Business
Capstone Therapeutics Corp. Announces Transaction with Diamond Products Holdings, LLC
Capstone Subsidiary Issues Debt to Acquire Equity Interest in Operating CompanyALSIP, IL / ACCESSWIRE / April 6, 2021 / On March 31, 2021, the Company,
About this update from Capstone Holding Corp.
[{"type":"text","content":"Capstone Subsidiary Issues Debt to Acquire Equity Interest in Operating CompanyALSIP, IL / ACCESSWIRE / April 6, 2021 / On March 31, 2021, the Company, through its relationship with Brookstone Partners (New York), executed definitive documents and acquired a minority interest in a consumer products company, Diamond Products, LLC (\"Diamond\"), a sexual wellness holding company. The transaction is based on the following structure:--Brookstone Acquisition Partners XXI Corporation (\"Brookstone XXI\") contributed its approximately 95% equity interest in Diamond, which represents approximately 62% equity ownership on a fully-diluted basis, to Diamond Products Holdings, LLC (\"DPH\");--The Company formed Capstone Beta LLC (\"Beta\") as a wholly-owned subsidiary, and Beta purchased a portion of Brookstone XXI's interest in DPH;--Beta issued a promissory note to Brookstone XXI in the original principal amount of $8.0 million, which bears interest at 1% per annum and has a 3-year term, and secured its obligations thereunder by pledging Beta's interests in DPH; and--As additional credit support, the Company issued a limited payment guaranty to Brookstone XXI in the amount of 10% of the principal amount of Beta's promissory note.Beta's obligations under its promissory note will be serviced by distributions from DPH, which, in turn, will largely reflect the contractually-allowable distributions received by DPH from Diamond. It is anticipated that substantially all of the distributions that DPH receives will be applied in the following manner: 99% of the first $8.35 million to Beta; 90% of the next $4.0 million to Beta; and 20% of all future amounts to Beta.As this transaction involves the Company's majority stockholder, it is related party in nature. The board appointed a special committee of independent directors to negotiate, perform due diligence and close this investment. The special committee relied on an independent valuation of Diamond as well as outside legal advisors to assist in structuring and maintaining its fiduciary independence for the transaction.An independent director, John M. Holliman, will serve as manager of Beta. Mr. Holliman will join Company board members Michael Toporek and Matthew Lipman as managers of DPH.About Diamond Products, LLC (Pipedream Products)Diamond Products, LLC is a holding company which owns Pipedre...