SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 0-20859
GERON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 75-2287752 | |||||
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(State or other jurisdiction of | (I.R.S. Employer | |||||
incorporation or organization) | Identification No.) |
230 Constitution Drive, Menlo Park, CA 94025
(Address, including zip code, of principal executive offices)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $0.001 par value
Document | Form 10-K Parts | |||||
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Portions of the Registrant’s definitive proxy statement for the 2005 annual meeting of stockholders to be filed pursuant to Regulation 14A within 120 days of the Registrant’s fiscal year end December 31, 2004 | III |
Forward-Looking Statements
This annual report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of Geron Corporation (“Geron”) to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The risks and uncertainties referred to above include, without limitation, risks inherent in the development and commercialization of Geron’s potential products, dependence on collaborative partners, need for additional capital, need for regulatory approvals or clearances, the maintenance of Geron’s intellectual property rights and other risks that are described herein and that are otherwise described from time to time in Geron’s Securities and Exchange Commission reports including, but not limited to, the factors described in “Additional Factors That May Affect Future Results” set forth in Item 1 of this report. Geron assumes no obligation and does not intend to update these forward-looking statements.
PART I
We are a biopharmaceutical company focused on developing and commercializing therapeutic and diagnostic products for cancer based on our telomerase technology, and cell-based therapeutics using our human embryonic stem cell technology.
Telomerase is an enzyme that is expressed in nearly all cancer cells, but not in most normal cells. We hope to kill cancer cells by inhibiting or targeting telomerase, and to diagnose cancer by measuring telomerase activity.
Human embryonic stem cells can develop and differentiate into all cells and tissues in the body. As such, they are a potential source of cells and tissues that we could use to replace those that are damaged in a wide range of chronic diseases.
We were incorporated in 1990 under the laws of Delaware. Our principal executive offices are located at 230 Constitution Drive, Menlo Park, California, 94025. Our telephone number is (650) 473-7700.
We make available free of charge on or through our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. Our Internet website address is “www.geron.com”.
Major Technology Platforms
Cells are the building blocks for all tissues in the human body and cell division plays a critical role in the normal growth, maintenance and repair of human tissue. However, in the human body, most cell division is a limited process. Depending on the tissue type, cells generally divide only 60 to 100 times during the course of their normal lifespan.
We and our collaborators have shown that telomeres, located at the ends of chromosomes, are key genetic elements involved in the regulation of the cellular aging process. Our work has shown that each time a normal cell divides, telomeres shorten. Once telomeres reach a certain short length, cell division halts and the cell enters a state known as replicative senescence or aging. Thus, this shortening of the telomeres effectively serves as a molecular “clock” for cellular aging. We and others have shown that when the enzyme telomerase is introduced into normal cells, it can restore telomere length — reset the “clock” — thereby increasing the functional lifespan of the cells. Importantly, it does this without altering the cells’ biology or causing them to become cancerous. Human telomerase, a complex enzyme, is composed of a ribonucleic acid (RNA) component, known as hTR, a protein component, known as hTERT, and other accessory proteins. In 1994, we cloned the gene for hTR, and in 1997, in collaboration with Dr. Thomas Cech, we cloned the gene for hTERT.
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Our work and that of others has shown that telomerase is not present in most normal cells and tissues, but that during cancer progression, telomerase is abnormally reactivated in all major cancer types. We have shown that while telomerase does not cause cancer (which is caused by mutations in oncogenes and tumor suppressor genes), the continued presence of telomerase enables cancer cells to maintain telomere length, providing them with indefinite replicative capacity. We and others have shown in various tumor models that inhibiting telomerase activity results in telomere shortening and causes aging or death of the cancer cell.
Although telomerase is expressed in nearly all cancer cells, it is not expressed in most normal cells. That gives telomerase the potential of being both a universal as well as a highly specific cancer target. This specificity means that drugs and biologics that attack cancer cells by targeting telomerase may leave other cells unaffected, and thus should have fewer side effects than conventional chemotherapeutic agents that typically attack both cancer and non-cancer cells.
We are working to develop anti-cancer therapies based on telomerase inhibitors, telomerase therapeutic vaccines and, through our licensees, telomerase-based oncolytic (cancer-killing) viruses. We also intend to continue to develop and commercialize products using telomerase as a marker for cancer diagnosis, prognosis, patient monitoring and screening.
Human Embryonic Stem Cells: A potential source for the manufacturing of replacement cells and tissues
Stem cells generally are self-renewing primitive cells that can develop into functional, differentiated cells. Human embryonic stem cells (hESCs), which are derived from very early stage embryos called blastocysts, are unique because:
• | they are pluripotent, that is they can develop into all cells and tissues in the body, and |
• | they self-renew indefinitely in the undifferentiated state. |
The ability of hESCs to divide indefinitely in the undifferentiated state without losing pluripotency is a unique characteristic that distinguishes them from all other stem cells discovered to date in humans. We have demonstrated that hESCs express telomerase continuously, a characteristic of immortal cells. Other stem cells such as blood or gut stem cells express telomerase at very low levels or only periodically; they therefore age, limiting their use in research or therapeutic applications. hESCs can be expanded in culture indefinitely and hence can be banked for scaled product manufacture.
We intend to use human embryonic stem cell technology to:
• | enable the development of transplantation therapies by providing standard starting material for the manufacture of cells and tissues; |
• | facilitate pharmaceutical research and development practices by providing cells for disease models and screening, and for assigning function to newly discovered genes; and |
• | accelerate research in human developmental biology by identifying the genes that control human growth and development. |
Commercial Opportunities for Our Major Technology Platforms
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normal cells. We believe that we have the dominant patent position in the field of telomerase. Whether it is achieved by us or by our collaborators and licensees, we believe that progress in the development of any of these telomerase-based cancer therapeutics will further validate the importance of telomerase as a cancer target and therefore benefit all of our telomerase cancer programs.
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Human Embryonic Stem Cell Therapies
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derive mouse cardiomyocytes. When injected into the hearts of recipient adult mice, the cardiomyocytes repopulated the heart tissue and stably integrated into the muscle tissue of the adult mouse heart. In human medicine, it is therefore possible that hESC-derived cardiomyocytes could be developed for cellular transplantation therapy in humans suffering from congestive heart failure and the damage caused by heart attacks. We have derived human cardiomyocytes from hESCs and observed their normal contractile function and response to cardiac drugs. We have transplanted these cells into animal models, and to date the cells appear to be engrafting and integrating with the myocardium in uninjured animals, as well as restoring cardiac function in animals with acutely or recently induced myocardial infarctions.
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produce a particular blood cell type(s), such as aplastic anemia (a deficiency of mature circulating blood cells), 2) infiltration of bone marrow by tumor cells which displace the marrow and cause deficiencies of mature circulating blood cells, or 3) side effects of chemotherapy or radiotherapy used for cancer treatment which is toxic to bone marrow stem cells. Although complex and expensive, the use of bone marrow transplantation is increasing worldwide. A major unresolved problem in the procedure is the lack of availability of suitably matched marrow donors, which severely limits the numbers of patients who can undergo the transplant.
Products for Research and Development
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normal cell aging in tissue culture potentially limit the utility of these cells in serial experiments and long-term research. Because of these limitations, most research laboratories utilize transformed cell lines for their studies. Cells can be transformed by using viruses which ultimately cause the cells to grow indefinitely in culture. However, such immortalized cell lines have abnormal characteristics compared to non-transformed cells. For this reason, they are not good models of normal tissue in the human body.
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derived from hESCs and a second U.S. patent in January 2003 covering the use of hESC-derived hepatocytes for drug screening. In May 2004 we announced a three-way collaboration between Geron, the Roslin Institute in Edinburgh, Scotland, and CXR BioSciences in Dundee, Scotland, to develop and commercialize hESC-derived hepatocytes for drug screens.
Nuclear Transfer: Agriculture/Xenotransplantation/Biologics
Patents and Proprietary Technology
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with our scientific collaborators and strategic partners. Typically, although not always, we file patent applications in the United States and internationally through the Patent Cooperation Treaty. In addition, where appropriate we try to obtain licenses from other organizations to patent filings that may be useful in advancing our scientific and product development programs.
Government Regulation
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in European and other countries. Various governmental statutes and regulations also govern or influence testing, manufacturing, safety, labeling, storage and recordkeeping related to such products and their marketing. The process of obtaining these approvals and the subsequent compliance with appropriate statutes and regulations require the expenditure of substantial time and money, and there can be no guarantee that approvals will be granted.
FDA Approval Process
European and Other Regulatory Approval
Other Regulations
Scientific Consultants
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expertise in numerous scientific fields, including embryonic stem cells, nuclear transfer and telomere and telomerase biology, as well as developmental biology, cellular biology and molecular biology.
Executive Officers of the Company
Name | Age | Position | ||||||||
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Thomas B. Okarma, Ph.D., M.D. | 59 | President, Chief Executive Officer and Director | ||||||||
David L. Greenwood | 53 | Executive Vice President, Chief Financial Officer, Treasurer and Secretary | ||||||||
David J. Earp, Ph.D., J.D. | 40 | Senior Vice President, Business Development and Chief Patent Counsel | ||||||||
Jane S. Lebkowski, Ph.D. | 49 | Senior Vice President, Regenerative Medicine | ||||||||
Calvin B. Harley, Ph.D. | 52 | Chief Scientific Officer | ||||||||
Melissa A. Kelly | 41 | Vice President, Oncology |
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Product Development. Dr. Lebkowski graduated Phi Beta Kappa with a B.S. in Chemistry and Biology from Syracuse University and received her Ph.D. from Princeton University.
Employees
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
Our business is at an early stage of development.
• | manufacture and market resulting products. |
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regulatory and commercial milestones that must be reached for any of our development programs to be successful, any program may be abandoned, even after we have expended significant resources on the program, such as our investments in telomerase technology and human embryonic stem cells, which could cause a sharp drop in our stock price.
We have a history of losses and anticipate future losses, and continued losses could impair our ability to sustain operations.
We will need additional capital to conduct our operations and develop our products, and our ability to obtain the necessary funding is uncertain.
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not be available on acceptable terms, or at all. The receptivity of the public and private equity markets to proposed financings is substantially affected by the general economic, market and political climate and by other factors which are unpredictable and over which we have no control. Additional equity financings, if we obtain them, could result in significant dilution to stockholders. Further, in the event that additional funds are obtained through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our technologies, product candidates or products that we would otherwise seek to develop and commercialize ourselves. If sufficient capital is not available, we may be required to delay, reduce the scope of or eliminate one or more of our programs, any of which could have a material adverse effect on our business.
Some of our competitors may develop technologies that are superior to or more cost-effective than ours, which may impact the commercial viability of our technologies and which may significantly damage our ability to sustain operations.
Restrictions on the use of human embryonic stem cells, and the ethical, legal and social implications of that research, could prevent us from developing or gaining acceptance for commercially viable products in these areas.
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becomes the subject of adverse commentary or publicity, the market price for our common stock could be significantly harmed.
Potential restrictions or a ban on nuclear transfer could prevent us from benefiting financially from our research in this area.
We do not have experience as a company in the regulatory approval process, conducting large scale clinical trials, or other areas required for the successful commercialization and marketing of our product candidates.
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Entry into clinical trials with one or more product candidates may not result in any commercially viable products.
Impairment of our intellectual property rights may limit our ability to pursue the development of our intended technologies and products.
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parties that receive an adverse decision in an interference can lose important patent rights. Our pending patent applications, or our issued patents, may be drawn into interference proceedings which may delay or prevent the issuance of patents, or result in the loss of issued patent rights.
If we fail to meet our obligations under license agreements, we may lose our rights to key technologies on which our business depends.
We may be subject to litigation that will be costly to defend or pursue and uncertain in its outcome.
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business. The outcome of litigation is always uncertain, and in some cases could include judgments against us that require us to pay damages, enjoin us from certain activities, or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business.
We may be subject to infringement claims that are costly to defend, and which may limit our ability to use disputed technologies and prevent us from pursuing research and development or commercialization of potential products.
Much of the information and know-how that is critical to our business is not patentable and we may not be able to prevent others from obtaining this information and establishing competitive enterprises.
We depend on our collaborators to help us develop and test our product candidates, and our ability to develop and commercialize products may be impaired or delayed if collaborations are unsuccessful.
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Our reliance on the activities of our non-employee consultants, research institutions, and scientific contractors, whose activities are not wholly within our control, may lead to delays in development of our product candidates.
The loss of key personnel could slow our ability to conduct research and develop product candidates.
We may not be able to obtain or maintain sufficient insurance on commercially reasonable terms or with adequate coverage against potential liabilities in order to protect ourselves against product liability claims.
Because we or our collaborators must obtain regulatory approval to market our products in the United States and other countries, we cannot predict whether or when we will be permitted to commercialize our products.
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the sale by us or our collaborators of any commercially viable product will be subject to government regulation from several standpoints, including the processes of:
To be successful, our product candidates must be accepted by the health care community, which can be very slow to adopt or unreceptive to new technologies and products.
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to develop represent substantial departures from established treatment methods and will compete with a number of more conventional drugs and therapies manufactured and marketed by major pharmaceutical companies. The degree of market acceptance of any of our developed products will depend on a number of factors, including:
If we fail to obtain acceptable prices or adequate reimbursement for our product candidates, the use of our potential products could be severely limited.
Our products are likely to be expensive to manufacture, and they may not be profitable if we are unable to significantly reduce the costs to manufacture them.
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profit. If we are unable to realize significant profits from our potential product candidates, our business would be materially harmed.
Our activities involve hazardous materials, and improper handling of these materials by our employees or agents could expose us to significant legal and financial penalties.
Our stock price has historically been very volatile.
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The sale of a substantial number of shares may adversely affect the market price for our common stock.
Our undesignated preferred stock may inhibit potential acquisition bids; this may adversely affect the market price for our common stock and the voting rights of the holders of our common stock.
Provisions in our share purchase rights plan, charter and bylaws, and provisions of Delaware law, may inhibit potential acquisition bids for us, which may prevent holders of our common stock from benefiting from what they believe may be the positive aspects of acquisitions and takeovers.
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holders of our common stock from benefiting from what they may believe are the positive aspects of acquisitions and takeovers, including the potential realization of a higher rate of return on their investment from these types of transactions.
We do not intend to pay cash dividends on our common stock in the foreseeable future.
Item 2.Properties
Item 3.Legal Proceedings
Item 4.Submission of Matters to a Vote of Security Holders
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PART II
Item 5.Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
High | Low | |||||||||
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Year ended December 31, 2004 | ||||||||||
First quarter | $ | 11.700 | $ | 8.210 | ||||||
Second quarter | $ | 10.230 | $ | 7.020 | ||||||
Third quarter | $ | 7.850 | $ | 5.230 | ||||||
Fourth quarter | $ | 8.340 | $ | 6.000 | ||||||
Year ended December 31, 2003 | ||||||||||
First quarter | $ | 5.290 | $ | 1.410 | ||||||
Second quarter | $ | 8.340 | $ | 4.100 | ||||||
Third quarter | $ | 14.803 | $ | 6.560 | ||||||
Fourth quarter | $ | 16.150 | $ | 9.650 |
Dividend Policy
Recent Sales of Unregistered Securities
Securities Authorized for Issuance Under Equity Compensation Plans
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Item 6.Selected Financial Data
Year Ended December 31, | |||||||||||||||||||||||
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2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||
(In thousands, except shares and per share data) | |||||||||||||||||||||||
Consolidated Statement of Operations Data: | |||||||||||||||||||||||
Revenues from collaborative agreements | $ | — | $ | 72 | $ | 566 | $ | 3,280 | $ | 6,500 | |||||||||||||
License fees and royalties | 1,053 | 1,102 | 682 | 340 | 109 | ||||||||||||||||||
Total revenues | 1,053 | 1,174 | 1,248 | 3,620 | 6,609 | ||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 30,084 | 25,551 | 29,822 | 27,926 | 22,417 | ||||||||||||||||||
Acquired in-process research technology (1) | 45,150 | — | — | — | — | ||||||||||||||||||
General and administrative | 7,104 | 5,803 | 7,126 | 10,713 | 10,404 | ||||||||||||||||||
Total operating expenses | 82,338 | 31,354 | 36,948 | 38,639 | 32,821 | ||||||||||||||||||
Loss from operations | (81,285 | ) | (30,180 | ) | (35,700 | ) | (35,019 | ) | (26,212 | ) | |||||||||||||
Interest and other income | 1,552 | 1,810 | 2,548 | 5,860 | 5,922 | ||||||||||||||||||
Conversion expense (2) | — | (779 | ) | — | (11,910 | ) | — | ||||||||||||||||
Interest and other expense | (672 | ) | (734 | ) | (756 | ) | (1,004 | ) | (12,284 | ) | |||||||||||||
Loss before cumulative effect of a change in accounting principle | (80,405 | ) | (29,883 | ) | (33,908 | ) | (42,073 | ) | (32,574 | ) | |||||||||||||
Cumulative effect of a change in accounting principle (3) | — | — | — | — | (13,259 | ) | |||||||||||||||||
Net loss | $ | (80,405 | ) | $ | (29,883 | ) | $ | (33,908 | ) | $ | (42,073 | ) | $ | (45,833 | ) | ||||||||
Basic and diluted net loss per share: | |||||||||||||||||||||||
Loss per share before cumulative effect of a change in accounting principle | $ | (1.79 | ) | $ | (0.97 | ) | $ | (1.37 | ) | $ | (1.90 | ) | $ | (1.56 | ) | ||||||||
Cumulative effect of a change in accounting principle | — | — | — | — | (0.64 | ) | |||||||||||||||||
Net loss per share | $ | (1.79 | ) | $ | (0.97 | ) | $ | (1.37 | ) | $ | (1.90 | ) | $ | (2.20 | ) | ||||||||
Shares used in computing net loss per share | 44,877,627 | 30,965,330 | 24,661,733 | 22,121,833 | 20,869,791 |
(1) In March 2004, we recognized $45.2 million of in-process research technology expense in conjunction with the acquisition of a co-exclusive right under patents controlled by Merix Bioscience, Inc. (now Argos Therapeutics, Inc.) for the use of defined antigens in therapeutic cancer vaccines.
(2) In November 2001, we amended the terms of the series D convertible debentures and warrants and converted a portion of the outstanding series D convertible debentures. We recognized $11.9 million as conversion expense related to this amendment and conversion. In May 2003, we modified the terms of the series D convertible debentures and warrants. We recognized $779,000 as conversion expense related to this modification.
(3) In November 2000, we adopted a new accounting principle which retroactively affected the calculation of the beneficial conversion features associated with the series C convertible debentures issued in September 1999 and the series D convertible debentures issued in June 2000. We recognized an additional $13.3 million in imputed non-cash interest expense to reflect the change in accounting principle.
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December 31, | |||||||||||||||||||||||
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2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||
Consolidated Balance Sheet Data: | |||||||||||||||||||||||
Cash, restricted cash, cash equivalents and marketable securities | $ | 120,494 | $ | 109,780 | $ | 47,517 | $ | 79,641 | $ | 95,785 | |||||||||||||
Working capital | 116,319 | 101,840 | 41,128 | 71,395 | 89,230 | ||||||||||||||||||
Total assets | 131,873 | 118,115 | 60,669 | 96,231 | 114,030 | ||||||||||||||||||
Long-term obligations | 645 | 1,151 | 20,515 | 23,280 | 41,987 | ||||||||||||||||||
Accumulated deficit | (336,071 | ) | (255,666 | ) | (225,783 | ) | (191,875 | ) | (149,802 | ) | |||||||||||||
Total stockholders’ equity | 122,063 | 106,324 | 29,741 | 61,542 | 63,918 |
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Critical Accounting Policies and Estimates
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Revenue Recognition
Intangible Asset and Research Funding Obligation
Valuation of Equity Instruments
30
Results of Operations
Revenues
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respectively, related to our various agreements. Also, we received royalties of $109,000, $130,000 and $190,000 in 2004, 2003 and 2002, respectively, on product sales of telomerase detection and telomere measurement kits to the research-use-only market, cell-based research products and agricultural products. License and royalty revenues are dependent upon additional agreements being signed and future product sales. We expect to recognize revenue of $477,000 in 2005, $165,000 in 2006, $137,000 in 2007, $119,000 in 2008 and $286,000 thereafter related to our existing deferred revenue. Current revenues may not be predictive of future revenues.
Research and Development Expenses
Year Ended December 31, | |||||||||||||||
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2004 | 2003 | 2002 | |||||||||||||
Oncology | $ | 17,139 | $ | 13,231 | $ | 12,717 | |||||||||
hESC Therapies | 12,945 | 12,320 | 17,105 | ||||||||||||
Total | $ | 30,084 | $ | 25,551 | $ | 29,822 |
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Acquired In-Process Research Technology
General and Administrative Expenses
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Interest and Other Income
Interest and Other Expense
Conversion Expense
Net Loss
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Liquidity and Capital Resources
Principal Payments Due by Period | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Contractual Obligations (1) | Total | Less Than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | ||||||||||||||||||
(Amounts in thousands) | |||||||||||||||||||||||
Equipment loans | $ | 201 | $ | 146 | $ | 55 | — | — | |||||||||||||||
Operating leases (2) | — | — | — | — | — | ||||||||||||||||||
Research funding (3) | 8,750 | 6,217 | 1,745 | $ | 394 | $ | 394 | ||||||||||||||||
Total contractual cash obligations | $ | 8,951 | $ | 6,363 | $ | 1,800 | $ | 394 | $ | 394 |
(2) In March 2004, we issued 363,039 shares of our common stock to the lessor of our premises at 200 and 230 Constitution Drive in payment of our monthly rental obligation from February 1, 2004 through
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July 31, 2008. The fair value of the common stock has been recorded as a prepaid asset and will be amortized to rent expense on a straight-line basis over the lease period.
(3) Research funding is comprised of sponsored research commitments at various academic laboratories around the world, including the Roslin Institute.
Recent Accounting Pronouncements
Off-Balance Sheet Arrangements
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
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Item 8.Consolidated Financial Statements and Supplementary Data
Page | ||||||
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Reports of Independent Registered Public Accounting Firm, Ernst & Young LLP | 38 | |||||
Consolidated Balance Sheets | 40 | |||||
Consolidated Statements of Operations | 41 | |||||
Consolidated Statements of Stockholders’ Equity | 42 | |||||
Consolidated Statements of Cash Flows | 43 | |||||
Notes to Consolidated Financial Statements | 44 | |||||
Supplemental Data: Quarterly Financial Information | 63 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Geron Corporation
We have audited the accompanying consolidated balance sheets of Geron Corporation as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. These 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 consolidated financial position of Geron Corporation at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Geron Corporation’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2005 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Palo Alto, California
February 24, 2005
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Geron Corporation
We have audited management’s assessment, included in the accompanying Management Report on Internal Control Over Financial Reporting, that Geron Corporation maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Geron Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.
We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s 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. Also, 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.
In our opinion, management’s assessment that Geron Corporation maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Geron Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Geron Corporation as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004 and our report dated February 24, 2005 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Palo Alto, California
February 24, 2005
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CONSOLIDATED BALANCE SHEETS
December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | ||||||||||
(In thousands, except shares) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 9,846 | $ | 12,823 | |||||||
Restricted cash | 530 | 530 | |||||||||
Marketable securities | 110,118 | 96,427 | |||||||||
Interest and other receivables | 1,550 | 1,146 | |||||||||
Notes receivable from related parties | 147 | 67 | |||||||||
Current portion of prepaid assets | 2,586 | 672 | |||||||||
Total current assets | 124,777 | 111,665 | |||||||||
Noncurrent portion of prepaid assets | 3,212 | 143 | |||||||||
Equity investments in licensees | 489 | 401 | |||||||||
Notes receivable from related parties | — | 172 | |||||||||
Property and equipment, net | 2,089 | 1,684 | |||||||||
Deposits and other assets | 175 | 231 | |||||||||
Intangible assets, net | 1,131 | 3,819 | |||||||||
$ | 131,873 | $ | 118,115 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 2,535 | $ | 1,297 | |||||||
Accrued compensation | 2,024 | 2,499 | |||||||||
Accrued liabilities | 822 | 762 | |||||||||
Current portion of deferred revenue | 477 | 227 | |||||||||
Current portion of equipment loans | 146 | 176 | |||||||||
Current portion of research funding obligation | 2,454 | 4,864 | |||||||||
Total current liabilities | 8,458 | 9,825 | |||||||||
Noncurrent portion of deferred revenue | 707 | 815 | |||||||||
Noncurrent portion of equipment loans | 55 | 201 | |||||||||
Noncurrent portion of research funding obligation | 590 | 950 | |||||||||
Commitments | |||||||||||
Stockholders’ equity: | |||||||||||
Preferred stock, $0.001 par value; 3,000,000 shares authorized; no shares issued and outstanding at December 31, 2004 and 2003 | — | — | |||||||||
Common stock, $0.001 par value; 100,000,000 shares authorized; 52,220,332 and 39,316,742 shares issued and outstanding at December 31, 2004 and 2003, respectively | 52 | 39 | |||||||||
Additional paid-in capital | 458,965 | 362,695 | |||||||||
Deferred compensation | (260 | ) | (231 | ) | |||||||
Accumulated deficit | (336,071 | ) | (255,666 | ) | |||||||
Accumulated other comprehensive loss | (623 | ) | (513 | ) | |||||||
Total stockholders’ equity | 122,063 | 106,324 | |||||||||
$ | 131,873 | $ | 118,115 |
See accompanying notes.
40
GERON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2002 | |||||||||||||
(In thousands, except shares and per share amounts) | |||||||||||||||
Revenues from collaborative agreements | $ | — | $ | 72 | $ | 566 | |||||||||
License fees and royalties | 1,053 | 1,102 | 682 | ||||||||||||
Total revenues | 1,053 | 1,174 | 1,248 | ||||||||||||
Operating expenses: | |||||||||||||||
Research and development | 30,084 | 25,551 | 29,822 | ||||||||||||
Acquired in-process research technology | 45,150 | — | — | ||||||||||||
General and administrative | 7,104 | 5,803 | 7,126 | ||||||||||||
Total operating expenses | 82,338 | 31,354 | 36,948 | ||||||||||||
Loss from operations | (81,285 | ) | (30,180 | ) | (35,700 | ) | |||||||||
Interest and other income | 1,552 | 1,810 | 2,548 | ||||||||||||
Conversion expense | — | (779 | ) | — | |||||||||||
Interest and other expense | (672 | ) | (734 | ) | (756 | ) | |||||||||
Net loss | $ | (80,405 | ) | $ | (29,883 | ) | $ | (33,908 | ) | ||||||
Basic and diluted net loss per share: | |||||||||||||||
Net loss per share | $ | (1.79 | ) | $ | (0.97 | ) | $ | (1.37 | ) | ||||||
Shares used in computing net loss per share | 44,877,627 | 30,965,330 | 24,661,733 |
See accompanying notes.
41
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Common Stock | |||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares | Amount | Additional Paid-In Capital | Deferred Compensation | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders’ Equity | |||||||||||||||||||||||||
(In thousands, except shares) | |||||||||||||||||||||||||||||||
Balances at December 31, 2001 | 24,481,774 | $ | 24 | $ | 253,595 | $ | (234 | ) | $ | (191,875 | ) | $ | 32 | $ | 61,542 | ||||||||||||||||
Net loss | — | — | — | — | (33,908 | ) | — | (33,908 | ) | ||||||||||||||||||||||
Net change in unrealized gain (loss) on marketable securities and equity investments in licensees | — | — | — | — | — | (437 | ) | (437 | ) | ||||||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | — | 16 | 16 | ||||||||||||||||||||||||
Comprehensive loss | (34,329 | ) | |||||||||||||||||||||||||||||
Issuance of common stock in acquisition of technology | 210,000 | 1 | 1,584 | — | — | — | 1,585 | ||||||||||||||||||||||||
Issuance of warrants to purchase common stock in exchange for services | — | — | 612 | — | — | — | 612 | ||||||||||||||||||||||||
Stock-based compensation related to issuance of common stock and options in exchange for services | 2,601 | — | 42 | — | — | — | 42 | ||||||||||||||||||||||||
Issuance of common stock under employee stock plans, net | 72,446 | — | 264 | — | — | — | 264 | ||||||||||||||||||||||||
Deferred compensation related to 401(k) contributions | — | — | — | (209 | ) | — | — | (209 | ) | ||||||||||||||||||||||
Amortization of deferred compensation related to option exchange | — | — | — | 234 | — | — | 234 | ||||||||||||||||||||||||
Balances at December 31, 2002 | 24,766,821 | 25 | 256,097 | (209 | ) | (225,783 | ) | (389 | ) | 29,741 | |||||||||||||||||||||
Net loss | — | — | — | — | (29,883 | ) | — | (29,883 | ) | ||||||||||||||||||||||
Net change in unrealized gain (loss) on marketable securities and equity investments in licensees | — | — | — | — | — | (44 | ) | (44 | ) | ||||||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | — | (80 | ) | (80 | ) | ||||||||||||||||||||||
Comprehensive loss | (30,007 | ) | |||||||||||||||||||||||||||||
Issuance of common stock in connection with private financings, net of issuance costs of $1,260 | 4,710,000 | 5 | 20,541 | — | — | — | 20,546 | ||||||||||||||||||||||||
Issuance of common stock in connection with public offering, net of issuance costs of $10,849 | 5,750,000 | 6 | 64,325 | — | — | — | 64,331 | ||||||||||||||||||||||||
Conversion of convertible debentures | 3,115,068 | 3 | 17,089 | — | — | — | 17,092 | ||||||||||||||||||||||||
Stock-based compensation related to issuance of common stock and options in exchange for services | 289,595 | — | 1,454 | — | — | — | 1,454 | ||||||||||||||||||||||||
Issuance of common stock upon exercise of warrants | 150,000 | — | 570 | — | — | — | 570 | ||||||||||||||||||||||||
Issuance of common stock under employee stock plans, net | 382,893 | — | 2,071 | — | — | — | 2,071 | ||||||||||||||||||||||||
401(k) contribution | 152,365 | — | 548 | — | — | — | 548 | ||||||||||||||||||||||||
Deferred compensation related to 401(k) contribution | — | — | — | (105 | ) | — | — | (105 | ) | ||||||||||||||||||||||
Amortization of deferred compensation related to 401(k) contribution | — | — | — | 83 | — | — | 83 | ||||||||||||||||||||||||
Balances at December 31, 2003 | 39,316,742 | 39 | 362,695 | (231 | ) | (255,666 | ) | (513 | ) | 106,324 | |||||||||||||||||||||
Net loss | — | — | — | — | (80,405 | ) | — | (80,405 | ) | ||||||||||||||||||||||
Net change in unrealized gain (loss) on marketable securities and equity investments in licensees | — | — | — | — | — | (133 | ) | (133 | ) | ||||||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | — | 23 | 23 | ||||||||||||||||||||||||
Comprehensive loss | (80,515 | ) | |||||||||||||||||||||||||||||
Issuance of common stock and warrants in connection with private financing, net of issuance costs of $12,792 | 6,557,377 | 7 | 39,912 | — | — | — | 39,919 | ||||||||||||||||||||||||
Issuance of common stock in acquisition of technology | 5,000,000 | 5 | 45,145 | — | — | — | 45,150 | ||||||||||||||||||||||||
Stock-based compensation related to issuance of common stock and options in exchange for services and prepaid facility rent | 966,666 | 1 | 8,865 | — | — | — | 8,866 | ||||||||||||||||||||||||
Issuance of common stock upon exercise of warrants | 50,000 | — | 200 | — | — | — | 200 | ||||||||||||||||||||||||
Issuance of common stock under employee stock plans, net | 290,051 | — | 1,749 | — | — | — | 1,749 | ||||||||||||||||||||||||
401(k) contribution | 39,496 | — | 399 | — | — | — | 399 | ||||||||||||||||||||||||
Deferred compensation related to 401(k) contribution | — | — | — | (125 | ) | — | — | (125 | ) | ||||||||||||||||||||||
Amortization of deferred compensation related to 401(k) contribution | — | — | — | 96 | — | — | 96 | ||||||||||||||||||||||||
Balances at December 31, 2004 | 52,220,332 | $ | 52 | $ | 458,965 | $ | (260 | ) | $ | (336,071 | ) | $ | (623 | ) | $ | 122,063 |
See accompanying notes.
42
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2002 | |||||||||||||
(In thousands) | |||||||||||||||
Cash flows from operating activities | |||||||||||||||
Net loss | $ | (80,405 | ) | $ | (29,883 | ) | $ | (33,908 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||||||
Depreciation and amortization | 1,121 | 1,174 | 1,492 | ||||||||||||
Accretion and amortization on investments | 2,794 | 1,334 | 1,101 | ||||||||||||
Loss on equity investments in licensees | 240 | 1 | 235 | ||||||||||||
Conversion expense related to modification of series D convertible debentures and warrants | — | 777 | — | ||||||||||||
Amortization of intangible assets, principally research related | 2,688 | 2,865 | 2,864 | ||||||||||||
Interest expense related to convertible debentures, net of premium amortization | — | — | 21 | ||||||||||||
Issuance of common stock in exchange for acquired in-process research technology | 45,150 | — | 1,585 | ||||||||||||
Accretion of interest on research funding obligation | 491 | 491 | 491 | ||||||||||||
Expense related to common stock issued for services rendered | 3,504 | 227 | 18 | ||||||||||||
Amortization of deferred compensation | 96 | 83 | 234 | ||||||||||||
Changes in assets and liabilities: | |||||||||||||||
Interest and other receivables | (404 | ) | (442 | ) | 593 | ||||||||||
Prepaid assets | 306 | 1,644 | (800 | ) | |||||||||||
Notes receivable from related parties | 92 | 356 | (63 | ) | |||||||||||
Equity investments in licensees | (308 | ) | — | — | |||||||||||
Deposits and other assets | 56 | 14 | (4 | ) | |||||||||||
Accounts payable | 1,238 | (297 | ) | 256 | |||||||||||
Accrued compensation | 378 | 2,153 | (692 | ) | |||||||||||
Accrued liabilities | 134 | 696 | (742 | ) | |||||||||||
Deferred revenue | 142 | (531 | ) | (291 | ) | ||||||||||
Research funding payments | (3,261 | ) | (3,640 | ) | (2,609 | ) | |||||||||
Translation adjustment | 23 | (84 | ) | (23 | ) | ||||||||||
Net cash used in operating activities | (25,925 | ) | (23,062 | ) | (30,242 | ) | |||||||||
Cash flows from investing activities | |||||||||||||||
Capital expenditures | (1,526 | ) | (411 | ) | (328 | ) | |||||||||
Purchases of marketable securities | (110,210 | ) | (109,033 | ) | (32,659 | ) | |||||||||
Proceeds from maturities of marketable securities | 93,371 | 53,574 | — | ||||||||||||
Proceeds from sales/calls of marketable securities | — | — | 49,176 | ||||||||||||
Proceeds from sale of marketable equity investment in licensee | 201 | — | — | ||||||||||||
Net cash (used in) provided by investing activities | (18,164 | ) | (55,870 | ) | 16,189 | ||||||||||
Cash flows from financing activities | |||||||||||||||
Proceeds from equipment loans | — | — | 498 | ||||||||||||
Payments of obligations under capital leases and equipment loans | (176 | ) | (367 | ) | (878 | ) | |||||||||
Proceeds from issuance of common stock, net of issuance costs | 41,288 | 87,518 | 264 | ||||||||||||
Net cash provided by (used in) financing activities | 41,112 | 87,151 | (116 | ) | |||||||||||
Net (decrease) increase in cash and cash equivalents | (2,977 | ) | 8,219 | (14,169 | ) | ||||||||||
Cash and cash equivalents, at beginning of year | 12,823 | 4,604 | 18,773 | ||||||||||||
Cash and cash equivalents, at end of year | $ | 9,846 | $ | 12,823 | $ | 4,604 |
See accompanying notes.
43
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Principles of Consolidation
Net Loss Per Share
Use of Estimates
Cash Equivalents and Marketable Debt Securities Available-For-Sale
44
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies (Continued)
available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Realized gains and losses are included in interest and other income and are derived using the specific identification method for determining the cost of securities sold and have been insignificant to date. We recognize an impairment charge when the declines in the fair values of our available-for-sale securities below the amortized cost basis are judged to be other-than-temporary. We consider various factors in determining whether to recognize an impairment charge, including the length of time and extent to which the fair value has been less than our cost basis, the financial condition and near-term prospects of the security issuer, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Declines in market value judged other-than-temporary result in a charge to interest and other income. No impairment charges were recorded for our available-for-sale securities for the years ended December 31, 2004, 2003 and 2002. Dividend and interest income are recognized when earned. See Note 2 on Financial Instruments and Credit Risk.
Revenue Recognition
Restricted Cash
Marketable and Non-Marketable Equity Investments in Licensees
45
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies (Continued)
temporary. Impairment charges are included in interest and other income. Factors used in determining an impairment include, but are not limited to, the current business environment including competition and uncertainty of financial condition; going concern considerations such as the rate at which the investee company utilizes cash, and the investee company’s ability to obtain additional private financing to fulfill its stated business plan; the need for changes to the investee company’s existing business model due to changing business environments and its ability to successfully implement necessary changes; and the general progress toward product development, including clinical trial results. If an investment is determined to be impaired, a determination is made as to whether such impairment is other-than-temporary. We recognized charges of $226,000 in 2004 and none in 2003 and 2002 related to other-than-temporary declines in the fair values of certain of our non-marketable equity investments. As of December 31, 2004 and 2003, the carrying values of our equity investments in non-marketable nonpublic companies were $448,000 and $206,000, respectively.
Derivative Financial Instruments
Intangible Asset and Research Funding Obligation
Research and Development Expenses
Depreciation and Amortization
46
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies (Continued)
Employee Stock Plans
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2002 | |||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
Net loss | $ | (80,405 | ) | $ | (29,883 | ) | $ | (33,908 | ) | ||||||
Add back: | |||||||||||||||
Deferred compensation | — | — | 241 | ||||||||||||
Deduct: | |||||||||||||||
Stock-based employee expense determined under SFAS 123 | (6,793 | ) | (7,429 | ) | (10,380 | ) | |||||||||
Pro forma net loss | $ | (87,198 | ) | $ | (37,312 | ) | $ | (44,047 | ) | ||||||
Basic and diluted net loss per share as reported | $ | (1.79 | ) | $ | (0.97 | ) | $ | (1.37 | ) | ||||||
Basic and diluted pro forma net loss per share | $ | (1.94 | ) | $ | (1.20 | ) | $ | (1.79 | ) |
2004 | 2003 | 2002 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dividend yield | None | None | None | |||||||||||
Expected volatility range | 0.904 to 0.992 | 0.881 to 1.072 | 0.881 | |||||||||||
Risk-free interest rate range | 2.37% to 3.72% | 1.57% to 3.28% | 2.47% to 4.69% | |||||||||||
Expected life | 4 yrs | 4 yrs | 4 yrs |
2004 | 2003 | �� | 2002 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dividend yield | None | None | None | |||||||||||
Expected volatility range | 0.567 to 0.580 | 1.019 to 1.025 | 0.881 | |||||||||||
Risk-free interest rate range | 1.59% to 2.47% | 0.97% to 1.06% | 1.17% to 1.27% | |||||||||||
Expected life | 6 mos | 6 mos | 6 mos |
47
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies (Continued)
Comprehensive Income (Loss)
December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | ||||||||||
(In thousands) | |||||||||||
Unrealized holding loss on available-for-sale securities and marketable equity investments in licensees | $ | (493 | ) | $ | (360 | ) | |||||
Foreign currency translation adjustments | (130 | ) | (153 | ) | |||||||
$ | (623 | ) | $ | (513 | ) |
Income Taxes
Concentrations of Customers and Suppliers
Other Recent Accounting Pronouncements
48
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies (Continued)
financial statements for fiscal years ending after December 15, 2003. Our adoption on January 1, 2004 of the disclosure provisions of EITF Issue No. 03-1 did not have any material effect on our financial position, results of operations, or cash flows. We are in the process of evaluating the effect of adopting EITF 03-1 when final guidance is released.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R requires the compensation cost relating to stock-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued on the grant date of such instruments, and will be recognized over the period during which an individual is required to provide service in exchange for the award (typically the vesting period). SFAS 123R covers a wide range of stock-based compensation arrangements including stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee stock purchase plans. SFAS 123R replaces SFAS 123 and supersedes APB Opinion 25. SFAS 123R must be adopted no later than July 1, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. We expect to adopt SFAS 123R on July 1, 2005.
SFAS 123R permits public companies to adopt its requirement using one of two methods: 1) A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123R for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date; or 2) A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123R for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption. The Company plans to adopt SFAS 123R using the modified prospective method.
As permitted by SFAS 123, we currently account for share-based payments to employees using APB Opinion 25’s intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123R’s fair value method will have a significant impact on our result of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS 123R in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net loss and loss per share in Note 1 to our consolidated financial statements. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. We cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options, and whether we will be in a taxable position). There is no tax impact related to the prior periods since we are in a net loss position.
In December 2004, the FASB issued FASB Staff Position No. FAS 109-1, “Application of FASB Statement No. 109, Accounting for Income Taxes to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004” (FSP 109-1) and FASB Staff Position No. FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (FSP 109-2). FSP 109-1 clarifies the guidance in FASB Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109) that applies to the new deduction for qualified domestic production activities under The American Jobs Creation Act of 2004 (the Act). FSP 109-1 clarifies that the deduction should be accounted for as a special deduction under Statement 109, not as a tax-rate reduction, because the deduction is contingent on performing activities identified in the Act. As a result, companies qualifying for the special deduction will not have a one-time adjustment of deferred tax assets and liabilities in the period the Act is enacted. FSP 109-2 addresses the effect of the Act’s one-time deduction for qualifying repatriations of foreign earnings. FSP 109-2 allows additional time for companies to determine whether any foreign earnings will be repatriated under the Act’s one-time deduction for repatriated earnings and how the Act affects whether undistributed earnings continue to qualify for SFAS 109’s exception from recognizing deferred tax liabilities. FSP 109-1 and FSP 109-2 were both effective upon issuance. We adopted the provisions of FSP 109-1 and 109-2 as of
49
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies (Continued)
December 31, 2004 which resulted in no impact to our consolidated financial statements, as we currently do not have any income subject to tax.
Reclassifications
2. Financial Instruments and Credit Risk
Cash Equivalents and Marketable Debt Securities Available-for-Sale
Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands) | |||||||||||||||||||
Included in cash and cash equivalents: | |||||||||||||||||||
Money market fund | $ | 6,236 | $ | — | $ | — | $ | 6,236 | |||||||||||
Corporate notes | 2,515 | — | (3 | ) | 2,512 | ||||||||||||||
$ | 8,751 | $ | — | $ | (3 | ) | $ | 8,748 | |||||||||||
Restricted cash: | |||||||||||||||||||
Certificate of deposit | $ | 530 | $ | — | $ | — | $ | 530 | |||||||||||
Marketable securities: | |||||||||||||||||||
Asset-backed securities | $ | 2,807 | $ | 3 | $ | (2 | ) | $ | 2,808 | ||||||||||
Corporate notes (due in less than 1 year) | 82,116 | 6 | (188 | ) | 81,934 | ||||||||||||||
Corporate notes (due in 1–2 years) | 25,502 | — | (126 | ) | 25,376 | ||||||||||||||
$ | 110,425 | $ | 9 | $ | (316 | ) | $ | 110,118 |
Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands) | |||||||||||||||||||
Included in cash and cash equivalents: | |||||||||||||||||||
Money market fund | $ | 8,787 | $ | — | $ | — | $ | 8,787 | |||||||||||
Corporate notes | 3,944 | — | (3 | ) | 3,941 | ||||||||||||||
$ | 12,731 | $ | — | $ | (3 | ) | $ | 12,728 | |||||||||||
Restricted cash: | |||||||||||||||||||
Certificate of deposit | $ | 530 | $ | — | $ | — | $ | 530 | |||||||||||
Marketable securities: | |||||||||||||||||||
Asset-backed securities | $ | 3,790 | $ | 9 | $ | — | $ | 3,799 | |||||||||||
Corporate notes (due in less than 1 year) | 60,623 | 21 | (49 | ) | 60,595 | ||||||||||||||
Corporate notes (due in 1–2 years) | 31,966 | 67 | — | 32,033 | |||||||||||||||
$ | 96,379 | $ | 97 | $ | (49 | ) | $ | 96,427 |
50
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Financial Instruments and Credit Risk (Continued)
Marketable debt and equity securities with unrealized losses at December 31, 2004 and 2003 were as follows:
Less Than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | ||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
As of December 31, 2004: | |||||||||||||||||||||||||||||
Asset-backed securities | $ | 1,948 | $ | (2 | ) | $ | — | $ | — | $ | 1,948 | $ | (2 | ) | |||||||||||||||
Corporate notes | 91,002 | (317 | ) | — | — | 91,002 | (317 | ) | |||||||||||||||||||||
Equity investments in licensees | — | — | 41 | (183 | ) | 41 | (183 | ) | |||||||||||||||||||||
$ | 92,950 | $ | (319 | ) | $ | 41 | $ | (183 | ) | $ | 92,991 | $ | (502 | ) | |||||||||||||||
As of December 31, 2003: | |||||||||||||||||||||||||||||
Asset-backed securities | $ | 512 | $ | — | $ | — | $ | — | $ | 512 | $ | — | |||||||||||||||||
Corporate notes | 48,096 | (52 | ) | — | — | 48,096 | (52 | ) | |||||||||||||||||||||
Equity investments in licensees | — | — | 195 | (405 | ) | 195 | (405 | ) | |||||||||||||||||||||
$ | 48,608 | $ | (52 | ) | $ | 195 | $ | (405 | ) | $ | 48,803 | $ | (457 | ) |
The gross unrealized losses related to corporate notes and asset-backed securities were due to changes in interest rates. The gross unrealized losses related to equity investments in licensees were a result of declining valuation for those biotech companies. We have determined that the gross unrealized losses on our investment securities as of December 31, 2004 and 2003 are temporary in nature. We review our investments quarterly to identify and evaluate whether any investments have indications of possible impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. Substantially all of our corporate notes and asset-backed securities are rated investment grade. We recognized charges of $226,000 in 2004 and none in 2003 and 2002 related to other-than-temporary declines in the fair values of certain of our equity investments. As of December 31, 2004 and 2003, the carrying values of our equity investments in non-marketable nonpublic companies were $448,000 and $206,000, respectively. See Note 3 on Marketable and Non-Marketable Equity Investments in Licensees.
Notes Receivable from Related Parties
Other Fair Value Disclosures
51
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Financial Instruments and Credit Risk (Continued)
See discussion of Roslin research funding obligation in Note 9 on Intangible Asset and Research Funding Obligation.
Credit Risk
3. Marketable and Non-Marketable Equity Investments in Licensees
52
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Marketable and Non-Marketable Equity Investments in Licensees (Continued)
merged with Exeter Life Sciences, Inc. with Exeter being the surviving corporation. As part of the merger, all of the ProLinia warrants were converted into warrants to purchase shares of Exeter’s Series P preferred stock.
As of December 31, 2004, we held a warrant to purchase 225,000 shares of Exeter Series P preferred stock at an exercise price of $2.67 per share. The warrant, which contains a cashless exercise feature, has an expiration date of May 17, 2005. Statement of Financial Accounting Standards No. 133 (SFAS 133), “Accounting for Derivative Instruments and Hedging Activities,” requires derivative instruments to be recorded at fair value. Accordingly, the warrant is recorded at fair value as of the balance sheet date based on the Black Scholes valuation of such instruments in comparable companies and other known indicators of the investment’s value and is included in the balance sheet under equity investments in licensees. Any resulting change in fair value is considered a realized gain or loss and is included in interest and other income. As of December 31, 2004, the original carrying value of the Exeter warrants was $210,000 and the fair value was $141,000.
4. Property and Equipment
December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | ||||||||||
(In thousands) | |||||||||||
Furniture and computer equipment | $ | 2,961 | $ | 3,041 | |||||||
Lab equipment | 5,901 | 5,570 | |||||||||
Leasehold improvements | 5,218 | 4,062 | |||||||||
14,080 | 12,673 | ||||||||||
Less accumulated depreciation and amortization | (11,991 | ) | (10,989 | ) | |||||||
$ | 2,089 | $ | 1,684 |
5. Equipment Loans
Equipment Loans | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
(In thousands) | ||||||||||
Year ending December 31: | ||||||||||
2005 | 146 | |||||||||
2006 | 55 | |||||||||
Total minimum principal payments | $ | 201 |
53
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Accrued Liabilities
December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | ||||||||||
(In thousands) | |||||||||||
Legal expenses | $ | 262 | $ | 265 | |||||||
Present value of lease exit obligations | — | 200 | |||||||||
Sponsored research agreements | 259 | 96 | |||||||||
Annual report | 80 | 33 | |||||||||
Sales tax | 52 | 16 | |||||||||
Other | 169 | 152 | |||||||||
$ | 822 | $ | 762 |
7. Operating Lease Commitment
8. Convertible Debentures
54
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Convertible Debentures (Continued)
share. The expiration periods were unchanged. As a result of this second modification, we recorded $779,000 in conversion expense on our consolidated statements of operations.
9. Intangible Asset and Research Funding Obligation
10. Acquisition of In-Process Research Technology
55
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity
Warrants
Issuance Date | Exercise Price | Number of Shares | Exercisable Date | Expiration Date | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
October 2003 | $ | 16.15 | 600,000 | October 2003 | October 2006 | |||||||||||||
April 2003 | $ | 6.34 | 600,000 | April 2003 | April 2006 | |||||||||||||
November 2001 | $ | 7.50 | 500,901 | November 2001 | December 2006 | |||||||||||||
September 2001 | $ | 9.07 | 5,000 | September 2001 | September 2011 | |||||||||||||
August 2001 | $ | 14.60 | 100,000 | August 2001 | August 2011 | |||||||||||||
August 2001 | $ | 22.56 | 9,000 | August 2001 | August 2006 | |||||||||||||
August 2000 | $ | 31.69 | 5,000 | August 2000 | August 2010 | |||||||||||||
July 2000 | $ | 6.75 | 25,000 | July 2000 | July 2010 | |||||||||||||
March 2000 | $ | 67.09 | 200,000 | March 2000 | March 2010 | |||||||||||||
March 2000 | $ | 12.50 | 100,000 | March 2000 | March 2010 | |||||||||||||
October 1998 | $ | 5.78 | 5,083 | October 1998 | October 2008 | |||||||||||||
August 1997 | $ | 6.75 | 25,000 | August 1997 | August 2007 | |||||||||||||
November 2004 | $ | 6.12 | 25,000 | November 2004 | November 2009 | |||||||||||||
November 2004 | $ | 8.62 | 2,295,082 | May 2005 | November 2008 | |||||||||||||
November 2004 | $ | 6.10 | 2,049,180 | November 2004 | January 2005 | |||||||||||||
6,544,246 |
1992 Stock Option Plan
2002 Equity Incentive Plan
56
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity (Continued)
shall be at least 110% of the fair market value of the underlying common stock and shall not be exercisable more than five years after the date of grant.
Options to purchase shares of common stock generally vest over a period of four years from the date of the option grant, with a portion vesting after six months and the remainder vesting ratably over the remaining period. Under certain circumstances, options may be exercised prior to vesting, subject to our right to repurchase shares subject to such option at the exercise price paid per share. Our repurchase rights would generally terminate on a vesting schedule identical to the vesting schedule of the exercised option. In 2004 and 2003, we did not repurchase any shares, in accordance with these repurchase rights. As of December 31, 2004, no shares outstanding were subject to repurchase.
In connection with the 2003 restructuring, we entered into employment agreements with our remaining executive officers and certain other employees, and adopted a Severance Plan applicable according to its terms to all remaining employees. In connection with the employment agreements and Severance Plan, we had a commitment to pay employees a retention bonus equal to 10% of their salary if the employee remained in employment with us until January 5, 2004. In January 2004, we awarded 57,309 shares of Geron common stock from the 2002 Plan to employees in payment of the retention bonus which fulfilled our 2003 accrued commitment of $574,000. As of December 31, 2004, we had no further obligation for this retention bonus and we do not have any new retention bonus obligations.
Directors’ Stock Option Plan
57
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity (Continued)
Aggregate option activity for the 1992 Plan, 2002 Plan and the Directors’ Stock Option Plan is as follows:
Outstanding Options | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Shares Available For Grant | Number of Shares | Price Per Share | Weighted Average Exercise Price | |||||||||||||||
Balance at December 31, 2001 | 282,085 | 5,028,689 | $ | 0.82 – $47.19 | $ | 10.97 | ||||||||||||
Additional shares authorized | 5,000,000 | — | $ | — | $ | — | ||||||||||||
Options granted | (2,058,366 | ) | 2,058,366 | $ | 3.76 – $ 9.23 | $ | 4.73 | |||||||||||
Options exercised | — | (16,357 | ) | $ | 0.82 – $11.85 | $ | 4.89 | |||||||||||
Options forfeited | 762,021 | (762,021 | ) | $ | 3.76 – $47.19 | $ | 12.04 | |||||||||||
1992 Plan options expired | (515,419 | ) | — | $ | — | $ | — | |||||||||||
Balance at December 31, 2002 | 3,470,321 | 6,308,677 | $ | 0.82 – $41.13 | $ | 8.82 | ||||||||||||
Additional shares authorized | 1,496,767 | — | $ | — | $ | — | ||||||||||||
Options granted | (977,470 | ) | 977,470 | $ | 1.83 – $10.01 | $ | 5.46 | |||||||||||
Options exercised | — | (356,864 | ) | $ | 0.82 – $14.32 | $ | 5.58 | |||||||||||
Options forfeited | 809,803 | (809,803 | ) | $ | 3.76 – $30.63 | $ | 10.72 | |||||||||||
1992 Plan options expired | (519,883 | ) | — | $ | — | $ | — | |||||||||||
Balance at December 31, 2003 | 4,279,538 | 6,119,480 | $ | .82 – $41.13 | $ | 8.22 | ||||||||||||
Additional shares authorized | 1,582,836 | — | $ | — | $ | — | ||||||||||||
Options granted | (1,048,882 | ) | 1,048,882 | $ | 5.69 – $11.65 | $ | 7.51 | |||||||||||
Awards granted | (63,129 | ) | — | $ | — | $ | — | |||||||||||
Options exercised | — | (220,982 | ) | $ | 0.82 – $10.10 | $ | 4.99 | |||||||||||
Options forfeited | 380,110 | (380,110 | ) | $ | 1.88 – $29.75 | $ | 9.25 | |||||||||||
1992 Plan options expired | (207,867 | ) | — | $ | — | $ | — | |||||||||||
Balance at December 31, 2004 | 4,922,606 | 6,567,270 | $ | 0.82 – $41.13 | $ | 8.15 |
Information about stock options outstanding as of December 31, 2004 is as follows:
Options Outstanding | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exercise Price Range | Number | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | ||||||||||||
$ 0.82 – $ 4.56 | 1,372,205 | $ | 3.79 | 6.84 | |||||||||||
$ 4.75 – $ 5.08 | 1,395,743 | $ | 4.93 | 6.23 | |||||||||||
$ 5.69 – $ 8.23 | 1,888,852 | $ | 7.63 | 8.23 | |||||||||||
$ 8.31 – $15.13 | 1,265,470 | $ | 11.43 | 5.26 | |||||||||||
$16.31 – $41.13 | 645,000 | $ | 19.52 | 6.00 | |||||||||||
$ 0.82 – $41.13 | 6,567,270 | $ | 8.15 | 6.72 |
Stock Based Compensation
58
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity (Continued)
There were no options granted with an exercise price below fair market value of our common stock on the date of grant for 2004, 2003 and 2002. The weighted average grant date fair value of options granted during 2004, 2003 and 2002 with an exercise price equal to the fair market value of our common stock on the date of grant was $7.51, $5.46 and $3.05, respectively. There were no options granted with an exercise price greater than the fair market value of our common stock in 2004, 2003 and 2002.
We grant options and warrants to consultants from time to time in exchange for services performed for us. In general, these options and warrants vest over the contractual period of the consulting arrangement. We granted options and warrants to consultants to purchase 31,791, 72,970 and 4,558 shares of our common stock in 2004, 2003 and 2002, respectively. The fair value of these options and warrants is being amortized to expense over the vesting term of the options and warrants. In addition, we will record any additional increase in the fair value of the option or warrant as the options and warrants vest. We recorded expense of $269,000, $163,000 and $18,000 for the fair value of these options and warrants in 2004, 2003 and 2002, respectively. As of December 31, 2004, unamortized fair value of options and warrants to consultants of $14,000 remained outstanding.
We also grant common stock to consultants, vendors, board members and research institutions in exchange for services performed for us. In 2004, 2003 and 2002, we issued 959,558, 281,793 and 2,601 shares of common stock, respectively, in exchange for goods or services. For these stock grants, we recognized an expense equal to the fair market value of the granted shares on the date of grant. In 2004, 2003 and 2002, we recognized approximately $6,167,000, $1,291,000 and $24,000, respectively, of expense in connection with stock grants to consultants, vendors, board members and research institutions. Also, we have prepaid our rental obligation for our facilities with common stock and as of December 31, 2004, have a prepaid balance of $2,430,000 which is being amortized to rent expense on a straight-line basis over the term of the lease to July 31, 2008.
Employee Stock Purchase Plan
Common Stock Reserved for Future Issuance
Outstanding stock options | 6,567,270 | |||||
Options available for grant | 4,922,606 | |||||
Employee stock purchase plan | 334,072 | |||||
Warrants outstanding | 6,544,246 | |||||
Total | 18,368,194 |
Share Purchase Rights Plan
59
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity (Continued)
share of Series A Junior Participating Preferred Stock for $100 per unit. Under certain circumstances, if a person or group acquires 15% or more of Geron outstanding common stock, holders of the rights (other than the person or group triggering their exercise) will be able to purchase, in exchange for the $100 exercise price, shares of Geron’s common stock, par value $0.001 per share, or of any company into which Geron is merged having a value of $200. The rights expire on July 31, 2011 unless extended by our Board of Directors. As of December 31, 2004, no rights were exercisable into any shares of common stock.
401(k) Plan
Private Financings
60
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Stockholders’ Equity (Continued)
Transgenomic purchased 310,000 shares of Geron common stock at $5.05 per share in addition to paying a non-refundable cash license fee. In a separate collaboration research agreement between the two companies, a research fee was paid to Transgenomic, Inc.
Public Offering
12. Collaborative Agreements
61
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Income Taxes
2004 | 2003 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands) | |||||||||||
Net operating loss carryforwards | $ | 95,100 | $ | 72,100 | |||||||
Purchased technology | 17,100 | — | |||||||||
Research credits | 13,200 | 10,500 | |||||||||
Capitalized research and development | 8,400 | 8,000 | |||||||||
License fees | 2,700 | 2,900 | |||||||||
Other — net | 4,400 | 4,700 | |||||||||
Total deferred tax assets | 140,900 | 98,200 | |||||||||
Valuation allowance for deferred tax assets | (140,900 | ) | (98,200 | ) | |||||||
Net deferred tax assets | $ | — | $ | — |
14. Segment Information
62
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Statement of Cash Flows Data
Years Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 | 2003 | 2002 | |||||||||||||
(In thousands) | |||||||||||||||
Supplementary information: | |||||||||||||||
Interest paid | $ | 26 | $ | 53 | $ | 87 | |||||||||
Supplementary investing and financing activities: | |||||||||||||||
Conversion of convertible debentures | $ | — | $ | 16,510 | $ | — | |||||||||
Issuance of warrants to purchase common stock and common stock issued for prior year services | $ | 1,917 | $ | 1,227 | $ | 636 | |||||||||
Issuance of common stock for prepaid facility rent | $ | 3,446 | $ | — | $ | — | |||||||||
Unrealized gain (loss) on equity investments | $ | 221 | $ | 37 | $ | (322 | ) | ||||||||
Net unrealized gain (loss) on available-for-sale securities | $ | (354 | ) | $ | (81 | ) | $ | (338 | ) | ||||||
Issuance of common stock for 401(k) contribution and retention bonus | $ | 978 | $ | 548 | $ | — | |||||||||
Deferred compensation on 401(k) contribution | $ | 125 | $ | 105 | $ | 209 |
16. Quarterly Results (Unaudited)
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(In thousands, except per share amounts) | |||||||||||||||||||
Year Ended December 31, 2004 | |||||||||||||||||||
Revenues | $ | 248 | $ | 366 | $ | 101 | $ | 338 | |||||||||||
Operating expenses | 52,259 | 9,534 | 10,576 | 9,969 | |||||||||||||||
Net loss | (51,683 | ) | (8,945 | ) | (10,302 | ) | (9,475 | ) | |||||||||||
Basic and diluted net loss per share | $ | (1.28 | ) | $ | (0.20 | ) | $ | (0.23 | ) | $ | (0.20 | ) | |||||||
Year Ended December 31, 2003 | |||||||||||||||||||
Revenues | $ | 262 | $ | 285 | $ | 472 | $ | 155 | |||||||||||
Operating expenses | 8,306 | 8,938 | 5,709 | 8,401 | |||||||||||||||
Net loss | (7,932 | ) | (9,288 | ) | (5,107 | ) | (7,556 | ) | |||||||||||
Basic and diluted net loss per share | $ | (0.32 | ) | $ | (0.32 | ) | $ | (0.15 | ) | $ | (0.21 | ) |
17. Subsequent Events
63
Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.Controls and Procedures
Management Report on Internal Control Over Financial Reporting
Thomas B. Okarma | David L. Greenwood | |||||
President and Chief Executive Officer | Executive Vice President Chief Financial Officer |
64
PART III
Item 10.Directors and Executive Officers of the Registrant
Identification of Directors
Identification of Executive Officers
Code of Ethics
Item 11.Executive Compensation
Item 12.Security Ownership of Certain Beneficial Owners and Management
Item 13.Certain Relationships and Related Transactions
Item 14.Principal Accounting Fees and Services
65
PART IV
Item 15.Exhibits, Financial Statement Schedules
(a) (1)Consolidated Financial Statements
Page | ||||||
---|---|---|---|---|---|---|
Reports of Independent Registered Public Accounting Firm | 38 | |||||
Consolidated Balance Sheets — December 31, 2004 and 2003 | 40 | |||||
Consolidated Statements of Operations — Years ended December 31, 2004, 2003 and 2002 | 41 | |||||
Consolidated Statement of Stockholders’ Equity — Years ended December 31, 2004, 2003 and 2002 | 42 | |||||
Consolidated Statements of Cash Flows — Years ended December 31, 2004, 2003 and 2002 | 43 | |||||
Notes to Consolidated Financial Statements | 44 |
(2)Financial Statement Schedules |
(3)Exhibits. |
Exhibit Number | | Description | ||||
---|---|---|---|---|---|---|
2.1(1)† | Sale and Purchase Agreement dated May 3, 1999, among the Registrant and each of the shareholders of Roslin | |||||
2.2(1) | Escrow Agreement dated May 3, 1999, among the Registrant, a committee acting for and on behalf of the Warrantors, and U.S. Bank Trust National Association | |||||
3.1(2) | Amended and Restated Certificate of Incorporation of Registrant | |||||
3.2(3) | Certificate of Amendment of Restated Certificate of Incorporation of Geron Corporation | |||||
3.3(3) | Bylaws of Registrant | |||||
4.1(2) | Form of Common Stock Certificate | |||||
4.4(4) | Registration Rights Agreement, dated April 30, 1999, by and among the Registrant and each of the Shareholders of Roslin | |||||
4.6(5) | Rights Agreement, dated as of July 20, 2001, by and between Geron Corporation and U.S. Stock Transfer Corporation, as Rights Agent, which includes the form of Certification of Designations of the Series A Junior Participating Preferred Stock of Geron Corporation as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C | |||||
4.11(6) | Form of Indenture | |||||
4.12(7) | Common Stock Purchase Agreement dated March 5, 2002, by and between Registrant and Lynx Therapeutics, Inc. | |||||
4.14(8) | Warrant No. 1 to purchase 300,000 shares of common stock issued by Registrant to the Purchaser, dated as of April 7, 2003 | |||||
4.15(9) | Warrant No. 2 to purchase 300,000 shares of common stock issued by Registrant to the Purchaser, dated as of April 7, 2003 | |||||
4.16(10) | Amended and Restated Common Stock Purchase Agreement dated as of April 8, 2003, by and between the Registrant and certain investors | |||||
4.17(11) | Stock Purchase Agreement dated March 21, 2003, by and between Registrant and Finnegan, Henderson, Farabow, Garrett & Dunner, LLP | |||||
4.18(12) | Equity Payment Agreement dated March 21, 2003, by and between Registrant and Finnegan, Henderson, Farabow, Garrett & Dunner, LLP | |||||
4.19(13) | Amendment No. 2 to Registration Rights Agreement dated as of May 23, 2003, by and between Registrant and RGC International Investors, LDC | |||||
4.20(14) | Series D Second Amended and Restated Convertible Debentures dated as of May 23, 2003 | |||||
4.21(15) | Amended and Restated Series D-1 Stock Purchase Warrant, dated as of May 23, 2003 |
66
Exhibit Number | | Description | ||||
---|---|---|---|---|---|---|
4.22(16) | Amended and Restated Series D-2 Stock Purchase Warrant, dated as of May 23, 2003 | |||||
4.28(17) | Agreement dated October 14, 2003, by and between Registrant and Mainfield Enterprises, Inc. | |||||
4.29(18) | Agreement dated October 14, 2003, by and between Registrant and The Riverview Group, LLC | |||||
4.30(19) | Common Stock Purchase Agreement dated as of January 21, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.31(20) | Common Stock Purchase Agreement dated as of January 27, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.32(21) | Common Stock Purchase Agreement dated as of March 6, 2004, by and between Registrant and Merix Bioscience, Inc. | |||||
4.33(22) | Common Stock Purchase Agreement dated as of March 18, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.34(23) | Common Stock Purchase Agreement dated as of March 23, 2004, by and between Registrant and David D. Bohannon Organization | |||||
4.35(24) | Common Stock Purchase Agreement dated as of March 23, 2004, by and between Registrant and Bohannon Development Company | |||||
4.36(25) | Common Stock Purchase Agreement dated as of April 23, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.37(26) | Common Stock Purchase Agreement dated as of April 23, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.38(27) | Form of Indenture | |||||
4.39(28) | Form of Subordinated Indenture, between Geron Corporation and one or more trustees to be named | |||||
4.40(29) | Common Stock Purchase Agreement dated as of July 1, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.41(30) | Common Stock Purchase Agreement dated as of September 28, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.42(31) | Form of A Warrant, dated November 12, 2004, issued by the Registrant to certain purchasers | |||||
4.43(32) | Form of B Warrant, dated November 12, 2004, issued by the Registrant to certain purchasers | |||||
4.44(33) | Form of C Warrant, dated November 12, 2004, issued by the Registrant to certain purchasers | |||||
10.1(34) | Form of Indemnification Agreement | |||||
10.2(35) | 1992 Stock Option Plan, as amended | |||||
10.3(34) | 1996 Employee Stock Purchase Plan, as amended | |||||
10.4(36) | 1996 Directors’ Stock Option Plan, as amended | |||||
10.5(37) | 2002 Equity Incentive Plan | |||||
10.6(2)† | Agreement with Respect to Option dated August 31, 1992 between Registrant and Cold Spring Harbor Laboratory and Amendments No. 1 and 2 thereto dated May 3, 1993 and January 1994 | |||||
10.7(2)† | Patent License Agreement dated September 8, 1992 between Registrant and University of Texas Southwestern Medical Center at Dallas | |||||
10.8(2)† | Sponsored Research Agreement dated as of September 8, 1992 between the Registrant and University of Texas Southwestern Medical Center at Dallas | |||||
10.9(2)† | Exclusive License Agreement dated February 2, 1994 between the Registrant and the Regents of the University of California | |||||
10.10(2)† | License and Research Collaboration Agreement dated April 24, 1995 between the Registrant and Kyowa Hakko Kogyo Co., Ltd., and Amendment No. 1 thereto dated July 15, 1995 | |||||
10.14(2) | Equipment Financing Agreement dated January 5, 1992 between the Registrant and Lease Management Services, Inc. | |||||
10.15(2) | Master Lease Agreement dated January 5, 1993 between the Registrant and Lease Management Services, Inc. | |||||
10.23(2) | Common Stock Warrant dated May 4, 1994, issued by the Registrant to Cold Spring Harbor Laboratory | |||||
10.27(39)† | Amendment No. 2 to License and Research Collaboration Agreement dated April 24, 1995 between the Registrant and Kyowa Hakko Kogyo Co., Ltd. dated March 23, 1997 | |||||
10.30(39) | Intellectual Property License Agreement dated December 9, 1996 between Registrant and University Technology Corporation | |||||
10.35(40)† | License Agreement dated August 1, 1997 between Registrant and The Johns Hopkins University |
67
Exhibit Number | | Description | ||||
---|---|---|---|---|---|---|
10.36(40)† | Research Agreement dated August 1, 1997 between Registrant and The Johns Hopkins University | |||||
10.37(41)† | License, Product Development, and Marketing Agreement dated as of December 19, 1997, by and between Registrant and Boehringer Mannheim, GmbH | |||||
10.42(1)† | Research and License Agreement dated May 3, 1999 by and between the Registrant, Roslin, and the Institute | |||||
10.43(1)† | License Agreement dated May 3, 1999, among the Registrant, Roslin and the Institute | |||||
10.52(42) | Amendment No. 3 to the License and Research Collaboration Agreement, dated as of January 24, 2000, by and between the Registrant and Kyowa Hakko Kogyo Co., Ltd. | |||||
10.53(43) | Securities Purchase Agreement by and between Registrant and private investor dated March 9, 2000 | |||||
10.54(44) | Warrant to purchase 100,000 shares of common stock issued by Registrant to private investor dated March 9, 2000 | |||||
10.55(45) | Warrant to purchase 200,000 shares of common stock issued by Registrant to private investor dated March 9, 2000 | |||||
10.61(46) | First Amendment to Intellectual Property License Agreement dated July 23, 2001, by and among Registrant and University Technology Corporation | |||||
10.62(47) | Common Stock Purchase Agreement dated as of August 30, 2001, by and among Registrant and University Technology Corporation | |||||
10.63(48) | Common Stock Warrant Agreement issued by Registrant to University Technology Corporation, dated as of August 30, 2001 | |||||
10.66(49) | License Agreement dated as of January 8, 2002, by and between Registrant and Wisconsin Alumni Research Foundation | |||||
10.67(50)† | Purchase Agreement dated as of March 5, 2002, by and between Registrant and Lynx Therapeutics, Inc. | |||||
10.68(51) | Employment agreement between Registrant and Thomas Okarma, dated January 21, 2003 | |||||
10.69(52) | Employment agreement between Registrant and David Greenwood, dated January 21, 2003 | |||||
10.70(53) | Employment agreement between Registrant and David Earp, dated January 21, 2003 | |||||
10.71(54) | Employment agreement between Registrant and Calvin Harley, dated January 21, 2003 | |||||
10.72(55) | Employment agreement between Registrant and Melissa Kelly, dated January 21, 2003 | |||||
10.73(56) | Employment agreement between Registrant and Jane Lebkowski, dated January 21, 2003 | |||||
10.74(57) | Employment agreement between Registrant and William Stempel, dated January 21, 2003 | |||||
10.75(58) | Severance Plan, effective January 21, 2003 | |||||
10.76(59)† | License Agreement Amendment between Geron Corporation and Transgenomic, Inc., dated June 2, 2003 | |||||
10.77(60) | Restructuring Agreement dated as of May 23, 2003, by and between Registrant and RGC International Investors, LDC | |||||
10.78(61)† | License Agreement dated as of March 6, 2004 by and between Registrant and Merix Bioscience, Inc. | |||||
10.79(62) | Lease Termination and Advance Payment Agreement by and between Registrant and David D. Bohannon Organization and Bohannon Development Company, dated March 23, 2004 | |||||
10.80(63) | Fourth Amendment to Lease by and between Registrant and David D. Bohannon Organization, dated March 23, 2004 | |||||
10.81(64) | Amendment to Lease by and between Registrant and David D. Bohannon Organization, dated March 23, 2004 | |||||
14.1(70) | Code of Conduct | |||||
21.1(80) | List of Subsidiaries | |||||
23.1 | Consent of Independent Registered Public Accounting Firm | |||||
24.1 | Power of Attorney (see signature page) | |||||
31.1 | Certification of Chief Executive Officer pursuant to Form of Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated February 25, 2005 | |||||
31.2 | Certification of Chief Financial Officer pursuant to Form of Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated February 25, 2005 | |||||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 25, 2005 | |||||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 25, 2005 |
68
† | Certain portions of this Exhibit have been omitted for which confidential treatment has been requested and filed separately with the Securities and Exchange Commission. | |||||
(1) | Incorporated by reference to identically numbered exhibits filed on the Registrant’s Form 8-K filed on May 18, 1999. | |||||
(2) | Incorporated by reference to identically numbered exhibits filed with the Registrant’s Registration Statement on Form S-1 filed on June 12, 1996. | |||||
(3) | Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Annual Report on Form 10-K filed on March 3, 2003. | |||||
(4) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on May 18, 1999. | |||||
(5) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on July 23, 2001. | |||||
(6) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on January 29, 2002. | |||||
(7) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on March 7, 2002. | |||||
(8) | Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on April 8, 2003. | |||||
(9) | Incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed on April 8, 2003. | |||||
(10) | Incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K filed on April 9, 2003. | |||||
(11) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on April 25, 2003. | |||||
(12) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on April 25, 2003. | |||||
(13) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(14) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(15) | Incorporated by reference to Exhibit 4.3 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(16) | Incorporated by reference to Exhibit 4.4 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(17) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on October 15, 2003. | |||||
(18) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K filed on October 15, 2003. | |||||
(19) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on January 30, 2004. | |||||
(20) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on January 30, 2004. | |||||
(21) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on March 22, 2004. | |||||
(22) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(23) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(24) | Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(25) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on May 5, 2004. | |||||
(26) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on May 5, 2004. | |||||
(27) | Incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-3 filed on May 5, 2004. | |||||
(28) | Incorporated by reference to Exhibit 4.6 of the Registrant’s Registration Statement on Form S-3 filed on May 5, 2004. | |||||
(29) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on July 16, 2004. | |||||
(30) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on October 7, 2004. | |||||
(31) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on 8-K filed on November 12, 2004. | |||||
(32) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on 8-K filed on November 12, 2004. | |||||
(33) | Incorporated by reference to Exhibit 4.3 of the Registrant’s Current Report on 8-K filed on November 12, 2004. | |||||
(34) | Incorporated by reference to Appendix C of the Registrant’s Definitive Proxy Statement filed on April 7, 2003. | |||||
(35) | Incorporated by reference to Exhibit 99.1 of the Registrant’s Registration Statement on Form S-8 filed on December 23, 1999. | |||||
(36) | Incorporated by reference to Appendix B of the Registrant’s Definitive Proxy Statement filed on April 15, 2003. | |||||
(37) | Incorporated by reference to Appendix 2 of the Registrant’s Definitive Proxy Statement filed on April 2, 2002. |
69
(38) | Not used | |||||
(39) | Incorporated by reference to identically numbered exhibits filed with Registrant’s Quarterly Report on Form 10-Q filed on May 13, 1997. | |||||
(40) | Incorporated by reference to identically numbered exhibits filed with Registrant’s Quarterly Report on Form 10-Q filed on November 14, 1997. | |||||
(41) | Incorporated by reference to identically numbered exhibits filed with Registrant’s Annual Report on Form 10-K filed on March 31, 1998. | |||||
(42) | Incorporated by reference to Exhibit 10.52 of the Registrant’s Annual Report on Form 10-K filed on March 17, 2000. | |||||
(43) | Incorporated by reference to Exhibit 4.7 of the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2000. | |||||
(44) | Incorporated by reference to Exhibit 4.8 of the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2000. | |||||
(45) | Incorporated by reference to Exhibit 4.9 of the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2000. | |||||
(46) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on September 27, 2001. | |||||
(47) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on September 27, 2001. | |||||
(48) | Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-3 filed on September 27, 2001. | |||||
(49) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on January 18, 2002. | |||||
(50) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-3 filed on March 7, 2002. | |||||
(51) | Incorporated by reference to Exhibit 10.1 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(52) | Incorporated by reference to Exhibit 10.2 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(53) | Incorporated by reference to Exhibit 10.3 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(54) | Incorporated by reference to Exhibit 10.4 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(55) | Incorporated by reference to Exhibit 10.5 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(56) | Incorporated by reference to Exhibit 10.6 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(57) | Incorporated by reference to Exhibit 10.7 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(58) | Incorporated by reference to Exhibit 10.8 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(59) | Incorporated by reference to Exhibit 10.1 filed with Registrant’s Quarterly Report on Form 10-Q filed on July 30, 2003. | |||||
(60) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(61) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-3 filed on March 22, 2004 and on Form S-3/A filed on June 24, 2004. | |||||
(62) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(63) | Incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(64) | Incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(70) | Incorporated by reference to Exhibit 14.1 of the Registrant’s Annual Report on Form 10-K filed on February 27, 2004. | |||||
(80) | Incorporated by reference to identically numbered exhibit filed with Registrant’s Annual Report on Form 10-K filed on March 13, 2000. |
70
(b)Reports on Form 8-K
• | On November 12, 2004, with respect to a press release dated November 11, 2004 announcing the Registrant’s completion of an offering of common stock and warrants to institutional investors. |
(c)Index to Exhibits
(d)Financial Statements and Schedules
71
SIGNATURES
By: | /s/ THOMAS B. OKARMA THOMAS B. OKARMA President and Chief Executive Officer |
POWER OF ATTORNEY
Signature | Title | Date | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ THOMAS B. OKARMA Thomas B. Okarma | President, Chief Executive Officer and Director (Principal Executive Officer) | February 25, 2005 | ||||||||
/s/ DAVID L. GREENWOOD David L. Greenwood | Executive Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) | February 25, 2005 | ||||||||
/s/ ALEXANDER E. BARKAS Alexander E. Barkas | Director | February 25, 2005 | ||||||||
/s/ EDWARD V. FRITZKY Edward V. Fritzky | Director | February 25, 2005 | ||||||||
/s/ THOMAS D. KILEY Thomas D. Kiley | Director | February 25, 2005 | ||||||||
/s/ JOHN P. WALKER John P. Walker | Director | February 25, 2005 | ||||||||
/s/ PATRICK J. ZENNER Patrick J. Zenner | Director | February 25, 2005 |
72
EXHIBIT INDEX
Exhibit Number | | Description | ||||
---|---|---|---|---|---|---|
2.1(1)† | Sale and Purchase Agreement dated May 3, 1999, among the Registrant and each of the shareholders of Roslin | |||||
2.2(1) | Escrow Agreement dated May 3, 1999, among the Registrant, a committee acting for and on behalf of the Warrantors, and U.S. Bank Trust National Association | |||||
3.1(2) | Amended and Restated Certificate of Incorporation of Registrant | |||||
3.2(3) | Certificate of Amendment of Restated Certificate of Incorporation of Geron Corporation | |||||
3.3(3) | Bylaws of Registrant | |||||
4.1(2) | Form of Common Stock Certificate | |||||
4.4(4) | Registration Rights Agreement, dated April 30, 1999, by and among the Registrant and each of the Shareholders of Roslin | |||||
4.6(5) | Rights Agreement, dated as of July 20, 2001, by and between Geron Corporation and U.S. Stock Transfer Corporation, as Rights Agent, which includes the form of Certification of Designations of the Series A Junior Participating Preferred Stock of Geron Corporation as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C | |||||
4.11(6) | Form of Indenture | |||||
4.12(7) | Common Stock Purchase Agreement dated March 5, 2002, by and between Registrant and Lynx Therapeutics, Inc. | |||||
4.14(8) | Warrant No. 1 to purchase 300,000 shares of common stock issued by Registrant to the Purchaser, dated as of April 7, 2003 | |||||
4.15(9) | Warrant No. 2 to purchase 300,000 shares of common stock issued by Registrant to the Purchaser, dated as of April 7, 2003 | |||||
4.16(10) | Amended and Restated Common Stock Purchase Agreement dated as of April 8, 2003, by and between the Registrant and certain investors | |||||
4.17(11) | Stock Purchase Agreement dated March 21, 2003, by and between Registrant and Finnegan, Henderson, Farabow, Garrett & Dunner, LLP | |||||
4.18(12) | Equity Payment Agreement dated March 21, 2003, by and between Registrant and Finnegan, Henderson, Farabow, Garrett & Dunner, LLP | |||||
4.19(13) | Amendment No. 2 to Registration Rights Agreement dated as of May 23, 2003, by and between Registrant and RGC International Investors, LDC | |||||
4.20(14) | Series D Second Amended and Restated Convertible Debentures dated as of May 23, 2003 | |||||
4.21(15) | Amended and Restated Series D-1 Stock Purchase Warrant, dated as of May 23, 2003 | |||||
4.22(16) | Amended and Restated Series D-2 Stock Purchase Warrant, dated as of May 23, 2003 | |||||
4.28(17) | Agreement dated October 14, 2003, by and between Registrant and Mainfield Enterprises, Inc. | |||||
4.29(18) | Agreement dated October 14, 2003, by and between Registrant and The Riverview Group, LLC | |||||
4.30(19) | Common Stock Purchase Agreement dated as of January 21, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.31(20) | Common Stock Purchase Agreement dated as of January 27, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.32(21) | Common Stock Purchase Agreement dated as of March 6, 2004, by and between Registrant and Merix Bioscience, Inc. | |||||
4.33(22) | Common Stock Purchase Agreement dated as of March 18, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.34(23) | Common Stock Purchase Agreement dated as of March 23, 2004, by and between Registrant and David D. Bohannon Organization | |||||
4.35(24) | Common Stock Purchase Agreement dated as of March 23, 2004, by and between Registrant and Bohannon Development Company | |||||
4.36(25) | Common Stock Purchase Agreement dated as of April 23, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.37(26) | Common Stock Purchase Agreement dated as of April 23, 2004, by and between Registrant and Transgenomic, Inc. |
73
Exhibit Number | | Description | ||||
---|---|---|---|---|---|---|
4.38(27) | Form of Indenture | |||||
4.39(28) | Form of Subordinated Indenture, between Geron Corporation and one or more trustees to be named | |||||
4.40(29) | Common Stock Purchase Agreement dated as of July 1, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.41(30) | Common Stock Purchase Agreement dated as of September 28, 2004, by and between Registrant and Transgenomic, Inc. | |||||
4.42(31) | Form of A Warrant, dated November 12, 2004, issued by the Registrant to certain purchasers. | |||||
4.43(32) | Form of B Warrant, dated November 12, 2004, issued by the Registrant to certain purchasers. | |||||
4.44(33) | Form of C Warrant, dated November 12, 2004, issued by the Registrant to certain purchasers. | |||||
10.1(34) | Form of Indemnification Agreement | |||||
10.2(35) | 1992 Stock Option Plan, as amended | |||||
10.3(34) | 1996 Employee Stock Purchase Plan, as amended | |||||
10.4(36) | 1996 Directors’ Stock Option Plan, as amended | |||||
10.5(37) | 2002 Equity Incentive Plan | |||||
10.6(2)† | Agreement with Respect to Option dated August 31, 1992 between Registrant and Cold Spring Harbor Laboratory and Amendments No. 1 and 2 thereto dated May 3, 1993 and January 1994 | |||||
10.7(2)† | Patent License Agreement dated September 8, 1992 between Registrant and University of Texas Southwestern Medical Center at Dallas | |||||
10.8(2)† | Sponsored Research Agreement dated as of September 8, 1992 between the Registrant and University of Texas Southwestern Medical Center at Dallas | |||||
10.9(2)† | Exclusive License Agreement dated February 2, 1994 between the Registrant and the Regents of the University of California | |||||
10.10(2)† | License and Research Collaboration Agreement dated April 24, 1995 between the Registrant and Kyowa Hakko Kogyo Co., Ltd., and Amendment No. 1 thereto dated July 15, 1995 | |||||
10.14(2) | Equipment Financing Agreement dated January 5, 1992 between the Registrant and Lease Management Services, Inc. | |||||
10.15(2) | Master Lease Agreement dated January 5, 1993 between the Registrant and Lease Management Services, Inc. | |||||
10.23(2) | Common Stock Warrant dated May 4, 1994, issued by the Registrant to Cold Spring Harbor Laboratory | |||||
10.27(39)† | Amendment No. 2 to License and Research Collaboration Agreement dated April 24, 1995 between the Registrant and Kyowa Hakko Kogyo Co., Ltd. dated March 23, 1997 | |||||
10.30(39) | Intellectual Property License Agreement dated December 9, 1996 between Registrant and University Technology Corporation | |||||
10.35(40)† | License Agreement dated August 1, 1997 between Registrant and The Johns Hopkins University | |||||
10.36(40)† | Research Agreement dated August 1, 1997 between Registrant and The Johns Hopkins University | |||||
10.37(41)† | License, Product Development, and Marketing Agreement dated as of December 19, 1997, by and between Registrant and Boehringer Mannheim, GmbH | |||||
10.42(1)† | Research and License Agreement dated May 3, 1999 by and between the Registrant, Roslin, and the Institute | |||||
10.43(1)† | License Agreement dated May 3, 1999, among the Registrant, Roslin and the Institute | |||||
10.52(42) | Amendment No. 3 to the License and Research Collaboration Agreement, dated as of January 24, 2000, by and between the Registrant and Kyowa Hakko Kogyo Co., Ltd. | |||||
10.53(43) | Securities Purchase Agreement by and between Registrant and private investor dated March 9, 2000 | |||||
10.54(44) | Warrant to purchase 100,000 shares of common stock issued by Registrant to private investor dated March 9, 2000 | |||||
10.55(45) | Warrant to purchase 200,000 shares of common stock issued by Registrant to private investor dated March 9, 2000 | |||||
10.61(46) | First Amendment to Intellectual Property License Agreement dated July 23, 2001, by and among Registrant and University Technology Corporation | |||||
10.62(47) | Common Stock Purchase Agreement dated as of August 30, 2001, by and among Registrant and University Technology Corporation |
74
Exhibit Number | | Description | ||||
---|---|---|---|---|---|---|
10.63(48) | Common Stock Warrant Agreement issued by Registrant to University Technology Corporation, dated as of August 30, 2001 | |||||
10.66(49) | License Agreement dated as of January 8, 2002, by and between Registrant and Wisconsin Alumni Research Foundation | |||||
10.67(50)† | Purchase Agreement dated as of March 5, 2002, by and between Registrant and Lynx Therapeutics, Inc. | |||||
10.68(51) | Employment agreement between Registrant and Thomas Okarma, dated January 21, 2003 | |||||
10.69(52) | Employment agreement between Registrant and David Greenwood, dated January 21, 2003 | |||||
10.70(53) | Employment agreement between Registrant and David Earp, dated January 21, 2003 | |||||
10.71(54) | Employment agreement between Registrant and Calvin Harley, dated January 21, 2003 | |||||
10.72(55) | Employment agreement between Registrant and Melissa Kelly, dated January 21, 2003 | |||||
10.73(56) | Employment agreement between Registrant and Jane Lebkowski, dated January 21, 2003 | |||||
10.74(57) | Employment agreement between Registrant and William Stempel, dated January 21, 2003 | |||||
10.75(58) | Severance Plan, effective January 21, 2003 | |||||
10.76(59)† | License Agreement Amendment between Geron Corporation and Transgenomic, Inc., dated June 2, 2003 | |||||
10.77(60) | Restructuring Agreement dated as of May 23, 2003, by and between Registrant and RGC International Investors, LDC | |||||
10.78(61)† | License Agreement dated as of March 6, 2004 by and between Registrant and Merix Bioscience, Inc. | |||||
10.79(62) | Lease Termination and Advance Payment Agreement by and between Registrant and David D. Bohannon Organization and Bohannon Development Company, dated March 23, 2004 | |||||
10.80(63) | Fourth Amendment to Lease by and between Registrant and David D. Bohannon Organization, dated March 23, 2004 | |||||
10.81(64) | Amendment to Lease by and between Registrant and David D. Bohannon Organization, dated March 23, 2004 | |||||
14.1(70) | Code of Conduct | |||||
21.1(80) | List of Subsidiaries | |||||
23.1 | Consent of Independent Registered Public Accounting Firm | |||||
24.1 | Power of Attorney (see signature page) | |||||
31.1 | Certification of Chief Executive Officer pursuant to Form of Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated February 25, 2005 | |||||
31.2 | Certification of Chief Financial Officer pursuant to Form of Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated February 25, 2005 | |||||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 25, 2005 | |||||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated February 25, 2005 |
† | Certain portions of this Exhibit have been omitted for which confidential treatment has been requested and filed separately with the Securities and Exchange Commission. | |||||
(1) | Incorporated by reference to identically numbered exhibits filed on the Registrant’s Form 8-K filed on May 18, 1999. | |||||
(2) | Incorporated by reference to identically numbered exhibits filed with the Registrant’s Registration Statement on Form S-1 filed on June 12, 1996. | |||||
(3) | Incorporated by reference to Exhibit 3.1 filed with the Registrant’s Annual Report on Form 10-K filed on March 3, 2003. | |||||
(4) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on May 18, 1999. | |||||
(5) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on July 23, 2001. | |||||
(6) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on January 29, 2002. | |||||
(7) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on March 7, 2002. | |||||
(8) | Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on April 8, 2003. | |||||
(9) | Incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed on April 8, 2003. | |||||
(10) | Incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K filed on April 9, 2003. | |||||
(11) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on April 25, 2003. |
75
(12) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on April 25, 2003. | |||||
(13) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(14) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(15) | Incorporated by reference to Exhibit 4.3 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(16) | Incorporated by reference to Exhibit 4.4 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(17) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on October 15, 2003. | |||||
(18) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on Form 8-K filed on October 15, 2003. | |||||
(19) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on January 30, 2004. | |||||
(20) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on January 30, 2004. | |||||
(21) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on March 22, 2004. | |||||
(22) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(23) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(24) | Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(25) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on May 5, 2004. | |||||
(26) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on May 5, 2004. | |||||
(27) | Incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-3 filed on May 5, 2004. | |||||
(28) | Incorporated by reference to Exhibit 4.6 of the Registrant’s Registration Statement on Form S-3 filed on May 5, 2004. | |||||
(29) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on July 16, 2004. | |||||
(30) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on October 7, 2004. | |||||
(31) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on 8-K filed on November 12, 2004. | |||||
(32) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Current Report on 8-K filed on November 12, 2004. | |||||
(33) | Incorporated by reference to Exhibit 4.3 of the Registrant’s Current Report on 8-K filed on November 12, 2004. | |||||
(34) | Incorporated by reference to Appendix C of the Registrant’s Definitive Proxy Statement filed on April 7, 2003. | |||||
(35) | Incorporated by reference to Exhibit 99.1 of the Registrant’s Registration Statement on Form S-8 filed on December 23, 1999. | |||||
(36) | Incorporated by reference to Appendix B of the Registrant’s Definitive Proxy Statement filed on April 15, 2003. | |||||
(37) | Incorporated by reference to Appendix 2 of the Registrant’s Definitive Proxy Statement filed on April 2, 2002. | |||||
(38) | Not used | |||||
(39) | Incorporated by reference to identically numbered exhibits filed with Registrant’s Quarterly Report on Form 10-Q filed on May 13, 1997. | |||||
(40) | Incorporated by reference to identically numbered exhibits filed with Registrant’s Quarterly Report on Form 10-Q filed on November 14, 1997. | |||||
(41) | Incorporated by reference to identically numbered exhibits filed with Registrant’s Annual Report on Form 10-K filed on March 31, 1998. | |||||
(42) | Incorporated by reference to Exhibit 10.52 of the Registrant’s Annual Report on Form 10-K filed on March 17, 2000. | |||||
(43) | Incorporated by reference to Exhibit 4.7 of the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2000. | |||||
(44) | Incorporated by reference to Exhibit 4.8 of the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2000. | |||||
(45) | Incorporated by reference to Exhibit 4.9 of the Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2000. | |||||
(46) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-3 filed on September 27, 2001. | |||||
(47) | Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-3 filed on September 27, 2001. | |||||
(48) | Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-3 filed on September 27, 2001. |
76
(49) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on January 18, 2002. | |||||
(50) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-3 filed on March 7, 2002. | |||||
(51) | Incorporated by reference to Exhibit 10.1 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(52) | Incorporated by reference to Exhibit 10.2 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(53) | Incorporated by reference to Exhibit 10.3 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(54) | Incorporated by reference to Exhibit 10.4 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(55) | Incorporated by reference to Exhibit 10.5 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(56) | Incorporated by reference to Exhibit 10.6 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(57) | Incorporated by reference to Exhibit 10.7 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(58) | Incorporated by reference to Exhibit 10.8 filed with Registrant’s Quarterly Report on Form 10-Q filed on April 30, 2003. | |||||
(59) | Incorporated by reference to Exhibit 10.1 filed with Registrant’s Quarterly Report on Form 10-Q filed on July 30, 2003. | |||||
(60) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on May 27, 2003. | |||||
(61) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-3 filed on March 22, 2004 and on Form S-3/A filed on June 24, 2004. | |||||
(62) | Incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(63) | Incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(64) | Incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-3 filed on March 29, 2004. | |||||
(70) | Incorporated by reference to Exhibit 14.1 of the Registrant’s Annual Report on Form 10-K filed on February 27, 2004. | |||||
(80) | Incorporated by reference to identically numbered exhibit filed with Registrant’s Annual Report on Form 10-K filed on March 13, 2000. |
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