form10ksb.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2007
OR
£ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
transition period from___________ to __________
Commission
file number 1-12830
BioTime,
Inc.
(Name of
small business issuer as specified in its charter)
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California
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94-3127919
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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6121
Hollis Street
Emeryville,
California 94608
(Address
of principal executive offices) (Zip Code)
Issuer’s
telephone number, including area code (510) 350-2940
Securities
registered pursuant to Section 12(b) of the Act:
None
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Securities
registered pursuant to Section 12(g) of the Act
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Title
of class
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Common Shares, no par
value
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Title
of class
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Common Share Purchase
Warrants
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Check
whether the issuer is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No x
Check whether
the issuer (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Check if
there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes o No x
The
issuer’s revenues for the fiscal year ended December 31, 2007 were
$1,046,121
The
approximate aggregate market value of voting common shares held by nonaffiliates
of the issuer computed by reference to the price at which common shares were
sold as of March 25, 2007 was $3,517,793. Shares held by
each executive officer and director and by each person who beneficially owns
more than 5% of the outstanding common shares have been excluded in that such
persons may under certain circumstances be deemed to be
affiliates. This determination of affiliate status is not necessarily
a conclusive determination for other purposes.
23,044,374
(Number
of common shares outstanding as of March 4, 2008)
Documents
Incorporated by Reference
None
Transitional
Small Business Disclosure Format (check one): Yes o No x
BioTime,
Inc.
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Statements
made in this Form 10-KSB that are not historical facts may constitute
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those
discussed. Words such as “expects,” “may,” “will,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions
identify forward-looking statements. See “Risk Factors” and Note 1 to
Financial Statements.
Overview
Since its
inception in November 1990, BioTime has been engaged primarily in research and
development activities, which have culminated in the commercial launch of
Hextend®,
our lead product, and a clinical trial of PentaLyte®. Our
operating revenues have been generated primarily from licensing fees and from
royalties on the sale of Hextend. During October 2007, we entered the
field of regenerative medicine where we plan to develop stem cell related
products and technology for diagnostic, therapeutic and research use. Our
ability to generate substantial operating revenue depends upon our success in
developing and marketing or licensing our plasma volume expanders, stem cell
products, and organ preservation solutions and technology for medical and
research use.
Products for Stem Cell
Research
On
October 10, 2007, Michael D. West, Ph.D. became BioTime's new Chief Executive
Officer. Dr. West will help spearhead BioTime's entry into the field of
regenerative medicine by initiating the development of advanced human stem cell
products and technology for diagnostic, therapeutic and research
use. Regenerative medicine refers to therapies based on human
embryonic stem (“hES”) cell technology that are designed to rebuild cell and
tissue function lost due to degenerative disease or injury. To
further these ends, in December 2007, BioTime created a new, wholly-owned
subsidiary called Embryome Sciences, Inc.™ (“Embryome
Sciences”). Human embryonic stem cells are capable of becoming all of
the thousands of different cell types in the body. Since embryonic stem cells
can now be derived in a noncontroversial manner, they are increasingly likely to
be utilized in a wide array of future therapies to restore the function of
organs damaged by degenerative diseases such as heart failure, stroke, and
diabetes. The future challenge for regenerative medicine is to
navigate the complexity of human development and manufacture purified
populations of desired cell types. Embryome Sciences represents the
merger of new technologies in the field of genomics with the biology of
embryonic stem cells to provide scientists with a detailed "roadmap" of the
human developmental tree, the factors to push the cells into desired lineages,
and tools to purify the desired cell types.
We
believe that the development of products in the embryomics sector may allow
Embryome Sciences to commercialize products more quickly, using less capital,
than developing therapeutic products from stem cells. Embryome
Sciences' plan is to market its products and services to companies and academic
researchers in this growing industry to provide them with the tools they need to
attain their goals.
The new
BioTime subsidiary plans to launch several kinds of research products in
the next two years. One such product is a commercial database
that will provide the first detailed map of the embryome, thereby aiding
researchers in navigating the complexities of human development and in
identifying the many hundreds of cell types coming from embryonic stem
cells. This map of the human and mouse embryome will take the form of
a relational database that would permit researchers to chart the cell lineages
of human development, the genes expressed in those cell types, and antigens
present on the cell surface of those cells that can be used in
purification. The relational database will be built using core
software licensed, on an exclusive basis for this purpose, from Targeted
Therapeutics Consulting, Inc., which currently operates a relational database
for cancer therapy research and the development of anti-cancer
drugs. When the new embryome database is operational, Embryome
Sciences will provide researchers access to it through an internet
website. Embryome Sciences plans to launch this web-based database in
the second quarter of 2008. The new website may also be used to
market stem cell research products developed by Embryome Sciences and by other
companies.
In order
to manufacture specific cell types from embryonic stem cells, researchers need
to use factors that induce those cells to become a desired cell
type. Embryome Sciences plans to develop growth and differentiation
factors that can do this, and hopes to launch the first of these products
beginning in 2008.
Another
category of near-term embryomics products that Embryome Sciences will pursue, to
be launched beginning in 2009, is a line of purification tools useful to
researchers in quality control of products for regenerative
medicine.
The
proposed collaboration among Lifeline, BioTime, and Embryome Sciences is subject
to the execution of a definitive agreement.
Our
ability to commercialize our planned stem cell research products is dependent
upon the success of our research and development program, and our ability to
obtain the capital needed for the financing of that program.
Plasma
Volume Expanders and Related Products
Our first
product, Hextend, is a physiologically balanced blood plasma volume expander,
for the treatment of hypovolemia. Hypovolemia is a condition caused
by low blood volume, often from blood loss during surgery or from
injury. Hextend maintains circulatory system fluid volume and blood
pressure and helps sustain vital organs during surgery. Hextend,
approved for use in major surgery, is the only blood plasma volume expander that
contains lactate, multiple electrolytes, glucose, and a medically approved form
of starch called hetastarch. Hextend is sterile to avoid risk of
infection. Health insurance reimbursements and HMO coverage now
include the cost of Hextend used in surgical procedures.
We are
also developing two other blood volume replacement products, PentaLyte® and
HetaCool®, which, like Hextend, have been formulated to maintain the patient’s
tissue and organ function by sustaining the patient’s fluid volume and
physiological balance. We have conducted a Phase II clinical trial
using PentaLyte in the treatment of hypovolemia in cardiac
surgery. PentaLyte contains a lower molecular weight hydroxyethyl
starch than Hextend, and is more quickly metabolized. PentaLyte is
designed for use when short lasting volume expansion is
desirable. Our ability to complete clinical studies of PentaLyte will
depend on our cash resources and the costs involved, which are not presently
determinable.
Hextend
is being distributed in the United States and Canada by Hospira, Inc., and in
South Korea by CJ Corp. (“CJ”) under exclusive licenses from
us. Hospira also has the right to obtain regulatory approval and
market Hextend in Latin America and Australia. Summit Pharmaceuticals
International Corporation (“Summit”) has a license to develop Hextend and
PentaLyte in Japan, the People’s Republic of China, and
Taiwan. Summit has entered into sublicenses with Maruishi
Pharmaceutical Co., Ltd. (“Maruishi”) to obtain regulatory approval,
manufacture, and market Hextend in Japan, and Hextend and PentaLyte in China and
Taiwan. See “Licensing” for more information about our licensing
arrangements with Hospira, CJ and Summit.
We are
also continuing to develop solutions for low temperature
surgery. Once a sufficient amount of data from successful low
temperature surgery has been compiled, we plan to seek permission to use Hextend
as a complete replacement for blood under near-freezing
conditions. We currently plan to market Hextend for complete blood
volume replacement at very low temperatures under the registered trademark
“HetaCool®”
after FDA approval is obtained, although the time frame for such approval is
presently uncertain.
BioTime
scientists believe the HetaCool program has the potential to produce a product
that could be used in very high fluid volumes (50 liters or more per procedure
if HetaCool were used as a multi-organ donor preservation solution or to
temporarily replace substantially all of the patient’s circulating blood volume)
in cardiovascular surgery, trauma treatment, and organ
transplantation. However, the cost and time to complete the
development of HetaCool, including clinical trials, cannot presently be
determined.
Until
such time as we are able to successfully commercialize any of the various
projected regenerative medicine products and can complete the development of
PentaLyte and HetaCool and enter into commercial license agreements for those
products and additional foreign commercial license agreements for Hextend, we
will depend upon royalties from the sale of Hextend by Hospira and CJ as our
principal source of revenues.
The
amount and pace of research and development work that we can do or sponsor, and
our ability to commence and complete clinical trials required to obtain FDA and
foreign regulatory approval of products, depends upon the amount of money we
have. Future research and clinical study costs are not presently
determinable due to many factors, including the inherent uncertainty of these
costs and the uncertainty as to timing, source, and amount of capital that will
become available for these projects. We have already curtailed the
pace of our product development efforts due to the limited amount of funds
available, and we may have to postpone further laboratory and clinical studies,
unless our cash resources increase through growth in revenues, the completion of
licensing agreements, additional equity investment, borrowing or third party
sponsorship.
Hextend®,
PentaLyte®, and HetaCool® are registered trademarks of BioTime.
The
Market for Plasma Volume Expanders
We are
developing Hextend, PentaLyte, HetaCool and other synthetic plasma expander
solutions to treat acute blood loss that occurs as a result of trauma injuries
and during many kinds of surgery. These products are synthetic, can
be sterilized, and can be manufactured in large volumes. Hextend,
PentaLyte, and HetaCool contain constituents that may maintain physiological
balance when used to replace lost blood volume.
Hextend
is also currently being used to treat hypovolemia subsequent to trauma or low
blood pressure due to shock by emergency room physicians. After
appropriate clinical testing and regulatory approval, it may be used by
paramedics to treat acute blood loss in trauma victims being transported to the
hospital. Hextend is part of the Tactical Combat Casualty Care
protocol and has been purchased by the U.S. Armed Forces through intermittent
large volume orders.
Approximately
10,000,000 surgeries take place in the United States each year, and blood
transfusions are required in approximately 3,000,000 of those
cases. Transfusions are also required to treat patients suffering
severe blood loss due to traumatic injury. Many more surgical and
trauma cases do not require blood transfusions but do involve significant
bleeding that can place the patient at risk of suffering from shock caused by
the loss of fluid volume (hypovolemia) and physiological
balance. Whole blood and packed red cells generally cannot be
administered to a patient until the patient’s blood has been typed and
sufficient units of compatible blood or red cells can be
located. Periodic shortages of supply of donated human blood are not
uncommon, and rare blood types are often difficult to locate. The use
of human blood products also poses the risk of exposing the patient to
blood-borne diseases such as AIDS and hepatitis.
Due to
the risks and cost of using human blood products, even when a sufficient supply
of compatible blood is available, physicians treating patients suffering blood
loss are generally not permitted to transfuse red blood cells until the
patient’s level of red blood cells has fallen to a level known as the
“transfusion trigger.” During the course of surgery, while blood
volume is being lost, the patient is infused with plasma volume expanders to
maintain adequate blood circulation. During the surgical procedure,
red blood cells are not generally replaced until the patient has lost
approximately 45% to 50% of his or her red blood cells, thus reaching the
transfusion trigger at which point the transfusion of red blood cells may be
required. After the transfusion of red blood cells, the patient may
continue to experience blood volume loss, which will be replaced with plasma
volume expanders. Even in those patients who do not require a
transfusion, physicians routinely administer plasma volume expanders to maintain
sufficient fluid volume to permit the available red blood cells to circulate
throughout the body and to maintain the patient’s physiological
balance.
Several
units of fluid replacement products are often administered during
surgery. The number of units will vary depending upon the amount of
blood loss and the kind of plasma volume expander
administered. Crystalloid products must be used in larger volumes
than colloid products such as Hextend.
The
Market for Products for Hypothermic Surgery
More than 400,000 coronary bypass and
other open-heart surgeries are performed in the United States each
year. Current estimates indicate that more than one million people
over age 55 have pathological changes associated with the aortic
arch. Open-heart procedures often require the use of cardio-pulmonary
bypass equipment to do the work of the heart and lungs during the
surgery. During open-heart surgery and surgical procedures for the
treatment of certain cardiovascular conditions such as large aneurysms,
cardiovascular abnormalities and damaged blood vessels in the brain, surgeons
must temporarily interrupt the flow of blood through the
body. Interruption of blood flow can be maintained only for short
periods of time at normal body temperatures because many critical organs,
particularly the brain, are quickly damaged by the resultant loss of
oxygen. As a result, certain surgical procedures are performed at low
temperatures because lower body temperature helps to minimize the chance of
damage to the patient’s organs by reducing the patient’s metabolic rate, thereby
decreasing the patient’s needs during surgery for oxygen and nutrients that
normally flow through the blood.
Current
technology limits the degree to which surgeons can lower a patient’s temperature
and the amount of time the patient can be maintained at a low body temperature
because blood, even when diluted, cannot be circulated through the body at
near-freezing temperatures. As a result, surgeons face severe time
constraints in performing surgical procedures requiring blood flow interruption,
and those time limitations prevent surgeons from correcting certain
cardiovascular abnormalities.
Uses
and Benefits of Hextend, PentaLyte and HetaCool
Our first
three blood volume replacement products, Hextend, PentaLyte, and HetaCool, have
been formulated to maintain the patient’s tissue and organ function by
sustaining the patient’s fluid volume and physiological
balance. Hextend, PentaLyte, and HetaCool are composed of a
hydroxyethyl starch, electrolytes, sugar and lactate in an aqueous
base. Hextend and HetaCool use a high molecular weight hydroxyethyl
starch (hetastarch) whereas PentaLyte uses a lower, molecular weight
hydroxyethyl starch (pentastarch). The hetastarch is retained in the
blood longer than the pentastarch, which may make Hextend and HetaCool the
products of choice when a larger volume of plasma expander or blood replacement
solution for low temperature surgery is needed, or where the patient’s ability
to restore his own blood proteins after surgery is
compromised. PentaLyte, with pentastarch, would be eliminated from
the blood faster than Hextend and HetaCool and might be used when less plasma
expander is needed or where the patient is more capable of quickly restoring
lost blood proteins. We believe that by testing and bringing these
products to the market, we can increase our market share by providing the
medical community with solutions to match patients’ needs.
Certain
clinical test results indicate that Hextend is effective at maintaining blood
calcium levels when used to replace lost blood volume. Calcium can be
a significant factor in regulating blood clotting and cardiac
function. Clinical studies have also shown that Hextend maintains
acid-base better than saline-based surgical fluids. We expect that PentaLyte
will also be able to maintain blood calcium levels and acid-base balance based
upon the fact that the electrolyte formulation of PentaLyte is identical to that
of Hextend.
Albumin
produced from human plasma is also used as plasma volume expander, but it is
expensive and subject to supply shortages. Additionally, an FDA
warning has cautioned physicians about the risk of administering albumin to
seriously ill patients.
We have
not attempted to synthesize potentially toxic and costly oxygen-carrying
molecules such as hemoglobin because the loss of fluid volume and physiological
balance may contribute as much to shock as the loss of the oxygen-carrying
component of the blood. Surgical and trauma patients are routinely
given supplemental oxygen and retain a substantial portion of their own red
blood cells. Whole blood or packed red blood cells are generally not
transfused during surgery or in trauma care until several units of plasma volume
expanders have been administered and the patient’s blood cell count has fallen
to the transfusion trigger. Therefore, the lack of oxygen-carrying
molecules in BioTime solutions should not pose a significant contraindication to
use.
However,
our scientists have conducted laboratory animal experiments in which they have
shown that Hextend can be successfully used in conjunction with a
hemoglobin-based oxygen carrier solution approved for veterinary purposes to
completely replace the animal’s circulating blood volume without any subsequent
transfusion and without the use of supplemental oxygen. By diluting
these oxygen carrier solutions, Hextend may reduce the potential toxicity and
costs associated with the use of those products. Once such solutions have
received regulatory approval and become commercially available, this sort of
protocol may prove valuable in markets in parts of the developing world where
the blood supply is extremely unsafe. These applications may also be
useful in combat where logistics make blood use impracticable.
Hextend is our proprietary
hetastarch-based synthetic blood plasma volume expander, designed especially to
treat hypovolemia in surgery where patients experience significant blood loss.
An important goal of the Hextend development program was to produce a product
that can be used in multi-liter volumes. The safety related secondary
endpoints targeted in the U.S. clinical study included those involving
coagulation. We believe that the low incidence of adverse events
related to blood clotting in the Hextend patients demonstrates that Hextend may
be safely used in amounts exceeding 1.5 liters. An average of 1.6
liters of Hextend was used in the Phase III clinical trials, with an average of
two liters for patients who received transfused blood products.
Hextend
is also being used in surgery with cardio-pulmonary bypass
circuits. In order to perform heart surgery, the patient’s heart must
be stopped and a mechanical apparatus is used to oxygenate and circulate the
blood. The cardio-pulmonary bypass apparatus requires a blood
compatible fluid such as Hextend to commence and maintain the process of
diverting the patient’s blood from the heart and lungs to the mechanical
oxygenator and pump. In a clinical trial conducted in 2001, cardiac
surgery patients treated with Hextend, maintained more normal kidney function,
experienced less pain and nausea, showed less deep venous thrombosis, avoided
dialysis, and had shorter delay times to first meal compared to those treated
with other fluids.
PentaLyte is our proprietary
pentastarch-based synthetic plasma expander, designed especially for use when a
faster elimination of the starch component is desired and
acceptable. Although Hextend can be used in these cases, some
physicians appear to prefer a solution which can be metabolized faster and
excreted earlier when the longer term protection provided by Hextend is not
required. PentaLyte combines the physiologically balanced Hextend
formulation with pentastarch that has a lower molecular weight and degree of
substitution than the hetastarch used in Hextend. Plasma expanders
containing pentastarch are currently widely used around the
world. Our present plan is to seek approval of PentaLyte for use in
the treatment of hypovolemia. We have conducted a Phase II clinical
study using PentaLyte in cardiac surgery for that purpose.
HetaCool is a modified
formulation of Hextend. HetaCool is specifically designed for use at
low temperatures. Surgeons are already using Hextend and a variety of
other solutions to carry out certain limited procedures involving shorter term
(up to nearly one hour) arrest of brain and heart function at temperatures
between 15o and
25o
C. However, we are not aware of any fluid currently used in medical
practice or any medically approved protocol allowing operations that can
completely replace all of a patient’s blood at temperatures close to the ice
point. We believe that very low temperature bloodless surgical
techniques could be developed for open heart and minimally invasive closed chest
cardiovascular surgeries, removal of tumors from and the repair of aneurysms in
the brain, heart, and other areas, as well as in the treatment of trauma,
toxicity and cancer.
In
medical use, HetaCool would be introduced into the patient’s body during the
cooling process. Once the patient’s body temperature is nearly ice
cold, and heart and brain function are temporarily arrested, the surgeon would
perform the operation. During the surgery, HetaCool may be circulated
throughout the body in place of blood, or the circulation may be arrested for a
period of time if an interruption of fluid circulation is
required. Upon completion of the surgery, the patient would be slowly
warmed and blood would be transfused.
Hextend
has already been used to partially replace blood during cancer surgery in which
a patient’s body temperature was lowered to 15oC and his
heart was stopped for 27 minutes while the tumor was removed. The
patient recovered without incident, and a case study of the procedure was
published in the April 2002 issue of the Canadian Journal of
Anesthesia. Hypothermic techniques may also have an important
use in treating trauma patients that have experienced severe blood
loss. We have conducted a research program using HetaCool in animal
models of trauma at the State University of New York Health Science Center in
Brooklyn. Laboratory results there have already supported the
feasibility of using HetaCool to treat subjects following severe
hemorrhage.
Organ
Transplant Products
The
Market for Organ Preservation Solutions
Organ
transplant surgery is a growing field. Each year in the United
States, approximately 5,000 donors donate organs, and approximately 5,000 people
donate skin, bone and other tissues. As more surgeons have gained the
necessary expertise, and surgical methods have been refined, the number of
transplant procedures has increased, as has the percentage of successful
transplants. Organ transplant surgeons and their patients face two
major obstacles: the shortage of available organs from donors, and the limited
amount of time that a transplantable organ can be kept viable between the time
it is harvested from the donor and the time it is transplanted into the
recipient.
The
scarcity of transplantable organs makes them too precious to lose and increases
the importance of effective preservation technology and
products. Current organ removal and preservation technology generally
requires multiple preservation solutions to remove and preserve effectively
different groups of organs. The removal of one organ can impair the
viability of other organs. Available technology does not permit
surgeons to keep the remaining organs viable within the donor’s body for a
significant time after the first organ is removed. Currently, an
organ available for transplant is flushed with an ice-cold solution during the
removal process to deactivate the organ and preserve its tissues, and then the
organ is transported on ice to the recipient. The ice-cold solutions
currently used, together with transportation on ice, keep the organ healthy for
only a short period of time. For example, the storage time for hearts
is limited to approximately six hours. Because of the short time span
available for removal and transplant of an organ, potential organ recipients may
not receive the needed organs.
We are
seeking to address this problem by developing a more effective organ
preservation solution that will permit surgeons to harvest all transplantable
organs from a single donor. We believe that preserving the viability
of all transplantable organs and tissues simultaneously, at low temperatures,
would extend by several hours the time span in which the organs can be preserved
prior to transplant.
Using
HetaCool for Multi-Organ Preservation
We are
seeking to develop HetaCool for use as a single solution that can simultaneously
preserve all of a single donor’s organs. When used as an organ
preservation solution, HetaCool would be perfused into the donor’s body while
the body is chilled, thereby eliminating an undesirable condition called “warm
ischemia,” caused when an organ is warm while its blood supply is
interrupted. The use of HetaCool in conjunction with the chilling of
the body should help to slow down the process of organ deterioration by a number
of hours so that a surgeon can remove all organs for donation and
transplant. We currently estimate that each such preservation
procedure could require as much as 50 liters of HetaCool.
We
believe that the ability to replace an animal’s blood with HetaCool, to maintain
the animal at near freezing temperatures for several hours, and then revive the
animal, would demonstrate that the solution could be used for human multi-organ
preservation. BioTime scientists have revived animals after more than
six hours of cold blood-substitution, and have observed heart function in
animals maintained cold and blood-substituted for more than eight
hours. An objective of our research and development program is to
extend the time span in which animal subjects can be maintained in a cold,
blood-substituted state before revival or removal of organs for transplant
purposes. Organ transplant procedures using animal subjects could
then be conducted to test the effectiveness of Hextend as an organ
preservative.
Long-term
Tissue and Organ Banking
The
development of marketable products and technologies for the preservation of
tissues and vital organs for weeks and months is a long-range goal of our
research and development plan. To permit such long-term organ banking
we are attempting to develop products and technologies that can protect tissues
and organs from the damage that occurs when human tissues are subjected to
subfreezing temperatures.
HetaFreeze® is one of a family
of BioTime freeze-protective solutions that may ultimately allow the extension
of time during which organs and tissues can be stored for future transplant or
surgical grafting. In laboratory experiments, our proprietary
freeze-protective compounds have already been used to preserve
skin. Silver dollar-sized full thickness shaved skin samples have
been removed after saturation with HetaFreeze solution, frozen at liquid
nitrogen temperatures and stored for periods ranging from days to
weeks. The grafts were then warmed and sewn onto the backs of host
animals. Many of these grafts survived. In other
experiments, rat femoral arteries were frozen to liquid nitrogen temperatures,
later thawed and then transplanted into host rats. These grafts were
proven to last up to four months. The work was published in the
October 2002 issue of the Annals of Plastic
Surgery.
We have
also developed a patent pending devise for hyperbaric freezing and thawing of
tissues in a manner that might reduce or eliminate structural damage to the
cells or tissue samples. This technology may have application in
biological and medical research and in the storage of cells and tissues for
medical use.
Our
scientists have also shown that animals can be revived to consciousness after
partial freezing with their blood replaced by HetaFreeze. While this
technology has not developed to an extent that allows long term survival of the
laboratory subjects and their organs, a better understanding of the effects of
partial freezing could allow for extended preservation times for vital organs,
skin and blood vessels.
Research
and Development Strategy
Plasma
Volume Expanders and Organ Preservation Solutions
The
greatest portion of our research and development efforts has been devoted to the
development of Hextend, PentaLyte and HetaCool for conventional surgery,
emergency care, low temperature surgery, and multi-organ
preservation. A lesser portion of our research and development
efforts have been devoted to developing solutions and protocols for storing
organs and tissues at subfreezing temperatures. As the first products
achieve market entry, more effort will be expended to bring the next tier of
products to maturity.
Experiments
intended to test the efficacy of our low temperature blood replacement solutions
involve replacing the animal’s blood with our solution, maintaining the animal
in a cold blood-substituted state for a period of time, and then attempting to
revive the animal. An integral part of that effort has been the
development of techniques and procedures or “protocols” for use of our products
at low temperatures. A substantial amount of data has been
accumulated through animal tests, including the proper surgical techniques,
drugs and anesthetics, the temperatures and pressures at which blood and blood
replacement solutions should be removed, restored and circulated, solution
volume, the temperature range, and times, for maintaining circulatory arrest,
and the rate at which the subject should be rewarmed.
We have
also done research for the development of products for low temperature
preservation of tissues and cells. This area of research includes our
work with HetaFreeze and a patent pending device for hyperbaric freezing and
thawing of tissues in a manner that might reduce or eliminate structural damage
to the cells or tissue samples.
We have
been also conducting two collaborative research programs at the University of
California at Berkeley. One program is testing our solutions and
protocols designed for organ preservation, and the other program is an
interventive gerontology project focused on the identification of specific
factors central to aging of the brain and the development of medical and
pharmacological strategies to treat senescence-related
consequences. To date this collaborative research has led to three
journal articles. One study, the results of which were published in
Neuroendocrinology Letters and in Mechanisms of Aging and Development,
demonstrated that a loss of hypothalamic estrogen-binding cells in females may
play a role in reproductive aging. The other study, the results of
which were published in the International Journal of Developmental Neuroscience
in 2007, indicated that the loss of insulin-like Growth Factor Receptor-1
containing cells, within specific hypothalamic areas, may play a key role in
aging. As funding permits, we may conduct further research to better
understand the cause and effect of these age-related degenerative conditions,
and to identify possible therapies that may be developed through the use of hES
cell technology.
We intend
to continue to foster relations with research hospitals and medical schools for
the purpose of conducting collaborative research projects because we believe
that such projects will introduce our potential products to members of the
medical profession and provide us with objective product evaluations from
independent research physicians and surgeons.
Stem
Cell Research Products
In
addition to our work with plasma volume expanders and organ preservation
solutions, we plan to focus on near-term commercialization opportunities
presented by stem cell research programs. We believe that the
development of products for use in stem cell research provides an opportunity to
commercialize products more quickly, using less capital, than developing
therapeutic products. Our plan is to market to companies and academic
researchers in the stem cell industry some of the tools they need to attain
their goals.
We are
conducting our stem cell research product business through our recently
organized subsidiary, Embryome Sciences, Inc. We plan to
launch several kinds of research products in the next two
years. One such product is a commercial embryome database that will
provide a map that researchers may use to navigate the complexities of human
development and to identify the many hundreds of cell types coming from hES
cells. Like the field of "genomics," where companies mapped the human
DNA, we believe that there is an important need for a map of the human
"embryome" in stem cell research. This map would take the form of a
relational data base that would permit researchers to chart the cell lineages of
human development, the genes expressed in those cell types, and antigens present
on the cell surface of those cells that can be used in
purification. We plan to launch this web-based database in the early
part of 2008.
We also
plan to develop growth and differentiation factors, and hope to launch the first
of these products beginning in 2008. In order to manufacture specific
cell types from hES cells, researchers need to use factors that signal to hES
cells to become a desired cell type. We may market these reagents
from a new BioTime website.
Another category
of near-term products that we plan to develop includes purification ligands
useful to researchers in purification and quality control analysis of products
in regenerative medicine. We hope to be able to launch the first of these
products in 2009.
The
proposed collaboration among Lifeline, BioTime, and Embryome Sciences is subject
to the execution of a definitive agreement.
We have
obtained a license from the Wisconsin Alumni Research Foundation to use their
patented technology and cell lines in our research program. See
“Patents and Trade Secrets—Licensed Patents.” We may seek to obtain
licenses to additional stem cell technology for use in developing new stem cell
products, and we may also enter into collaborative product development
arrangements with other companies in the stem cell industry if such
opportunities arise on terms acceptable to us.
Licensing
Hospira
Hospira
has the exclusive right to manufacture and sell Hextend in the United States,
Canada, Latin America and Australia under a license agreement with
us. Hospira is presently marketing Hextend in the United
States. Hospira’s license applies to all therapeutic uses other than
those involving hypothermic surgery where the patient’s body temperature is
lower than 12°C (“Hypothermic Use”), or replacement of substantially all of a
patient’s circulating blood volume (“Total Body Washout”).
Hospira
pays us a royalty on total annual net sales of Hextend. The royalty
rate is 5% plus an additional .22% for each $1,000,000 of annual net sales, up
to a maximum royalty rate of 36%. The royalty rate for each year is
applied on a total net sales basis. Hospira’s obligation to pay
royalties on sales of Hextend will expire on a country by country basis when all
patents protecting Hextend in the applicable country expire and any third party
obtains certain regulatory approvals to market a generic equivalent product in
that country. The relevant composition patents begin to expire in
2014 and the relevant methods of use patents expire in 2019.
We have
the right to convert Hospira’s exclusive license to a non-exclusive license or
to terminate the license outright if certain minimum sales and royalty payments
are not met. In order to terminate the license outright, we would pay
a termination fee in an amount ranging from the milestone payments we received
to an amount equal to three times prior year net sales, depending upon when
termination occurs. Hospira has agreed to manufacture Hextend for
sale by us in the event that the exclusive license is terminated.
Hospira
has certain rights to acquire additional licenses to manufacture and sell our
other plasma expander products in their market territory. If Hospira
exercises these rights to acquire a license to sell such products for uses other
than Hypothermic Surgery or Total Body Washout, in addition to paying royalties,
Hospira will be obligated to pay a license fee based upon our direct and
indirect research, development and other costs allocable to the new
product. If Hospira desires to acquire a license to sell any of our
products for use in Hypothermic Surgery or Total Body Washout, the license fees
and other terms of the license will be subject to negotiation between the
parties. For the purpose of determining the applicable royalty rates,
net sales of any such new products licensed by Hospira will be aggregated with
sales of Hextend. If Hospira does not exercise its right to acquire a
new product license, we may manufacture and sell the product ourselves or we may
license others to do so.
Hospira supplied us with batches of
PentaLyte for our clinical trial, and performed characterization and stability
studies, and other regulatory support needed for our clinical
studies. The foregoing description of the Hospira license agreement
is a summary only and is qualified in all respects by reference to the full text
of that license agreement.
CJ
Corp.
CJ
markets Hextend in South Korea under an exclusive license from us. CJ
paid us a license fee to acquire their right to market Hextend. CJ
also pays us a royalty on sales of Hextend. The royalty will range
from $1.30 to $2.60 per 500 ml unit of product sold, depending upon the price
approved by Korea’s National Health Insurance. CJ is also responsible
for obtaining the regulatory approvals required to manufacture and market
PentaLyte, including conducting any clinical trials that may be required, and
will bear all related costs and expenses.
The
foregoing description of the CJ license is a summary only and is qualified in
all respects by reference to the full text of the CJ license
agreement.
Summit
We have
entered into agreements with Summit to develop Hextend and PentaLyte in Japan,
the People’s Republic of China, and Taiwan. Summit has sublicensed to
Maruishi the right to manufacture and market Hextend in Japan, and the right to
manufacture and market Hextend and PentaLyte in China and Taiwan. The
licenses do not include Hypothermic Use.
Under the
sublicense, Maruishi will complete clinical trials required and obtain
regulatory approval to market the licensed products. Summit will also
participate in the clinical trial and regulatory approval process. A
Phase II clinical trial using Hextend in surgery is presently being conducted in
Japan, and if the results are favorable, Summit plans to begin a Phase III trial
during 2008. Maruishi will not be obligated to begin to seek
regulatory approval of Hextend or PentaLyte in China and Taiwan earlier than six
months after the results of the Phase II study of Hextend in Japan or our Phase
II study of PentaLyte in the United States are made available to them, or March
2009, whichever is later.
The
revenues from licensing fees, royalties, and net sales, and any other payments
made for co-development, manufacturing, or marking rights to Hextend and
PentaLyte in Japan will be shared between BioTime and Summit as follows: 40% to
us and 60% to Summit. Net sales means the gross revenues from the
sale of a product, less rebates, discounts, returns, transportation costs, sales
taxes and import/export duties.
Summit
paid us fees for the right to co-develop Hextend and PentaLyte in Japan, and
Summit has also paid us a share of a sublicense fee payment from
Maruishi. Additional milestone payments of 100,000,000 yen each, of
which BioTime will receive 40%, are payable by Maruishi to Summit when a new
drug application for Hextend is filed in Japan and when the new drug application
is approved. The filing of a new drug application in Japan will not
be done until clinical trials are completed, which could take several
years. We will also be entitled to receive 40% of the royalties paid
by Maruishi to Summit on sales in Japan. Royalties will range from
12% to 20% of net sales, depending upon the amount of Hextend
sold. The royalty rates are subject to reduction if Summit does not
complete its participation in Phase III trials of Hextend and the new drug
application, or if Summit elects to co-market Hextend in
Japan. However, if Summit sells Hextend, we will also be entitled to
receive 40% of Summit’s net sales revenues.
We will
pay to Summit 8% of all net royalties that we receive from the sale of PentaLyte
in the United States, plus 8% of any license fees that we receive in
consideration of granting a license to develop, manufacture and market PentaLyte
in the United States. Net royalties means royalty payments received
during a calendar year, minus the following costs and expenses incurred during
such calendar year: (a) all taxes assessed (other than taxes determined with
reference to our net income) and credits given or owed by us in connection with
the receipt of royalties on the sale of PentaLyte in the United States, and (b)
all fees and expenses payable by us to the United States Food and Drug
Administration (directly or as a reimbursement of any licensee) with respect to
PentaLyte. In the case of license fees received from Hospira based
upon the combined sale of PentaLyte and Hextend, the portion of that license fee
that will be deemed to be a paid on account of the sale of PentaLyte will be
determined by multiplying the total license fee paid by a fraction, the
numerator of which will be the total net sales of PentaLyte in the United States
for the applicable period and the denominator of which shall be the total net
sales of Hextend and PentaLyte in the United States for the same
period.
Summit
paid us a fee to acquire the China and Taiwan license. We also will
be entitled to receive 50% of the royalties and milestone payments payable to
Summit by its third-party sublicensee, Maruishi. Milestone payments
of 20,000,000 yen are payable by Maruishi when the first new drug application
for Hextend is filed and when the first clinical study of PentaLyte begins under
the sublicense. An additional milestone payment of 30,000,000 yen is
payable by Maruishi when the first new drug application for PentaLyte is filed
under the sublicense.
The
foregoing description of the Summit agreement is a summary only and is qualified
in all respects by reference to the full text of the Summit
agreements.
Other
Licensing Efforts
We are
discussing prospective licensing arrangements with other pharmaceutical
companies that have expressed their interest in marketing our products
abroad. In licensing
arrangements that include marketing rights, the participating pharmaceutical
company would be entitled to retain a large portion of the revenues from sales
to end users and would pay us a royalty on net sales. There is no
assurance that any such licensing arrangements can be made.
Manufacturing
Manufacturing
Arrangements
Hospira
manufactures Hextend for use in the North American market, and CJ manufactures
Hextend for use in South Korea. NPBI International, BV, a Netherlands
company (“NPBI”), has manufactured batches of Hextend for our use in seeking
regulatory approval in Europe. Hospira, CJ, and NPBI have the
facilities to manufacture Hextend and other BioTime products in commercial
quantities. If Hospira and CJ choose not to manufacture and market
PentaLyte or other BioTime products, and if NPBI declines to manufacture BioTime
products on a commercial basis, other manufacturers will have to be found that
would be willing to manufacture products for us or any licensee of our
products.
Facilities
Required - Plasma Volume Expanders
Any
products that are used in clinical trials for regulatory approval in the United
States or abroad, or that are approved by the FDA or foreign regulatory
authorities for marketing, have to be manufactured according to “good
manufacturing practices” (“GMP”) at a facility that has passed regulatory
inspection. In addition, products that are approved for sale will
have to be manufactured in commercial quantities, and with sufficient stability
to withstand the distribution process, and in compliance with such domestic and
foreign regulatory requirements as may be applicable. The active
ingredients and component parts of the products must be medical grade or
themselves manufactured according to FDA-acceptable “good manufacturing
practices.”
We do not
have facilities to manufacture our plasma volume expander products in commercial
quantities, or under “good manufacturing practices.” Acquiring a
manufacturing facility would involve significant expenditure of time and money
for design and construction of the facility, purchasing equipment, hiring and
training a production staff, purchasing raw material and attaining an efficient
level of production. Although we have not determined the cost of
constructing production facilities that meet FDA requirements, we expect that
the cost would be substantial, and that we would need to raise additional
capital in the future for that purpose. To avoid the incurrence of
those expenses and delays, we are relying on Hospira and CJ for the production
of Hextend, but there can be no assurance that satisfactory arrangements will be
made for any new products that we may develop.
Facilities
Required—Stem Cell Products
We
recently acquired, under a sublease, an 11,000 square foot tissue culture
facility in Alameda, California. The facility is GMP capable and has
previously been certified as Class 1000 and Class 10,000 laboratory space, and
includes cell culture and manufacturing equipment previously validated for use
in GMP manufacture of cell based products. Our subsidiary, Embryome
Sciences, Inc., will use the facility for the production of embryonic progenitor
cells, progenitor cell lines, and products derived from those embryonic
progenitor cell lines.
Raw
Materials
Although
most ingredients in the products we are developing are readily obtainable from
multiple sources, we know of only a few manufacturers of the hydroxyethyl
starches that serve as the primary drug substance in Hextend, PentaLyte and
HetaCool. Hospira and CJ presently have a source of supply of the
hydroxyethyl starch used in Hextend, PentaLyte and HetaCool, and have agreed to
maintain a supply sufficient to meet market demand for Hextend in the countries
in which they market the product. We believe that we will be able to
obtain a sufficient supply of starch for our needs in the foreseeable future,
although we do not have supply agreements in place. If for any reason
a sufficient supply of hydroxyethyl starch could not be obtained, we or a
licensee would have to acquire a manufacturing facility and the technology to
produce the hydroxyethyl starch according to good manufacturing practices. We
would have to raise additional capital to participate in the development and
acquisition of the necessary production technology and facilities, which may not
be feasible.
If
arrangements cannot be made for a source of supply of hydroxyethyl starch, we
would have to reformulate our solutions to use one or more other starches that
are more readily available. In order to reformulate our products, we
would have to perform new laboratory testing to determine whether the
alternative starches could be used in a safe and effective synthetic plasma
volume expander, low temperature blood substitute or organ preservation
solution. If needed, such testing would be costly to conduct and
would delay our product development program, and there is no certainty that any
such testing would demonstrate that an alternative ingredient, even if
chemically similar to the one currently used, would be as safe or
effective.
Marketing
Plasma
Volume Expanders
Hextend
is being distributed in the United States by Hospira and in South Korea by CJ
under exclusive licenses from us. Hospira also has the right to
obtain licenses to manufacture and sell other BioTime products. We
have granted Hospira the right to market Hextend in Latin America and Australia,
we have granted CJ the right to market PentaLyte in South Korea, and we have
licensed to Summit the right to market Hextend and PentaLyte in Japan, China and
Taiwan, but our licensees will have to first obtain the foreign regulatory
approvals required to sell our product in those countries.
Because
Hextend is a surgical product, sales efforts must be directed to physicians and
hospitals. The Hextend marketing strategy is designed to reach its
target customer base through sales calls and an advertising campaign focused on
the use of a plasma-like substance to replace lost blood volume and the ability
of Hextend to support vital physiological processes.
Hextend
competes with other products used to treat or prevent hypovolemia, including
albumin, generic 6% hetastarch solutions, and crystalloid
solutions. The competing products have been commonly used in surgery
and trauma care for many years, and in order to sell Hextend, physicians must be
convinced to change their product loyalties. Although albumin is
expensive, crystalloid solutions and generic 6% hetastarch solutions sell at low
prices. In order to compete with other products, particularly those
that sell at lower prices, Hextend will have to be recognized as providing
medically significant advantages.
The FDA
has required the manufacturers of 6% hetastarch in saline solutions to change
their product labeling by adding a warning stating that those products are not
recommended for use as a cardiac bypass prime solution, or while the patient is
on cardiopulmonary bypass, or in the immediate period after the pump has been
disconnected. We have not been required to add that warning to the
labeling of Hextend. An article discussing this issue entitled “6%
Hetastarch in Saline Linked to Excessive Bleeding in Bypass Surgery” appeared in
the December 2002 edition of Anesthesiology
News. We understand that a number of hospitals have switched
from 6% hetastarch in saline to Hextend due to these concerns.
As part
of the marketing program, a number of studies have been conducted that show the
advantages of receiving Hextend and other BioTime products during
surgery. As these studies are completed, the results are presented at
medical conferences and articles written for publication in medical
journals. We are also aware of independent studies using Hextend that
are being conducted by physicians and hospitals who may publish their findings
in medical journals or report their findings at medical
conferences. The outcome of future medical studies and timing of the
publication or presentation of the results could have an effect on Hextend
sales.
Stem
Cell Research Products
In
addition to our work with plasma volume expanders and organ preservation
solutions, we plan to focus on near-term commercialization opportunities
presented by stem cell research programs. We believe that the
development of products for use in stem cell research provides an opportunity to
commercialize products more quickly, using less capital, than developing
therapeutic products. Our plan is to market to companies and academic
researchers in the stem cell industry some of the tools they need to attain
their goals.
We are
conducting our stem cell research product business through our recently
organized subsidiary, Embryome Sciences, Inc. One of our first
product goals for Embryome Sciences is the development and launch of a
relational data base database that will provide a map that researchers may use
to navigate the complexities of human development and to identify the many
hundreds of cell types coming from hES cells. The relational database
will be built using core software licensed, on an exclusive basis for this
purpose, from Targeted Therapeutics Consulting, Inc., which currently operates a
relational database for cancer therapy research and the development of
anti-cancer drugs. When the new embryome database is operational,
Embryome Sciences will provide researchers access to it through an internet
website. Embryome Sciences plans to launch this web-based database in
the second quarter of 2008. The new website may also be used to
market other stem cell research products developed by Embryome Sciences and by
other companies.
Our
ability to commercialize our planned stem cell research products is dependent
upon the success of our research and development program, and our ability to
obtain the capital needed for the financing of that program. We may
also enter into collaborative product development and marketing arrangements
with other companies in the stem cell industry if such opportunities arise on
terms acceptable to us.
Government
Regulation
The FDA
and foreign regulatory authorities will regulate our proposed products as drugs,
biologicals, or medical devices, depending upon such factors as the use to which
the product will be put, the chemical composition and the interaction of the
product on the human body. In the United States, products that are
intended to be introduced into the body, such as blood substitute solutions for
low temperature surgery and plasma expanders, will be regulated as drugs and
will be reviewed by the FDA staff responsible for evaluating
biologicals.
Our
domestic human drug products will be subject to rigorous FDA review and approval
procedures. After testing in animals, an Investigational New Drug
Application (IND) must be filed with the FDA to obtain authorization for human
testing. Extensive clinical testing, which is generally done in three
phases, must then be undertaken at a hospital or medical center to demonstrate
optimal use, safety and efficacy of each product in humans. Each
clinical study is conducted under the auspices of an independent Institutional
Review Board (“IRB”). The IRB will consider, among other things,
ethical factors, the safety of human subjects and the possible liability of the
institution. The time and expense required to perform this clinical
testing can far exceed the time and expense of the research and development
initially required to create the product. No action can be taken to
market any therapeutic product in the United States until an appropriate New
Drug Application (“NDA”) has been approved by the FDA. Even after
initial FDA approval has been obtained, further studies may be required to
provide additional data on safety or to gain approval for the use of a product
as a treatment for clinical indications other than those initially
targeted. In addition, use of these products during testing and after
marketing could reveal side effects that could delay, impede or prevent FDA
marketing approval, resulting in a FDA-ordered product recall, or in FDA-imposed
limitations on permissible uses.
The FDA
regulates the manufacturing process of pharmaceutical products, requiring that
they be produced in compliance with “good manufacturing
practices.” See “Manufacturing.” The FDA also regulates
the content of advertisements used to market pharmaceutical
products. Generally, claims made in advertisements concerning the
safety and efficacy of a product, or any advantages of a product over another
product, must be supported by clinical data filed as part of an NDA or an
amendment to an NDA, and statements regarding the use of a product must be
consistent with the FDA approved labeling and dosage information for that
product.
Sales of
pharmaceutical products outside the United States are subject to foreign
regulatory requirements that vary widely from country to
country. Even if FDA approval has been obtained, approval of a
product by comparable regulatory authorities of foreign countries must be
obtained prior to the commencement of marketing the product in those
countries. The time required to obtain such approval may be longer or
shorter than that required for FDA approval.
California
Proposition 71
In
November 2004, California State Proposition 71 (“Prop. 71”), the
California Stem Cell Research and Cures Initiative, was adopted by state-wide
referendum. Prop. 71 provides for a state-sponsored program designed
to encourage stem cell research in the State of California, and to finance such
research with State funds totaling approximately $295 million annually for
10 years beginning in 2005. This initiative creates the
California Institute for Regenerative Medicine, which will provide grants,
primarily but not exclusively, to academic institutions to advance both hES cell
research and adult stem cell research. The implementation of Prop. 71
is being challenged in several lawsuits filed in 2005. As stated
above, hES cell research is now one of our primary areas of focus. It
is unclear whether we are eligible to directly receive Prop. 71 generated
funds. However, we intend to apply for any funding that becomes
available. We also expect to benefit from collaborations with
academic and other institutions eligible for Prop. 71 funding for research in
the use of hES cells for various diseases and conditions. Generally,
hES cell research does not qualify for federal funding due to restrictions on
embryonic stem cell research. Prop. 71 is specifically targeting
research in the embryonic stem cell field. We consider government
support to be important confirmation of the quality of our technology, but do
not rely on government programs as a significant source of financial
support.
Patents
and Trade Secrets
We
currently hold 25 issued United States patents having composition and methods of
use claims covering our proprietary solutions, including Hextend and
PentaLyte. The most recent U.S. patents were issued during
2002. Some of our allowed claims in the United States, which include
the composition and methods of use of Hextend and PentaLyte, are expected to
remain in force until 2014 in the case of the composition patents and 2019 in
the case of the methods of use patents. Patents covering certain of
our solutions have also been issued in several countries of the European Union,
Australia, Israel, Russia, South Africa, South Korea, Japan, China, Hong Kong,
Taiwan and Singapore, and we have filed patent applications in other foreign
countries for certain products, including Hextend, HetaCool, and
PentaLyte. Certain device patents describing our hyperbaric (high
pressure oxygen) chamber, and proprietary microcannula (a surgical tool) have
also been issued in the United States and overseas, both of which - although
only used in research so far - have possible indications in clinical
medicine. We have also filed patent applications for our new device
designed to freeze and thaw tissues.
There is
no assurance that any additional patents will be issued. There is
also the risk that any patents that we hold or later obtain could be challenged
by third parties and declared invalid or infringing of third party claims.
Further, the enforcement of patent rights often requires litigation against
third party infringers, and such litigation can be costly to
pursue.
In
addition to patents, we rely on trade secrets, know-how and continuing
technological advancement to maintain our competitive position. We
have entered into intellectual property, invention and non-disclosure agreements
with our employees and it is our practice to enter into confidentiality
agreements with our consultants. There can be no assurance, however,
that these measures will prevent the unauthorized disclosure or use of our trade
secrets and know-how or that others may not independently develop similar trade
secrets and know-how or obtain access to our trade secrets, know-how or
proprietary technology.
Licensed
Patents
On
January 3, 2008, we entered into a Commercial License and Option Agreement (the
“WARF License”) with Wisconsin Alumni Research Foundation
(“WARF”). The WARF License permits us to use certain patented and
patent pending technology belonging to WARF, as well as certain stem cell
materials, for research and development purposes, and for the production and
marketing of Research Products and Related Products. “Research
Products” are products used as research tools, including in drug discovery and
development. “Related Products” are products other than Research
Products, Diagnostic Products, or Therapeutic Products. “Diagnostic
Products” are products or services used in the diagnosis, prognosis, screening
or detection of disease in humans. “Therapeutic Products” are
products or services used in the treatment of disease in humans.
We agreed
to pay WARF a license fee of $225,000 in two installments. The first installment
of $10,000 was paid during February 2008, and the remaining $215,000 is due on
the earlier of (i) thirty (30) days after we raise $5,000,000 or more of new
equity financing, or (ii) January 3, 2009. A maintenance fee of
$25,000 will be due annually on January 3 of each year during the term of the
WARF License.
We will
pay WARF royalties on the sale of products and services under the WARF
License. The royalty will be 4% on the sale of Research Products and
2% on the sale of Related Products. The royalty is payable on sales
by us or by any sublicensee. The royalty rate is subject to certain
reductions if we also become obligated to pay royalties to a third party in
order to sell a product.
We will
also pay WARF $25,000 toward reimbursement of the costs associated with
preparing, filing and maintaining the licensed WARF patents. That fee
is payable in two installments. The first installment of $5,000 was
paid during February 2008, and the remaining $20,000 is due on the earlier of
(i) thirty (30) days after we raise $5,000,000 or more of new equity financing,
or (ii) January 3, 2009.
We have
an option to negotiate with WARF to obtain a license to manufacture and market
Therapeutic Products, excluding products in certain fields of
use. The issuance of a license for Therapeutic Products would depend
upon our submission and WARF’s acceptance of a product development plan, and our
reaching agreement with WARF on the commercial terms of the license such as a
license fee, royalties, patent reimbursement fees, and other contractual
matters.
The WARF
License shall remain in effect until the expiration of the latest expiration
date of the licensed patents. However, we may terminate the WARF
License prior to the expiration date by giving WARF at least ninety days written
notice, and WARF may terminate the WARF License if we (a) fail to make any
payment to WARF, (b) fail to submit any required report to WARF, (c) commit any
breach of any other covenant in the WARF License that is not remedied within
ninety days after written notice from WARF, or (d) commit any act of bankruptcy,
become insolvent, are unable to pay our debts as they become due, file a
petition under any bankruptcy or insolvency act, or have any such petition filed
against us which is not dismissed within sixty days, or offers its creditors any
component of the patents or materials covered by the WARF License.
Competition
Plasma
Volume Expanders
Our
plasma volume expander solutions will compete with products currently used to
treat or prevent hypovolemia, including albumin, other colloid solutions, and
crystalloid solutions presently manufactured by established pharmaceutical
companies, and with human blood products. Some of these products, in
particular crystalloid solutions, are commonly used in surgery and trauma care
and sell at low prices. In order to compete with other products,
particularly those that sell at lower prices, our products will have to be
recognized as providing medically significant advantages. Like
Hextend, the competing products are being manufactured and marketed by
established pharmaceutical companies that have large research facilities,
technical staffs and financial and marketing resources. B.Braun
presently markets Hespan, an artificial plasma volume expander containing 6%
hetastarch in saline solution. Hospira and Baxter International
manufacture and sell a generic equivalent of Hespan. As a result of
the introduction of generic plasma expanders and new proprietary products,
competition in the plasma expander market has intensified and wholesale prices
have declined. Hospira, which markets Hextend in the United States,
is also the leading seller of generic 6% hetastarch in saline solution and
recently obtained the right to sell Voluven®, a plasma volume expander
containing a 6% low molecular weight hydroxyethyl starch in saline solution.
Sanofi-Aventis, Baxter International, and Alpha Therapeutics sell albumin, and
Hospira, Baxter International, and B.Braun sell crystalloid
solutions.
To
compete with new and existing plasma expanders, we have developed products that
contain constituents that may prevent or reduce the physiological imbalances,
bleeding, fluid overload, edema, poor oxygenation, and organ failure that can
occur when competing products are used. To compete with existing
organ preservation solutions, we have developed solutions that can be used to
preserve all organs simultaneously and for long periods of time.
A number
of other companies are known to be developing hemoglobin and synthetic red blood
cell substitutes and technologies. Our products have been developed
for use either before red blood cells are needed or in conjunction with the use
of red blood cells. In contrast, hemoglobin and other red blood cell
substitute products are designed to remedy hypoxia and similar conditions that
may result from the loss of oxygen-carrying red blood cells. Those
products would not necessarily compete with our products unless the oxygenating
molecules were included in solutions that could replace fluid volume and prevent
or reduce the physiological imbalances as effectively as our
products. Generally, red blood cell substitutes are more expensive to
produce and potentially more toxic than Hextend and PentaLyte.
The
competition we face is likely to intensify further as new products and
technologies reach the market. Superior new products are likely to
sell for higher prices and generate higher profit margins once acceptance by the
medical community is achieved. Those companies that are successful in
introducing new products and technologies to the market first may gain
significant economic advantages over their competitors in the establishment of a
customer base and track record for the performance of their products and
technologies. Such companies will also benefit from revenues from
sales that could be used to strengthen their research and development,
production, and marketing resources. All companies engaged in the
medical products industry face the risk of obsolescence of their products and
technologies as more advanced or cost effective products and technologies are
developed by their competitors. As the industry matures, companies
will compete based upon the performance and cost effectiveness of their
products.
Products
for Stem Cell Research
The stem
cell industry is characterized by rapidly evolving technology and intense
competition. Our competitors include major multinational
pharmaceutical companies, specialty biotechnology companies, and chemical and
medical products companies operating in the fields of regenerative medicine,
cell therapy, tissue engineering, and tissue regeneration. Many of
these companies are well-established and possess technical, research and
development, financial, and sales and marketing resources significantly greater
than ours. In addition, certain smaller biotech companies have formed
strategic collaborations, partnerships, and other types of joint ventures with
larger, well established industry competitors that afford these companies’
potential research and development and commercialization
advantages. Academic institutions, governmental agencies, and other
public and private research organizations are also conducting and financing
research activities which may produce products directly competitive to those we
are developing.
We
believe that some of our competitors are trying to develop stem and progenitor
cell-based technologies which may compete with our potential stem cell products
based on efficacy, safety, cost, and intellectual property
positions.
We may
also face competition from companies that have filed patent applications
relating to the cloning or differentiation of stem cells. We may be
required to seek licenses from these competitors in order to commercialize
certain of our proposed products, and such licenses may not be
granted.
Employees
As of
December 31, 2007, we employed nine persons on a full-time basis and one person
on a part-time basis. Four full-time employees hold Ph.D. Degrees in
one or more fields of science.
We occupy
our office and laboratory facility in Heritage Square in Emeryville, California
under a lease that will expire on May 31, 2010, with a five year extension
option. We presently occupy approximately 5,244 square feet of space and pay
monthly rent in the amount of $15,551. Our rent will increase by 3%
each year during the initial five year term. If the option to extend
the lease is exercised, monthly rent will be set at 95% of fair market rent at
that time. In addition to rent, we will pay our pro rata share of
operating expenses and real estate taxes for the building in which our space is
located or for the Heritage Square project as a whole, as applicable, based upon
the ratio that the number of square feet we rent bears to the total number of
square feet in the building or project.
We have entered
into a sublease of approximately 11,000 square feet of office and research
laboratory spaced at 1301 Harbor Bay Parkway, in Alameda,
California. We plan to move our headquarters from our present
Emveryville location to this new facility. The sublease will expire
on November 30, 2010, but we have an early termination right that permits us to
terminate the sublease on July 31, 2008. Base monthly rent will be
$22,000 during 2008, $22,600 during 2009, and $23,339.80 during
2010. In addition to base rent, we will pay a prorata share of real
property taxes and certain costs related to the operation and maintenance of the
building in which the subleased premises are located.
We are
not presently involved in any material litigation or proceedings, and to our
knowledge no such litigation or proceedings are contemplated.
|
|
Submission
of Matters to a Vote of Security
Holders
|
None.
|
|
Market
for Common Equity, Related Stockholder Matters and Small Business Issuer
Purchases of Equity Securities
|
BioTime
common shares were traded on the American Stock Exchange from August 31, 1999
until July 14, 2005, and have been quoted on the OTC Bulletin Board under the
symbol BTIM since July 15, 2005.
The
following table sets forth the range of high and low sale or bid prices for the
common shares for the fiscal years ended December 31, 2006 and 2007 based on
transaction data as reported by the Nasdaq OTC Bulletin Board:
|
Quarter
Ended
|
High
|
Low
|
|
March
31, 2006
|
0.46
|
0.28
|
|
June
30, 2006
|
0.41
|
0.21
|
|
September
30, 2006
|
0.39
|
0.18
|
|
December
31, 2006
|
0.49
|
0.20
|
|
March
31, 2007
|
0.75
|
0.26
|
|
June
30, 2007
|
0.75
|
0.44
|
|
September
30, 2007
|
0.49
|
0.27
|
|
December
31, 2007
|
0.69
|
0.27
|
Over-the-counter
market quotations may reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
As of
March 17, 2008, there were 4,191 holders of the common shares.
BioTime
has paid no dividends on its common shares since its inception and does not plan
to pay dividends on its common shares in the foreseeable future. We
are also prohibited from paying dividends under the terms of a Revolving Line of
Credit Agreement.
The
following table shows certain information concerning the options and warrants
outstanding and available for issuance under all of our compensation plans and
agreements as of December 31, 2007.
|
Plan
Category
|
Number
of Shares to be
Issued
Upon Exercise
of
Outstanding Options,
Warrants,
and Rights
|
Weighted
Average
Exercise
Price of the
Outstanding
Options,
Warrants,
and Rights
|
Number
of Shares Remaining
Available
for Future Issuance
Under
Equity Compensation
Plans
|
| |
|
|
|
|
Equity
Compensation Plans
Approved
by Shareholders
|
9,181,199
|
$1.96
|
786,168
|
| |
|
|
|
|
Equity
Compensation Plans
Not
Approved By
Shareholders*
|
2,000,000
|
$0.50
|
__
|
*We have
granted stock options to certain officers subject to shareholder approval of an
amendment of our 2002 Employee Stock Option Plan. We intend to submit
that amendment to our shareholders for approval at our next annual
meeting.
During March 2008, we issued 10,000
common shares to a new lender who provided additional credit to us under the
line of credit. These shares were issued without registration under
the Securities Act of 1933, as amended, in reliance upon the exemption provided
by Section 4(2) thereunder.
|
|
Management’s
Discussion and Analysis or Plan of
Operation
|
Overview
We are in
the business of developing blood plasma volume expanders and related products,
and stem cell related products and technology for diagnostic, therapeutic and
research use. Our operating revenues have been generated primarily from
licensing fees and from royalties on the sale of Hextend. Our ability
to generate substantial operating revenue depends upon our success in developing
and marketing or licensing our plasma volume expanders and stem cell products
and technology for medical and research use.
Royalties
on sales of Hextend that occurred during the fourth quarter of 2006 through the
third quarter of 2007 are reflected in our financial statements for the year
ended December 31, 2007. We received $776,679 in royalties from Hextend sales
during 2007. This represents a decrease of 17% from $933,478 in
royalties from Hextend sales in 2006. The largest contributing factor
to the decrease in royalties from 2006 was a decrease from the record large
volume orders by the U.S. Armed Forces that we saw in the second half of
2006. Hextend is part of the Tactical Combat Casualty Care protocol
and has been purchased by the U.S. Armed Forces through intermittent large
volume orders. The decrease was partially offset by a continued
increase in sales to hospitals along with unit price increases to
hospitals.
Royalties
of $308,900 on sales that occurred during the fourth quarter of 2007 will be
reflected in our financial statements for the first quarter of
2008. This represents a 55% increase from royalty revenues of
$199,264 received during the same period last year. The increase
in royalties is due to an increase in both sales to the military and sales to
hospitals, which were augmented by an increase in the unit average sales price
to hospitals.
During
the year ended December 31, 2006, we received $500,000 from Summit for the right
to co-develop Hextend and PentaLyte in Japan, China, and Taiwan. A
portion of the cash payment will be a partial reimbursement of BioTime’s
development costs of Hextend and a portion will be a partial reimbursement of
BioTime’s development costs of PentaLyte. This payment is reflected
on our balance sheet as deferred revenue. See Note 4 to financial
statements for further discussion of the appropriate accounting.
We have
conducted a Phase II clinical trial of PentaLyte in which PentaLyte was used to
treat hypovolemia in cardiac surgery. Our ability to commence and
complete additional clinical studies of PentaLyte depends on our cash resources
and the costs involved, which are not presently
determinable. Clinical trials of PentaLyte in the United States may
take longer and may be more costly than the Hextend clinical trials, which cost
approximately $3,000,000. The FDA permitted us to proceed directly
into a Phase III clinical trial of Hextend involving only 120 patients because
the active ingredients in Hextend had already been approved for use in plasma
expanders by the FDA in other products. Because PentaLyte contains a starch
(pentastarch) that has not been approved by the FDA for use in a plasma volume
expander (although pentastarch is approved in the US for use in certain
intravenous solutions used to collect certain blood cell fractions), we had to
complete Phase I and Phase II clinical trials of PentaLyte. A
subsequent Phase III trial may involve more patients than the Hextend trials,
and we do not know yet the actual scope or cost of the clinical trials that the
FDA will require for PentaLyte or the other products we are
developing.
During
April 2007, Hospira declined an opportunity to commercialize PentaLyte®
under the terms we offered. Hospira will continue to manufacture and
sell Hextend®
under its License Agreement with us, and we will offer other pharmaceutical
companies the opportunity to license PentaLyte®.
Plasma
volume expanders containing pentastarch have been approved for use in certain
foreign countries including Canada, certain European Union countries, and
Japan. The regulatory agencies in those countries may be more willing
to accept applications for regulatory approval of PentaLyte based upon clinical
trials smaller in scope than those that may be required by the FDA. This would
permit us to bring PentaLyte to market overseas more quickly than in the United
States, provided that suitable licensing arrangements can be made with
multinational or foreign pharmaceutical companies to obtain financing for
clinical trials and manufacturing and marketing arrangements.
Although
we plan to launch our first products for stem cell research during 2008 and
2009, we cannot predict the amount of revenue that those products might
generate. We will depend upon royalties from the sale of Hextend by
Hospira and CJ as our principal source of revenues for the near
future. Those royalty revenues will be supplemented by any revenues
that we may receive from our stem cell research products, and by license fees if
we enter into new commercial license agreements for our products.
The
amount and pace of research and development work that we can do or sponsor, and
our ability to commence and complete clinical trials required to obtain FDA and
foreign regulatory approval of products, depends upon the amount of money we
have. Future research and clinical study costs are not presently
determinable due to many factors, including the inherent uncertainty of these
costs and the uncertainty as to timing, source, and amount of capital that will
become available for these projects. We have already curtailed the
pace of our product development efforts due to the limited amount of funds
available, and we may have to postpone further laboratory and clinical studies,
unless our cash resources increase through growth in revenues, the completion of
licensing agreements, additional equity investment, borrowing or third party
sponsorship.
Because
our research and development expenses, clinical trial expenses, and production
and marketing expenses will be charged against earnings for financial reporting
purposes, management expects that there will be losses from operations in the
near term.
Results
of Operations
Year
Ended December 31, 2007 and Year Ended December 31, 2006
For the
year ended December 31, 2007, we recognized $776,679 of royalty revenues,
compared with $933,478 recognized for the year ended December 31,
2006. This 17% decrease in royalties is attributable to a decrease in
product sales by Hospira. The largest contributing factor to this
overall decrease in royalties was a decrease in sales from the record large
volume orders by the U.S. Armed Forces that we saw in the second half of
2006. Hextend is part of the Tactical Combat Casualty Care protocol
and has been purchased by the U.S. Armed Forces through intermittent, large
volume orders, which makes it difficult to predict sales to them in subsequent
periods. The decrease in royalties from 2006 was partially offset by
a continued increase in sales to hospitals along with unit price increases to
hospitals.
Under our
License Agreement, Hospira reports sales of Hextend and pays us the royalties
and license fees due on account of such sales within 90 days after the end of
each calendar quarter. We recognize such revenues in the quarter in
which the sales report is received, rather than the quarter in which the sales
took place, as we do not have sufficient sales history to accurately predict
quarterly sales. For example, royalties on sales made during the
fourth quarter of 2007 will not be recognized until the first quarter of fiscal
year 2008.
We
recognized $255,549 and $172,371 of license fees from CJ and Summit during 2007
and 2006, respectively. Full recognition of license fees has been
deferred, and is being recognized over the life of the contract, which has been
estimated to last until approximately 2019 based on the current expected life of
the governing patent covering our products in Korea and Japan.
We have
been awarded a $299,990 research grant by the NIH for use in the development of
HetaCool. We were granted $149,994 for the project during 2004 and
$149,996 during 2005. We have received $254,244 of the grant funds
through December 31, 2007. In 2007, the time period for drawing down
the remainder of the grant funds was extended for another year, running through
March 31, 2008.
Research
and development expenses decreased to $967,864 for the year ended December 31,
2007, from $1,422,257 for the year ended December 31, 2006. The
decrease is chiefly attributable to the conclusion of our Phase II trials of
PentaLyte. Research and development expenses include laboratory study
expenses, salaries, preparation of regulatory applications for our products,
manufacturing of solution for trials, and consultants’ fees.
General
and administrative expenses decreased to $1,300,630 for the year ended December
31, 2007 from $1,491,622 for the year ended December 31, 2006. This
change reflects a decrease of approximately $21,000 in general and
administrative salary expense due to a voluntary salary reduction plan in effect
for the latter half of 2007, a decrease of approximately $88,000 in general and
administrative consulting expenses, a decrease of approximately $32,000 in
insurance costs charged to general and administrative expense, a decrease of
approximately $17,000 in investor/public relations expenses, a decrease of
approximately $32,000 in accounting expenses, a decrease of approximately
$34,000 in printing costs, and a decrease of approximately $23,000 in patent
expenses. These decreases were offset to some extent by an increase
of approximately $18,000 in office expenses and supplies, an increase of
approximately $2,000 in telephone charges allocated to general and adminstrative
expense, an increase of approximately $4,000 in miscellaneous expenses, and an
increase of approximately $32,000 in travel expenses. General and
administrative expenses include salaries allocated to general and administrative
accounts, scientific consulting fees, expenditures for patent costs, trademark
expenses, insurance costs allocated to general and administrative expenses,
stock exchange-related costs, depreciation expense, shipping expenses, marketing
costs, and other miscellaneous expenses.
Our
interest expense increased by approximately $76,000 during 2007 primarily due to
interest incurred on our lines of credit (See Note 3).
For the
year ended December 31, 2007, other income decreased to $16,926 from $44,357 for
the year ended December 31, 2006. The difference is chiefly
attributable to decrease in interest income due to lower cash
balances.
Taxes
At
December 31, 2007 we had a cumulative net operating loss carryforward of
approximately $45,350,000 for federal
income tax purposes. Our effective tax rate differs from the
statutory rate because we have recorded a 100% valuation allowance against our
deferred tax assets, as we do not consider realization to be more likely than
not.
Liquidity
and Capital Resources
During
2007 we received approximately $810,000 of cash in our
operations. Our sources of that cash were: approximately $780,000 of
royalty revenues from Hospira; approximately $10,000 of NIH grant money; and
$20,000 from CJ. During the same period our total research and
development expenditures were approximately $968,000 and our administrative
expenditures were approximately $1.3 million. We had no contractual
obligations as of December 31, 2007, with the exception of a fixed,
non-cancelable operating lease on our office and laboratory facilities in
Emeryville, California. Under this lease, we are committed to make
payments of $15,761 per month, increasing 3% annually, plus our pro rata share
of operating costs for the building and office complex, through May 31, 2010.
In April 2008, we
entered into a sublease of office and research laboratory space in Alameda,
California. We plan to move our headquarters from our present
Emeryville location to this new facility. The sublease will expire on
November 30, 2010, but we have an early termination right that permits us to
terminate the sublease on July 31, 2008. Base monthly rent will be
$22,000 during 2008, $22,600 during 2009, and $23,339.80 during
2010. In addition to base rent, we will pay a pro rata share of real
property taxes and certain costs related to the operation and maintenance of the
building in which the subleased premises are located.
At
December 31, 2007 we had $9,501 of cash on hand and $375,000 left available on
our line of credit. At our projected rate of spending, which includes
possible spending cuts, our cash on hand, anticipated royalties from the sale of
Hextend, licensing fees, and our available revolving line of credit will allow
us to operate through November 15, 2008.
We will
need to obtain additional equity capital or licensing fees during 2008 to
finance our current operations because our current line of credit and our
royalty revenues are not sufficient to fund our operating expenses operations
beyond November 15, 2008.
During
April, 2007 we submitted to Hospira a report of the results of our Phase II
clinical study of PentaLyte. Hospira subsequently declined an
opportunity to commercialize PentaLyte®
under the terms we offered. Hospira will continue to manufacture and
sell Hextend®
under its License Agreement with us, and we will offer other pharmaceutical
companies the opportunity to license PentaLyte®.
Since
inception, we have primarily financed our operations through the sale of equity
securities, licensing fees, royalties on product sales by our licensees, and
borrowings. The amount of license fees and royalties that may be
earned through the licensing and sale of our products and technology, the timing
of the receipt of license fee payments, and the future availability and terms of
equity financing, are uncertain. The unavailability or inadequacy of
financing or revenues to meet future capital needs could force us to modify,
curtail, delay or suspend some or all aspects of our planned
operations. Sales of additional equity securities could result in the
dilution of the interests of present shareholders.
In April
2006, we entered into a Revolving Line of Credit Agreement (the “Credit
Agreement”) with Alfred D. Kingsley, Cyndel & Co., Inc., and George
Karfunkel, investors in BioTime, under which we were permitted to borrow up to
$500,000 for working capital purposes at an interest rate of 10% per
annum. The maturity date of the Credit Agreement was the earlier of
(i) October 31, 2007 and (ii) such date on which the we shall have received an
aggregate of $600,000 through (A) the sale of capital stock, (B) the collection
of license fees, signing fees, milestone fees, or similar fees in excess of
$1,000,000 under any present or future agreement pursuant to which we grant one
or more licenses to use our patents or technology, (C) funds borrowed from other
lenders, (D) any combination of sources under clauses (A) through
(C). Under the Credit Agreement, we were allowed to prepay, and the
credit line would have been reduced by, any funds received prior to the maturity
date from those sources discussed above. In consideration for making
the line of credit available, we issued to the investors a total of 99,999
common shares. The line of credit was collateralized by a security
interest in our right to receive royalty and other payments under our license
agreement with Hospira. The market value of BioTime common stock was
$0.38 per common share on April 12, 2006, valuing the shares at
$38,000.
In
October 2007 and March 2008, we amended our Revolving Line of Credit
Agreement (See Note 3 and Note 10 to our Financial Statements). The
amendments increased the line of credit, increased the interest rate to 12% per
annum, and extended the maturity date of the line of credit to November 15,
2008. The line of credit may mature prior to November 15, 2008 if we
receive an aggregate of $4,000,000 through (A) the sale of capital stock,
(B) the collection of licensing fees, signing fees, milestone fees, or
similar fees in excess of $2,500,000 under any present or future agreement
pursuant to which we grant one or more licenses to use our patents or
technology, (C) funds borrowed from other lenders, or (D) any
combination of sources under clauses (A) through (C). The line of
credit is collateralized by a security interest in our right to receive royalty
and other payments under the license agreement with Hospira
The
amendments permit us to borrow up to $2,500,000 under our Revolving Line of
Credit Agreement, and as of April 2, 2008 we had received loan commitments from
the lenders for $2,050,000. In consideration for amending the line of
credit, we agreed to issue to the lenders a total of 420,000 common shares
during March and April of 2008, which had a value of $158,800 on the dates
of issue, and we will issue up to 90,000 additional shares to the lenders if we
receive commitments for the entire $2,500,000 million line of
credit.
Our
lenders have been given the right to exchange their line of credit promissory
notes for our common shares at a price of $1.00 per share, and/or for common
stock of our subsidiary Embryome Sciences, Inc. at a price of $2.00 per
share.
Report of Independent
Registered Public Accounting Firm
To
the Board of Directors and Shareholders of
BioTime,
Inc.
We
have audited the accompanying consolidated balance sheet of BioTime, Inc. (the
“Company”) as of December 31, 2007, and the related consolidated statements of
operations, shareholders’ equity (deficit), and cash flows for each of the years
in the two-year period ended December 31, 2007. These consolidated
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BioTime, Inc. as of December 31,
2007, and the results of its operations and its cash flows for each of the years
in the two-year period ended December 31, 2007, in conformity with accounting
principles generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1
to the financial statements, the Company has a working capital deficit of
$1,316,356, a shareholders’ deficit of $3,046,389 and an accumulated deficit of
$43,844,497. These conditions, among others, raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans in regard
to these matters are also described in Note 1. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
|
/s/
Rothstein, Kass & Company, P.C.
|
|
|
|
Roseland,
New Jersey
|
|
April
11, 2008
|
BIOTIME,
INC.
CONSOLIDATED BALANCE SHEET
|
|
|
December
31,
2007
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
9,501 |
|
|
Prepaid
expenses and other current assets
|
|
|
132,145 |
|
|
Total
current assets
|
|
|
141,646 |
|
|
|
|
|
|
|
|
Equipment,
net of accumulated depreciation of $585,765
|
|
|
12,480 |
|
|
Deposits
and other assets
|
|
|
20,976 |
|
|
TOTAL
ASSETS
|
|
$ |
175,102 |
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$ |
480,374 |
|
|
Line
of credit payable
|
|
|
716,537 |
|
|
Deferred
license revenue, current portion
|
|
|
261,091 |
|
|
Total
current liabilities
|
|
|
1,458,002 |
|
|
|
|
|
|
|
|
Stock
appreciation rights compensation liability
|
|
|
13,151 |
|
| |
|
|
|
|
|
Deferred
license revenue, net of current portion
|
|
|
1,740,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
rent, net of current portion
|
|
|
9,636 |
|
|
|
|
|
|
|
|
Total
long-term liabilities
|
|
|
1,763,489 |
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
DEFICIT:
|
|
|
|
|
|
Common
shares, no par value, authorized 50,000,000 shares; issued and outstanding
23,034,374 shares
|
|
|
40,704,136 |
|
|
Contributed
capital
|
|
|
93,972 |
|
|
Accumulated
deficit
|
|
|
(43,844,497 |
) |
|
Total
shareholders' deficit
|
|
|
(3,046,389 |
) |
|
TOTAL
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
$ |
175,102 |
|
See notes
to consolidated financial statements.
BIOTIME,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
Year
Ended
December
31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
License
fees
|
|
$ |
255,549 |
|
|
$ |
172,371 |
|
|
Royalty
from product sales
|
|
|
776,679 |
|
|
|
933,478 |
|
|
Grant
income
|
|
|
13,893 |
|
|
|
56,166 |
|
|
Total
revenue
|
|
|
1,046,121 |
|
|
|
1,162,015 |
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
(967,864 |
) |
|
|
(1,422,257 |
) |
|
General
and administrative
|
|
|
(1,300,630 |
) |
|
|
(1,491,622 |
) |
|
Total
expenses
|
|
|
(2,268,494 |
) |
|
|
(2,913,879 |
) |
|
Loss
from operations
|
|
|
(1,222,373 |
) |
|
|
(1,751,864 |
) |
|
INTEREST
EXPENSE AND OTHER INCOME:
|
|
|
|
|
|
|
|
|
|
Interest
and other expense
|
|
|
(232,779 |
) |
|
|
(157,114 |
) |
|
Other
income
|
|
|
16,926 |
|
|
|
44,357 |
|
|
Total
interest expense and other income
|
|
|
(215,853 |
) |
|
|
(112,757 |
) |
|
NET
LOSS
|
|
$ |
(1,438,226 |
) |
|
$ |
(1,864,621 |
) |
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED LOSS PER COMMON SHARE
|
|
$ |
(0.06 |
) |
|
$ |
(0.08 |
) |
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:BASIC AND
DILUTED
|
|
|
22,853,278 |
|
|
|
22,538,003 |
|
See notes
to consolidated financial statements.
BIOTIME,
INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
|
|
|
Common
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
|
|
Amount
|
|
|
Contributed
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Shareholders’
Equity
(Deficit)
|
|
|
BALANCE
AT JANUARY 1, 2006
|
|
|
22,339,312 |
|
|
$ |
40,251,097 |
|
|
$ |
93,972 |
|
|
$ |
(40,541,650 |
) |
|
$ |
(196,581 |
) |
|
Common
shares issued for line of credit
|
|
|
99,999 |
|
|
|
37,999 |
|
|
|
|
|
|
|
|
|
|
|
37,999 |
|
|
Shares
granted for services
|
|
|
135,000 |
|
|
|
43,876 |
|
|
|
|
|
|
|
|
|
|
|
43,876 |
|
|
Exercise
of warrants
|
|
|
63 |
|
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
126 |
|
|
Options
granted under FASB 123(R)
|
|
|
|
|
|
|
113,980 |
|
|
|
|
|
|
|
|
|
|
|
113,980 |
|
|
NET
LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,864,621 |
) |
|
|
(1,864,621 |
) |
|
BALANCE
AT DECEMBER 31, 2006
|
|
|
22,574,374 |
|
|
|
40,447,078 |
|
|
|
93,972 |
|
|
|
(42,406,271 |
) |
|
|
(1,865,221 |
) |
|
Common
shares issued for line of credit
|
|
|
200,000 |
|
|
|
106,000 |
|
|
|
|
|
|
|
|
|
|
|
106,000 |
|
|
Shares
granted for services
|
|
|
260,000 |
|
|
|
103,000 |
|
|
|
|
|
|
|
|
|
|
|
103,000 |
|
|
Options
granted under FASB 123(R)
|
|
|
|
|
|
|
48,058 |
|
|
|
|
|
|
|
|
|
|
|
48,058 |
|
|
NET
LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,438,226 |
) |
|
|
(1,438,226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
AT DECEMBER 31, 2007
|
|
|
23,034,374 |
|
|
$ |
40,704,136 |
|
|
$ |
93,972 |
|
|
$ |
(43,844,497 |
) |
|
$ |
(3,046,389 |
) |
See notes
to consolidated financial statements.
BIOTIME,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
Year
Ended
December
31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,438,226 |
) |
|
$ |
(1,864,621 |
) |
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
4,833 |
|
|
|
6,003 |
|
|
Amortization
of deferred license revenue
|
|
|
(255,549 |
) |
|
|
(168,461 |
) |
|
Amortization
of line of credit costs
|
|
|
61,486 |
|
|
|
20,508 |
|
|
Stock-based
compensation for services
|
|
|
151,059 |
|
|
|
167,643 |
|
|
Interest
on royalty obligation
|
|
|
129,458 |
|
|
|
138,813 |
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
3,675 |
|
|
|
— |
|
|
Prepaid
expenses and other current assets
|
|
|
(33,632 |
) |
|
|
(5,227 |
) |
|
Accounts
payable and accrued expenses
|
|
|
46,441 |
|
|
|
(144,670 |
) |
|
Interest
accrued - line of credit
|
|
|
21,600 |
|
|
|
— |
|
|
Deposits
and other assets
|
|
|
— |
|
|
|
62,899 |
|
|
Deferred
rent
|
|
|
1,737 |
|
|
|
5,579 |
|
|
Share-based
compensation liability
|
|
|
13,151 |
|
|
|
— |
|
|
Deferred
license revenue
|
|
|
53,987 |
|
|
|
519,315 |
|
|
Net
cash used in operating activities
|
|
|
(1,239,980 |
) |
|
|
(1,262,219 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchase
of property
|
|
|
(6,473 |
) |
|
|
(10,664 |
) |
|
Net
cash used in investing activities
|
|
|
(6,473 |
) |
|
|
(10,664 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Issuance
of common shares for cash
|
|
|
— |
|
|
|
126 |
|
|
Proceeds
from line of credit
|
|
|
694,937 |
|
|
|
— |
|
|
Net
cash provided by financing activities
|
|
|
694,937 |
|
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE
IN CASH AND CASH EQUIVALENTS
|
|
|
(551,516 |
) |
|
|
(1,272,757 |
) |
|
CASH
AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
|
|
At
beginning of year
|
|
|
561,017 |
|
|
|
1,833,774 |
|
|
At
end of year
|
|
$ |
9,501 |
|
|
$ |
561,017 |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES :
|
|
|
|
|
|
|
|
|
|
Issuance
of stock related to line of credit agreement
|
|
$ |
106,000 |
|
|
$ |
— |
|
|
Decrease
in royalty obligation due to licensee payment
|
|
$ |
— |
|
|
$ |
356,000 |
|
|
Issuance
of warrants to guarantors for participation in the Rights
Offer
|
|
$ |
— |
|
|
$ |
30,000 |
|
|
Extension
of existing warrant terms
|
|
$ |
— |
|
|
$ |
152,812 |
|
| Supplemental
disclosure of cash flow information, cash paid during year for
interest |
|
$ |
81,721 |
|
|
$ |
17,722 |
|
See notes
to consolidated financial statements.
BIOTIME,
INC.
NOTES
TO FINANCIAL STATEMENTS
General - BioTime, Inc. was
organized November 30, 1990 as a California corporation. BioTime is a biomedical
organization engaged in the development of synthetic plasma expanders, blood
volume substitute solutions, and organ preservation solutions, for use in
surgery, trauma care, organ transplant procedures, and other areas of
medicine. In December 2007, BioTime formed Embryome Sciences, Inc., a
wholly-owned subsidiary. As of December 31, 2007, there was no
financial activity conducted or recorded for this subsidiary.
Principles of Consolidation –
The accompanying consolidated financial statements include the accounts
of Embryome Sciences, Inc., a wholly-owned subsidiary of BioTime. As
of December 31, 2007, there was no financial activity with respect to this
subsidiary. All intercompany accounts and transactions have been
eliminated in consolidation.
Certain Significant Risks and
Uncertainties - BioTime’s operations are subject to a number of factors
that can affect its operating results and financial condition. Such factors
include but are not limited to the following: the results of clinical trials of
BioTime’s pharmaceutical products; BioTime’s ability to obtain United States
Food and Drug Administration and foreign regulatory approval to market its
pharmaceutical products; BioTime’s ability to develop new stem cell research
products and technologies; competition from products manufactured and sold or
being developed by other companies; the price of and demand for BioTime
products; BioTime’s ability to obtain additional financing and the terms of any
such financing that may be obtained; BioTime’s ability to negotiate favorable
licensing or other manufacturing and marketing agreements for its products; the
availability of ingredients used in BioTime’s products; and the availability of
reimbursement for the cost of BioTime’s pharmaceutical products (and related
treatment) from government health administration authorities, private health
coverage insurers and other organizations.
Liquidity and Going Concern -
At December 31, 2007, BioTime had $9,501 of cash on hand and negative working
capital of $1,316,356, a shareholders’ deficit of $3,046,389 and an accumulated
deficit of $43,844,497. BioTime will continue to need additional
capital and greater revenues to continue its current operations and to continue
to conduct its product development and research programs. Sales of additional
equity securities could result in the dilution of the interests of present
shareholders. BioTime is also continuing to seek new agreements with
pharmaceutical companies to provide product and technology licensing fees and
royalties. The availability and terms of equity financing and new
license agreements are uncertain. The unavailability or inadequacy of
additional financing or future revenues to meet capital needs could force
BioTime to modify, curtail, delay or suspend some or all aspects of its planned
operations. To mitigate these factors, management has instituted a
cost-cutting plan which included a reduction in discretionary general and
administrative expenses such as public relations. Additionally, in October
2007, BioTime’s line of credit for working capital was increased and the
maturity date was extended (see Note 3). BioTime will continue to
seek additional financing or capital as well as additional licensing revenues
from its current and future patents. In view of the matters described
above, BioTime’s continued operations are dependent on its ability to raise
additional capital, obtain additional financing, and succeed in generating more
revenue from its operations. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
asset amounts and classification of liabilities should the company be unable to
continue as a going concern.
|
2.
|
Summary
of Significant Accounting Policies
|
Financial Statement
Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue recognition – BioTime complies with the Securities and
Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, Revenue
Recognition, as amended by SAB No. 104. Royalty and license fee revenues consist
of product royalty payments and fees under license agreements and are recognized
when earned and reasonably estimable. BioTime recognizes revenue in
the quarter in which the royalty report is received rather than the quarter in
which the sales took place, as it does not have sufficient sales history to
accurately predict quarterly sales. Up-front nonrefundable fees where
BioTime has no continuing performance obligations are recognized as revenues
when collection is reasonably assured. In situations where continuing
performance obligations exist, up-front nonrefundable fees are deferred and
amortized ratably over the performance period. If the performance
period cannot be reasonably estimated, BioTime amortizes nonrefundable fees over
the life of the contract until such time that the performance period can be more
reasonably estimated. Milestones, if any, related to scientific or
technical achievements are recognized in income when the milestone is
accomplished if (a) substantive effort was required to achieve the milestone,
(b) the amount of the milestone payment appears reasonably commensurate with the
effort expended and (c) collection of the payment is reasonably assured.
BioTime
also defers costs, including finders’ fees, which are directly related to
license agreements for which revenue has been deferred. Deferred
costs are charged to expense proportionally and over the same period that
related deferred revenue is recognized as revenue. Deferred costs are
net against deferred revenues in BioTime’s balance sheet.
Grant
income is recognized as revenue when earned.
Cash and cash equivalents – BioTime
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
Concentrations of credit risk -
Financial instruments that potentially subject BioTime to significant
concentrations of credit risk consist primarily of cash and cash
equivalents. BioTime limits the amount of credit exposure of cash
balances by maintaining its accounts in high credit quality financial
institutions. Cash equivalent deposits with financial institutions
may, at times, exceed federally issued limits; however, BioTime has not
experienced any losses on such accounts.
Equipment - Equipment is stated at
cost. Equipment is being depreciated using the straight-line method over a
period of thirty-six to eighty-four months.
Deferred costs (other assets) -
Certain costs incurred in obtaining the line of credit have been deferred and
are being amortized over the term of the line of credit agreements.
Patent costs - Patent costs associated with obtaining patents on
products being developed are expensed as general and administrative expenses
when incurred. These costs totaled $103,204 and $126,618, for the years ended
December 31, 2007 and 2006, respectively.
Research and development –
BioTime complies with the accounting requirements of Statement of Financial
Accounting Standards (“SFAS”) No.2, Accounting for Research and Development
Costs. Research and development costs are expensed when incurred and consist
principally of salaries, payroll taxes, research and laboratory fees, hospital
and consultant fees related to clinical trials, and BioTime’s PentaLyte solution
for use in human clinical trials.
Income Taxes - BioTime
accounts for income taxes in accordance with SFAS No. 109, Accounting for Income
Taxes, which prescribes the use of the asset and liability method whereby
deferred tax asset or liability account balances are calculated at the balance
sheet date using current tax laws and rates in effect. Valuation
allowances are established when necessary to reduce deferred tax assets when it
is more likely than not that a portion or all of the deferred tax assets will
not be realized.
Stock-based Compensation - On
January 1, 2006, BioTime adopted SFAS No. 123 (revised 2004), “Share-Based
Payment” (“SFAS 123(R)”) which requires the measurement and recognition of
compensation expense for all share-based payment awards made to directors and
employees including employee stock options based on estimated fair values. SFAS
123(R) supersedes BioTime's previous accounting using the intrinsic value method
under Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock
Issued to Employees” for periods beginning in fiscal 2006. In March 2005, the
SEC issued SAB No. 107, “Valuation of Share-Based Payment Arrangements for
Public Companies”, which provides supplemental implementation guidance for SFAS
123(R). BioTime has applied the provisions of SAB 107 in its adoption of SFAS
123(R). Upon adoption of SFAS 123 (R), BioTime has continued to
utilize the Black-Scholes Merton option pricing model which was previously used
for BioTime's proforma disclosures under SFAS 123. BioTime's determination of
fair value of share-based payment awards on the date of grant using an
option-pricing model is affected by BioTime's stock price as well as assumptions
regarding a number of highly complex and subjective variables. These variables
include, but are not limited to, BioTime's expected stock price volatility over
the term of the awards, and the actual and the projected employee stock options
exercise behaviors. The expected term of options granted is derived from
historical data on employee exercises and post-vesting employment termination
behavior. The risk-free rate is based on the U.S Treasury rates in effect during
the corresponding period of grant. Because changes in the subjective assumptions
can materially affect the estimated value, in management's opinion, the existing
valuation models may not provide an accurate measure of the fair value of
BioTime's employee stock options. Although the fair value of employee stock
options is determined in accordance with SFAS 123(R) and SAB 107 using an
option-pricing model, that value may not be indicative of the fair value
observed in a willing buyer/willing seller market transaction.
Loss per share – BioTime
complies with the accounting and reporting requirements of SFAS No. 128,
“Earnings Per Share.” Basic net loss per share is computed by
dividing net loss available to common stockholders by the weighted-average
common shares outstanding for the period. Diluted net loss per share reflects
the weighted-average common shares outstanding plus the potential effect of
dilutive securities or contracts which are convertible to common shares such as
options, warrants, convertible debt, and preferred stock (using the treasury
stock method) and shares issuable in future periods, except in cases where the
effect would be anti-dilutive. Diluted loss per share for the years
ended December 31, 2007 and 2006 excludes any effect from 3,333,332 options and
7,847,867 warrants; 1,811,664 options and 7,943,314 warrants, respectively, as
their inclusion would be antidilutive.
Fair value of financial
instruments - The carrying amount of BioTime’s financial instruments,
consisting of cash, accounts receivable, and short-term payables, approximates
their fair value due to their short-term maturity.
Reclassification – Certain
prior year amounts have been reclassified to conform to the current year
presentation.
Recently issued accounting
standards –
In July 2006, the Financial Accounting Standards Board issued
Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes”
(FIN 48). FIN 48 creates a single accounting and disclosure model for uncertain
tax positions, provides guidance on the minimum threshold that a tax uncertainty
is required to meet before it can be recognized in the financial statements and
applies to all tax positions taken by a company; both those deemed to be routine
as well as those for which there may be a high degree of
uncertainty.
FIN 48
establishes a two-step approach for evaluating tax positions. The first step,
recognition, occurs when a company concludes (based solely on the technical
aspects of the tax matter) that a tax position is more likely than not to be
sustained on examination by a taxing authority. The second step, measurement, is
only considered after step one has been satisfied and measures any tax benefit
at the largest amount that is deemed more likely than not to be realized upon
ultimate settlement of the uncertainty. Tax positions that fail to qualify for
initial recognition are recognized in the first subsequent interim period that
they meet the more likely than not standard, when they are resolved through
negotiation or litigation with the taxing authority or upon the expiration of
the statute of limitations. Derecognition of a tax position previously
recognized would occur when a company subsequently concludes that a tax position
no longer meets the more likely than not threshold of being sustained. FIN 48
also significantly expands the financial statement disclosure requirements
relating to uncertain tax positions. FIN 48 is effective for fiscal years
beginning after December 15, 2006. Differences between the amounts
recognized in the balance sheet prior to adoption and the amounts recognized in
the balance sheet after adoption will be accounted for as a cumulative effect
adjustment to the beginning balance of retained earnings. BioTime does not
believe that the adoption of FIN 48 will have a material effect on its financial
statements.
In
September 2006, the Financial Accounting Standards Board (the “FASB”) issued
SFAS No. 157, “Fair Value Measurements” (SFAS No. 157), which defines
fair value, establishes a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 is
effective for fiscal years beginning after November 15, 2007. BioTime
is currently evaluating the effect, if any, the adoption of SFAS No. 157
will have on its financial statements.
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities”. SFAS 159 permits entities to
choose to measure many financial instruments, and certain other items, at fair
value. SFAS 159 applies to reporting periods beginning after November
15, 2007. BioTime is currently evaluating the effect, if any, that
the adoption of SFAS 159 will have on its financial statements.
In March
2006, BioTime entered into a Revolving Line of Credit Agreement (the “Credit
Agreement”) with Alfred D. Kingsley, Cyndel & Co., Inc., and George
Karfunkel, investors in BioTime, under which BioTime could borrow up to $500,000
for working capital purposes at an interest rate of 10% per annum. In
consideration for making the line of credit available, BioTime issued to the
investors a total of 99,999 common shares which had a value of $38,000 on the
date of issue. The line of credit is collateralized by a security
interest in BioTime’s right to receive royalty and other payments under the
license agreement with Hospira.
In
October 2007, the Credit Agreement was amended to increase the line of credit to
$1,000,000, and to increase the interest rate to 12% per annum. The
maturity date of the line of credit was extended to the earlier of (i) April 30,
2008 or (ii) when BioTime receives an aggregate of $2,000,000 through (A) the
sale of capital stock, (B) the collection of licensing fees, signing fees,
milestone fees, or similar fees in excess of $1,000,000 (C) funds borrowed from
other lenders, or (D) any combination of sources under clauses (A) through
(C). In consideration for amending the line of credit, BioTime issued
to the investors a total of 200,000 common shares, which had a value of $106,000
on the date of issue.
BioTime
also obtained a line of credit from American Express in August 2004, which
allows for borrowings up to $43,600; at December 31, 2007, BioTime had drawn
$34,937 against this line. Interest is paid monthly on borrowings at a total
rate equal to the prime rate plus 3.99%; however, regardless of the prime rate,
the interest rate payable will at no time be less than 9.49%.
BioTime
also secured a line of credit from Advanta in November 2006, which allows for
borrowings up to $35,000; at December 31, 2007, BioTime had drawn the entire
$35,000 against this line. Interest is payable on borrowings at a
Variable Rate Index, which will at no time be less than 8.25%.
In
December 2004, BioTime entered into an agreement with Summit Pharmaceuticals
International Corporation (“Summit”) to co-develop Hextend and PentaLyte for the
Japanese market. Under the agreement, BioTime received $300,000 in
December 2004, $450,000 in April 2005, and $150,000 in October
2005. The payments represent a partial reimbursement of BioTime’s
development cost of Hextend and PentaLyte. In June 2005, following
BioTime’s approval of Summit’s business plan for Hextend, BioTime paid to Summit
a one-time fee of $130,000 for their services in preparing the
plan. The agreement states that revenues from Hextend and PentaLyte
in Japan will be shared between BioTime and Summit as follows: BioTime 40% and
Summit 60%. Additionally, BioTime will pay Summit 8% of all net
royalties received from the sale of PentaLyte in the United States.
The
accounting treatment of the payments from Summit falls under the guidance of
Emerging Issues Task Force (“EITF”) Issue No. 88-18, “Sales of Future
Revenues.” EITF 88-18 addresses the accounting treatment when an
enterprise (BioTime) receives cash from an investor (Summit) and agrees to pay
to the investor a specified percentage or amount of the revenue or a measure of
income of a particular product line, business segment, trademark, patent, or
contractual right. The Emerging Issues Task Force reached a consensus on six
independent factors that would require reclassification of the proceeds as
debt. BioTime met one of the factors: BioTime was determined to have
had significant continuing involvement in the generation of the cash flows to
the investor due to BioTime’s supervision of the Phase II clinical trials of
PentaLyte. As a result, BioTime initially recorded the net proceeds
from Summit to date of $770,000 as long-term debt to comply with EITF 88-18 even
though BioTime is not legally indebted to Summit for that
amount.
In July
2005, Summit sublicensed the rights to Hextend in Japan to
Maruishi. In consideration for the license, Maruishi agreed to pay
Summit a series of milestone payments: Yen 70,000,000, (or $593,390 based on
foreign currency conversion rates at the time) upon executing the agreement, and
Yen 100,000,000 upon regulatory filing in Japan, and Yen 100,000,000 upon
regulatory approval of Hextend in Japan. Consistent with the terms of
the BioTime and Summit agreement, Summit paid 40% of that amount, or $237,356,
to BioTime during October 2005. BioTime does not expect the
regulatory filing and approval milestones to be attained for several
years.
The
initial accounting viewed the potential repayment of the $770,000 imputed debt
to come only from the 8% share of US PentaLyte revenues generated by BioTime and
paid to Summit. BioTime first became aware of the terms of the
Maruishi and Summit agreement during the fourth quarter of 2005, prepared an
estimate of the future cash flows, and determined that Summit would earn a
majority of their return on investment from their agreement with Maruishi, and
not the 8% of BioTime’s U.S. PentaLyte sales. Considering this, the
$770,000 was viewed as a royalty obligation which will be reduced by Summit’s 8%
share of BioTime’s U.S. PentaLyte sales plus Summit’s 60% share of Japanese
revenue. Accordingly, BioTime recorded the entire amount paid by
Maruishi to Summit for the sublicense of $593,390 as deferred revenue, to be
amortized over the remaining life of the patent through
2019. BioTime’s 40% share of this payment was collected in October
2005 and the remaining 60% share was recorded as a reduction of the long-term
royalty obligation of BioTime to Summit. Interest on the long-term
royalty obligation was accrued monthly using the effective interest method
beginning October 2005, using a rate of 25.2% per annum, which BioTime has
determined is the appropriate interest rate when the future cash flows from the
transaction are considered.
In 2007,
BioTime completed its Phase II trials of PentaLyte, however was unable to find a
suitable licensing agreement for the product. At this time, BioTime
has deemed the continuation of the clinical trials necessary to bring this
product to market to be a significantly lower priority than it had been in the
past. Correspondingly, it is less likely that proceeds from the 8% of
PentaLyte US sales will be sufficient to pay down the Summit Royalty Obligation
prior to the expiration of the patents. As a result of this change in
accounting estimates, BioTime has reevaluated treatment of this
transaction. The transaction no longer meets any of the factors that
require it to fall under the guidance from EITF88-18. Consequently,
BioTime has reclassified the royalty obligation to deferred revenue and is
amortizing it over the remaining life of the underlying patents.
During
April 1998, BioTime entered into a financial advisory services agreement with
Greenbelt, Corp., a corporation controlled by Alfred D. Kingsley and Gary K.
Duberstein, who are also shareholders of BioTime. BioTime agreed to
indemnify Greenbelt and its officers, affiliates, employees, agents, assignees,
and controlling person from any liabilities arising out of or in connection with
actions taken on BioTime's behalf under the agreement. The agreement
was renewed annually through March 31, 2007. BioTime paid Greenbelt
$45,000 in cash and issued 135,000 common shares for the twelve months ending
March 31, 2006, and paid $90,000 in cash and issued 200,000 common shares for
the twelve months ending March 31, 2007. Greenbelt permitted BioTime
to defer paying certain cash fees until October 2007. In return for
allowing the deferral, Greenbelt was issued an additional 60,000 common shares
by BioTime.
Activity
related to the Greenbelt agreement is presented in the table below:
|
|
Balance
included
in
Accounts
Payable
at
January
1
|
Add:
Cash-
based
expense
accrued
|
Add:
Stock-based
expense
accrued
|
Less:
Cash
payments
|
Less:
Value
of
stock-based
payments
|
Balance
included
in
Accounts
Payable
at
December
31,
|
|
2007
|
$108,000
|
$22,500
|
$62,500
|
$(0)
|
$(103,000)
|
$90,000
|
|
2006
|
$65,138
|
$78,750
|
$52,987
|
$(45,000)
|
$(43,875)
|
$108,000
|
BioTime,
as part of rights offerings and other agreements, has issued warrants to
purchase its common stock. Activity related to warrants in 2007 and
2006 is presented in the table below:
|
|
|
Number
of
Shares
|
|
|
Per
share
Warrant
price
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding,
January 1, 2006
|
|
|
8,220,972 |
|
|
$ |
1.47-8.14 |
|
|
$ |
2.03 |
|
|
Exercised
|
|
|
(63 |
) |
|
|
2.00 |
|
|
|
2.00 |
|
|
Expired
in 2006
|
|
|
(277,595 |
) |
|
|
1.47-8.14 |
|
|
|
2.70 |
|
|
Shares
under warrants at December 31, 2006
|
|
|
7,943,314 |
|
|
$ |
1.34-3.92 |
|
|
|
2.00 |
|
|
Expired
in 2007
|
|
|
(95,447 |
) |
|
$ |
1.34-3.92 |
|
|
|
2.17 |
|
|
Outstanding,
December 31, 2007
|
|
|
7,847,867 |
|
|
$ |
2.00 |
|
|
$ |
2.00 |
|
At
December 31, 2007, 7,847,867 warrants to purchase common stock with a weighted
average exercise price of $2.00 and a weighted average remaining contractual
life of 2.84 years were outstanding.
In March
2006, the board of directors approved an increase in the authorized number of
common shares to 50,000,000 shares.
In
October 2007, BioTime granted certain executives options to purchase 2,000,000
of BioTime’s common shares (the “Options”) under BioTime’s 2002 Employee Stock
Option Plan, as amended (the “2002 Plan”). The Options are paired
with stock appreciation rights ("SARs") with respect to 1,302,030
shares. The exercise price of the Options and the SARs is $0.50 per
share. The Options and SARs will vest at the rate of 1/60th of the
number of Options or SARs granted at the end of each full month of
employment.
The
vested portion of the Option and SARs shall expire on the earliest of
(A) seven (7) years from the date of grant, (B) three months after the executive
ceases to be an employee of BioTime for any reason other than his death or
disability, or (C) one year after he ceases to be an employee of BioTime due to
his death or disability; provided that if he dies during the three month period
described in clause (B), the expiration date of the vested portion of this
Option shall be one year after the date of his death. In addition, if
a SAR is exercised, the vested portion of the Option shall expire as to a number
of shares for which the SAR was exercised, and the vested and unvested portion
of the SAR shall expire when the shareholders of BioTime approve an amendment to
the 2002 Plan increasing the number of common shares available under the 2002
Plan from 2,000,000 to 4,000,000 shares..
During
1992, BioTime adopted the 1992 Stock Option Plan (the "1992
Plan"). Options granted under the 1992 Plan expire five to ten years
from the date of grant and may be fully exercisable immediately, or may be
exercisable according to a schedule or conditions specified by the Board of
Directors or the Option Committee. As of December 31, 2007, options to purchase
119,500 shares had been granted and were outstanding at exercise prices ranging
from $3.00 to $11.75 under the 1992 Plan. At December 31, 2007, no
options were available for future grants under the 1992 Plan.
During
2002, BioTime adopted the 2002 Plan, which was amended during December 2004 to
reserve 2,000,000 common shares for issuance under options granted to eligible
persons. During October 2007 the Board of Directors approved an
amendment to the 2002 Plan that will permit the grant of options to purchase up
to an additional 2,000,000 common shares. The 2007 amendment is
subject to approval by BioTime’s shareholders. No options may be
granted under the 2002 Plan more than ten years after the date the 2002 Plan was
adopted by the Board of Directors, and no options granted under the 2002 Plan
may be exercised after the expiration of ten years from the date of
grant. Under the 2002 Plan, options to purchase common shares may be
granted to employees, directors and certain consultants at prices not less than
the fair market value at date of grant for incentive stock options and not less
than 85% of fair market value for other stock options. These options
expire five to ten years from the date of grant and may be fully exercisable
immediately, or may be exercisable according to a schedule or conditions
specified by the Board of Directors or the Compensation
Committee. The 2002 Plan also permits BioTime to sell common shares
to employees subject to vesting provisions under restricted stock agreements
that entitle BioTime to repurchase unvested shares at the employee’s cost upon
the occurrence of specified events, such as termination of
employment. BioTime may permit employees or consultants, but not
executive officers or directors, who purchase stock under restricted stock
purchase agreements to pay for their shares by delivering a promissory note that
is secured by a pledge of their shares. Under the 2002 Plan, as of
December 31, 2007, BioTime had granted to certain employees, consultants, and
directors, options to purchase a total of 3,213,832 common shares at exercise
prices ranging from $0.32 to $2.17 per share. The grant of 1, 213,832
options is subject to shareholder approval of the 2007 amendment of the 2002
Plan.
On
January 1, 2006, BioTime adopted SFAS 123(R), which requires the measurement and
recognition for all share-based payment awards made to BioTime’s employees and
directors including employee stock options. The following table
summarizes stock-based compensation expense related to employee and director
stock options awards for the years ended December 31, 2007 and 2006, which was
allocated as follows:
|
|
|
Year
Ended December 31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
All
stock-based compensation expense:
|
|
|
|
|
|
|
|
Research
and Development
|
|
$ |
— |
|
|
$ |
26,874 |
|
|
General
and Administrative
|
|
|
48,058 |
|
|
|
87,106 |
|
|
Stock
appreciation rights
|
|
|
13,151 |
|
|
|
|
|
|
All
stock-based compensation expense included in operating
expense
|
|
|
61,209 |
|
|
|
113,980 |
|
|
Total
stock-based compensation expense
|
|
$ |
61,209 |
|
|
$ |
113,980 |
|
BioTime
adopted SFAS 123(R) using the modified prospective transition method, which
requires the application of the accounting standard as of January 1, 2006, the
first day of BioTime’s fiscal year 2006. BioTime’s financial
statements as of and for the year ended December 31, 2006, reflect the impact of
SFAS 123(R). As of December 31, 2007, total unrecognized compensation
costs related to unvested stock options was $379,682, which is expected to be
recognized as expense over a weighted average period of approximately 4.8
years.
For all
applicable periods, the value of each employee and director stock option was
estimated on the date of grant using the Black-Scholes Merton model for the
purpose of the pro forma financial disclosures in accordance with SFAS
123.
The
weighted-average estimated fair value of stock options granted during the years
ended December 31, 2007 and 2006 was $0.20 and $0.16 per share, respectively,
using the Black-Scholes Merton model with the following weighted-average
assumptions:
|
|
Year Ended
December
31,
2007
|
Year Ended
December
31,
2006
|
|
Expected
lives in years
|
5
|
5
|
|
Risk
free interest rates
|
4.38%
|
4.60%
|
|
Volatility
|
100%
|
89%
|
|
Dividend
yield
|
0%
|
0%
|
For
options granted prior to 2006 and valued in accordance with SFAS 123, the
expected life and the expected volatility of the stock options were based upon
historical data. Forfeitures of employee stock options were accounted
for on an as-incurred basis.
General
Option Information
A summary
of all option activity under the 1992 and 2002 option plans for the years ended
December 31, 2007 and 2006 is as follows:
|
|
|
Options
Available
for
Grant
|
|
Number
of
Options
Outstanding
|
|
Weighted
Average Exercise Price
|
|
|
January
1, 2006
|
|
|
887,336
|
|
1,477,164
|
|
$
|
3.31
|
|
|
Granted
|
|
|
(509,500)
|
|
509,500
|
|
|
0.32
|
|
|
Forfeited/expired
|
|
|
30,000
|
|
(175,000)
|
|
|
5.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2006
|
|
|
407,836
|
|
1,811,664
|
|
|
2.20
|
|
|
Granted
|
|
|
(40,000)
|
|
2,040,000
|
|
|
0.29
|
|
|
Forfeited/expired
|
|
|
328,332
|
|
(388,332)
|
|
|
3.05
|
|
|
December
31, 2007
|
|
|
696,168
|
|
3,463,332
|
|
$
|
1.72
|
|
Additional
information regarding options outstanding as of December 31, 2007 is as
follows:
|
|
|
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
Range
of
Exercise
Prices
|
|
Number
Outstanding
|
|
Weighted
Avg.
Remaining
Contractual
Life
(yrs)
|
|
Weighted
Avg.
Exercise
Price
|
|
Number
Exercisable
|
|
Weighted
Avg.
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$.32-$.34
|
|
484,500
|
|
4.77
|
|
$0.32
|
|
484,500
|
|
$0.32
|
|
.74-1.55
|
|
198,332
|
|
2.24
|
|
1.27
|
|
188,332
|
|
1.29
|
|
2.00-2.17
|
|
591,000
|
|
1.96
|
|
2.02
|
|
591,000
|
|
2.02
|
|
11.75
|
|
59,500
|
|
1.28
|
|
11.75
|
|
59,500
|
|
11.75
|
|
$0.32-$11.75
|
|
1,333,332
|
|
2.99
|
|
$1.72
|
|
1,323,332
|
|
$1.73
|
General
Stock Appreciation Rights Information
On
October 10, 2007, BioTime granted a total of 1,302,030 Stock Appreciation Rights
(“SARs”) to two new employees. The SARs have a weighted average
exercise price of $0.50 per share, and are being amortized over five
years. As of December 31, 2007, none of the SARs had expired or been
forfeited.
|
7.
|
Commitments
and Contingencies
|
BioTime
occupies approximately 5,244 square feet of office and laboratory space in
Heritage Square in Emeryville, California under a five year
lease. BioTime moved to this facility in May
2005. Monthly rent will increase by 3% each year
during the initial five year term. If BioTime exercises its option to
extend the lease, then monthly rent will be set at 95% of the fair market rent
at that time. In addition to rent, BioTime will pay its pro rata
share of operating expenses and real estate taxes for the building in which
BioTime’s space is located or for the Heritage Square project as a whole, as
applicable, based upon the ratio that the number of square feet rented by
BioTime bears to the total number of square feet in the building or
project.
Rent
expenses totaled $189,158 and $192,521 for the years ended December 31, 2007 and
2006, respectively. Remaining minimum annual lease payments under the
lease are as follows:
|
Year
|
|
Minimum
lease payments
|
|
2008
|
|
$ |
135,857
|
|
|
2009
|
|
|
139,933 |
|
|
2010
|
|
|
59,022 |
|
Indemnification – Under
BioTime’s bylaws, BioTime has agreed to indemnify its officers and directors for
certain events or occurrences arising as a result of the officer or director
serving in such capacity. The term of the indemnification period is for the
officer’s or director’s lifetime. The maximum potential amount of future
payments that BioTime could be required to make under the indemnification
provisions contained in BioTime’s bylaws is unlimited. However,
BioTime has a directors and officers liability insurance policy that limits its
exposure and enables it to recover a portion of any future amounts
paid. As a result of the insurance policy coverage, BioTime believes
the estimated fair value of these indemnification agreements is minimal and no
liabilities were recorded for these agreements as of December 31,
2007.
Under the
license agreements with Hospira and CJ, BioTime will indemnify Abbott
Laboratories (Hospira’s predecessor), Hospira, and/or CJ for any cost or expense
resulting from any third party claim or lawsuit arising from alleged patent
infringement, as defined, by Abbott, Hospira, or CJ relating to actions covered
by the applicable license agreement. Management believes that the
possibility of payments under the indemnification clauses is
remote. Therefore, BioTime has not recorded a provision for potential
claims as of December 31, 2007. BioTime enters into indemnification provisions
under (i) agreements with other companies in the ordinary course of business,
typically with business partners, licensees, contractors, hospitals at which
clinical studies are conducted, and landlords, and (ii) agreements with
investors, underwriters, investment bankers, and financial advisers. Under these
provisions, BioTime generally agrees to indemnify and hold harmless the
indemnified party for losses suffered or incurred by the indemnified party as a
result of BioTime’s activities or, in some cases, as a result of the indemnified
party’s activities under the agreement. These indemnification
provisions often include indemnifications relating to representations made by
BioTime with regard to intellectual property rights. These
indemnification provisions generally survive termination of the underlying
agreement. In some cases, BioTime has obtained liability insurance
providing coverage that limits its exposure for indemnified matters. The maximum
potential amount of future payments that BioTime could be required to make under
these indemnification provisions is unlimited. BioTime has not
incurred material costs to defend lawsuits or settle claims related to these
indemnification agreements. As a result, BioTime believes the
estimated fair value of these agreements is minimal. Accordingly,
BioTime has no liabilities recorded for these agreements as of December 31,
2007.
The
primary components of the net deferred tax asset are:
|
|
|
Year
Ended December 31,
2007
|
|
|
Deferred
tax asset:
|
|
|
|
|
Net
operating loss carryforwards
|
|
$ |
16,198,000 |
|
|
Research
& development and other credits
|
|
|
1,797,000 |
|
|
Other,
net
|
|
|
1,001,000 |
|
|
Total
|
|
|
18,996,000 |
|
|
Valuation
allowance
|
|
|
(18,996,000 |
) |
|
Net
deferred tax asset
|
|
$ |
-0- |
|
Income
taxes differed from the amounts computed by applying the U.S. federal income tax
of 34% to pretax losses from operations as a result of the
following:
|
Year Ended December
31,
|
2007
|
2006
|
|
Computed
tax benefit at federal statutory rate
|
34%
|
34%
|
|
Permanent
differences, primarily nondeductible interest due to write off of royalty
obligation
|
(0)
|
(4%)
|
|
Losses
for which no benefit has been recognized
|
(32%)
|
(39%)
|
|
State
tax benefit, net of effect on federal income taxes
|
0%
|
6%
|
|
Research
and development and other credits
|
2%
|
3%
|
|
|
0%
|
0%
|
No tax
benefit has been recorded through December 31, 2007 because of the net operating
losses incurred and a full valuation allowance provided. A valuation allowance
is provided when it is more likely than not that some portion of the deferred
tax asset will not be realized. BioTime established a 100% valuation allowance
for all periods presented due to the uncertainty of realizing future tax
benefits from its net operating loss carryforwards and other deferred tax
assets.
As of
December 31, 2007, BioTime has net operating loss carryforwards of approximately
$45,350,000 for federal and $13,320,000 for state tax purposes, which expire
through 2027. In addition, BioTime has tax credit carryforwards for
federal and state tax purposes of $1,020,000 and $777,000, respectively, which
expire through 2027.
Internal
Revenue Code Section 382 places a limitation (the “Section 382 Limitation”) on
the amount of taxable income that can be offset by net operating loss (“NOL”)
carryforwards after a change in control (generally greater than 50% change in
ownership within a three-year period) of a loss corporation. California has
similar rules. Generally, after a control change, a loss corporation cannot
deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these
“change in ownership” provisions, utilization of the NOL and tax credit
carryforwards may be subject to an annual limitation regarding their utilization
against taxable income in future periods.
|
9.
|
Enterprise-wide
Disclosures
|
Geographic
Area Information
Revenues,
including license fees and royalties, by geographic area are based on the
country of domicile of the counterparty to the agreement.
|
Year
ended December 31,
|
|
2007
|
|
|
2006
|
|
|
Revenues
|
|
|
|
|
|
|
|
Domestic
|
|
$ |
790,572 |
|
|
$ |
993,554 |
|
|
Asia
|
|
|
255,549 |
|
|
|
168,461 |
|
|
Total
revenues
|
|
$ |
1,046,121 |
|
|
$ |
1,162,015 |
|
All of
BioTime’s assets are located at its Emeryville, California
facility.
Major
Customers
BioTime
has two major customers comprising significant amounts of total revenues as
follows:
|
Year
ended December 31,
|
2007
|
2006
|
|
%
of Total Revenues
|
|
|
|
Hospira
|
74%
|
80%
|
|
CJ
Corp
|
10%
|
8%
|
10.
Subsequent Events
In
January 2008, BioTime signed a licensing agreement with the Wisconsin Alumni
Research Foundation (“WARF”) to 173 patents and patent applications filed
internationally relating to human embryonic stem cell technology created by
James Thomson at the University of Wisconsin-Madison. The agreement requires the
payment of approximately $250,000 prior to January 2009.
In
February 2008, BioTime received royalties in the amount of $308,900 from
Hospira; this amount is based on sales of Hextend made by Hospira in the fourth
quarter of 2007, and will be reflected in BioTime’s consolidated financial
statements for the first quarter of 2008.
On March
31, 2008, BioTime entered into an amendment to its Financial Adviser Agreement
with Greenbelt Corp, renewing that agreement through December 31,
2008. Greenbelt has served as BioTime’s financial adviser since
1998. Under the amendment, BioTime will pay Greenbelt a fee of
$135,000 in cash and 300,000 common shares. The shares shall be
issued as follows: 150,000 shares on April 1, 2008, and 75,000 shares on October
1, 2008, and January 2, 2009. The cash fee will be payable in three
equal installments of $45,000 each on October 1, 2008, and January 2,
2009. BioTime may elect to defer until January 2, 2009 the cash
payments due on July 1, 2008 and October 1, 2008, and if it does so, BioTime
will issue to Greenbelt 30,000 additional common shares at the time the deferred
cash payment is made.
The
agreement will terminate on December 31, 2008, unless BioTime or Greenbelt
terminates it on an earlier date. In the event of an early
termination, BioTime will pay Greenbelt a pro rata portion of the cash and
shares earned during the calendar quarter in which the agreement terminated,
based upon the number of days elapsed.
In March
2008, BioTime entered into amendments to its Credit Agreement that increased the
line of credit and extended the maturity date of the line of credit to November
15, 2008. The line of credit may mature prior to November 15, 2008 if
BioTime receives an aggregate of $4,000,000 through (A) the sale of capital
stock, (B) the collection of licensing fees, signing fees, milestone fees,
or similar fees in excess of $2,500,000 under any present or future agreement
pursuant to which BioTime grants one or more licenses to use its patents or
technology, (C) funds borrowed from other lenders, or (D) any
combination of sources under clauses (A) through (C).
The
amendments permit BioTime to borrow up to $2,500,000, and as of April 2, 2008
BioTime had received loan commitments from lenders for $2,050,000. In
consideration for the increased line of credit and later maturity date, BioTime
agreed to issue to the lenders a total of 420,000 common shares during March and
April 2008, which had a value of $158,800 on the dates of issue, and will issue
up to 90,000 additional shares to the lenders if it receives commitments for the
entire $2,500,000 million line of credit.
In April 2008,
BioTime entered into a sublease of approximately 11,000 square feet of
office and research laboratory spaced at 1301 Harbor Bay Parkway, in Alameda,
California. BioTime plans to move its headquarters from its present
Emeryville location to this new facility. The sublease will expire on
November 30, 2010, but BioTime has an early termination right that permits it to
terminate the sublease on July 31, 2008. Base monthly rent will be
$22,000 during 2008, $22,600 during 2009, and $23,339.80 during
2010. In addition to base rent, BioTime will pay a pro rata share of
real property taxes and certain costs related to the operation and maintenance
of the building in which the subleased premises are located.
|
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
Evaluation
of Disclosure Controls and Procedures
It is
management’s responsibility to establish and maintain adequate internal control
over all financial reporting pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934 (the “Exchange Act”). Our management, including
our principal executive officer, our principal operations officer, and our
principal financial officer, have reviewed and evaluated the effectiveness of
our disclosure controls and procedures as of a date within ninety (90) days of
the filing date of this Form 10-KSB annual report. Following this
review and evaluation,
management collectively determined that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in reports that we file or submit under the Exchange Act (i) is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms, and (ii) is accumulated and communicated to management,
including our chief executive officer, our chief operations officer, and our
chief financial officer, as appropriate to allow timely decisions regarding
required disclosure.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during the period covered by this Annual Report on Form 10-KSB that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial
reporting, as defined in Exchange Act Rule 13a-15(f), is a process designed by,
or under the supervision of, our principal executive officer, our principal
operations officer, and our principal financial officer, and effected by our
Board of Directors, management, and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures
that:
|
·
|
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our
assets;
|
|
|
|
|
·
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being
made only in accordance with authorizations of our management and
directors; and
|
|
|
|
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial
statements.
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control
systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. The scope of management’s assessment of
the effectiveness of internal control over financial reporting includes our
consolidated subsidiary.
Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2007. Based on this assessment,
management believes that, as of that date, our internal control over financial
reporting was effective.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.
During
October 2007 we agreed to issue 200,000 common shares, and during March 2008 we
agreed to issue 10,000 common shares, to our lenders under the terms of our
Credit Agreement. In connection with the most recent amendment of our
Credit Agreement, on March 31, 2008, we agreed to issue up to 500,000 additional
common shares to our lenders. These shares were or will be issued in
reliance upon an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
PART
III
|
|
Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance With Section 16(a) of the Exchange
Act
|
Directors
and Executive Officers
The names
and ages of our directors and executive officers of BioTime are as
follows:
Michael D. West, Ph.D., 54,
became our Chief Executive Officer during October 2007, and has served on the
Board of Directors since 2002. Dr. West is
Adjunct Professor of Bioengineering at the University of California,
Berkeley. Dr. West has extensive academic and business experience in
age-related degenerative diseases, telomerase molecular biology and human
embryonic stem cell research and development. Prior to becoming our
Chief Executive Officer, Dr. West served as President and Chief Scientific
Officer of Advanced Cell Technology, Inc., a company he founded in 1998, that is
engaged in developing human stem cell technology for use in regenerative
medicine. , Dr. West also founded Geron Corporation of Menlo Park,
California, and from 1990 to 1998 he was a Director and Vice President, where he
initiated and managed programs in telomerase diagnostics, oligonucleotide-based
telomerase inhibition as anti-tumor therapy, and the cloning and use of
telomerase in telomerase-mediated therapy wherein telomerase is utilized to
immortalize human cells. From 1995 to 1998 he organized and managed
the research between Geron and its academic collaborators James Thomson and John
Gearhart that led to the first isolation of human embryonic stem and human
embryonic germ cells. Dr. West received a B.S. Degree from Rensselaer
Polytechnic Institute in 1976, an M.S. Degree in Biology from Andrews University
in 1982, and a Ph.D. from Baylor College of Medicine in 1989 concentrating on
the biology of cellular aging.
Hal Sternberg, Ph.D., 54, is
our Vice President of Research, and has served on the Board of Directors since
1990. Dr. Sternberg was a visiting scientist and research Associate
at the University of California at Berkeley from 1985-1988, where he supervised
a team of researchers studying Alzheimer’s Disease. Dr. Sternberg
received his Ph.D. from the University of Maryland in Biochemistry in
1982.
Harold Waitz, Ph.D., 65, is
our Vice President of Engineering and Regulatory Affairs, and has served on the
Board of Directors since 1990. He received his Ph.D. in Biophysics
and Medical Physics from the University of California at Berkeley in
1983.
Judith Segall, 54, is our Vice
President of Technology and Secretary, and has served on the Board of Directors
from 1990 through 1994, and from 1995 through the present date. Ms.
Segall received a B.S. in Nutrition and Clinical Dietetics from the University
of California at Berkeley in 1989.
Valeta Gregg, 54, joined the
Board of Directors during October 2004. Ms. Gregg is Vice President
and Assistant General Counsel, Patents of Regeneron Pharmaceuticals, Inc., a
Tarrytown, New York based company engaged in the development of pharmaceutical
products for the treatment of a number of serious medical conditions, including
cancer, diseases of the eye, rheumatoid arthritis and other inflammatory
conditions, allergies, asthma, and obesity. Prior to joining
Regeneron in 2002, Ms. Gregg worked as a patent attorney, at Klauber &
Jackson in Hackensack, New Jersey from 2001 to 2002, and for Novo Nordisk A/S
and its United States subsidiary from 1996 to 2001, and for Fish &
Richardson, P.C., Menlo Park, California from 1994 to 1996. Ms. Gregg
received her law degree from University of Colorado School of Law in 1992 and
received a Ph.D in Biochemistry from the University of Alberta in
1982.
Michael
West, Robert Peabody, Hal Sternberg, Harold Waitz, Judith Segall, and Steven
Seinberg are the only executive officers of BioTime. From 2003 until
Dr. West became Chief Executive Officer, Hal Sternberg, Harold Waitz, and Judith
Segall served as members of the Office of the President. The members
of the Office of the President collectively exercised the powers of the Chief
Executive Officer.
Robert W. Peabody, CPA, 53,
joined BioTime as Senior Vice President and Chief Operating Officer in October
2007. Prior to joining BioTime, Mr. Peabody served as Vice President-Grant
Administration for Advanced Cell Technology, Inc., and also served on their
Board of Directors from 1998 to 2006. Prior to joining ACT, Mr.
Peabody spent 14 years as a Regional Controller for Ecolab, Inc., a Fortune 500
specialty chemical manufacturer and service company. Mr. Peabody, along with Dr.
West, was a co-founder of Geron Corporation of Menlo Park, Ca. He has also
been an audit manager for Ernst and Young where he was on the audit staff
serving the firm's clients whose shares are publicly traded. Mr. Peabody
received a Bachelor Degree in Business Administration from The University of
Michigan and is a Certified Public Accountant.
Steven A. Seinberg, J.D., 41,
became Chief Financial Officer and Treasurer during August
2001. Prior to assuming these positions, Mr. Seinberg worked for over
five years as BioTime’s Director of Financial and Legal Research, a position
that involved, among other duties, contract modifications and management of our
intellectual property portfolio. Mr. Seinberg received a J.D. from
Hastings College of the Law in San Francisco in 1994.
There are
no family relationships among our directors or officers.
The Board
of Directors had an Audit Committee, a Compensation Committee and a Nominating
Committee until October 2007, when Michael West became Chief Executive Officer
and was no longer eligible to serve on those committees. The charters
of each of those committees requires the members to be directors who are
“independent” in accordance with Section 121(A) of the American Stock Exchange
(AAMEX@)
listing standards and Section 10A-3 under the Securities Exchange Act of 1934,
as amended. Dr. West ceased to be an independent director when he
became Chief Executive Officer, leaving those committees with only one member
who qualifies as “independent.”
The Board
of Directors determined that Michael West was an audit committee financial
expert within the meaning of Item 407(d)) of SEC Regulation S-K during his
tenure on the committee, on the basis of Mr. West’s experience as the President
of Advanced Cell Technology, Inc. and as a founder of Geron, Inc. Mr.
West has had oversight over the performance of the chief financial and
accounting officers of those companies.
The Board
of Directors intends to reinstate the Audit Committee at such time as we have a
sufficient number of directors who qualify as “independent” in accordance with
Section 121(A) of the American Stock Exchange (AAMEX@)
listing standards and Section 10A-3 under the Securities Exchange Act of 1934,
as amended.
A copy of
the Audit Committee Charter has been posted on our internet website and can be
found at www.biotimeinc.com.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires our directors and executive officers and persons who own more than ten
percent (10%) of a registered class of our equity securities to file with the
Securities and Exchange Commission (the “SEC”) initial reports of ownership and
reports of changes in ownership of common shares and other BioTime equity
securities. Officers, directors and greater than ten percent
beneficial owners are required by SEC regulations to furnish us with copies of
all reports they file under Section 16(a).
To our
knowledge, based solely on our review of the copies of such reports furnished to
us, all Section 16(a) filing requirements applicable to our officers, directors,
and greater than ten percent beneficial owners were complied with during the
fiscal year ended December 31, 2007, except that Alfred D. Kingsley, Greenbelt
Corp., and Gary K Duberstein filed a delinquent Form 4 during May 2007, Mr.
Kingsley filed a delinquent Form 4 during October 2007, Robert Peabody filed a
delinquent Form 3 during October 2007, and Michael West filed a delinquent Form
4 during October 2007.
We have
adopted a Code of Ethics that applies to our principal executive officer, our
principal financial officer and accounting officer, our other executive
officers, and our directors. The purpose of the Code of Ethics is to
promote (i) honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships; (ii) full, fair, accurate, timely and understandable disclosure
in reports and documents that we file with or submit to the Securities and
Exchange Commission and in our other public communications; (iii) compliance
with applicable governmental rules and regulations, (iv) prompt internal
reporting of violations of the Code to an appropriate person or persons
identified in the Code; and (v) accountability for adherence to the
Code. A copy of our Code of Ethics has been posted on our internet
website and can be found at www.biotimeinc.com.
During
October 2007, we entered into an employment agreement with our Chief Executive
Officer, Dr. Michael West, pursuant to which he is entitled to receive an annual
salary of $250,000, an annual bonus equal to the lesser of (A) $65,000 or (B)
the sum of 65% of Consulting Fees and 6.5% of Grant Funds we receive during each
fiscal year; provided that (x) we obtained the grant that is the source of the
Grant Funds during the term of his employment, (y) the grant that is the source
of the Grant Funds is not a renewal, extension, modification, or novation of a
grant (or a new grant to fund the continuation of a study funded by a prior
grant from the same source) obtained us prior to his employment, and (z) the
grant that is the source of the Grant Funds was not obtained by us substantially
through the efforts of any consultant or independent contractor compensated by
us for obtaining the grant. Grant Funds means money actually paid to
us during a fiscal year as a research grant by any federal or state government
agency or any not for profit non-government organization, and expressly excludes
(1) license fees, (2) royalties, (3) Consulting Fees, (4) capital contributions
to us or any of our subsidiaries, or any joint venture of any kind (regardless
of the legal entity through which the joint venture is conducted) to which we
are a party, and (5) any other payments received by us from a business or
commercial enterprise for research and development of products or technology
pursuant to a contract or agreement for the commercial development of a product
or technology. Consulting Fees means money we receive under a
contract that entitles us to receive a cash fee for providing scientific and
technical advice to third parties concerning stem cells.
Dr. West
was granted an option to purchase 1,500,000 common shares (the AOption@)
under the 2002 Plan. The Option is paired with stock appreciation
rights ("SARs") with respect to 976,500 shares. The exercise price of
the Option and the SARs is $0.50. The Option and the SARs will vest
(as thereby become exercisable) at the rate of 1/60th of the number of Option
shares or SARs at the end of each full month of employment. Vesting
will depend on Dr. West=s
continued employment by us through the applicable vesting date, and will be
subject to the terms and conditions of the 2002 Plan and a Stock Option
Agreement consistent with the 2002 Plan and Dr. West’s Employment
Agreement. The unvested portion of the Option and the SARs shall not
be exercisable.
The
vested portion of the Option and the SARs shall expire on the earliest of (A)
seven (7) years from the date of grant, (B) three months after Dr. West ceases
to be employed by us for any reason other than his death or disability, or (C)
one year after he ceases to be employed by us due to his death or disability;
provided that if he dies during the three month period described in clause (B),
the expiration date of the vested portion of the Option shall be one year after
the date of his death. In addition, (X) if the SAR is exercised, the
vested portion of the Option shall expire as to a number of shares for which the
SAR was exercised, and (Y) the vested and unvested portion of the SARs shall
expire when our shareholders approve an amendment to the 2002 Plan increasing
the number of common shares available under the 2002 Plan from 2,000,000 to
4,000,000 shares. The Option and the SARs, respectively, shall not be
exercisable after it has expired.
The SARs
may not be exercised, in whole or in part, until the vested portion of the
Option has been exercised in full. A vested SAR may be exercised by
delivering a written notice to us specifying the number of SAR shares being
exercised. Upon exercise of an SAR, Dr. West shall be entitled to
receive a payment of cash per SAR share exercised equal to the amount by which
the fair market value of a BioTime common share on the date of exercise exceeds
the exercise price of the SAR. The fair market value of a BioTime
common share shall be determined by the Board of Directors in the manner
provided in the 2002 Plan. SARs may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised only by Dr. West during
his lifetime.
In the
event that Dr. West’s employment is terminated for “cause,” as defined in his
Employment Agreement, or as a result of his death or disability, or his
resignation, he will be entitled to receive payment for all unpaid salary,
accrued but unpaid bonus, if any, and vacation accrued as of the date of his
termination of employment.
If we
terminate Dr. West’s employment without “cause,” he will be entitled to
additional benefits, consisting of payment of either three months base salary,
if he was employed by us for less than two years, or six months base salary if
he was employed by us for at least two years. In addition, 50% of the
then unvested shares subject to Dr. West’s Option will vest if he was employed
by us for at least two years. However, if a termination of Dr. West’s
employment without “cause” occurs within twelve months following a “Change in
Control,” Dr. West will be entitled to four months base salary if he was
employed by us for less than two years, or twelve months base salary if he was
been employed by us for at least two years; and 50% of the then unvested shares
subject to Dr. West’s Option will vest if he was been employed for less than two
years, or one 100% of the then unvested shares subject to his Option if he was
employed for at least two years.
"Change
of Control" means (A) the acquisition of our voting securities by a person or an
Affiliated Group entitling the holder to elect a majority of our directors;
provided, that an increase in the amount of voting securities held by a person
or Affiliated Group who on the date of the Employment Agreement owned
beneficially owned (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the regulations thereunder) more than 10% of our voting
securities shall not constitute a Change of Control; and provided, further, that
an acquisition of voting securities by one or more persons acting as an
underwriter in connection with a sale or distribution of voting securities shall
not constitute a Change of Control, (B) the sale of all or substantially all of
our assets; or (C) a merger or consolidation in which we merge or consolidate
into another corporation or entity in which our stockholders immediately before
the merger or consolidation do not own, in the aggregate, voting securities of
the surviving corporation or entity (or the ultimate parent of the surviving
corporation or entity) entitling them, in the aggregate (and without regard to
whether they constitute an Affiliated Group) to elect a majority of the
directors or persons holding similar powers of the surviving corporation or
entity (or the ultimate parent of the surviving corporation or
entity). A Change of Control shall not be deemed to have occurred if
all of the persons acquiring our voting securities or assets or merging or
consolidating with us are one or more of our direct or indirect subsidiary or
parent corporations. "Affiliated Group" means (A) a person and one or
more other persons in control of, controlled by, or under common control with
such person; and (B) two or more persons who, by written agreement among them,
act in concert to acquire voting securities entitling them to elect a majority
of our directors. “Person” includes both people and
entities.
The
following table summarizes certain information concerning the compensation paid
during the past two fiscal years to each our Chief Executive Officer and the
members of the Office of the President who collectively exercised the powers of
the Chief Executive Officer during 2007:
SUMMARY
COMPENSATION TABLE
|
Name and principal position
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
awards
|
|
|
Option
awards
|
|
|
Nonequity
incentive
plan
compensation
|
|
|
Nonqualified
deferred
compensation
earnings
|
|
|
All
other
compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
D. West
|
2007
|
|
$ |
62,500 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
9,819 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
72,319 |
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judith
Segall
|
2007
|
|
$ |
97,200 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
97,200 |
|
|
Vice
President – Operations
Corporate
Secretary
|
2006
|
|
$ |
108,000 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
10,913 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
118,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hal
Sternberg
|
2007
|
|
$ |
90,000 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
90,000 |
|
|
Vice
President – Research
|
2006
|
|
$ |
100,000 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
10,913 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
110,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold
Waitz
|
2007
|
|
$ |
90,000 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
90,000 |
|
|
Vice
President-
Regulatory
Affairs & Engineering
|
2006
|
|
$ |
100,000 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
10,913 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
110,913 |
|
On
November 24, 2006, the Board of Directors granted Judith Segall, Harold Waitz,
and Hal Sternberg options to purchase 80,000 common shares, each, at an exercise
price of $0.32 per shares. Each option was granted under our 2002
Plan. The options will expire five years from the date of grant, or
within three months after termination of the executive’s employment, subject to
certain exceptions in the event of death or disability. The exercise price of
the options was equal to 150% of the closing price the common shares as reported
on the Nasdaq OTCBB on November 22, 2006, the last trading day before the
effective date of the grant.
Stock
Options
The
following table summarizes certain information concerning stock options held as
of December 31, 2007 by our Chief Executive Officer and the members of the
Office of the President who collectively exercised the powers of the Chief
Executive Officer during 2007.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| |
|
Option Awards
|
|
|
| |
|
|
|
|
|
|
Number
of Securities
|
Number
of Securities
|
|
|
|
|
Underlying
Unexercised
|
Underlying
Unexercised
|
Option
Exercise
|
Option
Expiration
|
|
Name
|
Options Exercisable
|
Options Unexercisable
|
Price
|
Date
|
|
|
|
|
|
|
|
Michael
West
|
20,000(1)
|
|
$1.55
|
March
30, 2008
|
|
|
20,000(1)
|
|
$2.17
|
March
7, 2009
|
|
|
20,000(1)
|
|
$1.26
|
March
20, 2010
|
|
|
20,000(1)
|
|
$0.34
|
March
27, 2011
|
|
|
20,000(1)
|
|
$0.74
|
June
1, 2014
|
|
|
1,500,000(2)
|
1,450,000
|
$0.50
|
October
9, 2014
|
|
|
|
|
|
|
|
Judith
Segall
|
50,000(3)
|
|
$2.00
|
May
31, 2009
|
|
|
125,000(4)
|
|
$2.00
|
November
7, 2010
|
|
|
80,000(5)
|
|
$0.32
|
November
23, 2011
|
|
|
|
|
|
|
|
Hal
Sternberg
|
50,000(3)
|
|
$2.00
|
May
31, 2009
|
|
|
80,000(5)
|
|
$0.32
|
November
23, 2011
|
|
|
|
|
|
|
|
Harold
Waitz
|
50,000(3)
|
|
$2.00
|
May
31, 2009
|
|
|
80,000(5)
|
|
$0.32
|
November
23, 2011
|
|
(1)
|
These
options were granted to Dr. West during his service as a non-employee
director.
|
|
(2)
|
These
options become exercisable at the rate of 25,000 per month during the term
of Dr. West’s employment.
|
|
(3)
|
12,500
options became exercisable on June 1, 2004 and the remaining options
became exercisable in three equal annual
installments.
|
|
(4)
|
125,000
options became exercisable on November 8,
2005
|
|
(5)
|
80,000
options became exercisable on November 24,
2006
|
Compensation
of Directors
During
2007, the two directors who were not then employees each received options to
purchase 20,000 common shares exercisable at $0.74 per share, which was the
closing price of the common shares reported on the OTCBB on April 30,
2007. The options granted to these directors vested and became
exercisable in equal quarterly installments based on continued service on the
Board of Directors. Directors and members of committees of the Board of
Directors who are employees are not compensated for serving as directors or
attending meetings of the Board or committees of the Board. Directors
are entitled to reimbursements for their out-of-pocket expenses incurred in
attending meetings of the Board or committees of the Board. Directors
who are our employees are also entitled to receive compensation as
employees.
The
following table summarizes certain information concerning the compensation paid
during the past fiscal year to each of the current members of the Board of
Directors who were not our employees on the date the compensation was
awarded. Dr. West became our Chief Executive Officer during October
2007.
|
Name
|
|
Fees Earned or Paid In
Cash
|
|
|
Option
Awards
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
West(1)
|
|
-- |
|
|
$ |
11,446 |
|
|
$ |
11,446 |
|
|
Valeta
Gregg(2)
|
|
--
|
|
|
$ |
11,446 |
|
|
$ |
11,446 |
|
(1) At
December 31, 2007 Michael West held options to purchase 1,600,000 common shares
at exercise prices ranging from $0.34 to $2.17 per share, which includes options
to purchase 1,500,000 common shares granted to him in his capacity as Chief
Executive Officer.
(2) At
December 31, 2007 Valeta Gregg held options to purchase 58,332 common shares at
exercise prices ranging from $0.34 to $1.26 per share.
|
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
The
following table sets forth information as of March 14, 2008 concerning
beneficial ownership of common shares by each shareholder known by us to be the
beneficial owner of 5% or more of our common shares. Information
concerning certain beneficial owners of more than 5% of the common shares is
based upon information disclosed by such owners in their reports on Schedule 13D
or Schedule 13G.
Security
Ownership of Certain Beneficial Owners
|
|
Number
of
|
Percent
of
|
|
|
Shares
|
Total
|
|
|
|
|
|
Alfred
D. Kingsley(1)
|
10,030,540
|
38.4%
|
|
Gary
K. Duberstein
|
|
|
|
Greenbelt
Corp.
|
|
|
|
Greenway
Partners, L.P.
|
|
|
|
Greenhouse
Partners, L.P.
|
|
|
|
150
E. 57th
Street, Suite 24E
|
|
|
|
New
York, New York 10022
|
|
|
|
|
|
|
|
Neal
C. Bradsher(2)
|
3,071,106
|
12.6%
|
|
Broadwood
Partners, L.P.
|
|
|
|
Broadwood
Capital, Inc.
|
|
|
|
724
Fifth Avenue, 9th
Floor
|
|
|
|
New
York, NY 10019
|
|
|
|
|
|
|
|
George
Karfunkel (3)
|
2,392,041
|
9.8%
|
|
59
Maiden Lane
|
|
|
|
New
York, New York 10038
|
|
|
|
Cyndel
& Co., Inc (4)
|
1,633,770
|
6.8%
|
|
Patrick
Kolenik
|
|
|
|
Huntington
Laurel Partnership
|
|
|
|
36
Golf Lane
|
|
|
|
Huntington,
NY 11743
|
|
|
|
Cynthia
Bayern
|
|
|
|
Steven
Bayern
|
|
|
|
26
West Broadway #1004
|
|
|
|
Long
Beach, NY 11561
|
|
|
___________________________
(1) Includes
1,716,698 shares presently owned by Greenbelt Corp, 334,632 shares that may be
acquired by Greenbelt Corp. upon the exercise of certain warrants, 527,942
shares owned by Greenway Partners, L.P., 448,121 shares that may be acquired by
Greenway Partners, L.P. upon the exercise of certain warrants, 4,719,522 shares
owned solely by Alfred D. Kingsley, 2,270,689 shares that may be acquired by Mr.
Kingsley upon the exercise of warrants, 12,256 shares owned solely by Gary K.
Duberstein, and 680 shares that may be acquired by Mr. Duberstein upon the
exercise of certain warrants. Mr. Kingsley and Mr. Duberstein control
Greenbelt Corp. and may be deemed to beneficially own the warrants and shares
that Greenbelt Corp. beneficially owns. Greenhouse Partners, L.P. is
the general partner of Greenway Partners, L.P., and Mr. Kingsley and Mr.
Duberstein are the general partners of Greenhouse Partners,
L.P. Greenhouse Partners, L.P., Mr. Kingsley, and Mr. Duberstein may
be deemed to beneficially own the shares that Greenway Partners, L.P.
owns. Mr. Duberstein disclaims beneficial ownership of the shares and
warrants owned solely by Mr. Kingsley, and Mr. Kingsley disclaims beneficial
ownership of the shares owned solely by Mr. Duberstein.
(2) Includes
1,650,805 shares owned by Broadwood Partners, L.P., 1,377,393 shares that may be
acquired by Broadwood Partners, L.P upon the exercise of certain warrants,
37,358 shares owned by Neal C. Bradsher, and 5,550 shares that may be acquired
by Mr. Bradsher upon the exercise of certain warrants. Broadwood
Capital, Inc. is the general partner of Broadwood Partners, L.P., and Mr.
Bradsher is the President of Broadwood Capital, Inc. Mr. Bradsher and
Broadwood Capital, Inc. may be deemed to beneficially own the shares that
Broadwood Partners, L.P. owns.
(3) Includes
1,379,878 shares that maybe acquired upon the exercise of certain
warrants.
(4) Includes
104,762 shares owned by Cyndel & Co., Inc., 135,714 shares that Cyndel maybe
acquire upon the exercise of certain warrants, 40,000 shares owned by
partnership of which Cynthia Bayern is a general partner, 95,000 shares that Dr.
Bayern may acquire upon the exercise of certain warrants, 180,000 shares owned
by Steven Bayern and 200,000 shares that Steven Bayern may acquire upon the
exercise of certain warrants, 222,897shares owned by Huntington Laurel
Partnership, 220,297 shares that Huntington Laurel Partnership may be acquire
upon the exercise of certain warrants, 205,100 shares owned by Patrick Kolenik,
55,000 shares owned by Mr. Kolenik’s wife jointly with a third party, and
175,000 shares that Mr. Kolenik may acquire upon the exercise of certain
warrants. Steven Bayern and Cynthia Bayern are husband and wife and
each may be deemed to beneficially own the shares beneficially owned by the
other. Mr. Bayern and Mr. Kolenik are the shareholders, officers and
directors of Cyndel and may be deemed to beneficially own the shares that Cyndel
owns. Mr. Bayern and Mr. Kolenik are the members of the general
partner of Huntington Laurel Partnership and may be deemed to beneficially own
the shares owned by that partnership.
Security
Ownership Of Management
The
following table sets forth information as of March 14, 2008 concerning
beneficial ownership of common shares by each member of the Board of Directors,
certain executive officers, and all officers and directors as a
group.
|
|
Number
of
|
Percent
of
|
|
|
Shares
|
Total
|
|
|
|
|
|
Michael
D. West(1)
|
275,000
|
1.2%
|
|
|
|
|
|
Judith
Segall(2)
|
712,669
|
3.0%
|
|
|
|
|
|
Hal
Sternberg(3)
|
410,201
|
1.8%
|
|
|
|
|
|
Harold
D. Waitz(4)
|
338,625
|
1.5%
|
|
|
|
|
|
Valeta
Gregg(5)
|
58,333
|
*
|
|
|
|
|
|
All
officers and directors
|
|
|
|
as
a group (7 persons)(6)
|
1,958,160
|
8.2%
|
___________________________
(1) Includes
275,000 shares that may be acquired upon the exercise of certain stock options
that are presently exercisable or that may become exercisable within 60
days. Excludes 1,325,000 shares that may be acquired upon the
exercise of certain stock options that are not presently exercisable and that
will not become exercisable within 60 days.
(2) Includes
255,000 shares that may be acquired upon the exercise of certain stock options,
and 45,337 shares that may be acquired upon the exercise of certain
warrants.
(3) Includes
130,000 shares that may be acquired upon the exercise of certain options and
25,931 shares that may be acquired upon the exercise of certain
warrants.
(4) Includes
2,952 shares held for the benefit of Dr. Waitz’s children, 130,000 shares that
may be acquired by Dr. Waitz upon the exercise of certain stock options, 38,379
shares that may be acquired by Dr. Waitz upon the exercise of certain warrants
(including 720 warrants held for the benefit of Dr. Waitz’s
children).
(5) Includes
58,332 shares that may be acquired upon the exercise of certain
options.
(6) Includes
1,121,312 shares that may be acquired upon the exercise of certain
options and warrants. Excludes certain shares that may be acquired
upon the exercise of certain options that are not presently exercisable and will
not become exercisable within 60 days.
|
|
Certain
Relationships and Related Transactions , and Director
Independence
|
During
April 1998, we entered into a financial advisory services agreement with
Greenbelt Corp., a corporation controlled by Alfred D. Kingsley and Gary K.
Duberstein, who are also BioTime shareholders. We agreed to indemnify
Greenbelt and its officers, affiliates, employees, agents, assignees, and
controlling person from any liabilities arising out of or in connection with
actions taken on our behalf under the agreement. The agreement was
renewed annually through March 31, 2007. We paid Greenbelt $45,000
cash and issued 135,000 common shares for the twelve months ending March 31,
2006, and we paid $90,000 in cash and issued 200,000 common shares for services
rendered for the twelve months ending March 31, 2007. Greenbelt
permitted us to defer paying certain cash fees until October 2007. In
return for allowing the deferral, we issued Greenbelt an additional 60,000
common shares. We have agreed to file a registration statement, at
our expense, to register Greenbelt’s shares for sale under the Securities Act of
1933, as amended, upon Greenbelt’s request.
During
April 2006, we entered into a Revolving Line of Credit Agreement (the “Credit
Agreement”) with Alfred D. Kingsley, Cyndel & Co., Inc., and George
Karfunkel under which we could borrow up to $500,000 for working capital
purposes at an interest rate of 10% per annum. In consideration for
making the line of credit available, we issued to the lenders a total of 99,999
common shares.
In
October 2007, the Credit Agreement was amended to increase the line of credit to
$1,000,000, to increase the interest rate to 12% per annum, and to extend the
maturity date to April 30, 2008. The loan payable to Cyndel &
Co., Inc. was paid in full, and Broadwood Partners, LP joined the lender group.
In consideration for extending the maturity date of the new line of
credit, we issued to the lenders a total of 200,000 common shares.
The
Credit Agreement was amended again during March 2008 to further increase the
amount of the line of credit and extend the maturity date. See
“Management’s Discussion and Analysis or Plan of Operation—Liquidity and Capital
Resources” and Note 3 and Note 10 to our Financial
Statements.
Director
Independence
Valeta
Gregg is the only member of the Board of Directors qualifies as “independent” in
accordance with Section 121(A) of the American Stock Exchange (AAMEX@)
listing standards and Section 10A-3 under the Securities Exchange Act of 1934,
as amended. The other directors, Michael D. West, Judith Segall, Hal
Sternberg, and Harold Waitz do not qualify as “independent” because they are our
full time employees and executive officers.
Ms. Gregg
served on the Audit Committee, the Nominating Committee and the Compensation
Committee during 2007. The only compensation or remuneration that we
have provided to Ms. Gregg during her tenure as a director has been compensation
as a non-employee director. Ms. Gregg and the members of her family
have not participated in any transaction with us that would disqualify her as an
“independent” director under the standard described above and in the charters to
the committees of the Board of Directors on which she served.
(a-1)
Financial Statements.
The
following financial statements of BioTime, Inc. are filed in the Form
10-K:
Notes to
Financial
Statements
(a-2)
Financial Statement Schedules
All
schedules are omitted because the required information is inapplicable or the
information is presented in the financial statements or the notes
thereto.
|
Exhibit
|
|
|
Numbers
|
Description
|
|
|
|
|
3.1
|
Articles
of Incorporation.†
|
|
|
|
|
3.2
|
Amendment
of Articles of Incorporation.***
|
|
|
|
|
3.3
|
By-Laws,
As Amended.#
|
|
|
|
|
4.1
|
Specimen
of Common Share Certificate.+
|
|
|
|
|
4.2
|
Form
of Warrant Agreement between BioTime, Inc. and American Stock Transfer
& Trust Company++
|
|
|
|
|
4.3
|
Form
of Amendment to Warrant Agreement between BioTime, Inc. and American Stock
Transfer & Trust Company. +++
|
|
|
|
|
4.4
|
Form
of Warrant+++
|
|
|
|
|
10.1
|
Intellectual
Property Agreement between BioTime, Inc. and Hal
Sternberg.+
|
|
|
|
|
10.2
|
Intellectual
Property Agreement between BioTime, Inc. and Harold
Waitz.+
|
|
|
|
|
10.3
|
Intellectual
Property Agreement between BioTime, Inc. and Judith
Segall.+
|
|
|
|
|
10.4
|
Intellectual
Property Agreement between BioTime, Inc. and Steven
Seinberg.*
|
|
|
|
|
10.5
|
Agreement
between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive License.+
|
|
|
|
|
10.6
|
Agreement
for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc.
Common Shares.+
|
|
|
|
|
10.7
|
2002
Stock Option Plan, as amended.##
|
|
|
|
|
10.8
|
Exclusive
License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a
request for confidential treatment).###
|
|
|
|
|
10.9
|
Modification
of Exclusive License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a request for
confidential treatment).^
|
|
|
|
|
10.10
|
Exclusive
License Agreement between BioTime, Inc. and CJ
Corp.**
|
|
10.11
|
Hextend
and PentaLyte Collaboration Agreement between BioTime, Inc. and Summit
Pharmaceuticals International Corporation.‡
|
|
|
|
|
10.12
|
Lease
dated as of May 4, 2005 between BioTime, Inc. and Hollis R& D
Associates ‡‡
|
|
|
|
|
10.13
|
Addendum
to Hextend and PentaLyte Collaboration Agreement Between BioTime Inc. And
Summit Pharmaceuticals International Corporation‡‡‡
|
|
|
|
|
10.14
|
Amendment
to Exclusive License Agreement Between BioTime Inc. and Hospira,
Inc.††
|
|
|
|
|
10.15
|
Hextend
and PentaLyte China License Agreement Between BioTime, Inc. and Summit
Pharmaceuticals International Corporation.†††
|
|
|
|
|
10.16
|
Revolving
Credit Line Agreement between BioTime, Inc, Alfred D. Kingsley, Cyndel
& Co., Inc., and George Karfunkel, dated April 12,
2006.††††
|
|
|
|
|
10.17
|
Security
Agreement executed by BioTime, Inc., dated April 12,
2006.††††
|
|
|
|
|
10.18
|
Form
of Revolving Credit Note of BioTime, Inc. in the principal amount of
$166,666.67 dated April 12, 2006.††††
|
|
|
|
|
10.19
|
First
Amended and Restated Revolving Line of Credit Agreement, dated October 17,
2007. ####
|
|
|
|
|
10.20
|
Form
of Amended and Restated Revolving Credit Note. ####
|
|
|
|
|
10.21
|
Form
of Revolving Credit Note. ####
|
|
|
|
|
10.22
|
First
Amended and Restated Security Agreement, dated October 17, 2007.
####
|
|
|
|
|
10.23
|
Employment
Agreement, dated October 10, 2007, between BioTime, Inc. and Michael D.
West.++++
|
|
|
|
|
10.24
|
Commercial
License and Option Agreement between BioTime and Wisconsin Alumni Research
Foundation.****
|
|
|
|
|
10.25
|
Second
Amended and Restated Revolving Line of Credit Agreement, dated February
15, 2008.‡‡‡‡
|
|
|
|
|
10.26
|
Form
of Amended and Restated Revolving Credit Note.‡‡‡‡
|
|
|
|
|
10.27
|
Second
Amended and Restated Security Agreement, dated February 15,
2008.‡‡‡‡
|
| |
|
| 10.28 |
Third
Amended and Restated Revolving Line of Credit Agreement, March 31, 2008.
~ |
| |
|
| 10.29 |
Third
Amended and Restated Security Agreement, dated March 31, 2008.
~ |
| |
|
| 10.30 |
Sublease
Agreement between BioTime, Inc. and Avigen, Inc.++++ |
| |
|
|
23.1
|
Consent
of Rothstein, Kass & Company, P.C.++++
|
|
|
|
|
31
|
Rule
13a-14(a)/15d-14(a) Certification++++
|
|
|
|
|
32
|
Section
1350 Certification++++
|
†Incorporated
by reference to BioTime’s Form 10-K for the fiscal year ended June 30,
1998.
+
Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992,
respectively.
#
Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992,
respectively.
++ Incorporated by reference
to Registration Statement on Form S-2, File Number 333-109442, filed with the
Securities and Exchange Commission on October 3, 2003, and Amendment No.1
thereto filed with the Securities and Exchange Commission on November 13,
2003.
+++Incorporated
by reference to Registration Statement on Form S-2, File Number 333-128083,
filed with the Securities and Exchange Commission on September 2,
2005.
##
Incorporated by reference to Registration Statement on Form S-8, File Number
333-101651 filed with the Securities and Exchange Commission on December 4, 2002
and Registration Statement on Form S-8, File Number 333-122844 filed with the
Securities and Exchange Commission on February 23, 2005.
###
Incorporated by reference to BioTime’s Form 8-K, filed April 24,
1997.
^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
1999.
*
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2001.
**
Incorporated by reference to BioTime’s Form 10-K/A-1 for the year ended December
31, 2002.
‡ Incorporated by
reference to BioTime’s Form 8-K, filed December 30, 2004
‡‡
Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 File Number 333-109442, filed with the Securities and
Exchange Commission on May 24, 2005
‡‡‡ Incorporated by
reference to BioTime’s Form 8-K, filed December 20, 2005
††
Incorporated by reference to BioTime’s Form 8-K, filed January 13,
2006
†††
Incorporated by reference to BioTime’s Form 8-K, filed March 30,
2006
††††
Incorporated by reference to BioTime’s Form 10-K For the year ended December 31,
2005
***
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2006.
****
Incorporated by reference to BioTime’s Form 8-K, filed January 9,
2008.
‡‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed March 10,
2008.
~ Incorporated by reference to BioTime's Form 8-K filed April 4,
2008.
++++Filed
herewith
|
|
Principal
Accountant Fees and Services
|
Rothstein,
Kass and Company (“RKCO”) audited our annual financial statements for the fiscal
year ended December 31, 2007. We first engaged RKCO as our auditors
in February 2007. BDO Seidman, LLP (“BDO”) audited our annual
financial statements for the fiscal year ended December 31, 2005, reviewed our
financial statements included in our quarterly reports on Form 10-QSB for the
first three quarters of 2006, and reissued their report on our fiscal year 2005
financial statements in conjunction with the filing of our 2006
10-KSB.
Audit Fees. RKCO
billed us $95,000 in 2007 for the audit of our annual financial statements and
for the review of our financial statements included in our quarterly reports on
Form 10-QSB.
Audit-Related
Fees. BDO billed us $20,466 for audit-related fees during the
fiscal year ended December 31 2007. These fees were incurred in
connection with the resissuance of BDO’s report on our fiscal year 2005
financial statements in conjunction with the filing of our 2006
10-KSB.
Tax Fees. RKCO
billed us $6,000 for review and preparation of U.S. federal, state, and local
tax returns during the fiscal year ended December 31, 2007. BDO
billed us $7,000 for review and preparation of U.S. federal, state, and local
tax returns during the fiscal year ended December 31, 2006.
Other Fees. There
were no other fees charged to us by RKCO or BDO during the fiscal years ended
December 31, 2006 and 2007.
The prior
approval of the Board of Directors is required for the engagement of our
auditors to perform any non-audit services for us. Other than de
minimis services incidental to audit services, non-audit services shall
generally be limited to tax services such as advice and planning and financial
due diligence services. All fees for such non-audit services must be approved by
the Board of Directors, except to the extent otherwise permitted by applicable
SEC regulations.
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report on Form 10-KSB to be signed on
its behalf by the undersigned, thereunto duly authorized on the 11th day of
April, 2008.
|
|
BIOTIME,
INC.
|
|
|
|
|
|
By: /s/Michael D.
West
|
|
|
|
|
|
Michael
D. West, Ph.D., Chief Executive
Officer
|
|
Signature
|
|
Title
|
Date
|
| |
|
|
|
|
/s/Michael D. West
|
|
Chief
Executive Officer
|
April 11,
2008
|
|
Michael
D. West, Ph.D.
|
|
and
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/Judith Segall
|
|
Vice
President -Operations and
|
April 11,
2008
|
|
Judith
Segall
|
|
Director
|
|
|
|
|
|
|
|
/s/Hal Sternberg
|
|
Vice
President-Research and
|
April 11,
2008
|
|
Hal
Sternberg, Ph.D.
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/Harold D. Waitz
|
|
Vice
President-Regulatory Affairs
|
April 11,
2008
|
|
Harold
D. Waitz, Ph.D.
|
|
and
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/Steven A. Seinberg
|
|
Chief
Financial Officer
|
April 11,
2008
|
|
Steven
A. Seinberg
|
|
(Principal
Financial and Accounting
Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/Valeta Gregg
|
|
|
|
|
Valeta
Gregg, Ph.D.
|
|
Director
|
April
11, 2008
|
|
Exhibit
|
|
|
Numbers
|
Description
|
|
|
|
|
3.1
|
Articles
of Incorporation.†
|
|
|
|
|
3.2
|
Amendment
of Articles of Incorporation.***
|
|
|
|
|
3.3
|
By-Laws,
As Amended.#
|
|
|
|
|
4.1
|
Specimen
of Common Share Certificate.+
|
|
|
|
|
4.2
|
Form
of Warrant Agreement between BioTime, Inc. and American Stock Transfer
& Trust Company++
|
|
|
|
|
4.3
|
Form
of Amendment to Warrant Agreement between BioTime, Inc. and American Stock
Transfer & Trust Company. +++
|
|
|
|
|
4.4
|
Form
of Warrant+++
|
|
|
|
|
10.1
|
Intellectual
Property Agreement between BioTime, Inc. and Hal
Sternberg.+
|
|
|
|
|
10.2
|
Intellectual
Property Agreement between BioTime, Inc. and Harold
Waitz.+
|
|
|
|
|
10.3
|
Intellectual
Property Agreement between BioTime, Inc. and Judith
Segall.+
|
|
|
|
|
10.4
|
Intellectual
Property Agreement between BioTime, Inc. and Steven
Seinberg.*
|
|
|
|
|
10.5
|
Agreement
between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive License.+
|
|
|
|
|
10.6
|
Agreement
for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc.
Common Shares.+
|
|
|
|
|
10.7
|
2002
Stock Option Plan, as amended.##
|
|
|
|
|
10.8
|
Exclusive
License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a
request for confidential treatment).###
|
|
|
|
|
10.9
|
Modification
of Exclusive License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a request for
confidential treatment).^
|
|
|
|
|
10.10
|
Exclusive
License Agreement between BioTime, Inc. and CJ Corp.**
|
|
|
|
|
10.11
|
Hextend
and PentaLyte Collaboration Agreement between BioTime, Inc. and Summit
Pharmaceuticals International
Corporation.‡
|
|
10.12
|
Lease
dated as of May 4, 2005 between BioTime, Inc. and Hollis R& D
Associates ‡‡
|
|
|
|
|
10.13
|
Addendum
to Hextend and PentaLyte Collaboration Agreement Between BioTime Inc. And
Summit Pharmaceuticals International Corporation‡‡‡
|
|
|
|
|
10.14
|
Amendment
to Exclusive License Agreement Between BioTime Inc. and Hospira,
Inc.††
|
|
|
|
|
10.15
|
Hextend
and PentaLyte China License Agreement Between BioTime, Inc. and Summit
Pharmaceuticals International Corporation.†††
|
|
|
|
|
10.16
|
Revolving
Credit Line Agreement between BioTime, Inc, Alfred D. Kingsley, Cyndel
& Co., Inc., and George Karfunkel, dated April 12,
2006.††††
|
|
|
|
|
10.17
|
Security
Agreement executed by BioTime, Inc., dated April 12,
2006.††††
|
|
|
|
|
10.18
|
Form
of Revolving Credit Note of BioTime, Inc. in the principal amount of
$166,666.67 dated April 12, 2006.††††
|
|
|
|
|
10.19
|
First
Amended and Restated Revolving Line of Credit Agreement, dated October 17,
2007. ####
|
|
|
|
|
10.20
|
Form
of Amended and Restated Revolving Credit Note. ####
|
|
|
|
|
10.21
|
Form
of Revolving Credit Note. ####
|
|
|
|
|
10.22
|
First
Amended and Restated Security Agreement, dated October 17, 2007.
####
|
|
|
|
|
10.23
|
Employment
Agreement, dated October 10, 2007, between BioTime, Inc. and Michael D.
West.++++
|
|
|
|
|
10.24
|
Commercial
License and Option Agreement between BioTime and Wisconsin Alumni Research
Foundation.****
|
|
|
|
|
10.25
|
Second
Amended and Restated Revolving Line of Credit Agreement, dated February
15, 2008.‡‡‡‡
|
|
|
|
|
10.26
|
Form
of Amended and Restated Revolving Credit Note.‡‡‡‡
|
|
|
|
|
10.27
|
Second
Amended and Restated Security Agreement, dated February 15,
2008.‡‡‡‡
|
| |
|
| 10.28 |
Third
Amended and Restated Revolving Line of Credit Agreement, March 31, 2008.
~ |
| |
|
| 10.29 |
Third
Amended and Restated Security Agreement, dated March 31, 2008.
~ |
| |
|
| 10.30 |
Sublease
Agreement between BioTime, Inc. and Avigen, Inc.++++ |
| |
|
|
23.1
|
Consent
of Rothstein, Kass & Company, P.C.++++
|
|
|
|
|
|
Rule
13a-14(a)/15d-14(a) Certification++++
|
|
|
|
|
|
Section
1350 Certification++++
|
†
Incorporated by reference to BioTime’s Form 10-K for the fiscal year ended June
30, 1998.
+
Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992,
respectively.
#
Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992,
respectively.
++ Incorporated by reference
to Registration Statement on Form S-2, File Number 333-109442, filed with the
Securities and Exchange Commission on October 3, 2003, and Amendment No.1
thereto filed with the Securities and Exchange Commission on November 13,
2003.
+++Incorporated
by reference to Registration Statement on Form S-2, File Number 333-128083,
filed with the Securities and Exchange Commission on September 2,
2005.
##
Incorporated by reference to Registration Statement on Form S-8, File Number
333-101651 filed with the Securities and Exchange Commission on December 4, 2002
and Registration Statement on Form S-8, File Number 333-122844 filed with the
Securities and Exchange Commission on February 23, 2005.
###
Incorporated by reference to BioTime’s Form 8-K, filed April 24,
1997.
^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
1999.
*
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2001.
**
Incorporated by reference to BioTime’s Form 10-K/A-1 for the year ended December
31, 2002.
‡ Incorporated by
reference to BioTime’s Form 8-K, filed December 30, 2004
‡‡
Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 File Number 333-109442, filed with the Securities and
Exchange Commission on May 24, 2005
‡‡‡ Incorporated by
reference to BioTime’s Form 8-K, filed December 20, 2005
††
Incorporated by reference to BioTime’s Form 8-K, filed January 13,
2006
†††
Incorporated by reference to BioTime’s Form 8-K, filed March 30,
2006
††††
Incorporated by reference to BioTime’s Form 10-K For the year ended December 31,
2005
***
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2006.
****
Incorporated by reference to BioTime’s Form 8-K, filed January 9,
2008.
‡‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed March 10,
2008.
~ Incorporated by reference to BioTime's Form 8-K filed April 4,
2008.
++++Filed
herewith
68