEM-28 were approved by the FDA, as an orphan drug in the U.S., it would have seven years of marketing exclusivity after registration. Accordingly, AEM-28 remains a potentially valuable commercial asset, but only in orphan indications.

Our joint venture has an exclusive license agreement with UABRF (see “Patents, Licenses and Proprietary Rights”, below) that provides for new technology developments and which has resulted in the discovery of new Apo E mimetic peptides. Recently, our joint venture has been testing an analog of AEM-28, which we refer to as AEM-28-02. In preclinical testing, AEM-28-02 is showing itself to be potentially more tolerable and more efficacious than AEM-28. In July 2014, our joint venture filed a patent application on AEM-28-02 as a unique and novel molecule seeking 21 years of composition of matter patent protection.

AEM-28-02 and the other analogs are significant in that their potential 21-year patent life could allow our joint venture and/or its potential future strategic partners to develop AEM-28-02 and the other analogs for “clinical outcomes” indications that typically require very large, lengthy clinical trials. These markets include acute coronary syndrome (which we estimate to be $10 billion in annual market size), peripheral artery disease (which we estimate to be $3 billion in annual market size) and metabolic syndrome (which we estimate to be an approximate $35 billion annual market for all drug therapies). Now, with AEM-28-02, we believe that our JV has a product candidate that not only serves sizable orphan markets, but also serves much larger indications potentially representing several billion dollars in annual product revenue.

Marketing and Sales

AEM-28 and its analogs are not currently available for sale and we do not expect them to be available for sale for some time into the future, if ever. Thus, neither we nor our JV currently have any marketing or sales staff.

Manufacturing

Currently, third parties certified under Good Manufacturing Practices manufacture AEM-28 and its analogs for our JV in limited amounts for its clinical and pre-clinical studies. Our JV uses a primary manufacturer for the peptides used in its human clinical trials, but secondary manufacturers are available as needed.

Patents, Licenses and Proprietary Rights

Our JV has an Exclusive License Agreement (the “License Agreement”) with the UABRF that grants an exclusive worldwide license to practice, commercialize and exploit the licensed patents and the exclusive license to make, have made, research, develop, use, lease, offer to sell, sell, import and export products, which would (without the license infringe one of more of the Licensed Patents). The License rights may be sublicensed by our JV with some restrictions. All products, as well as any ideas, inventions, developments, improvements, works of authorship, know-how, research, techniques, processes, methods, materials, results, data and other information and work product arising out of the JV’s practice of the licensed patents is owned by the JV, and UABRF does not have any right or license to use the same.

Under the License Agreement, the JV is required to pay patent filing, maintenance and other related patent fees, annual maintenance fees of $25,000 until the first commercial sale of a licensed product and various milestone payments of $50,000 to $500,000 as each licensed product is developed and obtains FDA approval. Once the first commercial sale of a licensed product occurs, the JV is required to pay a royalty of 3% on net sales of licensed products during the term of the License Agreement as well as 30% of royalty payments received by the JV from sales of licensed products by sublicensees, provided that the aggregate royalty does not exceed 3% of the sales of licensed products by the sublicensees in the applicable jurisdiction. The License Agreement provides for a minimum royalty payment of $500,000 to $1,000,000 per year commencing on January 1 of the first calendar year following the year in which the first commercial sale occurs. UABRF will also receive 5% of non-royalty income received. The License Agreement terminates upon the expiration of all valid patent claims within the licensed patents.

Capstone Therapeutics is a registered United States domestic trademark of Capstone Therapeutics Corp.

Insurance

Our business entails the risk of product liability claims. We maintain a product liability and general liability insurance policy and an umbrella excess liability policy. There can be no assurance that liability claims will not exceed the coverage limit of such policies or that such insurance will continue to be available on commercially reasonable terms or at all. Consequently, product liability claims or claims arising from our clinical trials could have a material adverse effect on our business, financial condition and results of operations. We have not experienced any material liability claims to date resulting from our clinical trials.

Employees

As of June 24, 2015, we had two full time administrative employees in our operations and utilize consultants to perform a variety of administrative, regulatory or research tasks. We have entered into consulting agreements with various former key employees, but there is no assurance that these persons will be available in the future to the extent their services may be needed. As a research and development business, we believe that the success of our business will depend in part on our ability to identify, attract and retain qualified research personnel, both as employees and as consultants. We face competition from private companies and public institutions for qualified research personnel. None of our employees are represented by a union and we consider our relationship with our employees to be good.

DESCRIPTION OF PROPERTY

We lease 2,845 square feet of office space in a facility in Tempe, Arizona, which is an approximately 100,000 square foot facility designed and constructed for industrial purposes and is located in an industrial district. In July 2007, we entered into a five-year lease for 17,000 square feet of space in this Tempe facility, which became effective March 1, 2008. We amended this lease, effective March 1, 2013, to extend the lease for two additional years and reduce the square feet rented to 2,845. On October 1, 2014 we amended this lease to extend the term to February 29, 2016. We believe the facility is well-maintained and adequate for use through the end of our lease term.

LEGAL PROCEEDINGS

In June 2015, we settled our long-pending qui tam lawsuit for a one-time payment of $50,000. The lawsuit had been filed under seal by Jeffrey J. Bierman, as Relator/Plaintiff, on March 28, 2005 in the United States District Court for the District of Massachusetts against us and substantially all sellers of bone growth stimulation devices during the period 1998-2003. The complaint asserted a variety of claims, including False Claims Act violations. We sold our bone growth stimulation device business in 2003 and first learned of this lawsuit in September 2009.

OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock commenced trading on Nasdaq on January 28, 1993 and was delisted by Nasdaq on July 21, 2011. Our common stock is currently traded on the OTCQB under the symbol “CAPS.” The following table sets forth, for the fiscal periods indicated, the range of high and low sales prices of our common stock. The OTCQB prices set forth below reflect inter-dealer prices, without adjustment for retail mark-up, markdown or commission, and may not necessarily represent the prices of actual transactions.

	2015				2014				2013
	High		Low		High		Low		High		Low
First Quarter	$	0.24	$	0.17	$	0.38	$	0.24	$	0.26	$	0.17
Second Quarter					$	0.33	$	0.21	$	0.24	$	0.17
Third Quarter					$	0.39	$	0.21	$	0.42	$	0.17
Fourth Quarter					$	0.27	$	0.19	$	0.38	$	0.21

As of June 24, 2015, 40,885,411 shares of our common stock were outstanding and held by approximately 779 stockholders of record. The last reported sale price of our common stock on the OTCQB Market on June 24, 2015 was $.23 per share.

Dividends

We have never paid a cash dividend on our common stock. We do not intend to pay any cash dividends on our common stock in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plan

The following provides tabular disclosure of the number of securities to be issued upon the exercise of outstanding options, the weighted average exercise price of outstanding options, and the number of securities remaining available for future issuance under equity compensation plans as of December 31, 2014, aggregated into two categories - plans that have been approved by stockholders and plans that have not. See Note 5 to the Financial Statements included in our Annual Report on Form 10-K, filed with the SEC on March 16, 2015, and Form S-8 filed with the SEC on June 22, 2015, for additional information on our equity compensation plans.

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Plan Category:

(a)

(b)

(c)

Equity Compensation Plans approved by Security Holders

3,022,706

1.06

495,519

Equity Compensation Plans not approved by Security Holders

N/A

Total

3,022,706

1.06

495,519

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion of significant events in the year ended December 31, 2014 and the three-month period ended March 31, 2015 and factors that affected our financial condition and results of operations for those periods. This should be read in conjunction with our financial statements and related notes that appear in this prospectus and the “Risk Factors” section in this prospectus.

Most of the proceeds of this offering will be made available to our JV to fund the continued development of AEM-28 and its analogs. Some development may relate to applications that are different from the applications on which our JV’s previous clinical trials focused. Our financial condition and results of operations for historic periods are not necessarily indicative of future results or performance.

Overview of the Business

We are a biopharmaceutical company primarily focused on the development of a family of ApoE mimetic peptides to serve a variety of therapeutic indications in reducing plasma cholesterol and triglycerides. Previously, we were focused on the development and commercialization of two product platforms: AZX100 and Chrysalin (TP508). Since March 2012, we no longer have any interest in or rights to Chrysalin. In 2012 we wound down internal operations, ceased clinical development of AZX100 in dermal scarring, formerly our principal product candidate, and moved to a more virtual operating model. In 2014, we terminated the license agreement with AzTE for the core intellectual property relating to AZX100 and returned all interest in and rights to the AZX100 intellectual property to the licensor.

Concurrent with the development activities for AEM-28, the JV has performed limited pre-clinical studies that have identified analogs of AEM-28, including one referred to as AEM-28-02, that have the potential of equivalent efficacy, higher human dose toleration and an extended composition of matter patent life. The JV has a development plan to pursue regulatory approval and commercialization of AEM-28, or one or more of its analogs, as treatment in orphan (rare disease) indications, including AP and HoFH, and potentially in acute coronary syndrome, peripheral artery disease and metabolic syndrome. HoFH as been designated by the FDA as an orphan indication. We believe that AP should also qualify for orphan indication designation.

For additional discussion regarding our and our JV’s business, including a description of our JV’s current peptide product candidates, see “Information with respect to the Company” in this prospectus.

Critical Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires that management make a number of assumptions and estimates that affect the reported amounts of assets, liabilities, and expenses in our financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact us in the future, actual results may differ from these estimates and assumptions. Our critical accounting policies are those that affect, or could affect our financial statements materially and involve a significant level of judgment by management.

Below are the accounting policies and related risks described in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 16, 2015, for the year ended December 31, 2014, which are those that depend most heavily on management’s judgments and estimates. As of June 24, 2015, there have been no material changes to any of these critical accounting policies.

Income Taxes : Accounting Standards Codification Topic 740 “Income Taxes” requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, we take into account all evidence with regard to the utilization of a deferred tax asset, including past earnings history, expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred asset. We have evaluated the available evidence about future taxable income and other possible sources of realization of deferred tax assets and have established a valuation allowance for all of our deferred tax assets of approximately $57 million at December 31, 2014.

In March 2014, LipimetiX Development, LLC (for more information, see Note 9 in the Financial Statements for the year ended December 31, 2014 included in this prospectus) formed a wholly-owned Australian subsidiary, LipimetiX Australia Pty Ltd, to conduct Phase 1a and Phase1b/2a clinical trials in Australia. Currently Australian tax regulations provide for a refundable research and development tax credit equal to 45% of qualified expenditures. Subsequent to the end of its Australian tax years, LipimetiX Australia Pty Ltd has submitted, or intends to submit, claims for a refundable research and development tax credit. The transitional Australian tax periods/years granted for LipimetiX Australia Pty Ltd end on June 30, 2014, December 31, 2014 and thereafter December 31 of each succeeding year. For the tax period ended June 30, 2014, LipimetiX Australia Pty Ltd received a refundable research and development tax credit of AUD$227,000. For the tax period ended December 31, 2014 a AUD$242,000 refundable tax credit, for research and development expenditures has been recorded by LipimetiX Australia Pty Ltd, as it is more likely than not, that the recorded refundable research and development tax credit at December 31, 2014 will be approved and received.

Patents : Patent license rights at December 31, 2014 were recorded at $1,045,000, their estimated fair value on the date they were acquired, August 3, 2012. Their cost is amortized on a straight-line basis over the key patent life of eighty months. At December 31, 2014, accumulated amortization totaled $379,000. If a change in conditions occurs, that indicates a material change in the future utility of the patent license rights, an evaluation will be performed to determine if impairment of the asset has occurred, and if so, the impairment will be recorded. Future utility of the patent license rights is dependent upon our ability to raise additional funding to continue development of AEM-28 and its analogs or to complete a sale, licensing or other transactions.

Our Joint Venture : As discussed in Note 9 “Joint Venture for Development of Apo E Mimetic Peptide Molecule AEM-28 and Analogs” in Notes to Financial Statements for the year ended December 31, 2014 included in this prospectus, we entered into a joint venture in which it has contributed $6,000,000, and the noncontrolling interests have contributed certain patent license rights. Neither we nor the noncontrolling interests have an obligation to contribute additional funds to our JV or to assume any joint venture liabilities or to provide a guarantee of either joint venture performance or any joint venture liability. The financial position and results of operations of our JV are presented on a consolidated basis with our financial position and results of operations. Intercompany transactions have been eliminated. Joint venture losses will be recorded on the basis of common ownership equity interests (currently 60% us / 40% noncontrolling interests) until common ownership equity is reduced to $0. Subsequent joint venture losses will be allocated to the preferred ownership equity (100% us). Subsequent to March 31, 2013, all joint venture losses are being allocated to us. We have a revolving loan agreement with our JV to advance the joint venture funds for operations in an amount not to exceed a net (net of expected tax credits or other funds obtained) of $700,000, with the net amount due June 30, 2015. Losses incurred by our JV in excess of the capital accounts of our JV will be allocated to us to the extent of net outstanding advances. At December 31, 2014, outstanding advances on the revolving loan agreement totaled $500,000.

Losses allocated to the noncontrolling interests represent an additional potential loss for us as the noncontrolling interests are not obligated to contribute assets to our JV to the extent they have a negative capital account and depending on the ultimate outcome of our JV, we could potentially absorb all losses associated with our JV. At December 31, 2014, losses totaling $667,000 have been allocated to the noncontrolling interests. We record a contingent loss when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. In the opinion of management, there was not at least a reasonable possibility that we may have incurred a material loss with respect to this loss contingency.

Fair value measurements : We determine the fair value measurements of our applicable assets and liabilities based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Stock based compensation : Effective January 1, 2006, we adopted SFAS No. 123 (revised 2004), “Share-Based Payment”, now Accounting Standards Codification Topic 718 “Stock Compensation” (“ASC 718”). ASC 718 requires all share-based payments, including grants of stock options, restricted stock units and employee stock purchase rights, to be recognized in our financial statements based on their respective grant date fair values. Under this standard, the fair value of each employee stock option and employee stock purchase right is estimated on the date of grant using an option pricing model that meets certain requirements. We currently use the Black-Scholes option pricing model to estimate the fair value of our share-based payments. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by our stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. We use the historical volatility adjusted for future expectations. The expected life of the stock options is based on historical data and future expectations. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of our stock options and stock purchase rights. The dividend yield assumption is based on our history and expectation of dividend payouts. The fair value of our restricted stock units is based on the fair market value of our common stock on the date of grant. Stock-based compensation expense recognized in our financial statements in 2006 and thereafter is based on awards that are ultimately expected to vest. We recognize compensation cost for an award with only service conditions that has a graded vesting schedule on a straight line basis over the requisite service period as if the award was, in-substance, a multiple award. However, the amount of compensation cost recognized at any date must at least equal the portion of grant-date fair value of the award that is vested at that date. For non-employees, this expense is recognized as the service is provided in accordance with ASC Topic 505-550 “Equity-Based Payments to Non-Employees.” The amount of stock-based compensation expense in 2006 and thereafter is reduced for estimated forfeitures. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We evaluate the assumptions used to value stock awards on a quarterly basis. If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past.

ASC 718 requires the benefits associated with tax deductions that are realized in excess of recognized compensation cost to be reported as a financing cash flow rather than as an operating cash flow as previously required. Subsequent to the adoption of ASC 718 on January 1, 2006, we have not recorded any excess tax benefit generated from option exercises, due to our net operating loss carryforwards, which cause such excess to be unrealized.

Recent Accounting Pronouncements: In June 2014, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation removes the definition of a development stage entity and all incremental financial reporting requirements from U.S. GAAP for development stage entities. Topic 915 Development Stage Entities will be removed from the FASB Accounting Standards Codification ™. The elimination of the development stage entity financial reporting requirements is effective for annual reporting periods beginning after December 15, 2014. A public business entity may adopt this guidance early for any annual reporting period or interim period for which financial statements have not been issued. The adoption of this accounting standard update had no impact on our condensed consolidated financial statements. We had previously presented our financial statements with development stage entity disclosures. We adopted this accounting standard update in our third quarter ending September 30, 2014, and accordingly, have omitted development stage information and disclosures from our presentation.

Joint Venture Accounting : As discussed in Note 9 to Financial Statements for the year ended December 31, 2014 included in this prospectus, “Joint Venture for Development of Apo E Mimetic Peptide Molecule AEM-28 and Analogs”, the Company entered into a joint venture in which it has contributed $6,000,000, and the noncontrolling interests have contributed certain patent license rights. Neither the Company nor the noncontrolling interests have an obligation to contribute additional funds to the joint venture or to assume any joint venture liabilities or to provide a guarantee of either joint venture performance or any joint venture liability. The financial position and results of operations of the joint venture are presented on a consolidated basis with the financial position and results of operations of the Company. Intercompany transactions have been eliminated. Joint venture losses will be recorded on the basis of common ownership equity interests (60% Company / 40% noncontrolling interests) until common ownership equity is reduced to $0. Subsequent joint venture losses will be allocated to the preferred ownership equity (100% Company). Subsequent to March 31, 2013, all joint venture losses are being allocated to the Company. The Company has a revolving loan agreement with the joint venture to advance the joint venture funds for operations in an amount not to exceed a net (net of expected tax credits or other funds obtained) of $700,000, with the net amount due June 30, 2015. Losses incurred by the joint venture in excess of the capital accounts of the joint venture will be allocated to the Company to the extent of net outstanding advances.

In August 2014, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40)(“Update”): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, providing a requirement under U.S. GAAP for an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued; and if those conditions exist, to disclose that fact, the conditions and the potential effects on the entity’s ability to meet its obligations. The Update will be effective for an annual period ending after December 15, 2016, with early application permitted . We have not elected early application, however, if additional funds are not obtained to continue the development of AEM-28 or its analogs, or operations, it will impair our ability to continue as a going concern. If we do not continue as a going concern, we may incur additional losses, up to, and possibly exceeding, our net joint venture investment and revolving loan balance.

Results of Operations Comparing Year Ended December 31, 2014 and 2013

General and Administrative (“G&A”) Expenses : G&A expenses related to our ongoing operations were $1,453,000 in 2014 compared to $1,169,000 in 2013. Administration expenses increased primarily due to costs related to the qui tam litigation, and investor relations activities.

Research and Development Expenses : Research and development expenses were $3,071,000 for 2014 compared to $3,124,000 for 2013. Our research and development expenses in 2014 and 2013 included the operating expenses of LipimetiX Development, Inc., which totaled (net of intercompany transactions) $2,354,000 for 2014, and $2,652,000 for 2013. The joint ventures’ initial planned research activities have been substantially completed as of December 31, 2014.

Interest and Other Expenses (Income), Net : Interest and Other Expenses (Income), Net, decreased from $158,000 of Income in 2013 to $43,000 of Expense in 2014 due to the receipt of $152,000 in the first quarter of 2013 from the conversion of an insurance company, in which we were a policyholder, from mutual to private ownership versus $60,000 in 2014. In 2014 this income was offset by a foreign exchange loss of $120,000 related to our joint ventures’ Australian activities.

Income Tax Benefit : Income tax benefit in 2014 consisted of a $400,000 refundable Australian research and development tax credit, as described in Notes 4 and 7 to the December 31, 2014 financial statements included in this Prospectus, related to our joint ventures’ Australian clinical trial activities.

Net Loss attributable to Capstone Therapeutics stockholders : We incurred a net loss in 2014 of $4.2 million compared to a net loss of $3.9 million in 2013. Net loss includes operations of LipimetiX Development, Inc., which totaled (net of intercompany transactions) $2,354,000 for 2014, and $2,652,000 for 2013, net of net loss allocated to noncontrolling interests of $0 for 2014 and $193,000 for 2013. The joint ventures’ initial planned research activities have been substantially completed as of December 31, 2014.

Results of Operations Comparing Year Ended December 31, 2013 and 2012

General and Administrative (“G&A”) Expenses : G&A expenses related to our ongoing operations were $1,169,000 in 2013 compared to $1,764,000 in 2012. Administration expenses declined primarily due to a decrease in our lease expenses caused by a reduction in office space occupied, effective March 1, 2013, and the reduction from four employees to two employees in the second quarter of 2012.

Research and Development Expenses : Research and development expenses were $3,124,000 for 2013 compared to $2,385,000 for 2012. Our research and development expenses increased in 2013 compared to 2012 primarily due to the operating expenses of LipimetiX Development, Inc., which totaled (net of intercompany transactions) $2,652,000 for 2013, and $1,133,000 for 2012, partially offset by a decline of AZX100 research activity.

Interest and Other Income, Net : Interest and Other Income, Net, increased from $96,000 in 2012 to $158,000 in 2013 due to the receipt of $152,000 in the first quarter of 2013 from the conversion of an insurance company, in which we were a policyholder, from mutual to private ownership, while 2012 included a gain of $80,000 from the sale of lab equipment.

Net Loss attributable to Capstone Therapeutics stockholders : We incurred a net loss in 2013 of $3.9 million compared to a net loss of $3.6 million in 2012. The net loss from 2013 benefited from a reduction in internal operations, but this beneficial effect was offset by inclusion of the operating expenses of LipimetiX Development, Inc. Net loss includes operating expenses of LipimetiX Development, Inc., which totaled (net of intercompany transactions) $2,652,000 for 2013, and $1,133,000 for 2012, net of net loss allocated to noncontrolling interests of $193,000 for 2013 and $473,000 for 2012.

Results of Operations Comparing Three-Month Period Ended March 31, 2015 to the Corresponding Period in 2014

General and Administrative (“G&A”) Expenses : G&A expenses related to our ongoing operations were $472,000 in the first quarter of 2015 compared to $452,000 in the first quarter of 2014. Administration expenses increased primarily due to costs related to the qui tam litigation and investor relations activities, but were otherwise comparable between periods, reflecting similar administrative activities.

Research and Development Expenses : Research and development expenses were $350,000 for the first quarter of 2015 compared to $630,000 for the first quarter of 2014. Our research and development expenses varied in the first quarter of 2015 compared to the same period in 2014 primarily due to the inclusion and fluctuation of operating expenses of LipimetiX Development, Inc., which totaled (net of intercompany transactions) $197,000 for the three months ended March 31, 2015, and $418,000 for the three months ended March 31, 2104. As discussed above, we have significantly reduced our development activities of AEM-28 and its analogs as we attempt to obtain additional funding.

Interest and Other Expenses (Income), Net : Interest and Other Expenses (Income), Net, decreased from $60,000 of Income in 2014 to $56,000 of Expense in 2015 due to the receipt of $60,000 in the first quarter of 2014 from the conversion of an insurance company, in which we were a policyholder, from mutual to private ownership, while in 2015 we incurred a foreign exchange loss of $57,000 related to our joint ventures’ Australian activities.

Income Tax Benefit : Income tax benefit in 2015 consisted of a refundable Australian research and development tax credit, as described in Note D to the March 31, 2015 financial statements included in this Prospectus, related to our joint ventures’ Australian clinical trial activities.

Net Loss attributable to Capstone Therapeutics stockholders : We incurred a net loss in the first quarter of 2015 of $0.7 million compared to a net loss of $1.1 million in the first quarter of 2014. Net loss is affected by the items discussed above in Interest and Other Expenses (Income), Net, Income Tax Benefit, and the inclusion of the operating expenses of LipimetiX Development, Inc., which totaled (net of intercompany transactions) $197,000 for the three months ended March 31, 2015 and $418,000 for the three months ended March 31, 2014.

Liquidity and Capital Resources

Since the sale of our Bone Device Business in November 2003, we have primarily relied on our cash and investments to finance all of our operations, the focus of which, since August 2012, has been research and development of our JV’s product candidates.

On August 3, 2012, we entered into our joint venture, LipimetiX Development, Inc, to develop Apo E mimetic peptide molecule AEM-28 and its analogs. As of June 24, 2015, we have contributed $6.0 million and loaned an additional $700,000 to our JV. At May 31, 2015, we had cash and cash equivalents of $1.2 million on a consolidated basis with our JV.

We intend to continue limiting our internal operations to a virtual operating model while monitoring and participating in the management of our JV’s AEM-28 and analogs development activities.

The amount of net proceeds which we will receive from this offering is uncertain. To the extent we sell less than all of the Units in this offering, we will need to seek additional funding sooner than otherwise would be the case. Because neither the timing nor the amount of future funding needs can be predicted, we cannot provide any assurance that we will have sufficient resources for our JV to continue its development work as planned. There is no assurance that we will be able to obtain the necessary additional funding from third parties on terms acceptable to us, or at all. New sources of funds, including raising capital through the sales of our debt or equity securities, joint venture or other forms of joint development arrangements, sales of development rights, or licensing agreements, may not be available or may only be available on terms that would have a material adverse impact on our existing stockholders’ interests. If our JV cannot complete its development work as planned due to a lack of funds, the value of our investment would be materially impaired, as would be our ability to continue as a going concern.

Our JV’s future research and development and other expenses will vary significantly from prior periods and will depend on the outcomes of pre-clinical and clinical trials, our and our JV’s decisions regarding future development and other factors.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth our directors executive officers along with their respective ages and positions as of June 24, 2015.

Name	Age	Title
John M. Holliman, III	61	Executive Chairman and Principal Executive Officer
Randolph C. Steer, MD, Ph.D.	66	Consultant / Chief Medical Officer
Les M. Taeger	64	Senior Vice President, Chief Financial Officer and Principal Financial and Accounting Officer
Eric W. Fangmann	45	Director (1)
Fredric J. Feldman, Ph.D.	75	Director (2) (3)
Elwood D. Howse, Jr.	75	Director (1) (2) (3)

(1)	Member of the Audit Committee

(2)	Member of the Compensation Committee

(3)	Member of the Corporate Governance/Nominating Committee

On April 28, 2014, the Board increased the number of directors to four and Eric W. Fangmann was elected to fill the fourth Board seat at our Annual Meeting held on June 12, 2014.

The Audit Committee of the Board, which is a separately-designated standing committee established in accordance with Section 3(a)(58)(A) of the Exchange Act, consists of Mr. Howse (Chairman) and Mr. Fangmann.

In particular, all Audit Committee members possess the required level of financial literacy, at least one member of the Audit Committee meets the current standard of requisite financial management expertise and the Board has determined that Elwood D. Howse, Jr., the Chairman of the Audit Committee, is an “audit committee financial expert” as defined in Item 407(d) of Regulation S-K. Additionally, Mr. Howse and Mr. Fangmann are “independent directors”, as defined in Nasdaq Listing Rule 5605(a)(2).

The employment of Mr. Holliman and Dr. Steer was terminated effective October 31, 2011. They continue to perform many of their previous duties and responsibilities under consulting agreements.

The following is a brief account of the business experience during the past five years of each of our directors and executive officers, including principal occupations and employment during that period and the name and principal business of any corporation or other organization in which such occupation and employment were carried on.

John M. Holliman, III

John M. Holliman III has served as Executive Chairman and Principal Executive Officer of the Company since April 2006 and has served as a director of the Company since September 1987 and as Chairman of the Board of Directors since August 1997. Since February 1993 he has been a general partner of entities which are the general partners of Valley Ventures, LP (formerly known as Arizona Growth Partners, LP), Valley Ventures II, LP, Valley Ventures III, LP, Valley Ventures III Annex, LP, all of which are venture capital funds that invest principally in life science companies.

John M. Holliman, III has over thirty years of business experience, including service on the boards of over forty companies, commercial lending experience with major financial institutions, and has been active in venture capital financing for over thirty years, concentrating in the medical/biotech industries. Mr. Holliman earned a BBA in Finance and a MBA from Southern Methodist University and a Master of International Management from the Thunderbird School of Global Management. During his career Mr. Holliman has gained substantial executive and board level experience in business, finance and operations. The Board believes the experience and knowledge of Mr. Holliman qualifies him to serve on our board.

Randolph C. Steer, MD, Ph.D.

Randolph C. Steer, MD, Ph.D. served as President of the Company from April 5, 2006 until October 31, 2011. Since then, Dr. Steer has provided scientific, regulatory and clinical consulting services to the Company. Dr. Steer has been an independent pharmaceutical, biotechnology and medical devices consultant since 1989, and has provided services to the Company since 2002. He has a broad scientific, medical and business background, including extensive experience in pre-clinical, clinical and regulatory affairs, having held key management positions in leading corporations and having served as an advisor to many companies in the United States and abroad. Dr. Steer has also advised numerous venture capital firms, investment banks and independent investors on the commercial development of drugs, biologics, diagnostics and medical devices. He has served as Associate Director of Medical Affairs at Marion Laboratories; Medical Director at Ciba Consumer Pharmaceuticals (Ciba-Geigy Corporation); Vice President, Senior Vice President and Member of the Executive Committee at Physicians World Communications Group; Chairman, President and Chief Executive Officer of Advanced Therapeutics Communications International, a global drug regulatory group, and Chairman and Chief Executive Officer of Vicus.com, Inc. He is a member of the Board of Trustees of the Mayo Clinic and the Board of Directors of Techne Corporation and Vital Therapies, and was a member of the Board of Directors of BioCryst Pharmaceuticals from 1994 to 2009. Dr. Steer received his MD degree from the Mayo Medical School and his Ph.D. from the University of Minnesota, where he also completed a residency and subspecialty training in clinical and chemical pathology. He is a Fellow of the American College of Clinical Pharmacology.

Les M. Taeger

Les M. Taeger joined the Company as Senior Vice President and Chief Financial Officer on January 16, 2006. Mr. Taeger most recently served as Chief Financial Officer of CardioTech International, Inc. (currently AdvanSource Biomaterials Corporation) (“CardioTech”). CardioTech was a publicly-traded, medical device company that developed, manufactured and sold advanced products for the treatment of cardiovascular disease. From September 2000 to February 2004, when Mr. Taeger became Chief Financial Officer of CardioTech, Mr. Taeger served as Chief Financial Officer of Gish Biomedical, Inc. (“Gish”). Gish, which became a subsidiary of CardioTech pursuant to a merger transaction involving the companies in April 2003, specialized in the manufacture and sale of products used in open-heart surgery, vascular access and orthopedic surgery. Prior to his employment with CardioTech and Gish, Mr. Taeger was employed for over five years as Chief Financial Officer of Cartwright Electronics, Inc., a division of Meggitt, PLC. Mr. Taeger is a Certified Public Accountant, with a Bachelor’s degree in accounting.

Eric W. Fangmann

Eric W. Fangmann has served as a director of the Company since June 2014. Mr. Fangmann has been the Chief Financial Officer for Lloyd I. Miller, III, since 2011. Mr. Fangmann is also the Acting President and Acting Chief Financial Officer for Pharmos Corporation, a pharmaceutical company, since 2012. Mr. Fangmann was previously an independent accounting and finance consultant who was principally engaged by public and private entities to assist in independent analysis and other projects. Mr. Fangmann was appointed by the Board of Directors of Synergy Brands Inc. in 2011 as its chief financial officer and treasurer, and was appointed as officer and/or director of certain of its subsidiaries, to serve in such capacities on an interim basis in connection with certain filings under Chapter 7 of the U.S. bankruptcy code. From 2005 to 2010, Mr. Fangmann served as Executive Vice President Technology of Frontera Investment, Inc., a publicly held cash and loan company. Prior to that, Mr. Fangmann has served principally in senior management accounting and finance functions for both public and private entities such as The Upper Deck Company, LLC, PriceSmart, Inc. and Teletrac, Inc. From 1992 to 1996, Mr. Fangmann worked in the audit division of Arthur Andersen. Mr. Fangmann also serves on the board of directors of Alliance Semiconductor and Global Agora, LLC. Mr. Fangmann holds a B.S. in Accountancy - Cum Laude from the University of Missouri, Columbia, Missouri.

Mr. Fangmann was introduced and recommended to the Board as a nominee for director by Lloyd I. Miller, III, a significant stockholder. The Board believes Mr. Fangmann’s diverse financial experience brings important experience to the Board and qualifies him to serve on our Board.

Fredric J. Feldman, Ph.D.

Fredric J. Feldman, Ph.D. has been the President of FJF Associates, a consultant to health care venture capital and emerging companies, since February 1992 and has served as a director of the Company since 1991. From September 1995 to June 1996, he was the Chief Executive Officer of Biex, Inc., a women’s healthcare company. He served as Chief Executive Officer of Oncogenetics, Inc., a cancer genetics reference laboratory, from 1992 to 1995. Between 1988 and 1992, Dr. Feldman was the President and Chief Executive Officer of Microgenics Corporation, a medical diagnostics company.

Dr. Feldman received his Ph.D. in analytical chemistry from the University of Maryland. He has been a director of a number of public and private companies involved in the healthcare industry. The Board believes that Dr. Feldman’s over 40 years of operating, scientific and business experience in the medical/biotech industry qualifies him for service on our board.

Elwood D. Howse, Jr.

Elwood D. Howse, Jr. has served as a director of the Company since September 1987. In 1982, Mr. Howse founded Cable, Howse and Ragen, investment banking and stock brokerage firm, subsequently known as Ragen MacKenzie. In 1977, Mr. Howse co-founded Cable & Howse Ventures, an early stage venture capital firm focused on technology. In 1976, he served as Vice President, Corporate Finance, for Foster & Marshall, a northwest stock brokerage firm. In 1974 he was the Chief Financial Officer of Seattle Stevedore Company and the Miller Produce Company. Mr. Howse has served as a corporate director and advisor to various public, private and non-profit enterprises. He served on the board of the National Venture Capital Association and is past President of the Stanford Business School Alumni Association. He currently serves on the boards of directors of Formotus, Inc., BeneSol Corporation, Stella Therapeutics, Inc. and not-for-profit, Junior Achievement of Washington. Mr. Howse holds a BS in Engineering from Stanford University and an MBA from Stanford Graduate School of Business.

The Board believes that Mr. Howse’s education and experience, particularly Mr. Howse’s financial experience, which qualifies him to be designated as our financial expert on our Audit Committee, brings important financial and business experience to the board and qualifies him to serve on our board.

Director Compensation

The following table sets forth compensation awarded to, earned by or paid to our directors during the last fiscal year. Mr. Holliman is not included in this table and his compensation as a director is included in the Summary Compensation Table in “Compensation of Executives” below.

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($) (1)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)
Fredric J. Feldman, Ph.D. Elwood D. Howse, Jr. Eric W. Fangmann	49,000 49,000 12,000		4,000 4,000 8,000	- - -	- - -	- - -	53,000 53,000 20,000

(1)	Fair value of the grants at the date of the grants was determined using the Black-Scholes model as described in Note 5 in Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2014.

During the year ended December 31, 2014, we paid directors Board Fees of $6,000 per quarter. All directors are eligible for a grant of non-qualified stock options pursuant to our 2005 Equity Incentive Plan. On June 10, 2005, the Board approved an annual award to each director of a non-qualified stock option to purchase 10,000 shares of our common stock. On January 1, 2014, we granted to each then-current director (Mr. Holliman, Dr. Feldman and Mr. Howse) non-qualified options to acquire 10,000 shares at an exercise price of $0.26 per share (fair value of $2,000). We also granted to Mr. Howse and Dr. Feldman non-qualified stock options to acquire 12,000 shares at an exercise price of $0.30 per share on February 6, 2014 (fair value of $2,000), Mr. Holliman non-qualified stock options to acquire 22,000 shares at an exercise price of $0.30 per share on February 6, 2014 (fair value of $5,000), and Mr. Fangmann non-qualified stock options to acquire 50,000 shares at an exercise price of $0.21 on June 12, 2014 (fair value of $8,000). These options vested immediately and were granted at the closing market price on the date of grant. All options have been granted with ten-year terms.

The Board also approved a cash award on January 1, 2014 to each then-current director ($15,000 to Mr. Holliman, $25,000 to Dr. Feldman, and $25,000 to Mr. Howse) in lieu of the annual award of our restricted common stock.

The following table sets forth the equity awards held by our directors that were outstanding at the end of our last fiscal year.

Directors Outstanding Equity Awards at Fiscal Year End

Name	Option Awards
	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Options Exercise Price ($)	Option Expiration Date
(a)	(b)	(c)	(d)	(e)	(f)
John M. Holliman, III	200,000			1.75	5/12/2016
	50,000			1.02	2/21/2018
	125,000			0.45	2/3/2019
	100,000			0.82	2/4/2020
	25,000			0.70	10/30/2018
	65,000			0.17	5/18/2022
	65,000			0.16	8/9/2022
	51,000			0.21	2/28/2023
*	20,167	1,833		0.30	2/6/2024
Eric W. Fangmann	50,000			0.24	6/12/2024

Various directors:
(1)(2)(3)	10,000			4.90	1/2/2016
(1)(2)(3)	25,000			1.75	5/12/2016
(1)(2)(3)	10,000			1.43	1/1/2017
(1)(2)(3)	10,000			1.35	1/1/2018
(1)(3)	25,000			0.70	10/30/2018
(1)(2)(3)	10,000			0.42	1/1/2019
(1)(2)(3)	10,000			0.72	1/1/2020
(1)(2)(3)	10,000			0.58	1/1/2021
(1)(2)(3)	10,000			0.26	1/1/2022
(1)(2)	35,000			0.17	5/18/2022
(1)(2)	42,500			0.16	8/9/2022
(1)(2)(3)	10,000			0.17	1/1/2023
(1)(3)	27,000			0.21	2/28/2023
(1)(2)(3)	10,000			0.26	1/1/2024
(1)(3) *	11,000	1,000		0.30	2/6/2024

(1) Feldman, Fred

(2) Holliman, John

(3) Howse, Elwood

* Vested on February 6, 2015.

Executive Compensation

The Compensation Committee, at its meeting held at the beginning of each fiscal year, formulates its recommendations regarding which compensation components will be adjusted for the upcoming year and what the performance bonus for the prior year will be.

At the first Compensation Committee meeting of the year, the Compensation Committee reviews the Executive Chairman’s and other executive officers’ compensation and bonuses and presents its recommendations to the Board. The final total compensation package decision regarding the Executive Chairman is made by the Independent Directors in an Executive Session without the Executive Chairman or other members of management present, and the final decisions on other executives’ total compensation packages are made by the full Board.

The following discussion is provided to facilitate investors’ understanding of the named executive officer compensation information included in this prospectus.

Officer and Key Consultant Compensation

On October 13, 2011, the Board adopted a plan to preserve cash during ongoing partnering efforts. Included in the actions taken was the termination of the employment of John M. Holliman, III, Executive Chairman and Randolph C. Steer, MD, Ph.D., President. These individuals have continued as consultants, rather than as employees, at consulting rates which would equate to approximately $100,000 per year for Mr. Holliman and $120,000 per year for Dr. Steer. As employees, their base compensation had been $200,000 for Mr. Holliman and $325,000 for Dr. Steer. Les M. Taeger, Chief Financial Officer and Senior Vice President has continued as an employee, but his base compensation was reduced from $242,000 per year to $120,000 (increased to $135,000 for 2014) per year. All of these officers had also been eligible for an annual bonus based on individual and Company performance goals of up to 40% of their base compensation. The Board’s actions included cancellation of our bonus plan. The vested outstanding stock options held by each executive will continue to be exercisable while such executive is serving as a consultant to the Company.

Equity-Based Compensation

We provide a certain level of cash compensation to each executive as both a short-term reward and to focus executive performance on short-term goals that are part of our long-term strategies. Additionally, we use a combination of stock option grants and common stock awards to generate a commitment to, and a long-term investment in, the Company. Grants and awards were determined based on the position and competitive factors, as well as substantial compensation reductions effective October 31, 2011.

Stock Option Grants

In 2014, we granted options to employees to purchase 74,000 shares of our common stock with the exercise price determined by the closing market price on the date of grant ($0.26 to $0.30) and an aggregate grant date fair value of $16,000. These grants included grants to the named executives (options to purchase 32,000 shares to Mr. Holliman, options to purchase 22,000 shares to Dr. Steer, and options to purchase 15,000 shares to Mr. Taeger).

Common Stock Awards

We did not grant any common stock awards in 2014.

Fringe Benefits, Perquisites and Retirement Benefits.

Our executive employee participates in group health, dental, life, and disability programs on the same basis as other employees. No perquisites are provided to executives that in aggregate exceed $10,000 per year.

Joint Venture Bonus Plan

On August 9, 2012, our Board approved a performance-based incentive compensation plan (the “JV Bonus Plan”) for our executive and consultants who were primarily responsible for identifying the investment opportunity for the development of Apo E mimetic peptide AEM-28 and its analogs, a class of Cardiovascular drugs targeting indications related to lowering blood cholesterol levels, completing the formation of our JV, and who will participate in the management of our JV.

Our joint venture Bonus Plan provides for a bonus pool, shared 40% by Mr. Holliman, 40% by Dr. Steer and 20% by Mr. Taeger, of 2.5% of the cash or in-kind distributions from our JV to us after we have received the return of our initial $6,000,000 investment. The individuals’ interest in the bonus pool vested 50% upon Board approval of the JV Bonus Plan (August 9, 2012) and vested 50% upon the presentation by our JV to its members of quantitative/qualitative safety and efficacy results from all protocol-designated endpoints of the AEM-28 Phase 1b/2a clinical trial. The bonuses under the JV Bonus Plan are fully vested at December 31, 2014; however, no amounts have been earned as of June 24, 2015.

Summary Compensation Table

The following table sets forth, with respect to the years ended December 31, 2014, 2013 and 2012, compensation awarded to, earned by or paid to our principal executive officer, principal financial officer and key consultant who were serving at the end of the last completed fiscal year (the “named executive officers”).

Name	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($) (1)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
John M. Holliman, III Executive Chairman (Principal Executive Officer)	2014 2013 2012	100,000 100,000 100,000	- - -	- - 3,000	7,000 7,000 14,000	- - -	- - -	31,000(1) 41,000(1) 16,000(1)	138,000 148,000 133,000
Randolph C. Steer, MD, Ph.D., Consultant (former President)	2014 2013 2012	120,000 120,000 120,000	15,000 - 25,000	- - -	5,000 9,000 12,000	- - -	- - -	- - -	140,000 129,000 157,000
Les M. Taeger Chief Financial Officer (Principal Financial Officer)	2014 2013 2012	135,000 120,000 120,000	- - 25,000	- - -	3,000 6,000 8,000	- - -	- - -	- - -	138,000 126,000 153,000

(1)

Mr. Holliman is a member of the Board, and as a director, received compensation of $31,000, $41,000 and $16,000, in cash, in 2014, 2013 and 2012, respectively, and an annual grant of an option to purchase 10,000 shares of our common stock. Mr. Holliman received total director’s compensation (Board fees, stock awards and option grants) of $38,000, $48,000 and $20,000 in 2014, 2013 and 2012, respectively, as more fully described in the “Compensation of Directors” section of this prospectus.

Fair value of the grants at the date of the grants was determined using the Black-Scholes model as described, for 2014, in Note 5 to the Financial Statements included in our Annual Report on Form 10-K, filed with the SEC on March 16, 2015, for 2013, in Note 5 to our Annual Report on Form 10-K filed with the SEC on March 27, 2014 and for 2012, in Note 5 to our Annual Report on form 10-K filed with the SEC on March 14, 2013.

Option Grants / Stock Awards

The following table sets forth information about stock option grants and stock awards during our last fiscal year to the executive officers named in the Summary Compensation Table.

Name	Grant Date	All Other Stock Awards: Number of Shares of Stock or Units (#)	All Other Option Awards: Number of Securities Underlying Options (#)	Exercise or Base Price of Option Awards ($/Share)	Grant Date Fair Value of Stock and Option Awards (1) ($)
(a)	(b)	(i)	(j)	(k)	(l)
John M. Holliman, III Executive Chairman	1/1/14 2/6/14	- -	10,000 22,000	0.26 0.30	2,000 5,000
Randolph C. Steer, MD, Ph.D. Consultant	2/6/14	-	22,000	0.30	5,000
Les M. Taeger Chief Financial Officer	2/6/14	-	15,000	0.30	3,000

(1) Fair value of the grants at the date of the grants was determined using the Black-Scholes model as described in Note 5 to the Financial Statements included in our Annual Report on Form 10-K filed with the SEC on March 16, 2015.

Outstanding Equity Awards at Fiscal Year End

The following table sets forth information about stock option grants and stock awards outstanding at the end or our last fiscal year held by the executive officers named in the Summary Compensation Table.

Name	Option Awards
	Number of Securities Underlying Unexercised Options (#)	Number of Securities Underlying Unexercised Options (#)	Option Exercise Price ($)	Option Expiration Date
(a)	(b)	(c)	(e)	(f)
John M. Holliman, III	10,000	-	4.90	1/2/2016
	25,000	-	1.75	5/12/2016
	200,000	-	1.75	5/12/2016
	10,000	-	1.43	12/31/2017
	10,000	-	1.35	12/31/2018
	50,000	-	1.02	2/21/2018
	25,000	-	0.70	10/30/2018
	10,000	-	0.42	1/1/2019
	125,000	-	0.45	2/3/2019
	10,000	-	0.72	1/1/2020
	100,000	-	0.82	2/4/2020
	10,000	-	0.58	1/1/2021
	10,000	-	0.26	1/1/2022
	65,000	-	0.17	5/18/2022
	65,000	-	0.16	8/9/2022
	10,000	-	0.17	1/1/2023
	51,000	-	0.21	2/28/2023
	10,000	-	0.26	1/1/2024
*	20,167	1,833	0.30	2/6/2024

Randolph C. Steer, MD, Ph.D.	200,000	-	1.75	5/12/2016
	50,000	-	1.53	5/21/2017
	50,000	-	1.02	2/21/2018
	75,000	-	0.45	2/3/2019
	50,000	-	0.82	2/4/2020
	50,000	-	0.67	1/17/2021
	65,000	-	0.17	5/18/2022
	65,000		0.16	8/9/2022
	51,000	-	0.21	2/28/2023
	10,000	-	0.35	10/25/2023
*	20,167	1,833	0.3	2/6/2024
Les M. Taeger	150,000	-	5.15	1/16/2016
	150,000	-	1.70	6/2/2016
	14,706	-	1.02	2/21/2018
	50,000	-	0.45	2/3/2019
	35,000	-	0.82	2/4/2020
	25,000	-	0.67	1/17/2021
	45,000	-	0.17	5/18/2022
	45,000	-	0.16	8/9/2022
	29,000	-	0.21	2/28/2023
	10,000	-	0.35	10/25/2023
*	13,750	1,250	0.30	2/6/2024

* Vested on February 6, 2015.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding the beneficial ownership of our common stock at June 24, 2015 with respect to (i) each person known to the Company to own beneficially more than five percent of the outstanding shares of our common stock, (ii) each director of the Company, (iii) each of the named executive officers and (iv) all directors and executive officers of the Company as a group. At June 24, 2015 there were 40,885,411 shares of our common stock outstanding.

	Common Stock
	Beneficially Owned (1)
Beneficial Owner	Number		Percentage of Class
Eric W. Fangmann (2)		160,000	less than 1%
Fredric J. Feldman (3)		592,064		1.4
John M. Holliman, III (4)		1,680,170		4.0
Elwood D. Howse, Jr. (5)		589,203		1.4
Randolph C. Steer (6)		923,298		2.2
Les M. Taeger (7)		803,280		1.9
BVF Group (8)		7,755,688		19.0
Lloyd Miller, III (9)		7,926,389		19.4
All directors and executive officers as a group (10)		4,748,015		10.7

(1)

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. In accordance with SEC rules, shares, which may be acquired upon exercise of stock options which are currently exercisable or which become exercisable within 60 days of the date of the table, are deemed beneficially owned by the optionee. Except as indicated by footnote, and subject to community property laws where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

(2)

Includes 160,000 shares Mr. Fangmann has a right to acquire upon exercise of stock options.

(3)

Includes 366,500 shares Dr. Feldman has a right to acquire upon exercise of stock options. Voting and investment power shared with spouse.

(4)

Includes 1,168,000 shares Mr. Holliman has a right to acquire upon exercise of stock options.

(5)

Includes 366,500 shares Mr. Howse has a right to acquire upon exercise of stock options.

(6)

Includes 878,000 shares Dr. Steer has a right to acquire upon exercise of stock options.

(7)

Includes 758,706 shares Mr. Taeger has a right to acquire upon exercise of stock options.

(8)

BVF Group (Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P. BVF Investments, L.L.C., Investment 10, L.L.C., BVF Partners, L.P., BVF Inc.) is not a related party or otherwise affiliated with the Company, its directors or officers, and the principal business office of the Reporting Persons comprising the Group is located at 900 North Michigan Avenue, Suite 1100, Chicago, IL 60611.

(9)

Lloyd Miller, III is not a related party or otherwise affiliated with the Company, its directors or officers, except that Lloyd Miller, III recommended Eric W. Fangmann to be a Company Board of Director member and Eric W. Fangmann is the Chief Financial Officer of various business entities associated with Mr. Miller, and the principal business office of the Reporting Person is located at 222 Lakeview Avenue, Suite 160-365, West Palm Beach, Florida 33401.

(10)

Includes 3,697,706 shares directors and executive officers have a right to acquire upon exercise of stock options.

The address of each of the listed stockholders, unless noted otherwise, is in care of Capstone Therapeutics Corp., 1275 West Washington Street, Suite 104, Tempe, AZ 85281.

TRANSACTIONS WITH RELATED PERSONS

Our Board reviews transactions with related parties, but has no formal policies in place with respect to such reviews or the approval of such transactions. Since January 1, 2014, there have been no transactions with directors, executive officers or other related parties which were material to the Company.

We have entered into indemnity agreements with all of our directors and officers for the indemnification of and advancing of expenses to such persons to the fullest extent permitted by law.

DESCRIPTION OF OUR CAPITAL STOCK

Our restated certificate of incorporation (“Restated Certificate”) provides that we have the authority to issue 150 million shares of $0.0005 par value common stock and 2 million shares of $0.0005 par value preferred stock.

There are 40,885,411 shares of our common stock outstanding as of June 24, 2015, excluding the following:

· Options outstanding to purchase 4,062,706 shares of our common stock, the exercise price of which ranges between $0.16 per share to $5.39 per share, which consists of:

Options to purchase 1,245,000 shares at exercise prices of $.16 to $.22 per share

Options to purchase 598,000 shares at exercise prices of $.24 to $.45 per share

Options to purchase 620,000 shares at an exercise price of $.25 per share

Options to purchase 504,000 shares at exercise prices of $.58 to $.82 per share

Options to purchase 914,706 shares at exercise prices of $1.02 to $1.75 per share

Options to purchase 181,000 shares at exercise prices of $4.90 to $5.39 per share

Warrants outstanding to purchase 46,706 shares of our common stock with an exercise price of $6.39 per share, and warrants outstanding to purchase 117,423 shares of our common stock with an exercise price of $1.91 per share.

There are no shares of our preferred stock outstanding as of June 24, 2015.

The following is a summary of the material provisions of our common stock and preferred stock. This summary does not purport to be exhaustive and is qualified in its entirety by reference to applicable Delaware law and our Restated Certificate and bylaws.

Common Stock

The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Stockholders are not entitled to cumulate their votes for the election of directors. Subject to preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board out of funds legally available for that purpose. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and nonassessable.

The transfer agent for our common stock is Computershare Inc. (“Computershare”)

Preferred Stock

Under our Restated Certificate, the Board has the authority, without further action by our stockholders, to issue up to 2 million shares of preferred stock in one or more series and to fix the variations in the powers, preferences, rights, qualifications, limitations or restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of our common stock. The Board, without stockholder approval, can issue preferred stock with voting, conversion or other rights that could adversely affect the voting power and other rights of the holders of our common stock. As a result, preferred stock could be issued quickly with terms that will delay or prevent a change of control or make removal of management more difficult. In addition, the issuance of preferred stock may have the effect of decreasing the market price of our common stock and may adversely affect the voting and other rights of our common stock. At present, there are no shares of preferred stock outstanding and we have no current plans to issue any shares of preferred stock.

Unit Warrants to be Sold in this Offering

The warrants included in the Units offered in this offering will be issued in a form filed as an exhibit to the registration statement of which this prospectus is a part. You should review a copy of the form of warrant for a complete description of the terms and conditions applicable to the warrants. The following is a brief summary of the warrants and is subject in all respects to the provisions contained in the form of warrant.

We are offering up to Units, each consisting of one share of common stock and one-half of a warrant to purchase one share of common stock. The shares of common stock and warrants will immediately separate after purchase and will be issued separately. The warrants are exercisable for a five-year period at an exercise price of $ , which is 150% of the offering price for each Unit.

There is no market for the warrants and we do not expect one to develop. The warrant holders will not have any of the rights or privileges of holders of common stock the warrants are exercised and the underlying shares of common stock are issued.

No fractional shares of common stock will be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the market value of a share of common stock. A warrant may be transferred by a holder, upon surrender of the warrant, properly endorsed (by the holder executing an assignment in the form attached to the warrant).

The exercise price and the number of shares of common stock issuable upon the exercise of each warrant are subject to adjustment upon the happening of certain events, such as recapitalizations, reorganizations, mergers or consolidations.

The warrants provide that, except as approved by the Company, no exercise will be effected, and the holder of a warrant will not have the right to exercise a warrant, if after giving effect to the exercise the holder, together with any affiliates, would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares upon exercise of such warrant.

Tax Benefit Preservation Plan (“Benefit Plan”)

In this prospectus, unless the context requires otherwise, all references to our common stock include the accompanying rights. In June 2014, our Board adopted a Tax Benefit Preservation Plan (“Benefit Plan”) with Computershare, pursuant to which each outstanding share of our common stock has attached one preferred stock purchase right. Each share of our common stock subsequently issued prior to the expiration of the Benefit Plan will likewise have attached one right.

Under specified circumstances, the right under the Benefit Plan that attaches to each share of our common stock will entitle the holder thereof to purchase 1/100 of a share of our Series A preferred stock for a purchase price of $5.00 (subject to adjustment), and to receive, upon exercise, shares of our common stock having a value equal to two times the exercise price of the right. By adopting the Benefit Plan, our Board sough to protect our ability to use our net operating losses and other tax attributes (collectively, “Tax Benefits”). We view our Tax Benefits as highly valuable assets that are likely to inure to our benefit and the benefit of our stockholders. However, if we experience an “ownership change,” our ability to use the Tax Benefits could be substantially limited, and the timing of the usage of the Tax Benefits could be substantially delayed, which could significantly impair the value of the Tax Benefits. The Benefit Plan is intended to act as a deterrent to any person effecting an “ownership change”, as defined in Section 382 of the Internal Revenue Code (the “Code”), without the approval of our Board. The Benefit Plan expires June 24, 2016.

At June 24, 2015, the rights are not exercisable and trade only with our common stock.

Delaware Law

We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, this statute prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date that the person became an interested stockholder unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years prior, did own) 15% or more of the corporation’s voting stock.

Certain Anti-Takeover Provisions

Stockholders’ rights and related matters are governed by Delaware corporate law, our Restated Certificate and our bylaws. Certain provisions of the Restated Certificate and bylaws which are summarized below may discourage or have the effect of delaying or deferring potential changes in control of the Company. The Board believes that these provisions are in the best interests of stockholders because they will encourage a potential acquirer to negotiate with the Board, which will be able to consider the interests of all stockholders in a change-in-control situation. However, the cumulative effect of these terms may be to make it more difficult to acquire and exercise control of the Company and to make changes in our management.

The Restated Certificate provides for the approval of the holders of two-thirds of our outstanding voting stock for a merger or a consolidation with, or a sale by us of all or substantially all of our assets to, any person, firm or corporation, or any group thereof, which owns, directly or indirectly, 5% or more of any class of our voting securities (an “Interested Person”). In addition, two-thirds approval is required with respect to other transactions involving any such Interested Person, including among other things, purchase by us or any of our subsidiaries of all or substantially all of the assets or stock of an Interested Person and any other transaction with an Interested Person which requires stockholder approval under Delaware law. The two-thirds voting requirement is not applicable to any transaction approved by the Board if a majority of the members of the Board voting to approve such transaction were elected prior to the date on which the other party became an Interested Person or certain other conditions are met (the “Continuing Directors”).

The Restated Certificate provides that each director will serve for a three-year term and that approximately one-third of the directors are to be elected annually. Candidates for directors shall be nominated only by the Board or by a stockholder who gives us written notice no later than 20 days before the annual meeting or, in the case of a special meeting, the close of business on the 15 th day following the date on which notice of such special meeting is first given to the stockholders. We may have three to nine directors as determined from time to time by our Board, which currently consists of four members. Between stockholder meetings, our Board may appoint new directors to fill vacancies or newly created directorships. The Restated Certificate does not provide for cumulative voting at stockholder meetings for the election of directors. Stockholders controlling at least 50% of the outstanding common stock can elect the entire Board, while stockholders controlling 49% of the outstanding common stock may not be able to elect any directors. A director may be removed from office only for cause and only by the affirmative vote of a majority of the combined voting power of the then outstanding shares of capital stock entitled to vote generally in the election of directors.

The Restated Certificate further provides that stockholder action must be taken at a meeting of stockholders and may not be effected by any consent in writing. Special meetings of stockholders may be called only by the President, a majority of the Board or the holders of at least 35% of the outstanding shares of capital stock entitled to vote.

The Restated Certificate provides further that the foregoing provisions of the Restated Certificate and bylaws may be amended or repealed only with the affirmative vote of at least two-thirds of the shares entitled to vote, unless the amendment is recommended for stockholder approval by a majority of the Continuing Directors. These provisions exceed the usual majority vote requirement of Delaware law and are intended to prevent the holders of less than two-thirds of the voting power from circumventing the foregoing terms by amending the Restated Certificate or bylaws. These provisions, however, enable the holders of more than one-third of the voting power to prevent amendments to the foregoing anti-takeover provisions of the Restated Certificate or bylaws even if they were favored by the holders of a majority of the voting power.

The effect of such provisions of our Restated Certificate and bylaws may be to make more difficult the accomplishment of a merger or other takeover or change in control of the Company. To the extent that these provisions have this effect, removal of our incumbent Board and management may be rendered more difficult. Furthermore, these provisions may make it more difficult for stockholders to participate in a tender or exchange offer for common stock and in so doing may diminish the market value of the common stock.

Limitations on Personal Liability of Directors

Delaware law authorizes a Delaware corporation to eliminate or limit the personal liability of a director to the corporation and its stockholders for monetary damages for breach of certain fiduciary duties as a director. We believe that such a provision is beneficial in attracting and retaining qualified directors, and accordingly the Restated Certificate includes a provision eliminating liability for monetary damages for any breach of fiduciary duty as a director, except: (1) for any breach of the duty of loyalty to the Company or our stockholders; (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (3) for any transaction from which the director derived an improper personal benefit; or (4) for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law. Thus, pursuant to Delaware law, our directors are not insulated from liability for breach of their duty of loyalty (requiring that, in making a business decision, directors act in good faith and in the honest belief that the action was taken in the best interest of the corporation). The foregoing provisions of the Restated Certificate may reduce the likelihood of derivative litigation against directors and may discourage or deter stockholders or management from bringing a lawsuit against directors for breaches of the fiduciary duties, even though an action, if successful, might otherwise have benefited us and our stockholders. Further, we have entered into indemnity agreements with all of our directors and officers for the indemnification of and advancing of expenses to such persons to the fullest extent permitted by law. We have also obtained insurance for the benefit of our officers and directors insuring such persons against certain liabilities, including liabilities under the securities laws.

LEGAL MATTERS

The validity of the securities to be sold pursuant to this prospectus is being passed upon for us by our counsel, Quarles & Brady LLP, Phoenix, Arizona.

EXPERTS

Our consolidated financial statements for the years ended December 31, 2014 and 2013 included in this prospectus were audited by Moss Adams, LLP, an independent registered public accounting firm, as stated in their report appearing with such financial statements (which report expressed a qualified opinion on the financial statements), and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission, Washington, D.C. 20549, under the Securities Act of 1933, a registration statement on Form S-1 relating to the shares of common stock and warrants offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to our company and the shares and warrants we are offering by this prospectus you should refer to the registration statement, including the exhibits and schedules thereto.

You may inspect a copy of the registration statement without charge at the Public Reference Section of the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549 on official business days during the hours of 10:00 am to 3:00 pm. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also maintains an Internet site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission. The Securities and Exchange Commission’s World Wide Web address is http://www.sec.gov .

We file periodic reports, proxy statements and other information with the Securities and Exchange Commission in accordance with requirements of the Exchange Act. These periodic reports, proxy statements and other information are available for inspection and copying at the regional offices, public reference facilities and Internet site of the Securities and Exchange Commission referred to above.

Information contained on our website is not a prospectus and does not constitute a part of this prospectus. You should rely only on the information contained in or provided in this prospectus. We have not authorized anyone else to provide you with different information. You should not assume the information in this prospectus is accurate as of any date other than the date on the front of this prospectus.

INDEX TO THE FINANCIAL STATEMENTS OF

CAPSTONE THERAPEUTICS CORP.

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2014 and 2013	F-3
Consolidated Statements of Operations for the years ended December 31, 2014 and 2013	F-4
Consolidated Statements of Changes in Equity for the period from December 31, 2012 to December 31, 2014	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013	F-6
Condensed Consolidated Balance Sheets at March 31, 2015 (unaudited) and December 31, 2014	F-19
Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 (unaudited)	F-20
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (unaudited)	F-21

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM *

* To be provided by amendment.

F-2

CAPSTONE THERAPEUTICS CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31,			December 31,
	2014			2013
ASSETS
Current assets
Cash and cash equivalents	$	2,164		$	6,258
Other current assets		555			233
Total current assets		2,719			6,491

Patent license rights, net		666			823
Furniture and equipment, net		-			3
Total assets	$	3,385		$	7,317

LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	124		$	88
Other accrued liabilities		158			12
Total current liabilities		282			100

Equity
Capstone Therapeutics Corp. Stockholders' Equity
Common Stock $.0005 par value; 100,000,000 shares authorized; 40,885,411 shares outstanding in 2014 and 2013		20			20
Additional paid-in capital		189,268			189,215
Accumulated deficit		(186,185	)		(182,018	)
Total Capstone Therapeutics Corp. stockholders' equity		3,103			7,217
Noncontrolling interest		-			-
Total equity		3,103			7,217

Total liabilities and equity	$	3,385		$	7,317
See notes to consolidated financial statements

F-3

CAPSTONE THERAPEUTICS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Years ended December 31,
	2014			2013
OPERATING EXPENSES
General and administrative	$	1,453		$	1,169
Research and development		3,071			3,124
Total operating expenses		4,524			4,293

Interest and other expenses (income), net		43			(158	)
Loss from operations before taxes		4,567			4,135
Income tax benefit		(400	)		(21	)
Net Loss		4,167			4,114

Less: Net Loss attributable to the noncontrolling interest		-			(193	)
Net Loss attributable to Capstone Therapeutics Corp. stockholders	$	4,167		$	3,921
Per Share Information:
Net loss, basic and diluted, attributable to Capstone Therapeutics Corp. stockholders	$	0.10		$	0.10
Basic and diluted shares outstanding		40,885			40,885

See notes to consolidated financial statements

F-4

CAPSTONE THERAPEUTICS CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands)

	Capstone Therapeutics Corp. Stockholders' Equity
										Non
	Common Stock				Additional		Accumulated			controlling
	Shares		Amount		Paid in Capital		Deficit			Interest			Total
Balance December 31, 2012		40,885	$	20	$	189,181	$	(178,097	)	$	193		$	11,297
Stock-based compensation cost		-		-		34		-			-			34
Net loss		-		-		-		(3,921	)		(193	)		(4,114	)
Balance December 31, 2013		40,885		20		189,215		(182,018	)		-			7,217

Stock-based compensation cost		-		-		53		-			-			53
Net loss		-		-		-		(4,167	)		-			(4,167	)
Balance December 31, 2014		40,885	$	20	$	189,268	$	(186,185	)	$	-		$	3,103

See notes to consolidated financial statements

F-5

CAPSTONE THERAPEUTICS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands )

	Years Ended December 31,
	2014			2013
OPERATING ACTIVITIES
Net loss	$	(4,167	)	$	(4,114	)
Non cash items:
Depreciation and amortization		160			173
Non-cash stock-based compensation		53			34
Change in other operating items:
Other current assets		(322	)		150
Accounts payable		36			(145	)
Other accrued liabilities		146			(49	)
Cash flows used in operating activities		(4,094	)		(3,951	)
INVESTING ACTIVITIES
Proceeds from sale of assets		-			4
Cash flows provided by investing activities		-			4
FINANCING ACTIVITIES
Cash flows provided by financing activities		-			-
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,094	)		(3,947	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		6,258			10,205
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,164		$	6,258

See notes to consolidated financial statements

F-6

CAPSTONE THERAPEUTICS CORP.

NOTES TO FINANCIAL STATEMENTS

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview of the Business

Capstone Therapeutics Corp. is a biotechnology company committed to developing a pipeline of novel peptides and other molecules aimed at helping patients with under-served medical conditions. Previously, we were focused on the development and commercialization of two product platforms: AZX100 and Chrysalin (TP508). Since March 2012, we no longer have any interest in or rights to Chrysalin. In 2012 we wound down internal operations, ceased clinical development of AZX100 in dermal scarring, formerly our principal drug candidate, and moved to a more virtual operating model. In 2014, we terminated the License Agreement for AZX100 intellectual property and returned all interest in and rights to the AZX100 intellectual property to the Licensor (AzTE).

On August 3, 2012, we entered into a joint venture, LipimetiX Development, LLC, (the “JV”) to develop Apo E mimetic peptide molecule AEM-28 and its analogs. The JV has a development plan to pursue regulatory approval of AEM-28, or an analog, as treatment for Homozygous Familial Hypercholesterolemia (granted Orphan Drug Designation by FDA in 2012) and other hyperlipidemic indications. The initial development plan extended through Phase 1a and 1b/2a clinical trials and was completed in the fourth quarter of 2014. The clinical trials have a safety primary endpoint and an efficacy endpoint targeting reduction of cholesterol and triglycerides.

The JV received allowance from regulatory authorities in Australia permitting the JV to proceed with the planned clinical trials. The Phase 1a clinical trial commenced in Australia in April 2014 and the Phase 1b/2a clinical trial commenced in Australia in June 2014. The clinical trials for AEM-28 are randomized, double-blinded, placebo-controlled studies to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of six escalating single doses (Phase 1a in healthy patients with elevated cholesterol) and multiple ascending doses of the three highest doses from Phase 1a (Phase 1b/2a in patients with Hypercholesterolemia and healthy subjects with elevated cholesterol and high Body Mass Index). The Phase 1a clinical trial consisted of 36 patients and the Phase 1b/2a consisted of 15 patients. Both clinical trials were completed in 2014 and the Medical Safety Committee, reviewing all safety-related aspects of the clinical trials, observed a generally acceptable safety profile. As first-in-man studies, the primary endpoint was safety; yet efficacy measurements analyzing pharmacodynamics yielded statistical significance in the pooled dataset favoring AEM-28 versus placebo in multiple lipid biomarker endpoints.

Concurrently with the development activities with AEM-28, the JV has performed limited pre-clinical studies that have identified an analog of AEM-28, referred to as AEM-28-02, and a new phospholipid formulation, that has the potential of equivalent efficacy, higher human dose toleration and an extended patent life (application filed in 2014).

The JV and Company intend to explore fundraising, partnering or licensing to obtain additional funding to continue development activities of AEM-28 and AEM-28-02.

The JV and the Company do not have sufficient funding at this time to continue additional material development activities of AEM-28 and its analogs. The JV may conduct future clinical trials in Australia, the USA, and other regulatory jurisdictions if regulatory approvals, additional funding, and other conditions permit. The JV may also fund research or studies to investigate AEM-28-02 for treatment of acute coronary syndrome and other indications.

The Company intends to limit its internal operations to a virtual operating model while continuing monitoring and participating in the management of LipimetiX Development LLC’s AEM-28 and analogs development activities and maintaining the required level of corporate governance and reporting required to comply with Securities and Exchange Commission rules and regulations.

Description of Current Peptide Drug Candidates.

Apo E Mimetic Peptide Molecule – AEM-28 and its analogs

F-7

Apolipoprotein E is a 299 amino acid protein that plays an important role in lipoprotein metabolism. AEM-28 is a 28 amino acid mimetic of Apo E and AEM-28-02 (an analog of AEM-28) is a 28 amino acid mimetic of Apo E (with an aminohexanoic acid group and a phospholipid) and both contain a domain that anchors into a lipoprotein surface while also providing the Apo E receptor binding domain, which allows clearance through the heparan sulfate proteoglycan (HSPG) receptors (Syndecan-1) in the liver. AEM-28 and AEM-28-02, as Apo E mimetics, have the potential to restore the ability of these atherogenic lipoproteins to be cleared from the plasma, completing the reverse cholesterol transport pathway, and thereby reducing cardiovascular risk. This is an important mechanism of action for AEM-28 and AEM-28-02. For patients that lack LDL receptors (Homozygous Familial Hypercholesterolemia-HoFH), or have hypercholesterolemia, AEM-28 or AEM-28-02 may provide a therapeutic solution. Our joint venture has an Exclusive License Agreement with the University of Alabama at Birmingham Research Foundation for AEM-28 and certain of its analogs.

Company History

In August 2004, we purchased substantially all of the assets and intellectual property of Chrysalis Biotechnology, Inc. (“CBI”), including its exclusive worldwide license for Chrysalin for all medical indications. Subsequently, our efforts were focused on research and development of Chrysalin with the goal of commercializing our products in fresh fracture healing. (In March 2012, we returned all rights to the Chrysalin intellectual property and no longer have any interest in, or rights to Chrysalin.)

In February 2006, we purchased certain assets and assumed certain liabilities of AzERx, Inc. Under the terms of the transaction, we acquired an exclusive license for the core intellectual property relating to AZX100, an anti-fibrotic peptide. In 2014, we terminated the License Agreement with AzTE (Licensor) for the core intellectual property relating to AZX100 and returned all interest in and rights to the AZX100 intellectual property to the Licensor.

On August 3, 2012, we entered into a joint venture, LipimetiX Development, LLC, (see Note 9 below) to develop Apo E mimetic peptide molecule AEM-28 and analogs.

Our development activities represent a single operating segment as they shared the same product development path and utilized the same Company resources. As a result, we determined that it is appropriate to reflect our operations as one reportable segment.

OrthoLogic Corp. commenced doing business under the trade name of Capstone Therapeutics on October 1, 2008, and we formally changed our name from OrthoLogic Corp. to Capstone Therapeutics Corp. on May 21, 2010.

In this Annual Report, references to “we”, “our”, the “Company”, “Capstone Therapeutics”, “Capstone”, and “OrthoLogic” refer to Capstone Therapeutics Corp. References to our Bone Device Business refer to our former business line of bone growth stimulation and fracture fixation devices, including the OL1000 product line, SpinaLogic®, OrthoFrame® and OrthoFrame/Mayo. References to our joint venture refer to LipimetiX Development, LLC.

Basis of presentation and Management’s Plans . The accompanying financials statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

F-8

As discussed above, Management has determined that the Company will require additional capital above its current cash and working capital balances to further develop AEM-28 and its analogs. Accordingly, the Company has significantly reduced its development activities. Relating to future corporate strategy, the duration and timing of resolution of the qui tam lawsuit could affect the board’s decision relating to: (a) engaging in a strategic/merger transaction, (b) conducting a private or public offering of debt or equity securities for capital to renew a more active development of AEM-28 and its analogs, and (c) a liquidating distribution to the shareholders. These financial statements do not include any adjustments that might result from the outcome of this uncertainty of corporate strategy.

Use of estimates . The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires that management make a number of assumptions and estimates that affect the reported amounts of assets, liabilities, and expenses in our financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s assumptions regarding current events and actions that may impact the Company in the future, actual results may differ from these estimates and assumptions.

Our significant estimates include income taxes, contingencies, accounting for stock-based compensation, accounting for the Australian refundable research and development tax credit, and accounting for the formation and consolidation of LipimetiX Development, LLC.

Fair value measurements . We determine the fair value measurements of our applicable assets and liabilities based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Cash and cash equivalents . Cash and cash equivalents consist of cash deposited with financial institutions, including money market accounts, and investments purchased with an original or remaining maturity of three months or less when acquired.

Furniture and equipment . Furniture and equipment are stated at cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of the various assets, which range from three to seven years. Leasehold improvements are amortized over the life of the asset or the period of the respective lease using the straight-line method, whichever is the shortest.

Research and development expenses . Research and development represents costs incurred for research and development activities, including costs incurred to fund the pre-clinical and clinical testing of our product candidates. Research and development costs are generally expensed when incurred. Nonrefundable advance payments are capitalized and recorded as expense when the respective product or service is delivered.

Accrued Clinical . Accrued clinical represents the liability recorded for the costs incurred for our human clinical trials. Total patient costs are based on the specified clinical trial protocol, recognized over the period of time service is provided to the subject. We had no active clinical trials at December 31, 2014

Stock-based compensation . We account for share-based compensation arrangements in accordance with ASC Topic 718 “Compensation - Stock Compensation” (“ASC 718”). ASC 718 requires all share-based payments, including grants of stock options, restricted stock units and employee stock purchase rights, to be recognized in our financial statements based on their respective grant date fair values. Under this standard, the fair value of each grant is estimated on the date of grant using a valuation model that meets certain requirements. We use the Black-Scholes option pricing model to estimate the fair value of our share-based payment awards. The determination of the fair value of share-based payment awards utilizing the Black-Scholes model was affected by our stock price and a number of assumptions, including expected volatility, expected term, risk-free interest rate and an expected dividend yield. We used our historical volatility as adjusted for future expectations. The expected life of the stock options was based on historical data and future expectations of when the awards will be exercised. The risk-free interest rate assumption was based on observed interest rates with durations consistent with the expected terms of our stock options. The dividend yield assumption was based on our history and expectation of dividend payouts. The fair value of our restricted stock units was based on the fair market value of our common stock on the date of grant. We evaluated the assumptions used to value our share-based payment awards on a quarterly basis. For non-employees, expense was recognized as the service was provided and when performance was complete in accordance with ASC Topic 505 – 550 “Equity-Based Payments to Non-Employees.”

F-9

Effective January 1, 2006, stock-based compensation expense recognized in our financial statements has been based on awards that were ultimately expected to vest. We recognized compensation cost for an award with only service conditions that had a graded vesting schedule on a straight line basis over the requisite service period as if the award was, in-substance, a multiple award. However, the amount of compensation cost recognized at any date was at least equal to the portion of grant-date fair value of the award that was vested at that date. The amount of stock-based compensation expense is reduced for estimated forfeitures. Forfeitures were required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates.

The Company recorded stock-based compensation of $53,000 in 2014 and $34,000 in 2013, which increased the net loss. Loss per weighted average basic and diluted shares outstanding increased by less than $0.01 per share in 2014 and $0.01 per share in 2013 due to stock-based compensation.

Loss per common share . In determining loss per common share for a period, we use weighted average shares outstanding during the period for primary shares and we utilize the treasury stock method to calculate the weighted average shares outstanding during the period for diluted shares. Utilizing the treasury stock method for the year ended December 31, 2014, 252,500 shares were determined to be outstanding and excluded from the calculation of loss per share because they were anti-dilutive. At December 31, 2014, options and warrants to purchase 3,186,835 shares of our common stock, at exercise prices ranging from $0.16 to $6.39 per share, were outstanding.

Income Taxes . Under ASC Topic 740 “Income Taxes” (“ASC 740”), income taxes are recorded based on current year amounts payable or refundable, as well as the consequences of events that give rise to deferred tax assets and liabilities. We base our estimate of current and deferred taxes on the tax laws and rates that are estimated to be in effect in the periods in which deferred tax liabilities or assets are expected to be settled or realized. Pursuant to ASC 740, we have determined that the deferred tax assets at December 31, 2014 and 2013 require a full valuation allowance given that it is not “more-likely-than-not” that the assets will be recovered.

We adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (now ASC 740) on January 1, 2007. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Subsequent to adoption of ASC 740, each period we evaluate the tax years that remain open for assessment for federal and state tax purposes. At December 31, 2014, tax years 2010 through 2014 remain open.

We may, from time-to-time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2014 and 2013, the Company did not recognize a material amount in interest and penalties.

Patents . Patent license rights were recorded at $1,045,000, their estimated fair value on the date they were acquired, August 3, 2012. Their cost will be amortized on a straight-line basis over the key patent life of eighty months. At December 31, 2014, accumulated amortization totaled $379,000. If a change in conditions occurs, that indicates a material change in the future utility of the patent license rights, an evaluation will be performed to determine if impairment of the asset has occurred, and if so, the impairment will be recorded.

F-10

Joint Venture Accounting . The Company entered into a joint venture in which it has contributed $6,000,000, and the noncontrolling interests have contributed certain patent license rights. Neither the Company nor the noncontrolling interests have an obligation to contribute additional funds to the joint venture or to assume any joint venture liabilities or to provide a guarantee of either joint venture performance or any joint venture liability. The financial position and results of operations of the joint venture are presented on a consolidated basis with the financial position and results of operations of the Company. Intercompany transactions have been eliminated. Joint venture losses were recorded on the basis of common ownership equity interests (60% Company / 40% noncontrolling interests) until common ownership equity was reduced to $0. Subsequent joint venture losses are being allocated to the preferred ownership equity (100% Company). Subsequent to March 31, 2013, all joint venture losses are being allocated to the Company. The Company has a revolving loan agreement with the joint venture to advance the joint venture funds for operations in an amount not to exceed a net (net of expected tax credits or other funds obtained) of $700,000, with the net amount due June 30, 2015. Losses incurred by the joint venture in excess of the capital accounts of the joint venture will be allocated to the Company to the extent of net outstanding advances.

Legal and Other Contingencies

As discussed in Note 10 “Contingency – Legal Proceedings”, the Company is subject to legal proceedings and claims that arise in the course of business. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss with respect to loss contingencies. However, the outcome of legal proceedings and claims brought against the Company are subject to significant uncertainty. Therefore, if the qui tam legal matter is resolved against the Company in excess of management’s expectations, the Company’s financial statements could be materially adversely affected.

Legal costs related to contingencies are expensed as incurred and were not material in either 2014 or 2013.

Recent Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation removes the definition of a development stage entity and all incremental financial reporting requirements from U.S. GAAP for development stage entities. Topic 915 Development Stage Entities will be removed from the FASB Accounting Standards Codification ™ . The elimination of the development stage entity financial reporting requirements is effective for annual reporting periods beginning after December 15, 2014. A public business entity may adopt this guidance early for any annual reporting period or interim period for which financial statements have not been issued. The adoption of this accounting standard update had no impact on our condensed consolidated financial statements. We had previously presented our financial statements with development stage entity disclosures. We adopted this accounting standard update in our third quarter ending September 30, 2014, and accordingly, have omitted development stage information and disclosures from our presentation.

In August 2014, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40)(“Update”): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, providing a requirement under U.S. GAAP for an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued; and if those conditions exist, to disclose that fact, the conditions and the potential effects on the entity’s ability to meet its obligations. The Update will be effective for an annual period ending after December 15, 2016, with early application permitted . We have not elected early application, however, if additional funds are not obtained to continue the development of AEM-28 or its analogs, or operations, it will impair our ability to continue as a going concern. If we do not continue as a going concern, the Company may incur additional losses, up to, and possibly exceeding, $932,000, the Company’s net joint venture investment and revolving loan balance at December 31, 2014.

F-11

2. INVESTMENTS

At December 31, 2014 and December 31, 2013, investments were classified as held-to-maturity securities. As of December 31, 2014 and 2013, all investments were in investments with maturities less than 90 days and are included in cash and cash equivalents.

3. FURNITURE AND EQUIPMENT

The components of furniture and equipment at December 31 are as follows (in thousands):

	December 31,
	2014			2013
Machinery and equipment	$	221		$	221
Furniture and fixtures		34			34
Leasehold improvements		-			-
		255			255
Less accumulated depreciation and amortization		(255	)		(252	)
Total	$	-		$	3

Depreciation and leasehold improvement amortization expenses for the years ended December 31, 2014 and 2013 were $3,000 and $11,000, respectively.

4. INCOME TAXES

The components of deferred income taxes at December 31 are as follows (in thousands):

	December 31
	2014			2013
Accruals and reserves	$	1		$	1
Valuation allowance		(1	)		(1	)
Total current		-			-
NOL, AMT and general business credit carryforwards		56,868			56,050
Difference in basis of fixed assets		3			3
Accruals and reserves		28			274
Difference in basis of intangibles		110			13
Difference in currency exchange rate		46
Valuation allowance		(57,055	)		(56,340	)
Total non current		-			-
Total deferred income taxes	$	-		$	-

F-12

ASC 740 requires that a valuation allowance be established when it is more-likely-than-not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period-to-period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, we take into account all evidence with regard to the utilization of a deferred tax asset including past earnings history, expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. Management has evaluated the available evidence about future taxable income and other possible sources of realization of deferred tax assets and has established a valuation allowance of approximately $57 million at December 31, 2014 and $56 million at December 31, 2013. The valuation allowance as of December 31, 2014 and 2013 includes approximately $2.7 million for net operating loss carry forwards that relate to stock compensation expense for income tax reporting purposes that upon realization, would be recorded as additional paid-in capital. The valuation allowance reduces deferred tax assets to an amount that management believes will more likely than not be realized.

The components of the income tax provision (benefit) are as follows (in thousands):

	Years Ended December 31
	2014			2013
Provision (benefit) for income taxes
Current	$	(400	)	$	(21	)
Deferred		-			-
Income tax provision (benefit)		(400	)		(21	)

The 2014 income tax benefit results from the Australian refundable research and development tax credit as explained in Note 7. The 2013 income tax benefit results from Arizona state income tax legislation passed in 2010 that provides for the refund of 75 percent of the 2012 Arizona state research and development tax credit for entities that would otherwise not be able to utilize their 2012 Arizona research and development tax credits to reduce 2012 Arizona state income taxes currently payable.

We have accumulated approximately $146 million in federal and $33 million in state net operating loss carryforwards (“NOLs”) and approximately $6 million of research and development and alternative minimum tax credit carryforwards. The federal NOLs expire between 2023 and 2034. The Arizona state NOL’s expire between 2015 and 2034. The availability of these NOL’s to offset future taxable income could be limited in the event of a change in ownership, as defined in Section 382 of the Internal Revenue Code.

A reconciliation of the difference between the provision (benefit) for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows for the years ended December 31, 2014 and 2013:

	Years Ended December 31
	2014			2013
Income tax provision (benefit) at statutory rate	$	(1,417	)	$	(1,333	)
State income taxes		(165	)		(138	)
Research credits		(435	)		(74	)
Expiration of state NOL		649			548
Other		252			324
Change in valuation allowance		716			652
Net provision (benefit)	$	(400	)	$	(21	)

5.	STOCKHOLDERS’ EQUITY

The number of common shares reserved for issuance under the OrthoLogic 1987 option plan was 4,160,000 shares. This plan expired during October 1997. In May 1997, our stockholders adopted a new stock option plan (the “1997 Plan”). The 1997 Plan reserved for issuance 1,040,000 shares of Common Stock. Subsequent to its original adoption, the Board of Directors and stockholders approved amendments to the 1997 Plan that increased the number of shares of common stock reserved for issuance to 4,190,000. The 1997 Plan expired in March 2007. In May 2006, our stockholders approved the 2005 Equity Incentive Plan (the “2005 Plan”) and reserved 2,000,000 shares of our common stock for issuance. Our stockholders approved the reservation of an additional 1,750,000 shares of common stock for issuance under the 2005 Plan, which increased the total shares available for grant under the 2005 Plan to 3,750,000 shares. At December 31, 2014, 495,519 shares remained available to grant under the 2005 Plan (the 1997 plan and the 2005 plan are collectively referred to as “The Plans”). The 2005 Plan expires in April 2015. Two types of options may be granted under the Plans: options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code (the “Code”) and other options not specifically authorized or qualified for favorable income tax treatment by the Code. All eligible employees may receive more than one type of option. Any director or consultant who is not an employee of the Company shall be eligible to receive only nonqualified stock options under the Plans.

F-13

The Plans provide that in the event of a takeover or merger of the Company in which 100% of the equity of the Company is purchased or a sale of all or substantially all of the Company’s assets, 75% of all unvested employee options will vest immediately and the remaining 25% will vest over the following twelve month period. If an employee or holder of stock options is terminated as a result of or subsequent to the acquisition, 100% of that individual’s stock option will vest immediately upon employment termination.

We used the Black-Scholes model with the following assumptions to determine the total fair value of $53,000 and $34,000 for options to purchase 223,000 and 255,000 shares of our common stock issued during 2014 and 2013, respectively.

	2014		2013
Risk free interest rate		1.7%		0.7%
Volatility		100%		77%
Expected term from vesting	4.2 Years		4.6 Years
Dividend yield		0%		0%

Summary

Non-cash stock compensation cost for the year ended December 31, 2014 totaled $53,000, and was recorded as a general and administrative expense in the Statement of Operations for the year ended December 31, 2014.

Non-cash stock compensation cost for the year ended December 31, 2013, totaled $34,000. In the Statement of Operations for the year ended December 31, 2013, non-cash stock compensation expense of $33,000 was recorded as a general and administrative expense and $1,000 was recorded as a research and development expense.

No options were exercised in the years ended December 31, 2014 and 2013.

At December 31, 2014, the remaining unamortized non-cash stock compensation costs totaled less than $1,000.

A summary of option activity under our stock option plans for the years ended December 31, 2014 and 2013 is as follows:

F-14

	2014							2013
						Weighted
				Weighted		average					Weighted
				average		remaining					average
	Number of			exercise		contractual term		Number of			exercise
	Options			price		(years)		Options			price

Options outstanding at the beginning of the year:		3,225,806		$	1.52				3,218,264		$	1.71
Granted		223,000		$	0.27				255,000		$	0.22
Exercised		-		$	-				-		$	-
Expired / Forfeited		(426,100	)	$	4.17				(247,458	)	$	2.65
Outstanding at end of year		3,022,706		$	1.06		4.96		3,225,806		$	1.52
Options exercisable at year-end		3,015,374		$	1.06		4.77		3,115,384		$	1.57
Options vested and expected to vest at year end		3,017,685		$	1.06		4.83		3,150,504		$	1.55

The Company had no unvested common stock share awards as of December 31, 2014 or December 31, 2013, and no common stock awards were made in 2014 or 2013.

It is the Company’s policy to issue options from stockholder approved incentive plans. However, if the options are issued as an inducement for an individual to join the Company, the Company may issue stock options outside of stockholder approved plans. The options granted to employees under stockholder approved incentive plans have a ten-year term and normally vest over a two to four-year period of service. All stock options are granted with an exercise price equal to the current market value on the date of grant and, accordingly, stock options have no intrinsic value on the date of grant. Based on the closing market price of the Company’s common stock at December 31, 2014 of $0.23, stock options exercisable or expected to vest at December 31, 2014, have intrinsic value of $41,000.

Warrants

At December 31, 2014, the Company has fully vested warrants outstanding to purchase 46,706 shares of the Company’s common stock with an exercise price of $6.39 per share, which expire in February 2016, and fully vested warrants outstanding to purchase 117,423 shares of the Company’s common stock with an exercise price of $1.91 per share, which expire in July 2016. No warrants were exercised during the years ended December 31, 2014 or 2013.

6. COMMITMENTS

Rent expense for the years ended December 31, 2014 and 2013, was $64,000 and $82,000, respectively.

In 2007, the Company entered into a lease for 17,000 square feet of space in a Tempe, Arizona office and research facility. This lease calls for monthly rental payments of $22,000, plus a proportionate share of building operating expenses and property taxes. The term of this lease was sixty months from March 1, 2008. In January of 2013, this lease was amended to extend the lease to February 28, 2015, with the rentable square feet of space reduced to 2,845 square feet and monthly rental payments of approximately $5,000 plus a proportionate share of building operating expenses and property taxes. On October 1, 2014 this lease was extended to February 29, 2016 with a monthly rental payment of approximately $5,000 plus a proportionate share of building operating expenses and property taxes.

7.	AUSTRALIAN REFUNDABLE RESEARCH & DEVELOPMENT CREDIT

In March 2014, LipimetiX Development LLC, (see Note 9 in the financial statement included in this Form 10-K) formed a wholly-owned Australian subsidiary, Lipimetix Australia Pty Ltd, to conduct Phase 1a and Phase1b/2a clinical trials in Australia. Currently Australian tax regulations provide for a refundable research and development tax credit equal to 43.5% of qualified expenditures. Subsequent to the end of its Australian tax years, Lipimetix Australia Pty Ltd intends to submit claims for a refundable research and development tax credit. The transitional Australian tax periods/years granted for Lipimetix Australia Pty Ltd end on June 30, 2014, December 31, 2014 and thereafter December 31 of each succeeding year. For the tax year ended June 30, 2014, Lipimetix Australia Pty Ltd received a refundable research and development tax credit of AUD$227,000. For the tax year ended December 31, 2014 a AUD$242,000 refundable research and development tax credit has been recorded by Lipimetix Australia Pty Ltd, as it is more likely than not that the recorded refundable research and development tax credit at December 31, 2014 will be approved and received.

F-15

8. AUTHORIZED PREFERRED STOCK

We have 2,000,000 shares of authorized preferred stock, the terms of which may be fixed by our Board of Directors. We presently have no outstanding shares of preferred stock. Our Board of Directors has the authority, without stockholder approval, to create and issue one or more series of such preferred stock and to determine the voting, dividend and other rights of holders of such preferred stock. If we raise additional funds to continue development of AEM-28 and its analogs, or operations, we may issue preferred stock. The issuance of any of such series of preferred stock may have an adverse effect on the holders of common stock.

In connection with the Tax Benefit Preservation Plan (“Benefit Plan”) dated June 24, 2014, between the Company and Computershare (formerly Bank of New York), our Board of Directors approved the designation of 1,000,000 shares of Series A Preferred Stock. The Benefit Plan and the exercise of rights to purchase Series A Preferred Stock, pursuant to the terms thereof, may delay, defer or prevent a change in control without the approval of the Board. In addition to the anti-takeover effects of the rights granted under the Benefit Plan, the issuance of preferred stock, generally, could have a dilutive effect on our stockholders. The Benefit Plan expires June 24, 2016.

9. JOINT VENTURE FOR DEVELOPMENT OF APO E MIMETIC PEPTIDE MOLECULE AEM-28 AND ANALOGS

On August 3, 2012, we entered into a Contribution Agreement with LipimetiX LLC to form a joint venture, LipimetiX Development, LLC (“JV”), to develop Apo E mimetic molecules, including AEM-28 and its analogs. The Company contributed $6 million, which included $1 million for 600,000 voting common ownership units, representing 60% ownership in the JV, and $5 million for 5,000,000 non-voting preferred ownership units, which have preferential distribution rights.

LipimetiX LLC contributed all intellectual property rights for Apo E mimetic molecules it owned and assigned its Exclusive License Agreement between the University of Alabama at Birmingham Research Foundation (“UABRF”) and LipimetiX, LLC, for the UABRF intellectual property related to Apo E mimetic molecules AEM-28 and its analogs to the JV, in return for 400,000 voting common ownership units representing 40% ownership in JV, and $378,000 in cash (for certain initial patent-related costs and legal expenses).

LipimetiX LLC was formed by the principals of Benu BioPharma, Inc. (“Benu”) and UABRF to commercialize UABRF’s intellectual property related to Apo E mimetic molecules, including AEM-28 and analogs. Benu is composed of Dennis I. Goldberg, Ph.D., Phillip M. Friden, Ph.D. and Eric M. Morrel, Ph.D. The Exclusive License Agreement, as amended, calls for payment of patent filing, maintenance and other related patent fees, as well as a royalty of 3% on Net Sales of Licensed Products during the Term of the Agreement. The Agreement terminates upon the expiration of all Valid Patent Claims within the Licensed Patents, which are currently estimated to expire between 2019 and 2034. The Agreement, as amended, also calls for annual maintenance payments of $25,000, various milestone payments of $50,000 to $500,000 and minimum royalty payments of $500,000 to $1,000,000 per year commencing on January 1 of the first calendar year following the year in which the First Commercial Sale occurs. UABRF will also receive 5% of Non Royalty Income received.

Concurrent with entering into the Contribution Agreement and the First Amendment and Consent to Assignment of Exclusive License Agreement between LipimetiX LLC, UABRF and the Company, the Company and LipimetiX LLC entered into a Limited Liability Company Agreement for JV which establishes a Joint Development Committee (“JDC”) to manage JV development activities. The JDC is composed of three members appointed by LipimetiX LLC and two members appointed by the Company. Non-development JV decisions, including the issuance of new equity, incurrence of debt, entry into strategic transactions, licenses or development agreements, sales of assets and liquidation, will be decided by a majority vote of the common ownership units.

F-16

The JV, on August 3, 2012, entered into a Management Agreement with Benu to manage JV development activities for a monthly fee of approximately $63,000 during the twenty-seven month development period, and an Accounting Services Agreement with the Company to manage JV accounting and administrative functions. The current accounting services fee is $1,000 a month. Commencing in November 2014, Benu has received a reduced monthly management fee in the amount of $35,000.

The joint venture formation was as follows ($000’s):

Patent license rights	$	1,045
Noncontrolling interests		( 667	)
Cash paid at formation	$	378

Patent license rights were recorded at their estimated fair value and are being amortized on a straight-line basis over the key patent life of eighty months.

The financial position and results of operations of the joint venture are presented on a consolidated basis with the financial position and results of operations of the Company. Intercompany transactions have been eliminated. The joint venture agreement requires profits and losses to be allocated on the basis of common ownership equity interests (60% Company / 40% noncontrolling interests). However, for the Company’s consolidated financial statement, joint venture losses were recorded on the basis of common ownership equity interests (60% Company / 40% noncontrolling interests) until common ownership equity was reduced to $0. Subsequent joint venture losses have been allocated to the preferred ownership equity (100% Company). Subsequent to March 31, 2013, all joint venture losses have been allocated to the Company. The Company has a revolving loan agreement with the joint venture to advance the joint venture funds for operations in an amount not to exceed a net (net of expected tax credits or other funds obtained) of $700,000, with the net amount due June 30, 2015. Losses incurred by the joint venture in excess of the capital accounts of the joint venture will be allocated to the Company to the extent of net outstanding advances. At December 31, 2014, outstanding advances on the revolving loan agreement totaled $500,000.

The joint venture incurred operating expenses, prior to the elimination of intercompany transactions, of $2,388,000 in 2014 and $6,235,000 for the period from August 3, 2012 (inception) to December 31, 2014, of which $2,388,000 and $5,568,000, respectively, have been allocated to the Company. The joint venture operating expenses are included in research and development expenses in the condensed consolidated statements of operations.

Neither the Company nor the noncontrolling interests have an obligation to contribute additional funds to the joint venture or to assume any joint venture liabilities or to provide a guarantee of either joint venture performance or any joint venture liability. Losses allocated to the noncontrolling interests represent an additional potential loss for the Company as the noncontrolling interests are not obligated to contribute assets to the joint venture to the extent they have a negative capital account, and depending on the ultimate outcome of the joint venture, the Company could potentially absorb all losses associated with the joint venture. From formation of the joint venture, August 3, 2012, through December 31, 2014, losses totaling $667,000 have been allocated to the noncontrolling interests. If the joint venture or Company is unable to obtain additional funding, the ability of the joint venture to continue development of AEM-28 and its analogs would be impaired as would the joint venture’s ability to continue operations. If the joint venture does not continue as a going concern, at December 31, 2014 the Company would incur an additional loss of $667,000 for the joint venture losses allocated to the noncontrolling interests.

F-17

10. CONTINGENCY – LEGAL PROCEEDINGS

In April 2009, we became aware of a qui tam complaint that was filed under seal by Jeffrey J. Bierman as Relator/Plaintiff on March 28, 2005 in the United States District Court for the District of Massachusetts against OrthoLogic and other companies that allegedly manufactured bone growth stimulation devices, including Orthofix International N.V., Orthofix, Inc., DJO Incorporated, Reable Therapeutics, Inc., the Blackstone Group, L.P., Biomet, Inc., EBI, L.P., EBI Holdings, Inc., EBI Medical Systems, Inc., Bioelectron, Inc., LBV Acquisition, Inc., and Smith & Nephew, Inc. By order entered on March 24, 2009, the court unsealed the amended complaint. The amended complaint alleges various causes of action under the federal False Claims Act and state and city false claims acts premised on the contention that the defendants improperly promoted the sale, as opposed to the rental, of bone growth stimulation devices. The amended complaint also includes claims against the defendants for, among other things, allegedly misleading physicians and purportedly causing them to file false claims and for allegedly violating the Anti-kickback Act by providing free products to physicians, waiving patients’ insurance co-payments, and providing inducements to independent sales agents to generate business. The Relator/Plaintiff is seeking civil penalties under various state and federal laws, as well as treble damages, which, in the aggregate could exceed the financial resources of the Company.

The United States Government declined to intervene or participate in the case. On September 4, 2009, the Relator/Plaintiff served the amended complaint on the Company. We sold our bone growth stimulation business in November 2003 and have had no further activity in the bone growth stimulation business since that date. We intend, in conjunction with the other defendants, to defend this matter vigorously and believe that at all times our billing practices in our bone growth stimulation business complied with applicable laws. On December 4, 2009, the Company, in conjunction with the other defendants, moved to dismiss the amended complaint with prejudice. In response to that motion, Relator/Plaintiff filed a second amended complaint. On August 17, 2010, the Company, in conjunction with the other defendants, moved to dismiss the second amended complaint with prejudice. That motion was denied by the court on December 8, 2010. On January 28, 2011, we, in conjunction with the other defendants, filed our answer to the second amended complaint. No trial date has been set. Discovery in the case is now open.

Based upon the currently available information, we believe that the ultimate resolution of this matter will not have a material effect on our financial position, liquidity or results of operations. However, because of many questions of law and facts that may arise, the outcome of this litigation is uncertain. If we are unable to successfully defer or otherwise dispose of this litigation, and the Relator/Plaintiff is awarded the damages sought, the litigation would have a material adverse effect on our financial position, liquidity and results of operations and we would not be able to continue our business as it is presently conducted.

F-18

CAPSTONE THERAPEUTICS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	March 31,			December 31,
	2015			2014
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,540		$	2,164
Other current assets		631			555
Total current assets		2,171			2,719

Patent license rights, net		627			666
Furniture and equipment, net		-			-
Total assets	$	2,798		$	3,385

LIABILITIES AND EQUITY
Current liabilities
Accounts payable		185			124
Other accrued liabilities		180			158
Total current liabilities		365			282

Equity
Capstone Therapeutics Corp. Stockholders' Equity
Common Stock $.0005 par value; 100,000,000 shares authorized; 40,885,411 shares in 2015 and 2014 issued and outstanding		20			20
Additional paid-in capital		189,314			189,268
Accumulated deficit		(186,901	)		(186,185	)
Total Capstone Therapeutics Corp. stockholders' equity		2,433			3,103
Noncontrolling interest		-			-
Total equity		2,433			3,103

Total liabilities and equity	$	2,798		$	3,385

See notes to unaudited condensed consolidated financial statements

F-19

CAPSTONE THERAPEUTICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

	Three months ended March 31,
	2015			2014

OPERATING EXPENSES
General and administrative	$	472		$	452
Research and development		350			630
Total operating expenses		822			1,082

Interest and other expenses (income), net		56			(60	)
Loss from operations before taxes		878			1,022
Income tax benefit		(162	)		-
NET LOSS		716			1,022
Less: Net Loss attributable to the noncontrolling interest		-			-

Net Loss attributable to Capstone Therapeutics Corp. stockholders	$	716		$	1,022
Per Share Information:
Net loss, basic and diluted, attributable to Capstone Therapeutic Corp. stockholders	$	0.02		$	0.02
Basic and diluted shares outstanding		40,885			40,885

See notes to unaudited condensed consolidated financial statements

F-20

CAPSTONE THERAPEUTICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Three months ended
	March 31,
	2015			2014
OPERATING ACTIVITIES
Net loss	$	(716	)	$	(1,022	)
Non cash items:
Depreciation and amortization		39			40
Non-cash stock compensation		46			28
Change in other operating items:
Other current assets		(76	)		(2	)
Accounts payable		61			165
Other accrued liabilities		22			23
Cash flows used in operating activities		(624	)		(768	)
INVESTING ACTIVITIES
Cash flows provided by investing activities		-			-
FINANCING ACTIVITIES
Cash flows provided by financing activities		-			-

NET DECREASE IN CASH AND CASH EQUIVALENTS		(624	)		(768	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		2,164			6,258
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,540		$	5,490

See notes to unaudited condensed consolidated financial statements

F-21

CAPSTONE THERAPEUTICS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

Note A.

OVERVIEW OF BUSINESS

Description of the Business

Capstone Therapeutics Corp. (the “Company”, “we”, “our” or “us”) is a biotechnology company committed to developing a pipeline of novel peptides and other molecules aimed at helping patients with under-served medical conditions. Previously, we were focused on the development and commercialization of two product platforms: AZX100 and Chrysalin (TP508). Since March 2012, we no longer have any interest in or rights to Chrysalin. In 2012 we wound down internal operations, ceased clinical development of AZX100 in dermal scarring, formerly our principal drug candidate, and moved to a more virtual operating model. In 2014, we terminated the License Agreement for AZX100 intellectual property and returned all interest in and rights to the AZX100 intellectual property to the Licensor (AzTE).

On August 3, 2012, we entered into a joint venture, LipimetiX Development, LLC, (the “JV”) to develop Apo E mimetic peptide molecule AEM-28 and its analogs. The JV has a development plan to pursue regulatory approval of AEM-28, or an analog, as treatment for Homozygous Familial Hypercholesterolemia (granted Orphan Drug Designation by FDA in 2012), Acute Pancreatitis, and other hyperlipidemic indications. The initial development plan extended through Phase 1a and 1b/2a clinical trials and was completed in the fourth quarter of 2014.

The JV received allowance from regulatory authorities in Australia permitting the JV to proceed with the planned clinical trials. The Phase 1a clinical trial commenced in Australia in April 2014 and the Phase 1b/2a clinical trial commenced in Australia in June 2014. The clinical trials for AEM-28 were randomized, double-blinded, placebo-controlled studies to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of six escalating single doses (Phase 1a in healthy patients with elevated cholesterol) and multiple ascending doses of the three highest doses from Phase 1a (Phase 1b/2a in patients with hypercholesterolemia and healthy subjects with elevated cholesterol and high Body Mass Index). The Phase 1a clinical trial consisted of 36 patients and the Phase 1b/2a consisted of 15 patients. Both clinical trials were completed in 2014 and the Medical Safety Committee, reviewing all safety-related aspects of the clinical trials, observed a generally acceptable safety profile. As first-in-man studies, the primary endpoint was safety; yet efficacy measurements analyzing pharmacodynamics yielded statistical significance in the pooled dataset favoring AEM-28 versus placebo in multiple lipid biomarker endpoints.

The JV and the Company intend to explore fundraising, partnering or licensing, to obtain additional funding to continue development activities of AEM-28 and AEM-28-02.

The Company intends to continue limiting its internal operations to a virtual operating model while monitoring and participating in the management of LipimetiX Development LLC’s AEM-28 and analogs development activities and maintaining the required level of corporate governance and reporting required to comply with Securities and Exchange Commission rules and regulations.

Description of Current Peptide Drug Candidates.

Apo E Mimetic Peptide Molecule – AEM-28 and its analogs

F-22

Apolipoprotein E is a 299 amino acid protein that plays an important role in lipoprotein metabolism. AEM-28 is a 28 amino acid mimetic of Apo E and AEM-28-02 (an analog of AEM-28) is a 28 amino acid mimetic of Apo E (with an aminohexanoic acid group and a phospholipid) and both contain a domain that anchors into a lipoprotein surface while also providing the Apo E receptor binding domain, which allows clearance through the heparan sulfate proteoglycan (HSPG) receptors (Syndecan-1) in the liver. AEM-28 and AEM-28-02, as Apo E mimetics, have the potential to restore the ability of these atherogenic lipoproteins to be cleared from the plasma, completing the reverse cholesterol transport pathway, and thereby reducing cardiovascular risk. This is an important mechanism of action for AEM-28 and AEM-28-02. For patients that lack LDL receptors (Homozygous Familial Hypercholesterolemia-HoFH), have acute pancreatitis, or have hypercholesterolemia, AEM-28 or AEM-28-02 may provide a therapeutic solution. Our joint venture has an Exclusive License Agreement with the University of Alabama at Birmingham Research Foundation for AEM-28 and certain of its analogs.

Company History

In February 2006, we purchased certain assets and assumed certain liabilities of AzERx, Inc. Under the terms of the transaction, we acquired an exclusive license for the core intellectual property relating to AZX100, an anti-fibrotic peptide. In 2014, we terminated the License Agreement with AzTE (Licensor) for the core intellectual property relating to AZX100 and returned all interest in and rights to the AZX100 intellectual property to the Licensor.

On August 3, 2012, we entered into a joint venture, LipimetiX Development, LLC, (see Note B below) to develop Apo E mimetic peptide molecule AEM-28 and analogs.

In these notes, references to “we”, “our”, “us”, the “Company”, “Capstone Therapeutics”, “Capstone”, and “OrthoLogic” refer to Capstone Therapeutics Corp. References to our joint venture or “JV”, refer to LipimetiX Development, LLC.

Financial Statement Presentation and Management’s Plan

The accompanying financials statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The report from our Independent Registered Public Accounting Firm on our consolidated financial statements for the year ended December 31, 2014 included in our Annual Report on Form 10-K expressed substantial doubt about the Company’s ability to continue as a going concern.

F-23

Management has determined that the Company will require additional capital above its current cash and working capital balances to further develop AEM-28 and its analogs or continue operations. Accordingly, the Company has reduced its development activities. The Company’s corporate strategy is to raise funds by possibly engaging in a strategic/merger transaction, or conducting a private or public offering of debt or equity securities for capital. These financial statements do not include any adjustments that might result from the outcome of the uncertainty of the Company successfully implementing its corporate strategy.

In the opinion of management, the unaudited condensed interim financial statements include all adjustments necessary for the fair presentation of our financial position, results of operations, and cash flows, and all adjustments were of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the complete fiscal year. The financial statements include the consolidated results of Capstone Therapeutics Corp. and our 60% owned subsidiary, LipimetiX Development, LLC. Intercompany transactions have been eliminated.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations, although we believe that the disclosures herein are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014. Information presented as of December 31, 2014 is derived from audited financial statements.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires that management make a number of assumptions and estimates that affect the reported amounts of assets, liabilities, and expenses in our financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s assumptions regarding current events and actions that may impact us in the future, actual results may differ from these estimates and assumptions.

Legal and Other Contingencies

As discussed in Part II, Item 1 of this Form 10-Q under the heading “Legal Proceedings” and in Note C, “Contingency – Legal Proceedings” in Notes to Financial Statements, the Company is subject to legal proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss with respect to loss contingencies. However, the outcome of legal proceedings and claims brought against the Company are subject to significant uncertainty. Therefore, if the qui tam legal matter, as described in Note C, is resolved against the Company in excess of management’s expectations, the Company’s financial statements, its development plans and financial viability, could be materially adversely affected.

Joint Venture Accounting

The Company entered into a joint venture in which it has contributed $6,000,000, and the noncontrolling interests have contributed certain patent license rights. Neither the Company nor the noncontrolling interests have an obligation to contribute additional funds to the joint venture or to assume any joint venture liabilities or to provide a guarantee of either joint venture performance or any joint venture liability. The financial position and results of operations of the joint venture are presented on a consolidated basis with the financial position and results of operations of the Company. Intercompany transactions have been eliminated. Joint venture losses were recorded on the basis of common ownership equity interests (60% Company / 40% noncontrolling interests) until common ownership equity was reduced to $0. Subsequent joint venture losses are being allocated to the preferred ownership equity (100% Company). Subsequent to March 31, 2013, all joint venture losses are being allocated to the Company. The Company has a revolving loan agreement with the joint venture to advance the joint venture funds for operations in an amount not to exceed a net (net of expected tax credits or other funds obtained) of $700,000, with the net amount due June 30, 2015. Losses incurred by the joint venture in excess of the capital accounts of the joint venture will be allocated to the Company to the extent of net outstanding advances.

F-24

Cash and Cash Equivalents

At March 31, 2015, cash and cash equivalents included money market accounts.

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40)(“Update”): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, providing a requirement under U.S. GAAP for an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued; and if those conditions exist, to disclose that fact, the conditions and the potential effects on the entity’s ability to meet its obligations. The Update will be effective for an annual period ending after December 15, 2016, with early application permitted . We have not elected early application. However, if additional funds are not obtained to continue the development of AEM-28 or its analogs, or operations, it will impair our ability to continue as a going concern. If we do not continue as a going concern, the Company may incur additional losses, up to, and possibly exceeding, $932,000, the Company’s net joint venture investment and revolving loan balance at March 31, 2015.

Note B. JOINT VENTURE FOR DEVELOPMENT OF APO E MIMETIC PEPTIDE MOLECULE AEM-28 AND ANALOGS

F-25

The joint venture formation was as follows ($000’s):

Patent license rights	$	1,045
Noncontrolling interests		( 667	)
Cash paid at formation	$	378

Patent license rights were recorded at their estimated fair value and are being amortized on a straight-line basis over the key patent life of eighty months.

The financial position and results of operations of the joint venture are presented on a consolidated basis with the financial position and results of operations of the Company. Intercompany transactions have been eliminated. The joint venture agreement requires profits and losses to be allocated on the basis of common ownership equity interests (60% Company / 40% noncontrolling interests). However, for the Company’s consolidated financial statement, joint venture losses were recorded on the basis of common ownership equity interests (60% Company / 40% noncontrolling interests) until common ownership equity was reduced to $0. Subsequent joint venture losses have been allocated to the preferred ownership equity (100% Company). Subsequent to March 31, 2013, all joint venture losses have been allocated to the Company. The Company has a revolving loan agreement with the joint venture to advance the joint venture funds for operations in an amount not to exceed a net (net of expected tax credits or other funds obtained) of $700,000, with the net amount due June 30, 2015. Losses incurred by the joint venture in excess of the capital accounts of the joint venture will be allocated to the Company to the extent of net outstanding advances. At March 31,2015, outstanding advances on the revolving loan agreement totaled $700,000.

The joint venture incurred net operating expenses, prior to the elimination of intercompany transactions, of $200,000 in the three month period ended March 31, 2015 and $6,435,000 for the period from August 3, 2012 (inception) to March 31, 2015, of which $200,000 and $5,768,000, respectively, have been allocated to the Company. The joint venture operating expenses are included in research and development expenses in the condensed consolidated statements of operations.

Neither the Company nor the noncontrolling interests have an obligation to contribute additional funds to the joint venture or to assume any joint venture liabilities or to provide a guarantee of either joint venture performance or any joint venture liability. Losses allocated to the noncontrolling interests represent an additional potential loss for the Company as the noncontrolling interests are not obligated to contribute assets to the joint venture to the extent they have a negative capital account, and depending on the ultimate outcome of the joint venture, the Company could potentially absorb all losses associated with the joint venture. From formation of the joint venture, August 3, 2012, through December 31, 2014, losses totaling $667,000 have been allocated to the noncontrolling interests. If the joint venture or Company is unable to obtain additional funding, the ability of the joint venture to continue development of AEM-28 and its analogs would be impaired as would the joint venture’s ability to continue operations. If the joint venture does not continue as a going concern, at March 31, 2015 the Company would incur an additional loss of $667,000 for the joint venture losses allocated to the noncontrolling interests.

Note C. CONTINGENCY – LEGAL PROCEEDINGS - SUBSEQUENT EVENT

In April 2009, we became aware of a qui tam complaint that was filed under seal by Jeffrey J. Bierman as Relator/Plaintiff on March 28, 2005 in the United States District Court for the District of Massachusetts (the “Court”) against OrthoLogic and other companies that manufactured bone growth stimulation devices, including Orthofix International N.V., Orthofix, Inc., DJO Incorporated, Reable Therapeutics, Inc., the Blackstone Group, L.P., Biomet, Inc., EBI, L.P., EBI Holdings, Inc., EBI Medical Systems, Inc., Bioelectron, Inc., LBV Acquisition, Inc., and Smith & Nephew, Inc. By order entered on March 24, 2009, the court unsealed the amended complaint. The amended complaint alleges various causes of action under the federal False Claims Act and state and city false claims acts premised on the contention that the defendants improperly promoted the sale, as opposed to the rental, of bone growth stimulation devices. The amended complaint also includes claims against the defendants for, among other things, allegedly misleading physicians and purportedly causing them to file false claims and (except for OrthoLogic) for allegedly violating the Anti-kickback Act by providing free products to physicians, waiving patients’ insurance co-payments, and providing inducements to independent sales agents to generate business. The Relator/Plaintiff is seeking civil penalties under various state and federal laws, as well as treble damages, which, in the aggregate could exceed the financial resources of the Company.

F-26

The United States Government declined to intervene or participate in the case. On September 4, 2009, the Relator/Plaintiff served the amended complaint on the Company. We sold our bone growth stimulation business in November 2003 and have had no further activity in the bone growth stimulation business since that date. We have, in conjunction with the other defendants, defended this matter vigorously and believe that at all times our billing practices in our bone growth stimulation business complied with applicable laws. On December 4, 2009, the Company, in conjunction with the other defendants, moved to dismiss the amended complaint with prejudice. In response to that motion, Relator/Plaintiff filed a second amended complaint. On August 17, 2010, the Company, in conjunction with the other defendants, moved to dismiss the second amended complaint with prejudice. That motion was denied by the court on December 8, 2010. On January 28, 2011, we, in conjunction with the other defendants, filed our answer to the second amended complaint. No trial date has been set. Discovery in the case has closed.

In May 2015, the Company and Relator/Plaintiff entered into an agreement to settle the qui tam action against the Company for a one-time payment of $50,000. A Stipulation and Motion requesting the Court to approve the parties’ Settlement Agreement has been filed and the Court’s decision is pending. The Company has accrued this $50,000 estimated liability at March 31, 2015. Based upon the currently available information, we believe that the ultimate resolution of this matter will not have a material effect on our financial position, liquidity or results of operations. However, until the Court approves the parties’ Settlement Agreement and dismisses OrthoLogic, the outcome of this litigation is uncertain. If we are unable to successfully defend or otherwise dispose of this litigation, and the Relator/Plaintiff is awarded the damages sought, the litigation would have a material adverse effect on our financial position, liquidity and results of operations and we would not be able to continue our business as it is presently conducted.

Note D. Australian Refundable Research & Development Credit

In March 2014, LipimetiX Development LLC, (see Note B) formed a wholly-owned Australian subsidiary, Lipimetix Australia Pty Ltd, to conduct Phase 1a and Phase1b/2a clinical trials in Australia. Currently Australian tax regulations provide for a refundable research and development tax credit equal to 45% of qualified expenditures. Subsequent to the end of its Australian tax years, Lipimetix Australia Pty Ltd intends to submit claims for a refundable research and development tax credit. The transitional Australian tax periods/years granted for Lipimetix Australia Pty Ltd end on June 30, 2014, December 31, 2014 and thereafter December 31 of each succeeding year. For the tax year ended June 30, 2014, Lipimetix Australia Pty Ltd received a refundable research and development tax credit of AUD$227,000. At December 31, 2014 a AUD$242,000 development tax credit was recorded by Lipimetix Australia Pty Ltd, and at March 31, 2015, an additional AUD$205,000 has been accrued, as it is more likely than not that the recorded refundable research and development tax credit will be approved and received. At March 31, 2015, and December 31, 2014, AUD$447,000 (US$ 340,000), and AUD$242,000 (US$196,000), respectively, have been accrued and are included in other current assets in our condensed consolidated balance sheets.

F-27

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The estimated expenses in connection with the issuance and distribution of the securities covered by this registration statement, all of which will be paid by the registrant, are as follows:

SEC registration fee (actual)	$	1,162
Blue sky fees	$		*
Printing and engraving expenses	$		*
Legal fees and expenses	$		*
Accounting fees and expenses	$		*
Miscellaneous	$		*
Total	$		*

* To be provided by amendment.

Item 14. Indemnification of Directors and Officers.

Section 145 of the General Corporation Law of the State of Delaware, or DGCL, empowers a Delaware corporation to indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation) by reason of the fact that such person is or was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

A Delaware corporation may indemnify past or present officers and directors of such corporation or of another corporation or other enterprise at the former corporation’s request, in an action by or in the right of the corporation to procure a judgment in its favor under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in defense of any action referred to above, or in defense of any claim, issue or matter therein, the corporation must indemnify such person against the expenses (including attorneys’ fees) which such person actually and reasonably incurred in connection therewith. Section 145 further provides that any indemnification shall be made by the corporation only as authorized in each specific case upon a determination that indemnification of such person is proper because he has met the applicable standard of conduct (i) by the stockholders, (ii) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, (iii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iv) by independent legal counsel in a written opinion, if there are no such disinterested directors, or if such disinterested directors so direct. Section 145 further provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

We have directors’ and officers’ insurance which provides for indemnification of our officers and directors and certain other persons against liabilities and expenses incurred by any of them in certain stated proceedings and under certain stated conditions. We have also entered into separate indemnification agreements with each of our directors and certain officers that may require us, among other things, to indemnify such directors and officers against certain liabilities that may arise by reason of their status or service as directors or officers to the maximum extent permitted under Delaware law.

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Our restated certificate of incorporation provides that indemnification shall be available to the fullest extent permitted by the DGCL for all current or former directors or officers.

Item 15. Recent Sale of Unregistered Securities

NONE

Item 16. Exhibits.

See the Exhibit Index following the “Signatures” page in this registration statement, which Exhibit Index is incorporated herein by reference.

Item 17. Undertakings.

(b) The undersigned registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

(3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;

(4) that, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(i)

each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

(ii)

each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however , that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; and

II-2

(iii)

each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however , that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use;

(5) that, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)

Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii)

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii)

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of an undersigned registrant; and

(iv)

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

II-3

(c) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 15 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tempe, State of Arizona, on June 26, 2015.

CAPSTONE THERAPEUTICS CORP.

By: /s/ John M. Holliman, III

John M. Holliman, III

Executive Chairman

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John M. Holliman, III and Les M. Taeger, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and to sign any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and any other regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the date indicated.*

Signature		Title
/s/ John M. Holliman, III		Executive Chairman (Principal Executive Officer),
John M. Holliman, III		Chairman of the Board and Director

/s/ Les M. Taeger		Senior Vice President and Chief Financial Officer
Les M. Taeger		(Principal Financial and Accounting Officer)

/s/ Eric W. Fangmann		Director
Eric W. Fangmann.

/s/ Frederic J. Feldman		Director
Frederic J. Feldman, Ph.D.

/s/ Elwood D. Howse, Jr.		Director
Elwood D. Howse, Jr.

*Each of the above signatures is affixed as of June 26, 2015.

S-1

CAPSTONE THERAPEUTICS CORP.

(the “Company”)

EXHIBIT INDEX TO

FORM S-1 REGISTRATION STATEMENT

THE FOLLOWING EXHIBITS ARE FILED WITH OR INCORPORATED BY REFERENCE IN THIS REGISTRATION STATEMENT:

Exhibit No.	Description	Incorporated by Reference To :	Filed Herewith:
1.1	Form of Underwriting Agreement (***)
2.1	Certificate of Conversion of Lipimetix Development, LLC, effective as of June 23, 2015		X
2.2	Plan of Conversion of Lipimetix Development, LLC, effective as of June 23, 2015		X
3.1	Second Amended and Restated Certificate of Incorporation, as amended through June 22, 2015, including the Amended and Restated Certificate of Designation of Series A Preferred Stock, executed June 24, 2014		X
3.2	Bylaws of the Company	Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed with the SEC on June 23, 2015
3.3	Certificate of Incorporation of Lipimetix Development, Inc.		X
	Bylaws of Lipimetix Development, Inc.		X
4.1	Class A Warrant Agreement dated February 24, 2006, between OrthoLogic Corp. and PharmaBio Development Inc. (d/b/a NovaQuest)	Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 3, 2006
4.2	Class A Warrant Agreement dated June 30, 2006 by and between OrthoLogic Corp. and PharmaBio Development Inc.	Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 6, 2006
4.3	Amended and Restated Class B Warrant Agreement dated February 24, 2006, and amended and restated as of June 30, 2006, between OrthoLogic Corp. and PharmaBio Development Inc. (d/b/a NovaQuest) (asterisks located within exhibit denote information that has been redacted pursuant to a request for confidential treatment filed with the SEC)	Exhibit 4.4 to the Company’s Amendment No. 1 to Registration Statement on Form 8-A/A filed with the SEC on May 25, 2010.
4.4	Tax Benefit Preservation Plan, dated as of June 24, 2014, by and between Capstone Therapeutics Corp. and Computershare Inc., as rights agent.	Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2014
4.5	Form of Warrant (***)
5.1	Opinion of Quarles & Brady LLP (***)
10.1	Form of Indemnification Agreement (*)	Exhibit 10.16 to the Company’s Amendment No. 2 to Registration Statement on Form S-1 (No. 33-47569) filed with the SEC on January 25, 1993

E-1

10.2	1997 Stock Option Plan of the Company, as amended and approved by the stockholders (1)	Exhibit 4.3 to the Company’s Registration Statement on Form S-8 filed with the SEC on March 2, 2005
10.3	Form of Incentive Stock Option Grant Letter for use in connection with the Company’s 1997 Stock Option Plan (**)	Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 4, 2005
10.4	Form of Non-qualified Stock Option Grant Letter for use in connection with the Company’s 1997 Stock Option Plan (**)	Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 19, 2006
10.5	Director Compensation Plan, effective June 10, 2005 (1)	Exhibit 10.2 to the Company’s Quarterly Report Form 10-Q for the quarterly period ended June 30, 2005 filed with the SEC on August 9, 2005
10.6	Employment Agreement dated January 10, 2006 between the Company and Les M. Taeger (1)	Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 11, 2006 (the “January 11 th 8-K”)
10.7	Intellectual Property, Confidentiality and Non-Competition Agreement between the Company and Les M. Taeger dated January 10, 2006 (1)	Exhibit 10.2 to the January 11 th 8-K
10.8	Common Stock and Warrant Purchase Agreement by and between OrthoLogic Corp. and PharmaBio Development Inc., dated February 24, 2006.	Exhibit 10.1 to the Company’s Registration Statement on Form S-3 filed with the SEC on April 13, 2006 (April 2006 S-3)
10.9	Registration Rights Agreement by and between OrthoLogic Corp. and PharmaBio Development Inc., dated February 24, 2006	Exhibit 4.8 to the Company’s Amendment No. 1 to Registration Statement on Form 8-A/A filed with the SEC on May 25, 2010.
10.10	Registration Rights Agreement by and between OrthoLogic Corp., AzERx, Inc., and Certain Shareholders, dated February 27, 2006	Exhibit 10.3 to the Company’s April 2006 S-3
10.11	Amended and Restated License Agreement dated February 23, 2006 by and between OrthoLogic Corp. and Arizona Science Technology Enterprises, LLC	Exhibit 10.5 to the Company’s Registration Statement on Form S-3 filed with the SEC on April 25, 2006
10.12	2005 Equity Incentive Plan (2005 Plan) (1)	Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2006
10.13	Form of Incentive Stock Option Grant Letters for Grants under the 2005 Plan (**)	Exhibit 10.1 to the Company’s Report on Form 10-Q for the quarterly period ended June 30, 2006, filed on August 8, 2006 (“June 2006 10-Q”)
10.14	Form of Non-Qualified Stock Options Grant Letter for Grants under the 2005 Plan (**)	Exhibit 10.2 to the Company’s June 2006 10-Q
10.15	Form of Restricted Stock Grant Letters for Grants under the 2005 Plan (**)	Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2006
10.16	Amendment to Employment Agreement dated January 10, 2006 between OrthoLogic Corp. and Les Taeger (1)	Exhibit 10.3 to the Company’s June 2006 10-Q

E-2

10.17	Contribution Agreement by and among LipimetiX, LLC, Capstone Therapeutics Corp., LipimetiX Development, LLC, The UAB Research Foundation, Dennis I. Goldberg, Ph.D., Philip M. Friden, Ph.D., Eric Morrell, Ph.D., G. M. Anantharamaiah, Ph.D., Palgunachari Mayakonda, Ph.D., Frederick Meyer, Ph.D., Michael Webb, and Jeffrey Elton, Ph.D., effective as of August 3, 2012.	Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed with the SEC on August 10, 2012
10.18	Limited Liability Company Agreement of LipimetiX Development, LLC, by and among LipimetiX Development, LLC, Capstone Therapeutics Corp., and the other members and managers party thereto, effective as of August 3, 2012.	Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed with the SEC on August 10, 2012
10.19	First Amendment and Consent to Assignment of Exclusive License Agreement by and among The UAB Research Foundation, LipimetiX, LLC and LipimetiX Development, LLC, dated as of August 3, 2012.	Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed with the SEC on August 10, 2012
10.20	Management Agreement by and among LipimetiX Development, LLC, Benu BioPharma, Inc., Dennis I. Goldberg, Ph.D., Phillip M. Friden, Ph.D., and Eric M. Morrel, Ph.D., effective as of August 3, 2012.	Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed with the SEC on August 10, 2012
10.21	Accounting Services Agreement by and among LipimetiX Development, LLC and Capstone Therapeutics Corp., effective as of August 3, 2012	Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed with the SEC on August 10, 2012
10.22	Escrow Agreement by and among Capstone Therapeutics Corp., LipimetiX Development, LLC dated as of August 3, 2012	Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed with the SEC on August 10, 2012
10.23	Exclusive License Agreement between the UAB Research Foundation and LipimetiX LLC dated August 26, 2011	Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed with the SEC on August 10, 2012
10.24	Second Amendment to Exclusive License Agreement between the UAB Research Foundation and LipimetiX, LLC, last signed on January 26, 2015	Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 30, 3015
10.25	Capstone Therapeutics Corp. Joint Venture Bonus Plan	Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2012, filed with the SEC on November 8, 2012
10.26	Accounting Services Agreement Amendment #1, dated August 23, 2013	Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013, filed with the SEC on November 12, 2013

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10.27	Capstone Therapeutics Corp. 2015 Equity Incentive Compensation Plan	Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 22, 2015
10.28	Form of Incentive Stock Option Grant Letter for Grants under the 2015 Equity Incentive Plan	Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 22, 2015
10.29	Form of Non-Qualified Stock Option Grant Letter for Grants to Directors under the 2015 Equity Incentive Plan	Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on June 22, 2015
10.30	Form of Non-Qualified Stock Option Grant Letter for Grants to Consultants under the 2015 Equity Incentive Plan	Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on June 22, 2015
10.31	Stockholders Agreement, dated as of June 23, 2015, by and among Lipimetix Development, Inc. and the stockholders named therein		X
23.1	Consent of Moss Adams LLP (***)
23.2	Consent of Quarles & Brady LLP (***)
24.1	Powers of Attorney	(Included on the Signature Page)

* Capstone Therapeutics Corp. has entered into separate indemnification agreements with each of its current directors and executive officers that differ only in party names and dates. Pursuant to the instructions accompanying Item 601 of Regulation S-K, Capstone has filed the form of such indemnification agreement.

** Capstone Therapeutics from time to time issues stock options to its employees, officers and directors pursuant to its 2005 and 2015 Stock Option Plans, as amended. The incentive stock option grant letters and non-qualified stock option grant letters that evidence these issuances differ only in such terms as the identity of the recipient, the grant date, the number of securities covered by the award, the price(s) at which the recipient may acquire the securities and the vesting schedule. Pursuant to the instructions accompanying Item 601 of Regulation S-K, Capstone has filed the form of such incentive stock option grant letter and non-qualified stock option grant letter.

*** To be provided by amendment.

(1) Management Contract or compensatory plan or arrangement

E-4

EXHIBIT 2.1

STATE OF DELAWARE

CERTIFICATE OF CONVERSION

FROM A DELAWARE LIMITED LIABILITY COMPANY

TO A DELAWARE CORPORATION

PURSUANT TO SECTION 265 OF THE

DELAWARE GENERAL CORPORATE LAW

This Certificate of Conversion (the “ Certificate ”) is being duly executed and filed by LipimetiX Development, LLC., a Delaware limited liability company (the “ Company ”), to convert the Company from a Delaware limited liability corporation to a Delaware corporation pursuant to Section 265 of the General Corporation Law of the State of Delaware (the “ DGCL ”).

(1)

The jurisdiction where the Company first formed is Delaware.

(2)

The jurisdiction immediately prior to filing this Certificate is Delaware.

(3)

The date the Company was formed is July 31, 2012.

(4)

The name of the Company immediately prior to filing this Certificate is “LipimetiX Development, LLC.”

(5)

The name of the Corporation as set forth in the Certificate of Incorporation is “LipimetiX Development, Inc.”

IN WITNESS WHEREOF , the undersigned, being duly authorized to sign on behalf of the Company, has executed this Certificate this 23rd day of June, 2015.

LIPIMETIX DEVELOPMENT, LLC,

a Delaware limited liability company

By: /s/ Dennis I. Goldberg, Ph.D.

Name: Dennis I. Goldberg, Ph.D.

Its: President

EXHIBIT 2.2

PLAN OF CONVERSION

This Plan of Conversion (this “ Plan ”) is adopted effective as of June 23, 2015, by LipimetiX Development, LLC, a Delaware limited liability company (the “ Converting Entity ”), to set forth the terms of the Converting Entity’s conversion into LipimetiX Development, Inc. (the “ Resulting Entity ”), pursuant to the provisions of Section 265 of the Delaware General Corporation Law (the “ DGCL ”).

BACKGROUND

A. The Converting Entity is a limited liability company duly organized and existing under, and subject to the jurisdiction of the laws of the State of Delaware. The Converting Entity’s address is 5 Commonwealth Rd., Suite 2A, Natick, Massachusetts 01760 . The outstanding capitalization of the Converting Entity consists of 1,000,000 Common Units and 5,000,000 Preferred Units (collectively, the “ Equity Interests ”).

B. The Resulting Entity will be a corporation duly organized and existing under, and subject to the jurisdiction of, the laws of the State of Delaware. The Resulting Entity’s address is 5 Commonwealth Rd., Suite 2A, Natick, Massachusetts 07160.

C. The Managers of the Converting Entity deem it advisable, and in the best interests of the Converting Entity, that the Converting Entity be converted into the Resulting Entity as set forth in Section 265 of the DGCL (the “ Conversion ”).

D. The Managers and members of the Converting Entity have approved the Plan and the Conversion by written consent duly adopted in accordance with the laws of the State of Delaware.

TERMS AND CONDITIONS OF THE CONVERSION

1. Resulting Entity . At the Effective Time (as defined below), the Converting Entity will be converted into the Resulting Entity pursuant to Section 265 of the DGCL, and will be governed by and subject to the laws of the State of Delaware. At the Effective Time, (i) the title to all property owned by the Converting Entity will continue to be owned in the same manner by the Resulting Entity without reversion or impairment, (ii) the Resulting Entity will continue to be subject to all the liabilities of the Converting Entity, and (iii) the membership interests in the Converting Entity will be converted into shareholdings in the Resulting Entity as set forth in Section 3 of this Plan.

2. Certificate of Incorporation and Bylaws .

(A) The Certificate of Incorporation in the form attached hereto as Exhibit A (the “ Certificate ”) will be the certificate of incorporation of the Resulting Entity and, upon the filing of a Certificate of Conversion (the “ Certificate of Conversion ”) with the Delaware Secretary of State, the Converting Entity will be converted into the Resulting Entity.

(B) The initial bylaws of the Resulting Entity (the “ Bylaws ”) will be the Bylaws in the form attached as Exhibit B .

3. Terms of Conversion .

(A) At the Effective Time, (i) each of the outstanding Common Units of the Converting Entity (other than the Common Units owned by The UAB Research Foundation (“ UAB ”)) will, automatically and without further act of the Converting Entity, the Resulting Entity or of any holder thereof, be extinguished and converted into one share of Class A-1 Common Stock of the Resulting Entity, with the rights, privileges and preferences set forth in the Certificate, (ii) each of the outstanding Common Units of the Converting Entity owned by UAB will, automatically and without further act of the Converting Entity, the Resulting Entity or of any holder thereof, be extinguished and converted into one share of Class A-2 Common Stock of the Resulting Entity, with the rights, privileges and preferences set forth in the Certificate, and (iii) each of the outstanding Preferred Units will automatically and without further act of the Converting Entity, the Resulting Entity or of any holder thereof be extinguished and converted into one share of Series A Preferred Stock of the Resulting Entity, with rights, privileges and preferences set forth in the Certificate. At the Effective Time, each certificate, if any, evidencing ownership of one or more membership interests of the Converting Entity shall entitle the holder of such certificate to receive, upon surrender to the Resulting Entity, that number of shares of Class A-1 Common Stock, Class A-2 Common Stock or Series A Preferred Stock, respectively, of the Resulting Entity that the holder of such certificate is entitled to receive as set forth in this section.

(B) At the Effective Time, any outstanding rights to acquire Common Units of the Converting Entity upon the conversion of any outstanding indebtedness of the Company under the Unsecured Loan Agreement, dated as of September 1, 2014, by and between the Converting Entity and Capstone Therapeutics Corp. (the “ Loan Agreement ”), will, automatically and without further act of the Converting Entity, the Resulting Entity or of any other party to the Loan Agreement, be extinguished and converted into the right to receive the same number of shares of Class A-1 Common Stock of the Resulting Entity as the number of Common Units that the holder thereof would be entitled to receive under the Loan Agreement. Without limiting the foregoing, the holder of the conversion rights under the Loan Agreement shall have the right to receive one share of Class A-1 Common Stock of the Resulting Entity for each Common Unit of the Converting Entity that such holder would otherwise have been entitled to receive pursuant to the terms and conditions of the Loan Agreement.

(C) At and after the Effective Time, all of the issued and outstanding Units held immediately prior to the Effective Time, will be cancelled and cease to exist.

4. Termination and Abandonment Amendment . At any time before the Effective Time and for any reason, this Plan may be terminated and abandoned by the Managers of the Converting Entity.

5. Tax Reporting . For federal and state income tax purposes the conversion of the Converting Entity into the Resulting Entity shall be reported as having occurred in the following manner: First, the Converting Entity shall be treated as having contributed all of its assets and assigned all of its liabilities to the Resulting Entity in exchange for the capital stock of the Resulting Entity pursuant to Section 351 of the Internal Revenue Code of 1986, as amended; and second, immediately thereafter, the Converting Entity shall be treated as distributing such capital stock of the Resulting Entity in a liquidating distribution of the Converting Entity. The parties shall report the transaction in a manner consistent with such characterization for all federal and state income tax purposes. Such reporting is intended to be in compliance with U.S. Internal Revenue Service Revenue Ruling 2004-59.

6. Effective Time of Conversion . The Effective Time of Conversion will be the date and time on which a Certificate of Conversion, substantially in the form set forth in Exhibit C , has been duly filed in the office of the Secretary of State of Delaware, after satisfaction of the requirements of the applicable laws of Delaware.

7. Miscellaneous .

(A) Applicable Law . THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF DELAWARE AS APPLIED TO AGREEMENTS ENTERED INTO AMONG DELAWARE RESIDENTS.

[signature page follows]

The undersigned hereto has adopted this Plan of Conversion as of the day and year first above written.

LIPIMETIX DEVELOPMENT, LLC. ,

a Delaware limited liability company

By: /s/ Dennis I. Goldberg, Ph.D.

Its: President

EXHIBIT 3.1

SECOND AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

CAPSTONE THERAPEUTICS CORP.

As amended through June 22, 2015

1. Name . The name of the corporation is:

Capstone Therapeutics Corp. (the “Corporation”)

2. Registered Agent . The name and address of the initial registered office and registered agent of the Corporation is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.

3. Purpose . The purpose for which this Corporation is organized is the transaction of any or all lawful activity for which corporations may be organized under the General Corporation Law of Delaware, as it may be amended from time to time.

4. Election of Directors . Elections of directors at an annual or special meeting of stockholders shall be by written ballot unless the Bylaws of the Corporation shall otherwise provide. Advance notice of stockholder nominations for the election of directors shall be given in the manner provided in the Bylaws of the Corporation.

5. Authorized Capital . The total number of shares of stock which the Corporation shall have authority to issue is 152,000,000 shares, consisting of 150,000,000 shares of common stock having a par value of $.0005 per share (the “Common Stock”) and 2,000,000 shares of preferred stock having a par value of $.0005 per share (the “Preferred Stock”).

The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of Article 5, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.

The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:

(a) The number of shares constituting that series and the distinctive designation of that series;

(b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;

(c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

(d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;

(e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;

(f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

(g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and

(h) Any other relative rights, preferences and limitations of that series.

5A. Common Stock Put Right .

(a)	Definitions. For purposes of this Article 5A, the following terms shall have the following meanings:

(1)	“Available Cash” means Net Liquid Assets less Commitments and Contingencies, each calculated as of the Record Date.

(2)	“Change of Control Transaction” means the occurrence of any of the following:

(a) any “person” or “group” (as such terms are defined in Section 13(d) and Section 14(d) of the Securities Exchange Act of 1934, as amended, or any successor provisions (the “Exchange Act”)) becomes the “beneficial owner” (as determined in accordance with Rule 13d-3 under the Exchange Act), directly or indirectly, of shares of voting securities of the Corporation representing 50% or more of the total voting power of all outstanding voting securities of the Corporation;

(b) the sale, lease, license, exchange or other transfer (in one or a series of transactions) of all or substantially all of the assets of the Corporation; or

(c) any merger, consolidation, share exchange, business combination or similar transaction in which the Corporation is not the surviving entity or in which the holders of the outstanding shares of stock of the Corporation immediately prior to such transaction hold, immediately after such transaction, less than 51% of the total voting power of the outstanding securities of the surviving or resulting entity in such transaction.

(3)	“Commencement Date” means the date specified by the Corporation as the first date on which the Put Rights may be exercised, as set forth in the Put Notice.

(4)

“Commitments and Contingencies” means the amount of funds necessary to satisfy all obligations and liabilities of the Corporation, including contingent obligations and liabilities, which are then outstanding or would arise if the Corporation was liquidated, as determined by the Board of Directors in its sole and absolute discretion.

(5)

“Depositary” means the bank or trust company having combined capital, surplus and undivided profits of at least $500,000,000 which is appointed by the Corporation to serve as agent for the purpose of receiving certificates representing shares of Common Stock upon exercise of the Put Right, and distributing the Put Price therefor.

(6)	“Letter of Transmittal” means the notice delivered to each holder of record as of the Record Date, containing instructions as to how to exercise the Put Right, including a form of written notice for exercising the Put Right.

(7)	“Material Transaction” means a partnering, development or any other transaction, whether commercial, investment or otherwise, that the Board of Directors in its sole and absolute discretion determines is material to the Corporation.

(8)	“Net Liquid Assets” means the sum of the Corporation’s cash and cash equivalents and the liquidation value of the Corporation’s other disposable assets, as determined by the Board of Directors in its sole and absolute discretion.

(9)	“Put Notice” means the written notice from the Corporation to each holder of record of Common Stock on the Record Date, notifying such holder of the Put Right, the Commencement Date, the Closing Date, and the Put Price, and providing a Letter of Transmittal.

(10)	“Put Period” means the period beginning on the Commencement Date and ending on the Closing Date.

(11)	“Put Price” means an amount equal to 90% of Available Cash divided by the number of Puttable Shares.

(12)	“Put Right” means the right to require the Corporation to redeem all or any portion of such holder’s Puttable Shares at a cash price equal to the Put Price in accordance with and subject to the terms and conditions of this Article 5A.

(13)	“Puttable Shares” means all shares of Common Stock outstanding as of the Record Date.

(14)	“Record Date” means June 30, 2011.

(15)	“Closing Date” means July 31, 2011, or such later date as may be designated by the Board of Directors.

(b)	Each holder of record of Common Stock on the Record Date shall have a Put Right beginning on the Commencement Date and ending on the Closing Date.

(c)	With respect to each Puttable Share as to which the Put Right has been properly exercised, the Corporation shall pay the holder an amount equal to 90% of Available Cash divided by the number of shares of Common Stock outstanding as of the Record Date.

(d)

If, after the Record Date, the Corporation shall effect a subdivision or combination of the Common Stock into a greater or lesser number of shares of Common Stock, or declare a dividend on the Common Stock payable in shares of Common Stock, then in each such case the Put Price shall be adjusted by multiplying the Put Price in effect immediately prior to such event by the ratio of the number of shares of Common Stock outstanding immediately prior to such event to the number of shares of Common Stock outstanding immediately after such event. If the Corporation shall at any time declare or pay any dividend on Common Stock in cash, securities or other property other than Common Stock, the Put Price shall be reduced by the per share value of such dividend. The Board of Directors shall determine in its sole and absolute discretion the value of any non-cash dividend for purposes of calculating any adjustment to the Put Price.

(e)

As soon as practicable following the Record Date, the Corporation shall mail the Put Notice to each holder of record of Puttable Shares to such holder’s address as it appears on the stock register of the Corporation. A holder of Puttable Shares may exercise his, her or its Put Right by delivering to the Depositary a duly and properly completed Letter of Transmittal during the Put Period, specifying, among other things, the number of Puttable Shares as to which the Put Right is being exercised and accompanied by a certificate or certificates representing such shares, with all necessary endorsements and stock powers.

(f)

As soon as practicable following the Closing Date, the Corporation shall deposit with the Depositary funds in an amount sufficient to pay the Put Price for all Puttable Shares as to which Put Rights have been properly exercised. Each holder of Puttable Shares who has properly exercised the Put Right shall be paid the Put Price for each such share as soon as practicable following the Closing Date. In the event that a holder of Puttable Shares exercises his, her or its Put Right with respect to less than all of the Puttable Shares held by such holder, a new certificate representing the shares of Common Stock as to which the Put Right was not exercised will be issued to the holder of such shares as soon as practicable after the Closing Date.

(g)	Notwithstanding any other provision of this Article 5A, the Corporation’s obligation to pay the Put Price in respect of Puttable Shares as to which Put Rights have been properly exercised shall be subject to the satisfaction of each of the following conditions:

(1)	compliance with all applicable federal and state securities laws, including without limitation the filing with the U.S. Securities and Exchange Commission of an issuer tender offer statement on Schedule TO and Schedule 13E-3, to the extent required;

(2)	compliance with all other applicable laws, including Delaware General Corporation Law §160 relating to repurchases of shares;

(3)	availability of sufficient cash to pay the Put Price in respect of all Puttable Shares as to which Put Rights have been properly exercised;

(4)	absence of any court or administrative order or proceeding prohibiting or seeking the prohibition of the consummation of the redemption of Puttable Shares hereunder; and

(5)	less than 100% of the Puttable Shares having been put pursuant to the Put Rights.

If any of the above conditions are not satisfied, the Corporation shall not be obligated to pay the Put Price in respect of Puttable Shares as to which Put Rights have been properly exercised.

(h)	Notwithstanding any other provision of this Article 5A, the Put Rights will terminate immediately upon the occurrence of any of the following:

(1)	the Corporation enters into a Material Transaction;

(2)	the Corporation consummates a Change of Control Transaction;

(3)	the Board of Directors approves a plan of dissolution or liquidation at any time prior to the redemption of Puttable Shares hereunder, whether before or after the Commencement Date; or

(4)	the Put Rights are exercised with respect to 100% of the Puttable Shares, in which case the Board of Directors shall promptly thereafter propose a plan of dissolution or liquidation to stockholders in accordance with the Delaware General Corporation Law.

(i)

Provided that all conditions to the payment of the Put Price have been satisfied and the Put Rights have not otherwise terminated in accordance with this Article 5A, the Corporation shall pay the Put Price in respect of all, and not less than all, Puttable Shares as to which Put Rights have been properly exercised.

6. Classification and Terms of Directors . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors consisting of not less than three directors nor more than nine directors, the exact number of directors to be determined from time to time by resolution adopted by the Board of Directors. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The terms of the initial Class I directors shall terminate on the date of the first annual meeting of stockholders held after the effective date of this Article 6; the term of the initial Class II directors shall terminate on the date of the second annual meeting of stockholders held after the effective date of this Article 6; and the term of the initial Class III directors shall terminate on the date of the third annual meeting of stockholders held after the effective date of this Article 6. At each annual meeting of stockholders beginning with the first annual meeting held after the effective date of this Article 6, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional directors of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining terms of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors, howsoever resulting (including without limitation newly created directorships), may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected.

Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation or the resolution or resolutions adopted by the Board of Directors pursuant to Article Five applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article Six unless expressly provided by such terms.

7. Removal of Directors . Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of a majority of the outstanding shares of the Corporation then entitled to vote generally in the election of directors, considered for purposes of this Article 7 as one class.

8. Director Liability . 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 from which the director derived an improper personal benefit. No amendment to or repeal of this Section 8 shall 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.

9. Action by Consent of Stockholders . Any action required or permitted to be taken by the stockholders must be effected at a duly called and noticed annual or special meeting of such stockholders and may not be effected by any consent in writing by such stockholders.

10. Compromise of Debts . 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 jurisdiction 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 8 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 direct. 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 a 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.

11. Special Voting Requirements .

(a) Except as set forth in Section (b) of this Article 11, the affirmative vote of the holders of two-thirds of the outstanding stock of the Corporation entitled to vote shall be required for:

(1) any merger or consolidation to which the Corporation, or any of its subsidiaries, and an Interested Person (as hereinafter defined) are parties;

(2) any sale or other disposition by the Corporation, or any of its subsidiaries, of all or substantially all of its assets to an Interested Person;

(3) any purchase or other acquisition by the Corporation, or any of its subsidiaries, of all or substantially all of the assets or stock of an Interested Person; and

(4) any other transaction with an Interested Person which requires the approval of the stockholders of the Corporation under the GCL, as in effect from time to time.

(b) The provisions of Section (a) of this Article 11 shall not be applicable to any transaction described therein if such transaction is approved by resolution of the Corporation’s Board of Directors, provided that a majority of the members of the Board of Directors voting for the approval of such transaction are Continuing Directors. The term “Continuing Director” shall mean any member of the Board of Directors of the Corporation who is not the Interested Person, and not an affiliate, associate, representative or nominee of the Interested Person or of such an affiliate or associate that is involved in the relevant transaction, and (A) was a member of the Board of Directors prior to the date that the person, firm or corporation, or any group thereof, with whom such transaction is proposed, became an Interested Person or (B) whose initial election as a director of the Corporation succeeds a Continuing Director or is a newly created directorship, and in either case was recommended by a majority vote of the Continuing Directors then in office.

(c) As used in this Article 11, the term “Interested Person” shall mean any person, firm or corporation, or any group thereof, acting or intending to act in concert, including any person directly or indirectly controlling or controlled by or under direct or indirect common control with such person, firm or corporation or group, which owns of record or beneficially, directly or indirectly, five percent (5%) or more of any class of voting securities of the Corporation.

12. Special Meetings . Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time only by the President, or the Board of Directors pursuant to a resolution approved by a majority of the whole Board of Directors, or at the request in writing of shareholders owning at least 35% of the capital stock issued and outstanding and entitled to vote. Special meetings of the stockholders may not be called by any other person or persons. Business transacted at any special meeting of the stockholders shall be limited to the purposes stated in the notice of such meeting.

13. Bylaws . In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized by majority vote of the whole Board of Directors to adopt, repeal, alter, amend or rescind the Bylaws of the Corporation. In addition, the Bylaws of the Corporation may be adopted, repealed, altered, amended, or rescinded by the affirmative vote of two-thirds of the outstanding stock of the Corporation entitled to vote thereon; provided, if the Continuing Directors, as defined in Article 11 shall by a majority vote of such Continuing Directors have adopted a resolution approving the amendment or repeal proposal and have determined to recommend it for approval by the holders of stock entitled to vote thereon, then the vote required shall be the affirmative vote of the holders of at least a majority of the outstanding shares entitled to vote thereon.

14. Certificate . The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute and the Certificate of Incorporation, and all rights conferred on stockholders herein are granted subject to the reservations in Article 14. Provided, however, the affirmative vote of the holders of at least two-thirds of the voting power of the outstanding stock of the Corporation entitled to vote thereon, shall be required to alter, amend, or adopt any provision inconsistent with or repeal Articles 4, 6, 7, 9, 11, 12 and 13 and this Article 14; provided, if the Continuing Directors, as defined in Article 11 shall by a majority vote of such Continuing Directors have adopted a resolution approving the amendment or repeal proposal and have determined to recommend it for approval by the holders of stock entitled to vote thereon, then the vote required shall be the affirmative vote of the holders of at least a majority of the outstanding shares entitled to vote thereon.

AMENDED AND RESTATED

CERTIFICATE OF DESIGNATION

SERIES A PREFERRED STOCK

CAPSTONE THERAPEUTICS CORP.

The undersigned, being the Executive Chairman of Capstone Therapeutics Corp. (the “Corporation”), a corporation organized and existing under the Delaware General Corporation Law, hereby certifies that, pursuant to the provisions of Section 151 of the Delaware General Corporation Law, the Board of Directors of the Corporation duly adopted the following resolution on June 24, 2014, which resolution remains in full force and effect as of the date hereof:

Series A Preferred Stock

RESOLVED, that the Board of Directors of the Corporation, pursuant to authority vested in it by the provisions of the Corporation’s Certificate of Incorporation (the “ Charter ”), hereby amends restates the powers, designations, preferences and relative, participating, optional or other rights of the Series A Preferred Stock of the Corporation, and the qualifications, limitations or restrictions thereof, as follows:

The first series of Preferred Stock, par value $.0005 per share, of the Corporation shall be, and hereby is, designated “Series A Preferred Stock” (the “ Series A Shares ”), and the number of shares constituting such series shall be One Million (1,000,000). The relative rights and preferences of the Series A Shares shall be as follows:

Section A. Dividends and Distributions .

(1) Subject to the prior and superior rights of the holders of any shares of any series of stock prior and superior to the Series A Shares with respect to dividends, the holders of Series A Shares, in preference to the holders of Common Stock, par value $.0005 per share, of the Corporation (the “ Common Stock ”) and of any other junior stock, shall be entitled to receive, when and as declared by the Board of Directors, out of any funds lawfully available therefor, cash dividends thereon, payable quarterly, from the date of issuance thereof, upon the tenth days of January, April, July and October in each year (each such date being referred to herein as a “ Quarterly Dividend Payment Date ”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a Series A Share, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $0.10 or (b) subject to the provisions for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend or distribution payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any Series A Share. In the event the Corporation shall at any time after the first issuance of any Series A Share (i) declare any dividend on the Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amounts to which holders of Series A Shares were entitled immediately prior to such event under clause (a) and clause (b) of the preceding sentence shall be adjusted by multiplying each such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(2) The Corporation shall declare a dividend or distribution on the Series A Shares as provided in paragraph (1) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend or distribution payable in shares of Common Stock); provided , however , that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.10 per share on the Series A Shares shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date; and provided further , that nothing contained in this paragraph (2) shall be construed so as to conflict with any provision relating to the declaration of dividends contained in the Charter.

(3) Dividends shall begin to accrue and be cumulative on outstanding Series A Shares from the Quarterly Dividend Payment Date next preceding the date of issue of such Series A Shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of Series A Shares entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the Series A Shares in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of Series A Shares entitled to receive payment of a dividend or distribution declared thereon.

Section B. Redemption . The Series A Shares are not redeemable.

Section C. Liquidation, Dissolution or Winding Up . In the event of the voluntary or involuntary liquidation of the Corporation the “preferential amount” that the holders of the Series A Shares shall be entitled to receive out of the assets of the Corporation shall be $0.10 per share plus all accrued and unpaid dividends thereon.

(1) Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (upon liquidation, dissolution or winding up) to the Series A Shares unless, prior thereto, the holders of Series A Shares shall have received $0.10 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “ Series A Liquidation Preference ”). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of Series A Shares unless, prior thereto, the holders of shares of common stock shall have received an amount per share (the “ Common Adjustment ”) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in paragraph (3) of this Section C to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the “ Adjustment Number ”). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding Series A Shares and Common Stock, respectively, holders of Series A Shares and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to one with respect to the Series A Shares and Common Stock, on a per share basis, respectively.

(2) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, that rank on a parity with the Series A Shares, then all such available assets shall be distributed ratably to the holders of the Series A Shares and the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then any such remaining assets shall be distributed ratably to the holders of Common Stock.

(3) In the event the Corporation shall at any time after the first issuance of any Series A Share (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section D. Sinking Fund . The Preferred Shares shall not be entitled to the benefit of any sinking fund for the redemption or purchase of such shares.

Section E. Conversion .

(1) Subject to paragraph (2) of this Section E, the Preferred Shares shall not be convertible.

(2) In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the Series A Shares shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of Series A Shares shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event, and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section F. Voting Rights .

(1) The holders of Series A Shares shall have no voting rights except as provided by Delaware statutes or by paragraph (2) of this Section F.

(2) So long as any Series A Shares shall be outstanding, and in addition to any other approvals or consents required by law, without the consent of the holders of 66- 2/3% of the Series A Shares outstanding as of a record date fixed by the Board of Directors, given either by their affirmative vote at a special meeting called for that purpose, or, if permitted by law, in writing without a meeting:

(i) The Corporation shall not sell, transfer or lease all or substantially all the properties and assets of the Corporation; provided , however , that nothing herein shall require the consent of the holders of Series A Shares for or in respect of the creation of any mortgage, pledge, or other lien upon all or any part of the assets of the Corporation.

(ii) The Corporation shall not effect a merger or consolidation with any other corporation or corporations unless as a result of such merger or consolidation and after giving effect thereto holders of Series A Shares are entitled to receive a per share amount and type of consideration equal to 100 times the per share amount and type of consideration received by holders of shares of Common Stock, or (1) either (A) the Corporation shall be the surviving corporation or (B) if the Corporation is not the surviving corporation, the successor corporation shall be a corporation duly organized and existing under the laws of any state of the United States of America or the District of Columbia, and all obligations of the Corporation with respect to the Series A Shares shall be assumed by such successor corporation, (2) the Series A Shares then outstanding shall continue to be outstanding and (3) there shall be no alteration or change in the designation or the preferences, relative rights or limitations applicable to outstanding Series A Shares prejudicial to the holders thereof.

(iii) The Corporation shall not amend, alter or repeal any of the provisions of its Certificate of Incorporation in any manner that adversely affects the relative rights, preferences or limitations of the Series A Shares or the holders thereof.

Section G. Certain Restrictions .

(1) Whenever quarterly dividends or other dividends or distributions payable on the Series A Shares as provided in Section A are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on Series A Shares outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (as to dividends) to the Series A Shares;

(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (as to dividends) with the Series A Shares, except dividends paid ratably on the Series A Shares and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (as to dividends) to the Series A Shares; provided , however , that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation, ranking junior (as to dividends) to the Series A Shares; and

(iv) purchase or otherwise acquire for consideration any Series A Shares, or any shares of stock ranking on a parity (as to dividends) with the Series A Shares, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(2) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (1) of this Section G, purchase or otherwise acquire such shares at such time and in such manner.

Section H. Fractional Shares . The Corporation may issue fractions and certificates representing fractions of Series A Shares in integral multiples of 1/100th of a Series A Share, or in lieu thereof, at the election of the Board of Directors of the Corporation at the time of the first issue of any Series A Shares, evidence such fractions by depositary receipts, pursuant to an appropriate agreement between the Corporation and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all rights, privileges and preferences to which they would be entitled as beneficial owners of Series A Shares. In the event that fractional Series A Shares are issued, the holders thereof shall have all the rights provided herein for holders of full Series A Shares in the proportion that such fraction bears to a full share.

IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Designation of Series A Preferred Stock to be signed as of this 22nd day of June, 2015.

CAPSTONE THERAPEUTICS CORP.

By: /s/ John M. Holliman, III

Name: John M. Holliman, III

Title: Executive Chairman

EXHIBIT 3.3

CERTIFICATE OF INCORPORATION

LIPIMETIX DEVELOPMENT, INC.

FIRST: The name of this corporation is LipimetiX Development, Inc. (the “ Corporation ”).

SECOND: The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 2,000,000 shares of Common Stock, $.00001 par value per share (“ Common Stock ”), 1,920,000 of which shall be designated Class A-1 Common Stock and 80,000 of which shall be designated Class A-2 Common Stock; and (ii) 10,000,000 shares of Preferred Stock, $.00001 par value per share (“ Preferred Stock ”).

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

A. COMMON STOCK

1. General . The Class A-1 Common Stock and Class A-2 Common Stock shall be identical in all respects, except as to dividends and distributions on liquidation as set forth in Section A.3 below, and shall vote together as one class. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

2. Voting . The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

3. Dividends; Distributions upon Liquidation .

(a) The holders of Common Stock will be entitled to receive such dividends as the Board of Directors of the Corporation may declare from time to time from funds legally available therefor, subject to any preferential dividend rights of the Preferred Stock as described in Section B below. Any dividends declared or payable with respect to the Common Stock shall be payable pro rata to the holders of the Common Stock based on the number of shares of Common Stock held by each such holder; provided , however , that all amounts in excess of One Hundred Thousand Dollars ($100,000) paid to any holder of Class A-2 Common Stock pursuant to Sections 5.8, 5.9 and 5.11 of that certain Exclusive License Agreement dated August 26, 2011, between The UAB Research Foundation and LipimetiX, LLC, a Delaware limited liability company, as amended on August 3, 2012 and December 15, 2014, and as amended from time to time (such excess amounts being the “ Excess Payments ”) shall be taken into account for, and shall reduce on a dollar-for-dollar basis, the dividends that would otherwise be payable to the holders of Class A-2 Common Stock hereunder.

(b) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder, and any other series of Preferred Stock entitled to participate therein; provided , however , that all Excess Payments not already offset against dividends otherwise payable to the holders of Class A-2 Common Stock pursuant to Section A.3.(a) above shall be taken into account for, and shall reduce on a dollar-for-dollar basis, the distributions that would otherwise be payable to the holders of Class A-2 Common Stock hereunder.

B. PREFERRED STOCK

The Board of Directors is hereby expressly authorized to provide, out of the unissued shares of preferred stock, for one or more series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers, if any, of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.

5,000,000 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “ Series A Preferred Stock ” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “sections” or “subsections” in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth.

1. Dividends . From and after the date of the issuance of any shares of Series A Preferred Stock, the Corporation shall not declare, pay or set aside any dividends on shares of the Common Stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series A Preferred Stock then outstanding shall have previously received, or simultaneously receive, aggregate dividends on each outstanding share of Series A Preferred Stock in an amount at least equal to the Series A Original Issue Price (the “ Dividend Preferential Payment ”). The “ Series A Original Issue Price ” shall mean $1.00 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock. Once the Dividend Preferential Payment has been paid in full, the holders of the Series A Preferred Stock shall not be entitled to receive any further dividends or liquidating distributions pursuant to Section 2.1 hereof, and the Corporation shall not declare, pay or set aside any dividends on the shares of Series A Preferred Stock.

2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales .

2.1 Preferential Payments to Holders of Series A Preferred Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the Series A Original Issue Price, less any dividends paid with respect to such share pursuant to Section B.1. above (the amount payable pursuant to this sentence is hereinafter referred to as the “ Series A Liquidation Amoun t”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1 , the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution to the holders of the Series A Preferred Stock in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.2 Payments to Holders of Common Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment in full of the Series A Liquidation Amount, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock as set forth in Section A.3.(b) above and any other series of Preferred Stock entitled to participate therein.

2.3 Deemed Liquidation Events .

2.3.1 Definition . Each of the following events shall be considered a “Deemed Liquidation Event ” unless the holders of at least fifty percent (50%) of the outstanding shares of Series A Preferred Stock elect otherwise by written notice sent to the Corporation at least five (5) days prior to the effective date of any such event:

(a) a merger or consolidation in which

(i) the Corporation is a constituent party or

(ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

(b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

2.3.2 Effecting a Deemed Liquidation Event .

(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “ Merger Agreement ”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 .

(b) In the event of a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(ii) or 2.3.1(b) , if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Series A Preferred Stock no later than the ninetieth (90 th ) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Series A Preferred Stock, and (iii) if the holders of at least fifty percent (50%) of the then outstanding shares of Series A Preferred Stock so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation) , together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “ Available Proceeds ”), on the one hundred fiftieth (150 th ) day after such Deemed Liquidation Event, to redeem all outstanding shares of Series A Preferred Stock at a price per share equal to the Series A Liquidation Amount. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series A Preferred Stock, the Corporation shall ratably redeem each holder’s shares of Series A Preferred Stock to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. Prior to the distribution or redemption provided for in this Subsection 2.3.2(b) , the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event.

2.3.3 Amount Deemed Paid or Distributed . The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity.

2.3.4 Allocation of Escrow and Contingent Consideration . In the event of a Deemed Liquidation Event pursuant to Subsection 2.3.1(a)(i) , if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “ Additional Consideration ”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “ Initial Consideration ”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 2.3.4 , consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Initial Consideration.

3. Voting .

3.1 General . Except as specifically set forth herein (including Subsection 3.2 below) or as otherwise required by applicable law, the shares of the Series A Preferred Stock shall not entitle the holders of such shares to vote on matters brought to the stockholder for a vote.

3.2 Series A Preferred Stock Protective Provisions . At any time when shares of Series A Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class:

(a) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent to any of the foregoing;

(b) amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation;

(c) create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock, or increase the authorized number of shares of Series A Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock;

(d) (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock in respect of any such right, preference or privilege, or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in respect of any such right, preference or privilege; or

(e) increase or decrease the authorized number of directors constituting the Board of Directors.

4. Redemption .

4.1 Mandatory Redemption . In the event that the holders of the Series A Preferred then outstanding shall at any time have received aggregate dividends in an amount per share equal to the Series A Original Issue Price, the Preferred Stock may be redeemed at the election of the Corporation (a “ Mandatory Redemption ”) out of funds lawfully available therefor at a price equal to $.001 per share (the “ Mandatory Redemption Price ”).

4.2 Optional Redemption Upon Liquidity Trigger Event . In the event of a Liquidity Trigger Event (as defined below), the Corporation shall send a written notice to each holder of Series A Preferred Stock no later than the ninetieth (90th) day after the Liquidity Trigger Event (the “ Notice of Trigger Event ”) advising such holders of their right pursuant to the terms of this Section 4 to require the redemption of such shares of Series A Preferred Stock as set forth herein (a “ Liquidity Event Redemption ”). If the holders of at least fifty percent (50%) of the then outstanding shares of Series A Preferred Stock so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after receipt of the Notice of Trigger Event, the Corporation shall use the Net Cash Proceeds (as defined below) received by the Corporation as part of such Liquidity Trigger Event, to the extent permitted by Delaware law governing distributions to stockholders (the “ Available Redemption Proceeds ”), to redeem that number of shares of Series A Preferred Stock equal to the largest whole number (the “ Redemption Shares ”) determined by dividing the Available Redemption Proceeds by the Series A Liquidation Amount, and disregarding any fractional shares. The redemption price for each of the Redemption Shares to be redeemed pursuant hereto shall be the Series A Liquidation Amount (the “ Liquidity Event Redemption Price ”, and together with the Mandatory Redemption Price, the “ Redemption Price ”). As used herein, the term “ Liquidity Trigger Event ” shall mean either of the following (except to the extent that such events constitute a Deemed Liquidation Event): (i) the sale or issuance of any equity or debt securities of the Corporation, or any other incurrence of indebtedness by the Corporation, that results in Net Cash Proceeds of at least $1,000,000; or (ii) the sale, license, or other disposition of any of the assets or property of the Corporation that results in Net Cash Proceeds of at least $1,000,000. As used herein, the term “ Net Cash Proceeds ” shall mean the aggregate cash proceeds received by the Corporation as a result of the Liquidity Trigger Event, less the costs and expenses of the Corporation incurred in connection with such Liquidity Trigger Event.

4.3 Redemption Notice . The Corporation shall send written notice of the Mandatory Redemption or the Liquidity Event Redemption, as applicable (the “ Redemption Notice ”), to each holder of record of Series A Preferred Stock not less than 40 days prior to the date for such redemption (the " Redemption Date "). Each Redemption Notice shall state:

(a) the number of shares of Series A Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;

(b) the Redemption Date and the Redemption Price; and

(c) that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Series A Preferred Stock to be redeemed.

4.4 Surrender of Certificates; Payment . On or before the applicable Redemption Date, each holder of shares of Series A Preferred Stock to be redeemed on such Redemption Date, shall surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof.

4.5 Rights Subsequent to Redemption . If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of Series A Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that the certificates evidencing any of the shares of Series A Preferred Stock so called for redemption shall not have been surrendered, all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificate or certificates therefor.

5. Redeemed or Otherwise Acquired Shares . Any shares of Series A Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred.

6. Waiver . Any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of at least fifty percentage (50%) of the shares of Series A Preferred Stock then outstanding.

7. Notices . Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Series A Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

FIFTH: The name and mailing address of the incorporator is as follows:

Name: Dennis I. Goldberg, Ph.D.

Mailing Address: 5 Commonwealth Rd., Suite 2A, Natick,

Massachusetts 07160

SIXTH: Subject to any additional vote required by the Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

SEVENTH: Subject to any additional vote required by the Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

EIGHTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

NINTH: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

TENTH: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Tenth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.

Any repeal or modification of the foregoing provisions of this Article Tenth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

ELEVENTH: To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers, managers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

Any amendment, repeal or modification of the foregoing provisions of this Article Eleventh shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.

TWELFTH: The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “ Excluded Opportunity ” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of any holder of Series A Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, or any person serving as a director or manager of the Corporation at the request of such Holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “ Covered Persons ”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.

* * *

I, the undersigned, as the sole incorporator of the Corporation, have signed this Certificate of Incorporation on June 23, 2015.

By: /s/ Dennis I. Goldberg, Ph.D.

Dennis I. Goldberg, Ph.D.

Sole Incorporator

BYLAWS

LIPIMETIX DEVELOPMENT, INC.

ARTICLE I

STOCKHOLDERS

Section 1.1. Annual Meetings . An annual meeting of stockholders shall be held for the election of directors at such date, time and place, and in such manner, either within or without the State of Delaware, as may be designated by resolution of the Board of Directors from time to time, and as permitted by law. Any other proper business may be transacted at the annual meeting.

Section 1.2. Special Meetings . Special meetings of stockholders for any purpose or purposes may be called at any time by the President or any director, and shall be called by the President or Secretary at the request in writing of stockholders owning more than 20% of the capital stock of the Corporation issued and outstanding and entitled to vote.

Section 1.3. Notice of Meetings . Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given in a manner as permitted by law and shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the Certificate of Incorporation, these Bylaws or the Stockholders Agreement by and between the Corporation and the stockholders, dated as of the date hereof, as the same may be amended from time to time (the “Stockholders Agreement”), the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. If via electronic transmission, such notice shall be deemed to be given upon transmission and shall be valid when in a form of electronic transmission to which the stockholder has consented, and as permitted by law. Notwithstanding the foregoing, with respect to the matters set forth in Section 4.1 of the Stockholders Agreement, the provisions thereof shall apply instead of the foregoing, and Consent of the Stockholders shall have the meaning set forth therein.

Section 1.4. Adjournments . Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 1.5. Quorum . Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the presence in person, by proxy or as otherwise permitted by law, of the holders of shares of stock having at least 50% of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided in Section 1.4 of these Bylaws until a quorum shall attend. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

Section 1.6. Organization . Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the Chief Executive Officer, or in his absence by the President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The chairman of the meeting shall announce at the meeting of stockholders the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote.

Section 1.7. Voting; Proxies . Except as otherwise provided by the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by him which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by delivering a proxy in accordance with applicable law bearing a later date to the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by law, need not be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at such meeting. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by law, the Certificate of Incorporation, the Stockholders Agreement (including Sections 4.1 and 4.2 thereof) or these Bylaws, be decided by the vote of the holders of shares of stock present in person or by proxy having a majority of the votes entitled to vote thereon.

Section 1.8. Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting; (2) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (3) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 1.9. List of Stockholders Entitled to Vote . The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting; or (ii) during ordinary business hours, at the Corporation’s principal office, or electronically, which method shall be determined by the Board of Directors, which shall be specified in the notice of the meeting. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Upon the willful neglect or refusal of the directors to produce such a list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

Section 1.10. Action By Consent of Stockholders . Unless otherwise restricted by the Certificate of Incorporation or the Stockholders Agreement, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents, setting forth the action so taken, shall be signed or electronically transmitted by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered (by hand, by certified or registered mail, return receipt requested or by electronic transmission) to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of minutes of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

ARTICLE II

BOARD OF DIRECTORS

Section 2.1. Number; Qualifications . The Board of Directors shall consist of five directors. Directors need not be stockholders.

Section 2.2. Election: Resignation: Removal: Vacancies . The Board of Directors shall initially consist of the persons named as directors by the incorporator, and each director so elected shall hold office until the first annual meeting of stockholders or until his successor is elected and qualified. At the first annual meeting of stockholders and at each annual meeting thereafter, the stockholders shall elect directors each of whom shall hold office for a term of one year or until his successor is elected and qualified. Any director may resign at any time upon written notice or by electronic transmission to the Corporation. Any newly created directorship or any vacancy occurring in the Board of Directors for any cause may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by a plurality of the votes cast at a meeting of stockholders, and each director so elected shall hold office until the expiration of the term of office of the director whom he has replaced or until his successor is elected and qualified.

Section 2.3. Meetings . Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine, and if so determined notices thereof need not be given. The Board of Directors shall have at least four (4) meetings per calendar year and, unless otherwise agreed to by at least three (3) directors, including one of the directors selected by Capstone Therapeutics Corp. pursuant to the Stockholders Agreement (a “Capstone Director”), each such meeting shall be at least sixty (60) days apart.

Section 2.4. Calling Meetings. Meetings of the Board of Directors shall be held on the call of any three directors (with at least one of such directors being a Capstone Director) upon at least five (5) days’ written notice (if the meeting is to be held in person) or one (1) day’s written notice (if the meeting is to be held by telephone communications or video conference) to the directors, or upon such shorter notice as may be approved by four (4) directors. Any director may waive such notice as to himself. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

Section 2.5. Telephonic Meetings Permitted . Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Bylaw shall constitute presence in person at such meeting.

Section 2.6. Quorum: Vote Required for Action . At all meetings of the Board of Directors at least three (3) of the directors, including at least one (1) Capstone Director, shall constitute a quorum for the transaction of business. Except in cases in which the Certificate of Incorporation or these Bylaws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 2.7. Organization . Meetings of the Board of Directors shall be presided over by the President, or in his absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

Section 2.8. Action by Consent of Directors . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing or by electronic transmission, and such consent is filed with the minutes of proceedings of the Board of Directors or such committee.

ARTICLE III

COMMITTEES

Section 3.1. Committees . The Board of Directors may, by resolution passed by a majority of the whole Board of Directors and approved by Stockholders owning a majority in amount of the capital stock of the Corporation issued and outstanding and entitled to vote appoint one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee.

Section 3.2. Committee Rules . Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these Bylaws.

ARTICLE IV

OFFICERS

Section 4.1. Executive Officers; Election; Qualifications; Term of Office; Resignation; Removal; Vacancies . The Board of Directors shall elect a President and Secretary, and it may, if it so determines, choose a Chairman of the Board from among its members. The Board of Directors may also choose a Chief Executive Officer, one or more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. Each such officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding his election, and until his successor is elected and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice or electronic transmission to the Corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. Any number of offices may be held by the same person. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting.

Section 4.2. Powers and Duties of Executive Officers . The officers of the Corporation shall have such powers and duties in the management of the Corporation as may be prescribed in a resolution by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his duties.

ARTICLE V

STOCK

Section 5.1. Certificates . Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation certifying the number of shares owned by him in the Corporation. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates . The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

ARTICLE VI

INDEMNIFICATION

Section 6.1. Right to Indemnification . The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such person.

Section 6.2. Non-Exclusivity of Rights . The rights conferred on any person by this Article VI shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

Section 6.3. Amendment or Repeal . Any repeal or modification of the foregoing provisions of this Article VI shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

ARTICLE VII

MISCELLANEOUS

Section 7.1. Fiscal Year . The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.

Section 7.2. Seal . The corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors.

Section 7.3. Waiver of Notice of Meetings of Stockholders, Directors and Committees . Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice.

Section 7.4. Interested Directors; Quorum . No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

Section 7.5. Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time.

Section 7.6. Amendment of Bylaws . Except as otherwise provided in the Certificate of Incorporation or the Stockholders Agreement, these Bylaws may be altered or repealed, and new bylaws made, by the Board of Directors only with the approval of stockholders owning a majority in amount of the capital stock of the Corporation issued and outstanding and entitled to vote. Except as otherwise provided in the Certificate of Incorporation or the Stockholders Agreement, Stockholders owning a majority in amount of the capital stock of the Corporation issued and outstanding and entitled to vote may make additional bylaws and may alter and repeal any bylaws whether adopted by them or otherwise.

EXHIBIT 10.31

STOCKHOLDERS AGREEMENT

among

LIPIMETIX DEVELOPMENT, INC.

and

THE STOCKHOLDERS NAMED HEREIN

Dated as of June 23, 2015

LIPIMETIX DEVELOPMENT, INC.

STOCKHOLDERS AGREEMENT

THIS STOCKHOLDERS AGREEMENT (this “ Agreement ”) is made and entered into as of June 23, 2015 by and among LipimetiX Development, Inc., a Delaware corporation (the “ Company ”), Capstone Therapeutics Corp., a Delaware corporation (“ CAPS ”), each of the stockholders listed on the signature page hereto as the LX Stockholders (collectively, the “ LX Stockholders ”), and The UAB Research Foundation (“ UABRF ”), and any subsequent stockholders of the Company who become parties to this Agreement pursuant to the terms hereof (each a “ Stockholder ” and, collectively, the “ Stockholders ”).

WITNESSETH:

WHEREAS, immediately prior to the execution hereof, LipimetiX Development, LLC, a Delaware limited liability company (the “ Converting Entity ”), converted into the Company pursuant to Section 265 of the Delaware General Corporation Law (the “ DGCL ”) by filing a Certificate of Conversion dated as of June 23, 2015.

WHEREAS, the parties desire to enter into this Agreement to govern certain of their respective rights, duties and obligations as Stockholders.

NOW, THEREFORE, in consideration of the covenants and agreements contained herein, the parties agree as follows:

AGREEMENT:

In consideration of the foregoing and the mutual promises contained in this Agreement, the parties agree as follows:

1. Definitions .

1.1 Defined Terms . As used in this Agreement:

“ Accounting Services Agreement ” means that certain Accounting Services Agreement by and between the Company and CAPS dated as of August 3, 2012.

“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person; provided that no securityholder of the Company shall be deemed an Affiliate of any other securityholder solely by reason of any investment in the Company. For the purpose of this definition, the term “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“ Allocation Ratio ” means with respect to any Stockholder the fraction (a) the numerator of which is the number of outstanding Common Shares owned by such Stockholder and (b) the denominator of which is the number of then outstanding shares of Common Shares.

“ Benu Management Agreement ” means that certain Management Agreement by and between the Company and Benu BioPharma, Inc., dated as of August 3, 2012.

“ Board ” means the board of directors of the Company.

“ Business Day ” means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close.

“ Bylaws ” means the Bylaws of the Company, as amended from time to time.

“ Capital Stock ” means (a) Common Shares (whether now outstanding or hereafter issued in any context), (b) shares of Series A Preferred Stock (whether now outstanding or hereafter issued in any context), (c) shares of any Other Stock, or (d) any option, warrant or right to receive any Common Shares, Series A Preferred Stock or Other Stock other than options issued under the Company’s stock option plan(s) in effect from time to time (but any Common Shares, Series A Preferred Stock or Other Stock issued upon exercise of such options shall be Capital Stock).

“ CAPS Majority Holders ” means the holders of a majority of the Common Shares held by CAPS and/or any of its Permitted Transferees.

“ CAPS Stockholders ” means CAPS and each of its Permitted Transferees holding Common Shares.

“ Certificate of Incorporation ” means the Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware and in effect as of the date of this Agreement, as amended from time to time, including amendments made through a certificate of designations filed with the Secretary of State of the State of Delaware.

“ Change of Control ” means: (a) the sale of all or substantially all of the consolidated assets of the Company and the Company Subsidiaries, if any, to a Third party Purchaser; (b) a sale resulting in no less than a majority of the Common Shares being held by a Third party Purchaser; or (c) a merger, consolidation, recapitalization or reorganization of the Company with or into a Third party Purchaser that results in the inability of the Stockholders to designate or elect a majority of the managers (or the board of directors (or its equivalent)) of the resulting entity or its parent company.

“ Class A-1 Common Shares ” means shares of Class A-1 Common Stock, par value $0.00001 per share, of the Company and any stock into which such Class A-1 Common Shares may hereafter be converted or changed.

“ Class A-2 Common Shares ” means shares of Class A-2 Common Stock, par value $0.00001 per share, of the Company and any stock into which such Class A-2 Common Shares may hereafter be converted or changed.

“ Common Shares ” means shares of Class A-1 Common Shares and Class A-2 Common Shares.

“ Company Breach Event ” means either of: (i) the failure of the Company during any calendar year to operate substantially in accordance with the Budget for such year or to achieve any of the Milestones for such year; or (ii) the failure of the Company to perform any of its obligations hereunder, including any of the provisions of Sections 4.4, 4.5, or 4.6 hereof.

“ Company Competitor ” means any Person who is engaged in the commercial development, sale or distribution of pharmaceutical products, or any person who owns, directly or indirectly, an ownership interest in any such Person (other than a passive ownership of less than one percent (1%) of the outstanding stock of any entity whose stock is traded on an established stock exchange).

“ Company Subsidiary ” means a Subsidiary of the Company.

“ Governmental Authority ” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction.

“ Holder ” means any Stockholder.

“ License Agreement ” means that certain Exclusive License Agreement dated August 26, 2011 between UABRF and LipimetiX, LLC (“ LX ”), as amended on August 3, 2012 and December 15, 2014 by and among UABRF, LX and the Company with LX assigning its interest therein to the Company in connection therewith.

“ LX Majority Holders ” means the holders of a majority of the Common Shares held by the LX Stockholders and/or any of their respective Permitted Transferees.

“ LX Stockholders ” has the meaning set forth in the Preamble to this Agreement.

“ Majority in Interest of the Stockholders ” means one or more Stockholders who own, collectively, shares of the Capital Stock of the Company holding at least a majority of the Voting Power.

“ New Shares ” means any Capital Stock other than (a) any Capital Stock issued pursuant to an offering of the securities of the Company pursuant to a registration statement filed pursuant to the Securities Act of 1933, as amended, (b) Common Shares issuable upon the exercise of options, warrants or other rights to purchase such shares issued or issuable pursuant to the Company’s stock option plan(s) in effect from time to time, (c) Common Shares or options, warrants or other rights to purchase Common Shares that are issued or issuable to directors or employees of the Company for compensatory purposes and are approved by the Board, and the Common Shares issuable upon the exercise of any such options, warrants or other rights, (d) Capital Stock issued to the Company’s stockholders in connection with any stock split, stock dividend, reverse stock split, recapitalization, reclassification or similar event in which new Capital Stock is issued only to the Persons who were stockholders of the Company immediately prior to such issuance and in which the allocation of such new Capital Stock is based upon the proportionate ownership of Capital Stock immediately prior to such issuance, (e) Capital Stock issued in connection with a lender financing transaction approved by the Board, (f) Capital Stock issued as consideration for the acquisition of all or a portion of the business or assets of a Person or all or a portion of the equity securities of a Person, regardless of the structure of such transaction, provided such Person is not Affiliated with any Investor immediately prior to such acquisition and such issuance is approved by the Board, and (g) Capital Stock issued in connection with the formation of a joint venture or similar arrangement between the Company and a Person, provided such Person is not Affiliated with any Stockholder immediately prior to such formation and such issuance is approved by the Board.

“ Other Stock ” means any class or series of capital stock of the Company (other than Common Shares or Series A Preferred Stock) that may hereafter be authorized.

“ Permitted Transfer ” means a Transfer of Shares carried out pursuant to Section 3.2 or Section 3.3.

“ Permitted Transferee ” means a recipient of a Permitted Transfer.

“ Person ” means an individual, corporation, limited liability company, partnership, association, trust (revocable or irrevocable) or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“ Preferred Shares ” means any Series A Preferred Stock or Other Stock that is designated as a class or series of preferred stock of the Company.

“ Proportionate Share ” means with respect to each Stockholder, the fraction whose numerator is the number of Common Shares owned by such Stockholder at the date with respect to which such amount is being calculated and the denominator of which is the sum of the number of Common Shares outstanding at such date.

“ Representative ” means, with respect to any Person, any and all directors, officers, managers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Series A Preferred Stock ” means shares of Series A Preferred Stock, par value $0.0001 per share, of the Company.

“ Shares ” means the Common Shares and the Preferred Shares.

“ Subsidiary ” means, with respect to any Person, any other Person of which a majority of the outstanding shares or other equity interests having the power to vote for directors or comparable managers or other governing body are owned, directly or indirectly, by the first Person.

“ Supermajority in Interest of the Stockholders ” means one or more Stockholders who own, collectively, at least seventy five percent (75%) or more of the Common Shares held by all of the Stockholders entitled to vote on or consent to the matter under consideration.

“ Third party Purchaser ” means any Person who, immediately prior to the contemplated transaction, (a) does not directly or indirectly own or have the right to acquire any outstanding Shares or (b) is not a Permitted Transferee of any Person who directly or indirectly owns or has the right to acquire any Shares.

“ Transfer ” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Shares owned by a Person or any interest (including a beneficial interest) in any Shares owned by a Person. “ Transfer ” when used as a noun shall have a correlative meaning.

“ UABRF Shares ” means those certain Common Shares held by UABRF.

“ Voting Power ” means the power to cast votes in a vote of the stockholders of the Company in accordance with the Certificate of Incorporation.

1.2 Cross-Reference of Defined Terms . Each of the following terms is defined in the Section set forth opposite such term:

Term		Section
Agreement		Preamble
Budget		6.3
CAPS		Preamble
Company		Preamble
Confidential Information		6.4
Consent of Spouse		11.7
Exercising Buyers		5.1(c)
New Share Offeree		5.1(a)
Notice of Proposed Issuance		5.1(a)
Offered New Shares		5.1(a)
Participating Stockholder		6.2
Proposed Purchaser/Proposed Purchasers		5.1(a)
Stockholder/Stockholders		Preamble
Twenty Day Period		5.1(b)
UABRF		Preamble

2. Board of Directors .

2.1 Board of Directors; Composition; Vacancies . Each Stockholder shall vote (in person, by proxy or by action by written consent, as applicable) all of such Stockholder’s Capital Stock, whether now owned or hereafter acquired or which such Stockholder may be empowered to vote, from time to time and at all times, in whatever manner shall be necessary to ensure that the number of directors who comprise the Board shall be five (5) and the members of the Board shall consist of the following:

(a) Prior to a Company Breach Event, the Board shall be comprised as follows: (i) three (3) individuals designated in writing by the LX Majority Holders (the “LX Directors”), who shall initially be Dennis I. Goldberg, Ph.D., Philip M. Friden, Ph.D. and Eric Morrell, Ph.D.; and (ii) two (2) individuals designated in writing by the CAPS Majority Holders (the “ CAPS Directors ”), who shall initially be J.M. Holliman, III and Randy Steer.

(b) On and after a Company Breach Event, the Board shall be reconstituted and thereafter shall be comprised as follows: (i) two (2) individuals designated by the LX Majority Holders; and (ii) three (3) individuals designated by the CAPS Majority Holders.

(c) In the event that a vacancy is created on the Board at any time due to the death, disability, retirement, resignation or removal of a LX Director, then the LX Majority Holders shall have the right to designate an individual to fill such vacancy and the Company and each Stockholder hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board. In the event that the LX Majority Holders shall fail to designate in writing a representative to fill a vacant LX Director position on the Board, and such failure shall continue for more than fifteen (15) days after notice from any director to the LX Stockholders with respect to such failure, then the vacant position shall be filled by an individual designated by the LX Directors then in office; provided , however , that such individual shall be removed from such position if the LX Majority Holders so direct and simultaneously designate a new LX Director.

(d) In the event that a vacancy is created on the Board at any time due to the death, disability, retirement, resignation or removal of a CAPS Director, then the CAPS Majority Holders shall have the right to designate an individual to fill such vacancy and the Company and each Stockholder hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board. In the event that the CAPS Majority Holders shall fail to designate in writing a representative to fill a vacant CAPS Director position on the Board, and such failure shall continue for more than fifteen (15) days after notice from any director to the CAPS Stockholders with respect to such failure, then the vacant position shall be filled by an individual designated by the CAPS Directors then in office; provided , however , that such individual shall be removed from such position if the CAPS Majority Holders so direct and simultaneously designate a new CAPS Director.

2.2 Removal; Resignation .

(a) A LX Director may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written request of the LX Majority Holders.

(b) A CAPS Director may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written request of the CAPS Majority Holders.

(c) A director may resign at any time from the Board by delivering his written resignation to the Board and the Stockholder(s) appointing such director as provided in Section 2.1. Any such resignation shall be effective upon receipt thereof unless it is specified to be effective at some other time or upon the occurrence of some other event. The Board’s or any Stockholder’s acceptance of a resignation shall not be necessary to make it effective.

(d) Each Stockholder shall vote (in person, by proxy or by action by written consent, as applicable) all of such Stockholder’s Capital Stock, whether now owned or hereafter acquired or which such Stockholder may be empowered to vote, from time to time and at all times, in whatever manner shall be necessary to ensure that (a) no director designated pursuant to Section 2.1 may be removed from such office unless such removal is directed or approved in writing by the Stockholders entitled to designate such director, and (b) any vacancy created by the resignation, removal or death of a director designated pursuant to Section 2.1 shall be filled with a director designated by the Stockholders entitled to designate such director.

3. Transfer .

3.1 General Restrictions on Transfer .

(a) Each Stockholder acknowledges and agrees that such Stockholder (or any Permitted Transferee of such Stockholder) shall not Transfer any Shares except as may be approved by a Majority in Interest of the Stockholders (which consent shall not be unreasonably withheld), as permitted pursuant to Section 3.2 or Section 3.3, or in accordance with the procedures described in Section 3.4 or Section 3.5, as applicable. No Transfer other than pursuant to Section 3.4 may be made unless the prospective Transferee has executed and delivered to the Company a counterpart signature or joinder to this Agreement, agreeing to be bound by the terms hereof, in a form acceptable to a Majority in Interest of the Stockholders.

(b) Notwithstanding any other provision of this Agreement to the contrary (including Section 3.2 and Section 3.3), each Stockholder agrees that it will not, directly or indirectly, Transfer any of its Shares, and the Company agrees that it shall not issue any Shares or otherwise approve the Transfer of any Shares:

(i) except as permitted under the Securities Act and other applicable federal or state securities or blue sky laws, and then, with respect to a Transfer of Shares, if requested by the Company, only upon delivery to the Company of an opinion of counsel in form and substance satisfactory to the Company to the effect that such Transfer may be effected without registration under the Securities Act;

(ii) if such Transfer or issuance would cause the Company or any of the Company Subsidiaries, if any, to be required to register as an investment company under the Investment Company Act of 1940, as amended; or

(iii) if such Transfer or issuance would cause the assets of the Company or any of the Company Subsidiaries to be deemed “Plan Assets” as defined under the Employee Retirement Income Security Act of 1974 or its accompanying regulations or result in any “prohibited transaction” thereunder involving the Company or any Company Subsidiary, if any.

A Majority in Interest of the Stockholders may refuse: (i) the Transfer of any Shares to any Person if such Transfer would have a material adverse effect on the Company as a result of any regulatory or other restrictions imposed by any Governmental Authority; or (ii) the Transfer of any Shares to any Company Competitor. No Transfer described in (i) or (ii) of the preceding sentence may be effected without the prior written consent of a Majority in Interest of the Stockholders.

(c) Any Transfer or attempted Transfer of any Shares in violation of this Agreement shall be null and void, no such Transfer shall be recorded on the Company’s books and the purported transferee in any such Transfer shall not be treated (and the purported transferor shall continue be treated) as the owner of such Shares for all purposes of this Agreement.

3.2 CAPS Permitted Transfers . The provisions of Section 3.1(a) (other than the last sentence of such section), Section 3.4 (with respect to the Dragging Stockholders only) and Section 3.5 shall not apply to any of the following Transfers by CAPS of any of its Shares: (i) a Transfer to an Affiliate of CAPS and (ii) in the event of a liquidation, dissolution or winding up of CAPS, a Transfer to its shareholders in accordance with its constitutive documents. Notwithstanding the foregoing, each of the foregoing Transfers of Shares shall be subject to Sections 3.1(b) and 3.1(c), and the last sentence of Section 3.1(a).

3.3 LX Permitted Transfers . The provisions of Section 3.1(a) (other than the last sentence of such section), Section 3.4 (with respect to the Dragging Stockholders only) and Section 3.5 shall not apply to any of the following Transfers by LX Stockholders of any of their Shares: (i) a Transfer to an Affiliate of the transferor, provided that all Shares held by the transferor are so transferred; and (ii) in the event of a liquidation, dissolution or winding up of a LX Stockholder who is a corporation or limited liability company, a Transfer to such entity’s shareholders or members in accordance with its constitutive documents. Notwithstanding the foregoing, each of the foregoing Transfers of Shares shall be subject to Sections 3.1(b) and 3.1(c), and the last sentence of Section 3.1(a).

3.4 Drag-along Rights .

(a) Participation . If one or more Stockholders (together with their respective Permitted Transferees) holding no less than a majority of all the Common Shares (such Stockholders, the “ Dragging Stockholders ”), propose to consummate, in one transaction or a series of related transactions, a Change of Control (a “ Drag-along Sale ”), the Dragging Stockholders shall have the right, after delivering the Drag-along Notice in accordance with Section 3.4(c) and subject to compliance with Section 3.4(d), to require that each other Stockholder (each, a “ Drag-along Stockholder ”) participate in such sale in the manner set forth in Section 3.4(b) .

(b) Sale of Shares . Subject to compliance with Section 3.4(d):

(i) If the Drag-along Sale is structured as a sale resulting in a majority of the Common Shares being held by a Third party Purchaser, then each Drag-along Stockholder shall sell, with respect to each class or series of Shares proposed by the Dragging Stockholders to be included in the Drag-along Sale, the number of Shares of such class or series equal to the product obtained by multiplying (A) the number of applicable Shares held by such Drag-along Stockholder by (B) a fraction (x) the numerator of which is equal to the number of applicable Shares that the Dragging Stockholders proposes to sell in the Drag-along Sale and (y) the denominator of which is equal to the number of applicable Shares held by the Dragging Stockholders at such time; and

(ii) If the Drag-along Sale is structured as a sale of all or substantially all of the assets of the Company or as a merger, consolidation, recapitalization, or reorganization of the Company or other transaction requiring the consent or approval of a Majority in Interest of the Stockholders, then notwithstanding anything to the contrary in this Agreement, each Drag-along Stockholder shall vote in favor of the transaction and otherwise consent to and raise no objection to such transaction, and shall take all actions to waive any dissenters’, appraisal or other similar rights that it may have in connection with such transaction.

(c) Sale Notice . The Dragging Stockholders shall exercise their rights pursuant to this Section 3.4 by delivering a written notice (the “ Drag-along Notice ”) to the Company and each Drag-along Stockholder no more than ten (10) Business Days after the execution and delivery by all of the parties thereto of the definitive agreement entered into with respect to the Drag-along Sale and, in any event, no later than twenty (20) Business Days prior to the closing date of such Drag-along Sale. The Drag-along Notice shall make reference to the Dragging Stockholders’ rights and obligations hereunder and shall describe in reasonable detail: (i) the name of the Person to whom such Shares are proposed to be sold; (ii) the proposed date, time and location of the closing of the sale; (iii) the number of each class or series of Shares to be sold by the Dragging Stockholders, the proposed amount of consideration for the Drag-along Sale and the other material terms and conditions of the Drag-along Sale, including a description of any non-cash consideration in sufficient detail to permit the valuation thereof and including, if available, the purchase price per Share of each applicable class or series; and (iv) a copy of any form of agreement proposed to be executed in connection therewith.

(d) Conditions of Sale . The obligations of the Drag-along Stockholders in respect of a Drag-along Sale under this Section 3.4 are subject to the satisfaction of the following conditions:

(i) The consideration to be received by each Drag-along Stockholder shall be the same form and amount of consideration to be received by the Dragging Stockholders per Share of each applicable class or series and the terms and conditions of such sale shall, except as otherwise provided in Section 3.4(d)(ii), be the same as those upon which the Dragging Stockholders sells its Shares;

(ii) If the Dragging Stockholders or any Drag-along Stockholder is given an option as to the form and amount of consideration to be received, the same option shall be given to all Drag-along Stockholders; and

(iii) Each Drag-along Stockholder shall execute the applicable purchase agreement, if applicable, and make or provide the same representations, warranties, covenants, indemnities and agreements as the Dragging Stockholders make or provide in connection with the Drag-along Sale; provided , however , that each Drag-along Stockholder shall only be obligated to make individual representations and warranties with respect to its title to and ownership of the applicable Shares, authorization, execution and delivery of relevant documents, enforceability of such documents against the Drag-along Stockholder, and other matters relating to such Drag-along Stockholder, but not with respect to any of the foregoing with respect to any other Stockholders or their Shares; provided , further , however , that all representations, warranties, covenants and indemnities shall be made by the Dragging Stockholders and each Drag-along Stockholder severally and not jointly and any indemnification obligation shall be pro rata based on the consideration received by the Dragging Stockholders and each Drag-along Stockholder, in each case in an amount not to exceed the aggregate proceeds received by the Dragging Stockholders and each such Drag-along Stockholder in connection with the Drag-along Sale.

(e) Cooperation .

(i) Each Drag-along Stockholder shall take all actions as may be reasonably necessary to consummate the Drag-along Sale, including, without limitation, entering into agreements and delivering certificates and instruments, in each case, consistent with the agreements being entered into and the certificates being delivered by the Dragging Stockholders, but subject to Section 3.4(d)(ii).

(ii) If a Drag-Along Stockholder fails, for any reason, to execute any agreements or other documents, or to take any other action necessary to satisfy its obligations set forth in this Section 3.4, such Drag-along Stockholder: (A) to the extent applicable, shall be deemed to have assigned all of its right, title and interest in and to its Shares to the Third party Purchaser and the Third party Purchaser shall have the right to receive all distributions with respect to such Shares, (B) shall be deemed to have given the Dragging Stockholders an irrevocable proxy, coupled with an interest, to vote its Shares on all matters submitted on which such Drag-along Stockholder is entitled to a vote, (C) shall be deemed to have given the Dragging Stockholders an irrevocable power of attorney solely to execute and deliver in such Drag-along Stockholder’s name and stead all documents, agreements and instruments necessary and appropriate to effectuate the Drag-along Sale, and (D) shall cease to have any rights with respect to such Shares except to only the right to receive the respective amounts for such Drag-along Stockholder’s Shares as computed pursuant to this Section 3.4 upon the closing of the Drag-along Sale as set forth in this Section 3.4. This remedy is in addition to any other remedies allowed by law or by this Agreement.

(f) Expenses . The fees and expenses of the Dragging Stockholders incurred in connection with a Drag-along Sale and for the benefit of all Drag-along Stockholders (it being understood that costs incurred by or on behalf of Dragging Stockholders for their sole benefit will not be considered to be for the benefit of all Drag-along Stockholders), to the extent not paid or reimbursed by the Company or the Third party Purchaser, shall be shared by the Dragging Stockholder and all the Drag-along Stockholders on a pro rata basis, based on the consideration received by each such Stockholder; provided , however , that no Drag-along Stockholder shall be obligated to make any out-of-pocket expenditure prior to the consummation of the Drag-along Sale.

3.5 Tag-along Rights .

(a) Participation . Subject to the terms and conditions specified in Section 3.1 and Section 3.2, if any Stockholder (the “ Selling Stockholder ”) proposes to Transfer any of its Common Shares to any Person (a “ Proposed Transferee ”), each other Stockholder (each, a “ Tag-along Stockholder ”) shall be permitted to participate in such sale (a “ Tag-along Sale ”) on the terms and conditions set forth in this Section 3.5.

(b) Application of Transfer Restrictions . The provisions of this Section 3.5 shall not apply to Transfers in which the Dragging Stockholders have elected to exercise their drag-along right under Section 3.4.

(c) Sale Notice . Prior to the consummation of any Transfer of Common Shares qualifying under Section 3.5(a), the Selling Stockholder shall deliver to the Company and each other Stockholder holding Common Shares of the class or series proposed to be Transferred a written notice (a “ Sale Notice ”) of the proposed Tag-along Sale. The Sale Notice shall make reference to the Tag-along Stockholders’ rights hereunder and shall describe in reasonable detail: (i) the aggregate number of Common Shares the Proposed Transferee has offered or otherwise agreed to purchase; (ii) the identity of the Proposed Transferee; (iii) the proposed date, time and location of the closing of the Tag-along Sale; (iv) the purchase price per applicable Common Share (which shall be payable solely in cash) and the other material terms and conditions of the Transfer; and (v) a copy of any form of agreement proposed to be executed in connection therewith.

(d) Exercise of Tag-along Right .

(i) The Selling Stockholder and each Tag-along Stockholder timely electing to participate in the Tag-along Sale pursuant to Section 3.5(d)(ii) shall have the right to Transfer in the Tag-along Sale the number of Common Shares equal to the product of (A) the aggregate number of Common Shares that the Proposed Transferee proposes or has otherwise agreed to buy as stated in the Sale Notice and (B) a fraction (x) the numerator of which is equal to the number of Common Shares then held by the applicable Stockholder, and (y) the denominator of which is equal to the number of Common Shares then held by the Selling Stockholder and all of the Tag-along Stockholders timely electing to participate in the Tag-along Sale pursuant to Section 3.5(d)(ii) (such amount with respect to the Common Shares, the “ Tag-along Portion ”) .

(ii) Each Tag-along Stockholder shall exercise its right to participate in a Tag-along Sale by delivering to the Selling Stockholder a written notice (a “ Tag-along Notice ”) stating its election to do so and specifying the number of Common Shares (up to its Tag-along Portion) to be Transferred by it no later than ten (10) days after receipt of the Sale Notice (the “ Tag-along Period ”).

(iii) The offer of each Tag-along Stockholder set forth in a Tag-along Notice shall be irrevocable, and, to the extent such offer is accepted, such Tag-along Stockholder shall be bound and obligated to consummate the Transfer on the terms and conditions set forth in this Section 3.5.

(e) Remaining Portions .

(i) If any Tag-along Stockholder declines to exercise its right under Section 3.5(d) or elects to exercise it with respect to less than its full Tag-Along Portion (the aggregate amount of Common Shares resulting from all such unexercised Tag-Along Portions, the “ Remaining Portion ”), the Selling Stockholder shall promptly deliver a written notice (a “ Remaining Portion Notice ”) to those Tag-along Stockholders who have elected to Transfer their Tag-Along Portion in full (each, a “ Fully Participating Tag-along Stockholder ”). The Selling Stockholder and each Fully Participating Tag-along Stockholder (with respect to any Remaining Portion) shall be entitled to Transfer, in addition to any applicable Common Shares already being Transferred, a number of Common Shares, held by it equal to the product of (A) the Remaining Portion and (B) a fraction (x) the numerator of which is equal to the number of Common Shares then held by the applicable Stockholder, and (y) the denominator of which is equal to the number of Common Shares then held by the Selling Stockholder and all Fully Participating Tag-along Stockholders.

(ii) Each Fully Participating Tag-along Stockholder shall exercise its right to participate in the Transfer described in Section 3.5(e) by delivering to the Selling Stockholder a written notice (a “ Remaining Tag-along Notice ”) stating its election to do so and specifying the number of Common Shares (up to the amounts it may Transfer pursuant to Section 3.5(e)), to be Transferred by it no later than five (5) Business Days after receipt of the Remaining Portion Notice.

(iii) The offer of each Fully Participating Tag-along Stockholder set forth in a Remaining Tag-along Notice shall be irrevocable, and, to the extent such offer is accepted, such Stockholder shall be bound and obligated to consummate the Transfer on the terms and conditions set forth in this Section 3.5.

(f) Waiver . Each Tag-along Stockholder who does not deliver a Tag-along Notice in compliance with Section 3.5(d)(ii) shall be deemed to have waived all of such Tag-along Stockholder’s rights to participate in the Tag-along Sale with respect to the Common Shares owned by such Tag-along Stockholder, and the Selling Stockholder shall (subject to the rights of any other participating Tag-along Stockholder and the requirements of Section 3.1) thereafter be free to sell to the Proposed Transferee the Common Shares identified in the Sale Notice at a per Common Share price that is no greater than the applicable per Common Share price set forth in the Sale Notice and on other terms and conditions which are not in the aggregate materially more favorable to the Selling Stockholder than those set forth in the Sale Notice, without any further obligation to the non-accepting Tag-along Stockholders.

(g) Conditions of Sale .

(i) Each Stockholder participating in the Tag-along Sale shall receive the same consideration per Common Share after deduction of such Stockholder’s proportionate share of the related expenses in accordance with Section 3.5(i) below.

(ii) Each Tag-along Stockholder shall make or provide the same representations, warranties, covenants, indemnities and agreements as the Selling Stockholder makes or provides in connection with the Tag-along Sale; provided , however , that each Tag-along Stockholder shall only be obligated to make individual representations and warranties with respect to its title to and ownership of the applicable Common Shares, authorization, execution and delivery of relevant documents, enforceability of such documents against the Tag-along Stockholder, and other matters relating to such Tag-along Stockholder, but not with respect to any of the foregoing with respect to any other Stockholders or their Common Shares; provided , further , however , that all representations, warranties, covenants and indemnities shall be made by the Selling Stockholder and each Tag-along Stockholder severally and not jointly and any indemnification obligation shall be pro rata based on the consideration received by the Selling Stockholder and each Tag-along Stockholder, in each case in an amount not to exceed the aggregate proceeds received by the Selling Stockholder and each such Tag-along Stockholder in connection with the Tag-along Sale.

(h) Cooperation . Each Tag-along Stockholder shall take all actions as may be reasonably necessary to consummate the Tag-along Sale, including, without limitation, entering into agreements and delivering certificates and instruments, in each case, consistent with the agreements being entered into and the certificates being delivered by the Selling Stockholder, but subject to Section 3.5(g)(ii).

(i) Expenses . The fees and expenses of the Selling Stockholder incurred in connection with a Tag-along Sale and for the benefit of all Tag-along Stockholders (it being understood that costs incurred by or on behalf of a Selling Stockholder for its sole benefit will not be considered to be for the benefit of all Tag-along Stockholders), to the extent not paid or reimbursed by the Company or the Proposed Transferee, shall be shared by the Selling Stockholder and all the participating Tag-along Stockholders on a pro rata basis, based on the consideration received by each such Stockholder; provided , however , that no Tag-along Stockholder shall be obligated to make any out-of-pocket expenditure prior to the consummation of the Tag-along Sale.

(j) Consummation of Sale . The Selling Stockholder shall have thirty (30) days following the expiration of the Tag-along Period in which to consummate the Tag-along Sale, on terms not more favorable to the Selling Stockholder than those set forth in the Tag-along Notice (which 30-day period may be extended for a reasonable time not to exceed forty-five (45) days to the extent reasonably necessary to obtain required approvals or consents from any governmental authority). If at the end of such period the Selling Stockholder has not completed the Tag-along Sale, the Selling Stockholder may not then effect a Transfer that is subject to this Section 3.5 without again fully complying with the provisions of this Section 3.5.

(k) Transfers in Violation of the Tag-along Right . If the Selling Stockholder sells or otherwise Transfers to the Proposed Transferee any of its Common Shares in breach of this Section 3.5, then each Tag-along Stockholder shall have the right to sell to the Selling Stockholder, and the Selling Stockholder undertakes to purchase from each Tag-along Stockholder, the number of Common Shares of each applicable class or series that such Tag-along Stockholder would have had the right to sell to the Proposed Transferee pursuant to this Section 3.5, for a per Common Share amount and form of consideration and upon the terms and conditions on which the Proposed Transferee bought such Common Shares from the Selling Stockholder, but without indemnity being granted by any Tag-along Stockholder to the Selling Stockholder; provided , however , that nothing contained in this Section 3.5(k) shall preclude any Stockholder from seeking alternative remedies against such Selling Stockholder as a result of its breach of this Section 3.5. The Selling Stockholder shall also reimburse each Tag-along Stockholder for any and all reasonable and documented out-of-pocket fees and expenses, including reasonable legal fees and expenses, incurred pursuant to the exercise or the attempted exercise of the Tag-along Stockholders’ rights under this Section 3.5(k).

4. Special Shareholder Matters .

4.1 Protective Provisions . In addition to those actions for which this Agreement specifically requires the consent of one or more Stockholders, neither the Company, the Board nor the Stockholders shall take any of the following actions on behalf of the Company without first obtaining the written consent of the Stockholders as provided in this Section 4.1:

(a) Issue Shares or any other Capital Stock or securities in the Company or allow or cause any Company Subsidiary, if any, to do the same;

(b) Authorize or pay any dividends or other distributions to the Stockholders;

(c) Enter into or amend any sale, license or partnering agreements relating to AEM-28 or any other compound then under development by the Company including, without limitation, the License Agreement;

(d) Incur indebtedness other than trade payables incurred in the ordinary course of the Company’s business or as may otherwise be set forth in the Budget;

(e) Enter into, amend or terminate any related party transaction or agreement, including the Benu Management Agreement or the Accounting Services Agreement;

(f) Enter into or amend any material contract outside the ordinary course of the Company’s business;

(g) Except as otherwise provided in Section 4.2 below, liquidate or dissolve the Company or any Company Subsidiary;

(h) Merge or consolidate the Company with or into one or more Persons as permitted in the Act;

(i) Sell, lease, exchange, or otherwise dispose of all or any portion of Company’s property in a single transaction or a series of related transactions other than in the ordinary course of the Company’s business;

(j) Make an assignment for the benefit of creditors of the Company, file a voluntary petition in bankruptcy, consent to the appointment of a receiver for the Company or its assets, or engage in any other similar event or act; or

(k) Amend the Company’s Certificate of Incorporation or Bylaws.

Consent of the Stockholders for purposes of this Section 4.1 shall mean the following:

(i) The written consent of a Supermajority in Interest of the Stockholders; or

(ii) The affirmative vote of a Majority in Interest of the Stockholders at a duly noticed meeting in accordance with the following procedure: if a Majority in Interest of the Stockholders wish to consent to some action, such Majority in Interest of the Stockholders may provide written notice thereof to the Board (the “ Request Notice ”), whereupon the Board shall call a meeting of the Stockholders on a date specified by the Majority in Interest of the Stockholders that is not less than 15 days after the date of the Request Notice; provided, that if the action of the Company is necessary before 15 days after the date of the Request Notice due to the requirements of law or contract or to prevent or avoid material harm to the Company, the Stockholders may consent to such action by the written consent of a Majority in Interest of the Stockholders without regard to the procedures in this paragraph (ii); or

(iii) The written consent of a Majority in Interest of the Stockholders delivered to the Company and effective no earlier than the date following the date of the Stockholder meeting specified by the Majority in Interest of the Stockholders in the Request Notice.

4.2 Dissolution . The parties agree that the Company shall not be dissolved without the written consent of the holders of a Super Majority in Interest of the Stockholders. At the request of the holders of a Super Majority in Interest of the Stockholders, the Company agrees to take all actions required to effect the dissolution of the Company.

4.3 Special Voting Provision . The parties acknowledge and agree that the Common Shares are entitled to vote together as a single class. If for any reason, the holders of the Class A-2 Shares become entitled to vote as a separate class, under applicable corporate law or otherwise, the holders of the Class A-2 Shares agree to vote all of their Shares in the same manner as voted by a majority of the Class A-1 Shares.

4.4 Accounting and Tax Services . The Company and CAPS have previously entered into the Accounting Services Agreement. The Company agrees to maintain such Accounting Services Agreement in full force and effect and not to terminate, amend, modify or fail to renew such agreement, without the written consent of CAPS. Without limiting the forgoing, the Company agrees that CAPS shall at all times have full and exclusive authority, unless otherwise agreed by CAPS, to provide, direct and manage all accounting, treasury, funds management and finance functions for the Company, including without limitation, maintaining the Company’s books and records, managing the Company’s funds, including receipts and disbursements, overseeing the preparation of tax returns, and preparing financial statements. The Company agrees that CAPS shall have full access to all Company records and information requested by CAPS in connection therewith.

4.5 Budget/Milestones . On or before January 15 of each year, the Company shall prepare a written budget and operational plan (the “ Budget ”) for the upcoming calendar year that is acceptable to, and approved by, a Majority in Interest of the Stockholders, containing operational and other milestones (the “ Milestones ”) acceptable to and approved by a Majority in Interest of the Stockholders. The Company shall use best efforts to cause the Company to be operated in accordance with the Budget and to achieve the Milestones.

4.6 Covenants . Upon the written request of a Majority in Interest of the Stockholders, the Company agrees to take the following actions:

(i) declare dividends on the capital stock of the Company out of funds legally available therefor, in such amounts and with respect to such classes of stock as the Majority in Interest of the Stockholders shall direct, subject to the preferential rights of the Preferred Stock as set forth in the Company’s Certificate of Incorporation;

(ii) offer, sell and issue New Shares (subject to Section 5.1 below) of the Company on such terms and conditions as may be directed by a Majority in Interest of the Stockholders.

5. Rights to Purchase .

5.1 Rights to Purchase .

(a) In the event a Majority in Interest of the Stockholders desires to issue any New Shares, the Company shall first deliver to each Stockholder (each such Stockholder being referred to in this Section 5 as a “ New Share Offeree ”) a written notice (the “ Notice of Proposed Issuance ”) specifying in reasonable detail the total number of such New Shares which the Company then desires to issue (the “ Offered New Shares ”), the preferences, powers, rights and privileges of such Offered New Shares, the price per share for the Offered New Shares and the proposed purchaser(s) of such Offered New Shares (collectively, the “ Proposed Purchasers ”; individually, a “ Proposed Purchaser ”), and stating that the New Share Offerees shall have the right to purchase the Offered New Shares in the manner specified in this Section 5.1 at the price and in accordance with the terms and conditions specified in such Notice of Proposed Issuance.

(b) During the twenty (20) day period commencing on the date on which the Notice of Proposed Issuance has been delivered to all of the New Share Offerees (the “ Twenty Day Period ”), the New Share Offerees shall have the option to purchase Offered New Shares at the price and pursuant to the terms specified in the Notice of Proposed Issuance. Each New Share Offeree electing to purchase Offered New Shares must give written notice of such election to the Company during such Twenty Day Period. Each New Share Offeree shall have the right to purchase that number of the Offered New Shares as shall be equal to the total number of the Offered New Shares multiplied by such New Share Offeree’s Proportionate Share at the date the Notice of Proposed Issuance is given. If, at the termination of such Twenty Day Period any New Share Offeree shall not have delivered a notice to the Company exercising such New Share Offeree’s right to purchase Offered New Shares, such New Share Offeree shall be deemed to have waived all of its rights under this Section 5 with respect to the purchase of such Offered New Shares.

(c) If each New Share Offeree does not elect to purchase its full proportionate share of any Offered New Shares pursuant to Section 5.1(b ) during the Twenty Day Period applicable to such Offered New Shares, then the Company shall, within two (2) Business Days after the expiration of such Twenty Day Period, send written notice to those New Share Offerees who fully exercised their options within such Twenty Day Period (the “ Exercising Buyers ”), indicating the number of remaining Offered New Shares. Each Exercising Buyer shall have an additional option to purchase all or any part of the balance of such remaining Offered New Shares. To exercise such option, an Exercising Buyer must deliver notice of such additional exercise to the Company within five (5) Business Days after receipt of such notice from the Company stating the number of such remaining Offered New Shares such Exercising Buyer elects to purchase. In the event the Exercising Buyers in the aggregate exercise such option for a total number of remaining Offered New Shares in excess of the number available, such Offered New Shares will be allocated as follows: first, each Exercising Buyer who elects to purchase a number of additional Offered New Shares which is less than the number of additional Offered New Shares multiplied by the Allocation Ratio applicable to such Exercising Buyer, will purchase the amount of such Offered New Shares such Exercising Buyer has elected to purchase; and second, the remaining Offered New Shares will be allocated among the Exercising Buyers who have exercised their option pursuant to this Section 5.1(c) in proportion to their respective Allocation Ratios.

(d) The Company shall have the right, until the expiration of one hundred eighty (180) days commencing on the first day immediately following the expiration of the option period provided in Section 5.1(c) with respect to such Offered New Shares, to issue the remaining Offered New Shares to the Proposed Purchaser(s) at a price not less than, and on other terms and conditions no more favorable to the Proposed Purchaser(s) than, the price and other terms and conditions specified in the Notice of Proposed Issuance. If for any reason the Offered New Shares are not issued within such period and at such price and on such terms and conditions, the right to issue such Offered New Shares in accordance with the Notice of Proposed Issuance shall expire and the provisions of this Agreement shall continue to be applicable to the Offered New Shares.

5.2 Price . The purchase price for the Offered New Shares shall, unless otherwise agreed in writing by the parties to such transaction, be paid in cash or by certified check on the date of the closing.

5.3 Closing . The closing of the purchase and sale of the Offered New Shares shall occur at the same time and on the same date but shall not be earlier than thirty (30) days following the last day of the applicable Twenty Day Period. At such closing, the New Share Offerees or the Proposed Purchaser(s), as the case may be, shall deliver the consideration required by Section 5.2 and the Company shall deliver certificates representing the Offered New Shares.

5.4 No Obligation to Sell . The Company shall not be obligated to consummate any proposed issuance of New Shares, nor be liable to any Stockholder if the Company has not consummated any proposed issuance of New Shares pursuant to this Section 5 for any reason, regardless of whether it shall have delivered a Notice of Proposed Issuance or received any notice of exercise in respect of such proposed issuance.

5.5 Alternative Procedures . If the Board determines that the Company requires additional funds from the sale of New Shares prior to the time such funds would be available if the provisions of this Section 5 were complied with in full, the Board may authorize the Company to accept subscriptions for, and issue, New Shares from some or all of the Stockholders without compliance in full with the procedures provided in this Section 5 ; provided , however , that the Company concurrently establishes an alternative procedure whereby each Investor, as soon as practicable after such issuance, is provided a purchase right with respect to such New Shares equivalent to, and providing substantially the same overall effect of, the rights provided in this Section 5 .

6. Delivery of Corporate Information .

6.1 Delivery of Financial Statements .

(a) The Company shall deliver the following to each Stockholder who owns at least five percent (5%) of the outstanding Common Shares:

(i) Annual Financial Statements . As soon as available, and in any event within one hundred twenty (120) days after the end of each fiscal year, unaudited consolidated balance sheets of the Company and Company Subsidiaries, if any, as at the end of each such Fiscal Year and unaudited consolidated statements of income, cash flows and Stockholders’ equity for such Fiscal Year, in each case setting forth in comparative form the figures for the previous Fiscal Year, all in reasonable detail and all prepared in accordance with GAAP, consistently applied (subject to normal year-end audit adjustments and the absence of notes thereto) The parties agree, however, that for so long as CAPS has no material sources of revenue other than from, or as a result of, the operations of the Company, delivery of the unaudited consolidated financial statements of CAPS shall be deemed to satisfy the foregoing requirements.

(ii) Quarterly Financial Statements . As soon as available, and in any event within forty-five (45) days after the end of each quarterly accounting period in each Fiscal Year (other than the last fiscal quarter of the Fiscal Year), unaudited consolidated balance sheets of the Company and Company Subsidiaries, if any, as at the end of each such fiscal quarter and for the current Fiscal Year to date and unaudited consolidated statements of income, cash flows and Stockholders’ equity for such fiscal quarter and for the current Fiscal Year to date, in each case setting forth in comparative form the figures for the corresponding periods of the previous fiscal quarter, all in reasonable detail and all prepared in accordance with GAAP, consistently applied (subject to normal year-end audit adjustments and the absence of notes thereto). The parties agree, however, that for so long as CAPS has no material sources of revenue other than from, or as a result of, the operations of the Company, delivery of the unaudited consolidated financial statements of CAPS shall be deemed to satisfy the foregoing requirements.

(b) Unless earlier terminated, the rights granted pursuant to this Section 6.1 shall terminate if the Company becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act.

6.2 Inspection Rights . Upon reasonable notice from a Stockholder, the Company shall, and shall afford each Stockholder and its Representatives reasonable access during normal business hours to (a) the Company’s and the Company Subsidiaries’, if any, properties, offices, plants and other facilities, (b) the corporate, financial and similar records, reports and documents of the Company and the Company Subsidiaries, if any, including, without limitation, all books and records, minutes of proceedings, internal management documents, reports of operations, reports of adverse developments, copies of any management letters and communications with the Company, and to permit each Stockholder and its Representatives to examine such documents and make copies thereof, and (c) the Company’s and the Company Subsidiaries’, if any, officers, senior employees and public accountants, and to afford each Stockholder and its Representatives the opportunity to discuss and advise on the affairs, finances and accounts of the Company and the Company Subsidiaries, if any, with their officers, senior employees and public accountants (and the Company hereby authorizes said accountants to discuss with such Stockholder and its Representatives such affairs, finances and accounts).

6.3 Budget . The Board shall use best efforts to operate the Company in all material respects in accordance with the Budget.

6.4 Confidentiality and Use of Information .

(a) Each Stockholder ( a “ Company Person ”) acknowledges that during the term of this Agreement, it will have access to and become acquainted with trade secrets, proprietary information and confidential information belonging to the Company, the Company Subsidiaries, if any, and their Affiliates that are not generally known to the public, including, but not limited to, information concerning business plans, financial statements and other information provided pursuant to this Agreement, operating practices and methods, expansion plans, strategic plans, marketing plans, contracts, customer lists or other business documents which the Company treats as confidential, in any format whatsoever (including oral, written, electronic or any other form or medium) (collectively, “ Confidential Information ”). In addition, each Company Person acknowledges that: (i) the Company has invested, and continues to invest, substantial time, expense and specialized knowledge in developing its Confidential Information; (ii) the Confidential Information provides the Company with a competitive advantage over others in the marketplace; and (iii) the Company would be irreparably harmed if the Confidential Information were disclosed to competitors or made available to the public. Without limiting the applicability of any other agreement to which any Company Person is subject, no Company Person shall, directly or indirectly, whether through such Company Person’s agents, employees contractors, affiliates or otherwise, disclose or use (other than solely for the purposes of such Company Person monitoring and analyzing his investment in the Company or performing his duties as a director, manager, officer, employee, consultant or other service provider of the Company) at any time, including, without limitation, use for personal, commercial or proprietary advantage or profit, either during his membership, association or employment with the Company or thereafter, any Confidential Information of which such Company Person is or becomes aware. Each Company Person in possession of Confidential Information shall take all appropriate steps to safeguard such information and to protect it against disclosure, misuse, espionage, loss and theft.

(b) Nothing contained in Section 6.4 shall prevent any Company Person from disclosing Confidential Information: (i) upon the order of any court or administrative agency; (ii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Company Person; (iii) to the extent compelled by legal process or required or requested pursuant to subpoena, interrogatories or other discovery requests; (iv) to the extent necessary in connection with the exercise of any remedy hereunder; (v) to other directors or other Stockholders; (vi) to a Stockholder’s Representatives who, in the reasonable judgment of such Company Person, needs to know such Confidential Information; or (vii) to any potential Permitted Transferee in connection with a proposed Transfer of Shares from a Stockholder, as long as such Transferee agrees to be bound by the provisions of this Section 6.4 as if a Stockholder; provided , however , that in the case of clause (i), (ii) or (iii), such Company Person shall notify the Company, the other directors, and the other Stockholders of the proposed disclosure as far in advance of such disclosure as practicable (but in no event make any such disclosure before notifying the Company, the other directors, and the other Stockholders) and use reasonable efforts to ensure that any Confidential Information so disclosed is accorded confidential treatment satisfactory to the Company, when and if available.

(c) The restrictions of Section 6.4 shall not apply to Confidential Information that: (i) is or becomes generally available to the public other than as a result of a disclosure by a Company Person in violation of this Agreement; (ii) is or becomes available to a Company Person or any of its Representatives on a non-confidential basis prior to its disclosure to the receiving Company Person and any of its Representatives in compliance with this Agreement; (iii) is or has been independently developed or conceived by such Company Person without use of Confidential Information; or (iv) becomes available to the receiving Company Person or any of its Representatives on a non-confidential basis from a source other than the Company, any other Company Person or any of their respective Representatives; provided , however , that such source is not known by the recipient of the Confidential Information to be bound by a confidentiality agreement with the disclosing Company Person or any of its Representatives.

(d) Each Company Person agrees that upon the Transfer of his or her ownership of all of his or her Shares for any reason whatsoever, such Company Person shall surrender to the Company in good condition any record or records kept by such Company Person containing Confidential Information. Upon request of a Majority in Interest of the Stockholders, such Company Person shall certify in writing to the Company that he or she has complied with the foregoing, and that he or she has not retained any Confidential Information in hard or soft copy, or any other form.

6.5 Other Business Activities . The parties hereto expressly acknowledge and agree that, subject to all confidentiality provisions contained in Section 6.4 and subject at all times to this Agreement: (i) UABRF, CAPS and their Affiliates are permitted to have, and may presently or in the future have, investments or other business relationships, ventures, agreements or arrangements with entities engaged in the business of the Company, other than through the Company and the Company Subsidiaries (an “ Other Business ”); provided , however , that no such Other Businesses shall be a Directly Competitive Business (as defined below), provided , further , that UABRF may engage in an Other Business or have presently or in the future investments in an Other Business including a Directly Competitive Business as long as UABRF does not directly engage in partnering with or investing in a business that develops, sells or manufactures the Apo E Mimetic molecules, including AEM-28 and AEM-18 and analogs licensed pursuant to the License Agreement; (ii) none of UABRF, CAPS or their Affiliates will be obligated to inform the Company or any Stockholder of any business opportunity, relationship or investment (a “ Company Opportunity ”) or to present any Company Opportunity to the Company, and the Company hereby renounces any interest in a Company Opportunity and any expectancy that a Company Opportunity will be offered to it; (iii) nothing contained herein shall limit, prohibit or restrict any Manager appointed by the CAPS Majority Holders from serving on the board of directors or other governing body of any Other Business; and (iv) the Stockholders will not acquire, be provided with an option or opportunity to acquire, or be entitled to any interest or participation in any Other Business as a result of the participation therein of any of UABRF, CAPS or their Affiliates. The parties hereto expressly authorize and consent to the involvement of CAPS and/or its Affiliates in any Other Business subject to the terms contained in this Section 6.5; provided , however , that any transactions between the Company and/or the Company Subsidiaries, if any, and an Other Business will be on terms no less favorable to the Company and/or any Company Subsidiaries, if any, than would be obtainable in a comparable arm’s-length transaction. For purposes of this Section 6.5, a “ Directly Competitive Business ” is a business that engages in the development, manufacture or sale of any molecules for the treatment of hypercholesterolemia, hyperlipidemia, acute coronary syndrome, obesity and diabetes.

7. Legend on Capital Stock .

7.1 Legend . In addition to any other legend that may be required by law or another agreement between the Company and a Stockholder, each certificate representing shares of Capital Stock held by a Stockholder or issued to any subsequent transferee of such shares shall be endorsed with a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER SUCH ACT AND SUCH STATE LAWS OR A WRITTEN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION FOR SUCH SALE, OFFER, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER ASSIGNMENT IS AVAILABLE UNDER SUCH ACT AND SUCH STATE LAWS.

THE VOTING, SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO, AND IN CERTAIN CASES PROHIBITED BY, THE TERMS AND CONDITIONS OF A CERTAIN STOCKHOLDERS AGREEMENT BY AND AMONG THE STOCKHOLDER, THE COMPANY AND CERTAIN OTHER HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

7.2 Stop Transfer Order . Each Stockholder agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

8. Exculpation and Indemnification .

8.1 Exculpation and Covered Persons .

(a) Covered Persons . As used herein, the term “ Covered Person ” shall mean (i) each Stockholder, (ii) each officer, director, shareholder, partner, member, controlling Affiliate, employee, agent or representative of each Stockholder, and each of their controlling Affiliates, and (iii) each director, officer, employee, agent, manager, or representative of the Company.

(b) Standard of Care . No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any action taken or omitted to be taken by such Covered Person in good faith and with the belief that such action or omission is in, or not opposed to, the best interest of the Company, so long as such action or omission does not constitute fraud, gross negligence or willful misconduct by such Covered Person.

(c) Good Faith Reliance . A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements (including financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, net income or net losses of the Company or any facts pertinent to the existence and amount of assets from which dividends or other might properly be paid) of the following Persons or groups: (i) another director; (ii) one or more Officers or employees of the Company; (iii) any attorney, independent accountant, appraiser or other expert or professional employed or engaged by or on behalf of the Company; or (iv) any other Person selected in good faith by or on behalf of the Company, in each case as to matters that such relying Person reasonably believes to be within such other Person’s professional or expert competence.

8.2 Liabilities and Duties of Covered Persons .

(a) Limitation of Liability . This Agreement is not intended to, and does not, create or impose any fiduciary duty on any Covered Person. Furthermore, each of the Stockholders and the Company hereby waives any and all fiduciary duties that, absent such waiver, may be implied by Applicable Law, and in doing so, acknowledges and agrees that the duties and obligation of each Covered Person to each other and to the Company are only as expressly set forth in this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Stockholders to replace such other duties and liabilities of such Covered Person. To the extent that, at law or in equity, any Covered Person has duties and liabilities related thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for such Covered Person’s good faith reliance on the provisions of this Agreement.

(b) Duties . Whenever in this Agreement a Covered Person is permitted or required to make a decision (including a decision that is in such Covered Person’s “discretion” or under a grant of similar authority or latitude), the Covered Person shall be entitled to consider only such interests and factors as such Covered Person desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Company or any other Person. Whenever in this Agreement a Covered Person is permitted or required to make a decision in such Covered Person’s “good faith” or under another express standard, the Covered Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or any other Applicable Law.

8.3 Indemnification .

(a) General . To the fullest extent permitted by the Act, as the same now exists or may hereafter be amended, substituted or replaced (but, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Company to provide broader indemnification rights than the Act permitted the Company to provide prior to such amendment, substitution or replacement), the Company shall indemnify, hold harmless, defend, pay and reimburse any Covered Person against any and all losses, claims, damages, judgments, fines or liabilities, including reasonable legal fees or other expenses incurred in investigating or defending against such losses, claims, damages, judgments, fines or liabilities, and any amounts expended in settlement of any claims (collectively, “ Losses ”) to which such Covered Person may become subject by reason of:

(i) Any act or omission or alleged act or omission performed or omitted to be performed on behalf of the Company, any Stockholder or any direct or indirect Subsidiary of the foregoing in connection with the business of the Company; or

(ii) The fact that such Covered Person is or was acting in connection with the business of the Company as a partner, member, stockholder, controlling Affiliate, manager, director, officer, employee or agent of the Company, any Stockholder, or any of their respective controlling Affiliates, or that such Covered Person is or was serving at the request of the Company as a partner, member, manager, director, officer, employee or agent of any Person including the Company or any Company Subsidiary; provided , however , that (A) such Covered Person acted in good faith and in a manner believed by such Covered Person to be in, or not opposed to, the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful, and (B) such Covered Person’s conduct did not constitute fraud, gross negligence or willful misconduct, in either case as determined by a final, nonappealable order of a court of competent jurisdiction. In connection with the foregoing, the termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Covered Person did not act in good faith or, with respect to any criminal proceeding, had reasonable cause to believe that such Covered Person’s conduct was unlawful, or that the Covered Person’s conduct constituted fraud, gross negligence or willful misconduct.

(b) Reimbursement . The Company shall promptly reimburse (and/or advance to the extent reasonably required) each Covered Person for reasonable legal or other expenses (as incurred) of such Covered Person in connection with investigating, preparing to defend or defending any claim, lawsuit or other proceeding relating to any Losses for which such Covered Person may be indemnified pursuant to this Section 8.3; provided , however , that if it is finally judicially determined that such Covered Person is not entitled to the indemnification provided by this Section 8.3, then such Covered Person shall promptly reimburse the Company for any reimbursed or advanced expenses.

(c) Entitlement to Indemnity . The indemnification provided by this Section 8.3 shall not be deemed exclusive of any other rights to indemnification to which those seeking indemnification may be entitled under any agreement or otherwise. The provisions of this Section 8.3 shall continue to afford protection to each Covered Person regardless of whether such Covered Person remains in the position or capacity pursuant to which such Covered Person became entitled to indemnification under this Section 8.3 and shall inure to the benefit of the executors, administrators, legatees and distributees of such Covered Person.

(d) Insurance . To the extent available on commercially reasonable terms, the Company may purchase, at its expense, insurance to cover Losses covered by the foregoing indemnification provisions and to otherwise cover Losses for any breach or alleged breach by any Covered Person of such Covered Person’s duties in such amount and with such deductibles as the JDC may determine; provided , however , that the failure to obtain such insurance shall not affect the right to indemnification of any Covered Person under the indemnification provisions contained herein, including the right to be reimbursed or advanced expenses or otherwise indemnified for Losses hereunder. If any Covered Person recovers any amounts in respect of any Losses from any insurance coverage, then such Covered Person shall, to the extent that such recovery is duplicative, reimburse the Company for any amounts previously paid to such Covered Person by the Company in respect of such Losses.

(e) Funding of Indemnification Obligation . Notwithstanding anything contained herein to the contrary, any indemnity by the Company relating to the matters covered in this Section 8.3 shall be provided out of and to the extent of Company assets only, and no Stockholder (unless such Stockholder otherwise agrees in writing) shall have personal liability on account thereof.

(f) Savings Clause . If this Section 8.3 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Covered Person pursuant to this Section 8.3 to the fullest extent permitted by any applicable portion of this Section 8.3 that shall not have been invalidated and to the fullest extent permitted by applicable law.

(g) Amendment . The provisions of this Section 8.3 shall be a contract between the Company, on the one hand, and each Covered Person who served in such capacity at any time while this Section 8.3 is in effect, on the other hand, pursuant to which the Company and each such Covered Person intend to be legally bound. No amendment, modification or repeal of this Section 8.3 that adversely affects the rights of a Covered Person to indemnification for Losses incurred or relating to a state of facts existing prior to such amendment, modification or repeal shall apply in such a way as to eliminate or reduce such Covered Person’s entitlement to indemnification for such Losses without the Covered Person’s prior written consent.

8.4 Survival . The provisions of Section 8.3 shall survive the dissolution, liquidation, winding up and termination of the Company.

9. Term . This Agreement shall be effective as of the date hereof and shall continue in effect until and shall terminate upon the earlier to occur of:

(a) the written agreement of Stockholders whose outstanding shares of Capital Stock are sufficient to amend this Agreement pursuant to Section 11.1;

(b) the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (whether pursuant to a proceeding under the United States bankruptcy code or any similar law, Federal or state, whether now or hereafter existing), or the general assignment by the Company of all or substantially all of its property for the benefit of creditors; or

(c) the merger of the Company into or the consolidation of the Company with one or more corporations not Affiliated with (i) the Company or (ii) Stockholders then owning a majority of the Voting Power if, as a result of such merger or consolidation, the Stockholders holding a majority of the Voting Power immediately prior to such merger or consolidation do not own a majority of the Voting Power (or a majority of the voting power of the surviving entity if the Company is not the surviving entity) immediately after such merger or consolidation.

10. Specific Enforcement . Each party acknowledges and agrees that each other party will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the parties in accordance with their specific terms and conditions or are otherwise breached. Accordingly, it is agreed that each of the Company and the Stockholders shall be entitled to an injunction to prevent breaches of this Agreement and to specific enforcement of this Agreement and its provisions, in addition to any other remedy to which a party may be entitled at law or in equity (without the posting of any bond or other security and without having to prove actual damages), and if any action shall be brought in equity to enforce any of the provisions of this Agreement, none of the parties shall raise the defense that there is an adequate remedy at law.

11. Miscellaneous .

11.1 Amendment .

(a) This Agreement may be amended or modified and the observance of any provision hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by a Supermajority in Interest of the Stockholders.

(b) Any amendment, modification or waiver effected in accordance herewith shall be binding upon each party and each of their respective successors and permitted assigns, regardless of whether such Person entered into or approved such amendment, modification or waiver. The Company shall give written notice of any amendment or modification of this Agreement or any waiver under this Agreement to any party that did not consent in writing to such amendment, modification or waiver after such amendment, modification or waiver becomes effective.

11.2 Successors and Assigns . Except as otherwise expressly provided herein, and subject to the restrictions on Transfer set forth herein, the provisions of this Agreement shall inure to the benefit of and be binding upon the respective successors, permitted assigns, heirs, executors and administrators of the parties.

11.3 No Third party Beneficiaries . Except as expressly provided in this Agreement, nothing in this Agreement is intended to confer upon any Person, other than the parties or their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement. Each Person entitled to indemnification under Section 8 shall be entitled to the benefits thereof and authorized to enforce the terms thereof that are for its benefit, even if such Person is not a party.

11.4 Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing, shall be transmitted to the appropriate party by hand delivery, by registered or certified mail, return receipt requested, postage prepaid or by overnight delivery by an internationally recognized overnight courier and shall be addressed to such party at his, her or its address shown on the signature page hereto. Any party may designate by written notice given to all parties a new address to which any notice, demand or other communication hereunder shall thereafter be given. Each notice or other communication transmitted in the manner described in this Section 11.4 shall be deemed to have been given and received for all purposes: (a) upon personal delivery to the party to be notified, (b) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (c) two (2) days after deposit with an internationally recognized overnight courier, with written verification of receipt.

11.5 Further Assurances . Each party agrees to execute such additional documents or instruments as may be reasonably necessary or desirable in order to carry out the provisions of this Agreement. Without limiting the foregoing, each Stockholder shall vote (in person, by proxy or by action by written consent, as applicable) all of such Stockholder’s Capital Stock, whether now owned or hereafter acquired or which such Stockholder may be empowered to vote, from time to time and at all times, in whatever manner shall be necessary to increase the number of authorized Common Shares from time to time to ensure that there will be sufficient Common Shares available for conversion of all of the shares of Preferred Stock outstanding at any given time.

11.6 Severability . The determination by a court of competent jurisdiction that any provision of this Agreement is invalid or unenforceable shall in no way affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect in the same manner and to the same extent as if the invalid or unenforceable provision had not been contained in this Agreement. If any such invalidity or unenforceability of a provision of this Agreement becomes known or apparent to any of the parties, the parties shall negotiate promptly and in good faith in an attempt to make appropriate changes and adjustments to such provisions specifically and this Agreement generally to achieve as closely as possible, consistent with applicable law, the intent and spirit of such provision specifically and this Agreement generally.

11.7 Waiver . No delay or omission in exercising, or failure to exercise, any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

11.8 Entire Agreement . This Agreement (including the Schedules and Exhibits hereto) contains the entire agreement of the parties with respect to the subject matter hereof, and supersedes any prior communications, understandings or agreements of the parties with respect to the subject matter hereof. This Agreement, however, does not supersede any obligations of confidentiality that may exist among the parties pursuant to any other agreements between or among them.

11.9 Governing Law . All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

11.10 Arbitration . All claims, disputes and other matters in controversy (a “ Dispute ”) regarding any matter set forth in this Agreement shall be resolved exclusively according to the procedures set forth in this Section 11.10.

(a) If a Dispute arises relating to any matter set forth herein between or among the parties hereto, it is expected that the parties will attempt in good faith to resolve any such dispute in an amicable and mutually satisfactory manner.

(b) In the event such efforts are unsuccessful, any party may serve a notice of arbitration (“ Notice of Arbitration ”) on any other party. The Notice of Arbitration shall be dated, and without prejudice to any right under the applicable rules of arbitration permitting subsequent modifications, shall specify the claims or issues that are to be subjected to arbitration.

(c) THE PARTIES AGREE THAT IN ORDER TO PROMOTE TO THE FULLEST EXTENT REASONABLY POSSIBLE A MUTUALLY AMICABLE RESOLUTION OF THE DISPUTE IN A TIMELY, EFFICIENT AND COST-EFFECTIVE MANNER, THEY WILL WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY AND SETTLE THEIR DISPUTE BY SUBMITTING THE CONTROVERSY TO ARBITRATION TO AN ARBITRATOR OR ARBITRATION PANEL, AS APPLICABLE, SELECTED IN ACCORDANCE HEREWITH FOR PROCEEDINGS GOVERNED BY THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION (A.A.A.) EXCEPT THAT ALL PARTIES SHALL BE ENTITLED TO ALL DISCOVERY RIGHTS ALLOWED UNDER THE DELAWARE RULES OF CIVIL PROCEDURE.

(d) The parties shall attempt to select a mutually agreeable arbitrator. If no agreement is reached within ten (10) Business Days of the Notice of Arbitration, then each party shall select one Person to act as arbitrator, and the two so selected shall, within fifteen (15) calendar days of their selection, select a third arbitrator. If the arbitrators selected by the parties are unable or fail to agree upon the third arbitrator within the allotted time, the each party shall replace the Person selected to act as arbitrator, and the two so replacement arbitrators shall, within fifteen (15) calendar days of their selection, select a third arbitrator. This process shall be repeated until a three person arbitration panel is selected. All arbitrators shall serve as neutral, independent and impartial arbitrators. In all cases, it shall be a condition of such appointment that the arbitrator(s) can conduct all proceedings and render a decision within sixty (60) days after selection of the arbitrator or arbitrator panel, as applicable.

(e) The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §1 et seq ., and the judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. Any party may elect to participate in the arbitration telephonically. Any substantive or procedural rights other than the enforceability of the arbitration agreement shall be governed by Delaware law, without regards to Delaware’s conflict of laws principles.

(f) The parties further expressly agree that (i) the arbitrator(s) shall only reach his or her decision by applying strict rules of law to the facts, (ii) the arbitration shall be conducted in the English language, in Maricopa County, Arizona, (iii) the party in whose favor the arbitration award is rendered shall be entitled to recover costs and expenses of the arbitration including, but not limited to, attorneys’ fees and the cost and expense of administration of the arbitration proceedings, and any costs and attorney’s fees incurred in executing on or enforcing the arbitration award or, if the decision is not clearly in favor of one party or other, such costs and expenses shall be borne as determined by the arbitrator, and (iv) the arbitral award shall be issued in Maricopa County, Arizona.

(g) Except as provided in the following sentences, no party shall be entitled to commence or maintain any action in a court of law upon any matter in dispute until such matter shall have been submitted and determined as provided herein and then only for the enforcement of such arbitration award. Provided that, notwithstanding this dispute resolution policy, either party may apply to the United States District Court for the District of Delaware or the Court of Chancery of the State of Delaware, to seek injunctive relief before or after the pendency of any arbitration proceeding. The institution of any action for injunctive relief shall not constitute a waiver of the right or obligation of any party to submit any claim seeking relief other than injunctive relief to arbitration. Judgment upon the award may be entered by the United States District Court for the District of Delaware or the Court of Chancery of the State of Delaware, or application may be made to any such court for the judicial acceptance of the award and order of enforcement, as the case may be, if the Arbitrator’s award or decision is not complied with within seven (7) Business Days of the Arbitrator’s decision.

(h) Arbitration shall be the sole and exclusive procedure for resolution of disputes between the parties, including any disputes that might arise after termination of this Agreement, except as set forth otherwise herein with respect to equitable remedies.

11.11 Equitable Remedies . Each party hereto acknowledges that a breach or threatened breach by such party of any of its obligations under this Agreement would give rise to irreparable harm to the other parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, each of the other parties hereto shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

11.12 Attorneys’ Fees . In the event that any party hereto institutes any legal suit, action or proceeding, including arbitration, against another party in respect of a matter arising out of or relating to this Agreement, the prevailing party in the suit, action or proceeding shall be entitled to receive, in addition to all other damages to which it may be entitled, the costs incurred by such party in conducting the suit, action or proceeding, including reasonable attorneys’ fees and expenses and court costs.

11.13 Remedies Cumulative . The rights and remedies under this Agreement are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise, except to the extent expressly provided in this Agreement to the contrary.

11.14 Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

11.15 Counterparts . This Agreement may be executed in one or more counterparts, all of which will be considered one and the same agreement and will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, regardless of whether all of the parties have executed the same counterpart. Counterparts may be delivered via facsimile, electronic mail (including pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

11.16 Stock Splits, Stock Dividends, etc . In the event of any issuance of Capital Stock after the date of this Agreement to the Stockholders (including in connection with any stock split, stock dividend, recapitalization, reorganization, or the like), such Capital Stock shall become subject to this Agreement and shall be endorsed with the legend set forth in Section 7.1 herein.

11.17 Spousal Consent . If any Stockholder has a spouse on the date on which such Stockholder enters into this Agreement, such Stockholder’s spouse shall execute and deliver to the Company a Consent of Spouse, effective as of such date. If any Stockholder should marry or remarry subsequent to the date on which such Stockholder enters into this Agreement, such Stockholder shall within thirty (30) days thereafter obtain his or her new spouse’s acknowledgment of and consent to the provisions of this Agreement by causing such new spouse to execute and deliver to the Company a Consent of Spouse. Notwithstanding the execution and delivery thereof, no Consent of Spouse shall be deemed to confer on or convey to a spouse any rights in such Stockholder’s Capital Stock or any interest therein.

11.18 Construction . The parties agree that this Agreement is the product of negotiations between sophisticated Persons, all of whom were represented by counsel, and each of whom had an opportunity to participate in, and did participate in, the drafting of each provision hereof. Accordingly, ambiguities in this Agreement, if any, shall not be construed strictly or in favor of or against any party but rather shall be given fair and reasonable construction without regard to the rule of contra proferentem . As used in this Agreement, the masculine gender shall include the feminine and neuter gender. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified or the context otherwise requires, (a) references made in this Agreement to an Article, Section, Clause, Schedule or an Exhibit are to a Section, Clause, Schedule or an Exhibit of or to this Agreement, (b) the term “or” has the inclusive meaning represented by the term “and/or”. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. References to any Person include the successors and permitted assigns of that Person. References to “$” or dollar amounts are to lawful currency of the United States of America, unless otherwise expressly stated.

[signature page follows]

IN WITNESS WHEREOF, the parties have executed this Stockholders Agreement as of the date first above written.

THE COMPANY :

LIPIMETIX DEVELOPMENT, INC.

By: /s/ Dennis I. Goldberg

Name: Dennis I. Goldberg, Ph.D.

Title: President

Address for Notices:

5 Commonwealth Rd., Suite 2A

Natick, Massachusetts 01760

Attn: Dennis I. Goldberg, Ph.D.

Email: dgoldberg@benubio.com

STOCKHOLDERS :

MEMBERS:

CAPS:

CAPSTONE THERAPEUTICS CORP., a Delaware corporation

By: /s/ John M. Holliman, III

John M. Holliman, III

Executive Chairman

LX STOCKHOLDERS:

/s/ Dennis I. Goldberg, Ph.D.

Dennis I. Goldberg, Ph.D.

/s/ Phillip M. Friden, Ph.D.

Phillip M. Friden, Ph.D.

/s/ Eric Morrell, Ph.D.

Eric Morrell, Ph.D.

_____________________

G.M. Anantharamaiah

[signature page to Stockholders Agreement]

/s/ Palgunachari Mayakonda

Palgunachari Mayakonda

______________________

Frederick Meyer

/s/ Michael Webb

Michael Webb

/s/ Jeffrey Elton

Jeffrey Elton

THE UAB RESEARCH FOUNDATION

By: ______________________________

Kathy L. Nugent

Chief Executive Officer

[signature page to Stockholders Agreement]

SCHEDULE A

Name and Address for Notices	Shares of Class A-1 Common Stock	Shares of Class A-2 Common Stock	Shares of Series A Preferred Stock
CAPS
Capstone Therapeutics Corp. 1275 W. Washington Street, Suite 104 Tempe, AZ 85281 Email: jholliman@capstonethx.com Attn: John M. Holliman, III	600,000		5,000,000
LX STOCKHOLDERS
Dennis I. Goldberg, Ph.D. 50 Land’s End Lane Sudbury, MA 01776 Email: dgoldberg@benubio.com	120,000
Philip M. Friden, Ph.D. 32 Washington Street Bedford, MA 01730 Email: pfriden@benubio.com	60,000
Eric Morrell, Ph.D. 49 Green Lane Sherborn, MA 01770 Email: emorrel@benubio.com	60,000
G. M. Anantharamaiah 3798 Carisbrooke Drive Birmingham, AL 35526 Email: ganatha@uabmc.edu	32,000
Frederick Meyer 24 Shuman Circle Newton, MA 02459 Email: fameyer@verizon.net	28,000

Jeffrey Elton 884 Lowell Road Concord, MA 01742 Email: jeff.elton@gmail.com	8,000
Michael Webb 161 Forest Street Sherborn, MA 01770 Email: webb.michael@comcast.net	8,000
Palgunachari Mayakonda 5035 Melrose Way, Hoover Birmingham, AL 35226 Email: maya.pa100@gmail.com	4,000
UABRF
The UAB Research Foundation 701 20th Street South, AB 770 Birmingham, Alabama 35294 Email:_____________ Attn: The Chief Executive Officer		80,000
Totals:	920,000	80,000	5,000,000