FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______________to__________________
Commission file number 1-12830
BioTime, Inc.
(Exact name of registrant as specified in its charter)
California 94-3127919
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
935 Pardee Street
Berkeley, California 94710
(Address of principal executive offices)
(510) 845-9535
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No__
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 10,819,733 common
shares, no par value, as of May 11, 1998.
PART 1--FINANCIAL INFORMATION
Statements made in this Report that are not historical facts may
constitute forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
discussed. Such risks and uncertainties include but are not limited to those
discussed in this report under Item 1 of the Notes to Financial Statements, and
in BioTime's Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Words such as "expects," "may," "will," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," and similar expressions identify
forward-looking statements.
Item 1. Financial Statements
BIOTIME, INC,
(A Development Stage Company)
CONDENSED BALANCE SHEETS
(Unaudited)
March 31, December 31,
ASSETS 1999 1998
--------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $ 8,609,463 $ 2,429,014
License fee receivable 250,000 -
Prepaid expenses and other current assets 195,613 153,267
--------------- -----------------
Total current assets 9,055,076 2,582,281
EQUIPMENT, Net of accumulated depreciation of $228,997 and $217,107 167,227 166,474
DEPOSITS AND OTHER ASSETS 43,900 60,700
--------------- -----------------
TOTAL ASSETS $ 9,266,203 $ 2,809,455
=============== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 321,396 $ 237,203
Deferred revenue - current portion -- 187,500
--------------- -----------------
Total current liabilities 321,396 424,703
COMMITMENTS
SHAREHOLDERS' EQUITY:
Preferred Shares, no par value, undesignated as to Series,
authorized 1,000,000 shares; none outstanding
Common Shares, no par value, authorized 25,000,000 shares; issued 26,369,110 19,022,116
and outstanding 10,804,733 and 10,033,079
Contributed Capital 93,972 93,972
Deficit accumulated during development stage (17,518,275) (16,731,336)
--------------- -----------------
Total shareholders' equity 8,944,807 2,384,752
--------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,266,203 $ 2,809,455
=============== =================
<FN>
See notes to condensed financial statements.
</FN>
2
BIOTIME, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Period from Inception
March 31, (November 30, 1990)
1999 1998 to March 31, 1999
---------------- --------------- -----------------------
REVENUE:
License Fee 437,500 125,000 1,900,000
---------------- --------------- -------------------
EXPENSES:
Research and development $ (739,484) $ (878,422) $ (12,421,472)
General and administrative (513,450) (390,904) (8,303,214)
---------------- --------------- -------------------
Total expenses (1,252,934) (1,269,326) (20,724,686)
---------------- --------------- -------------------
INTEREST AND OTHER INCOME: 28,495 72,788 1,331,242
---------------- --------------- -------------------
NET LOSS $ (786,939) $(1,071,538) $ (17,493,444)
================ =============== ===================
BASIC AND DILUTED LOSS PER SHARE $ (0.08) $ (0.11)
================ ===============
COMMON AND EQUIVALENT SHARES USED IN
COMPUTING PER SHARE AMOUNTS:
BASIC AND DILUTED 10,232,279 9,919,079
================ ===============
<FN>
See notes to condensed financial statements.
</FN>
3
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
Series A Convertible Deficit
Preferred Shares Common Shares Accumulated
---------------------- ----------------------- During
Number Number Contributed Development
of Shares Amount of Shares Amount Capital Stage
---------- ---------- ---------- ----------- ------------ ---------------
BALANCE, November 30, 1990
(date of inception) -- -- -- -- -- --
NOVEMBER 1990 1,312,761 $ 263
Common shares issued for cash
DECEMBER 1990:
Common shares issued for
stock of a separate entity at
fair value 1,050,210 137,400
Contributed equipment at $ 16,425
appraised value
Contributed cash 77,547
MAY 1991:
Common shares issued for cash
less offering costs 101,175 54,463
Common shares issued for stock
of a separate entity at fair
value 100,020 60,000
JULY 1991:
Common shares issued for
services performed 30,000 18,000
AUGUST-DECEMBER 1991
Preferred shares issued for
cash less offering costs of
$125,700 360,000 $474,300
MARCH 1992:
Common shares issued for
cash less offering costs of
$1,015,873 2,173,500 4,780,127
Preferred shares converted
into common shares (360,000) (474,300) 360,000 474,300
Dividends declared and paid
on preferred shares $ (24,831)
MARCH 1994:
Common shares issued for cash
less offering costs
of $865,826 2,805,600 3,927,074
JANUARY-JUNE 1995:
Common shares repurchased
with cash (253,800) (190,029)
NET LOSS SINCE INCEPTION $(6,099,136)
---------- ---------- ---------- ----------- ---------- -------------
BALANCE AT JUNE 30, 1995 -- $ 7,679,466 9,261,598 $ 93,972 $(6,123,967)
Common shares issued for cash
(exercise of options and
warrants) 496,521 1,162,370
Common shares issued for cash
(lapse of recision) 112,176 67,300
Common shares repurchased with
cash (18,600) (12,693)
Common shares warrants and
options granted for services 356,000
NET LOSS (1,965,335)
---------- ---------- ---------- ----------- ---------- -------------
BALANCE AT JUNE 30, 1996 -- $ -- 8,269,563 10,834,575 93,972 (8,089,302)
<FN>
See notes to financial statements. (Continued)
</FN>
4
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
(Continued)
Series A Convertible Deficit
Preferred Shares Common Shares Accumulated
--------------------- ------------------------- During
Number Number of Contributed Development
of Shares Amount Shares Amount Capital Stage
---------- ---------- ------------- ----------- ----------- -----------------
Common shares issued for cash less 849,327 5,491,583
offering costs of $170,597
Common shares issued for cash 490,689 1,194,488
(exercise of options and warrants)
Common shares warrants and options 105,000
granted for service
NET LOSS (3,094,210)
---------- ---------- ----------- ----------- --------- --------------
BALANCE AT JUNE 30, 1997 -- $ -- 9,609,579 $17,625,646 $ 93,972 $(11,183,512)
Common shares issued for cash
(exercise of options) 337,500 887,690
Common shares warrants and options
granted for service 38,050
Common shares issued for services 500 6,250
NET LOSS (3,453,346)
---------- ---------- ----------- ----------- --------- --------------
BALANCE AT JUNE 30,1998 -- -- 9,947,579 $18,557,636 $93,972 $(14,636,858)
Common shares issued for cash
(exercise of options and warrants) 84,000 395,730
Common shares options granted for
services 50,000
Common shares issued for
services 1,500 18,750
NET LOSS (2,094,478)
---------- ---------- ----------- ----------- --------- --------------
BALANCE AT DECEMBER 31, 1998 -- $ -- 10,033,079 $19,022,116 $93,972 $(16,731,336)
Common shares issued for cash 20,000 145,000
(exercise of options) - unaudited
Common shares issued for cash (less 751,654 7,201,994
offering costs of $126,632) -
unaudited
NET LOSS - unaudited (786,939)
---------- ---------- ----------- ----------- --------- --------------
BALANCE AT MARCH 31, 1999 - -- $ -- 10,804,733 26,369,110 $93,972 $(17,518,275)
unaudited ========== ========== =========== =========== ========= ==============
<FN>
See Notes to financial statements. (Concluded)
</FN>
5
BIOTIME, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Period from Inception
March 31, (November 30, 1990)
1999 1998 to March 31, 1999
------------ ------------- --------------------
OPERATING ACTIVITIES:
Net loss $ (786,939) $(1,071,538) $(17,493,444)
Adjustments to reconcile net loss to net cash
used in operating activities:
Deferred Revenue (187,500) 275,000 (1,000,000)
Depreciation 11,890 14,476 228,996
Cost of Services - options and warrants 5,000 29,000 582,328
Supply Reserves -- -- 200,000
Changes in operating assets and liabilities:
Research and development supplies on hand -- -- (200,000)
Prepaid expenses and other current (47,346) 12,770 (185,891)
assets
Deposits 16,800 5,000 (43,900)
License fee receivables (250,000) -- (250,000)
Accounts payable 84,193 (64,247) 321,396
Deferred revenue (400,000) 1,000,000
------------ ------------- -------------
Net cash used in operating activities (1,153,902) (1,199,539) (16,840,514)
------------ ------------- -------------
INVESTING ACTIVITIES:
Sale of investments -- -- 197,400
Purchase of short-term investments -- -- (9,946,203)
Redemption of short-term investments -- -- 9,934,000
Purchase of equipment and furniture (12,643) (75,539) (379,799)
------------ ------------- -------------
Net cash used in investing activities (12,643) (75,539) (182,399)
------------ ------------- -------------
FINANCING ACTIVITIES:
Issuance of preferred shares for cash -- -- 600,000
Preferred shares placement costs -- -- (125,700)
Issuance of common shares for cash 7,328,626 -- 23,701,732
Net proceeds from exercise of common share 145,000 99,000 3,785,278
options and
warrants
Common shares placement costs (126,632) -- (2,178,928)
Contributed capital - cash -- -- 77,547
Dividends paid on preferred shares -- -- (24,831)
Repurchase Common Shares -- -- (202,722)
------------ ------------- -------------
Net cash provided by (used in) financing 7,346,994 99,000 25,632,376
activities
------------ ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,180,449 (1,176,078) 8,609,463
CASH: AND CASH EQUIVALENTS:
At beginning of period 2,429,014 6,321,242 --
------------ ------------- -------------
At end of period $ 8,609,463 $ 5,145,164 $ 8,609,463
============= ============= =============
<FN>
(Continued)
</FN>
6
BIOTIME, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Period from Inception
March 31, (November 30, 1990)
1999 1998 to March 31, 1999
------------ ------------- --------------------
NONCASH FINANCING AND
INVESTING ACTIVITIES:
$ 16,425
Receipt of contributed equipment
Issuance of common shares
in exchange for shares of $ 197,400
common stock of Cryomedical
Sciences, Inc. in a stock-for-stock
transaction
Granting of options and warrants for services 17,750 $ 567,050
Common shares for services $ 25,000
<FN>
See notes to condensed financial statements. (Concluded)
</FN>
7
BIOTIME, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. GENERAL AND DEVELOPMENT STAGE ENTERPRISE
General - BioTime, Inc. (the Company) was organized November 30, 1990
as a California corporation. The Company is a biomedical organization,
currently in the development stage, which is engaged in the research
and development of synthetic plasma expanders, blood volume substitute
solutions, and organ preservation solutions, for use in surgery, trauma
care, organ transplant procedures, and other areas of medicine. On
March 31, 1999, the Company received approval from the U.S. Food and
Drug Administration to market its first product, Hextend.
The balance sheet as of March 31, 1999, the statements of operations
for the three months ended March 31, 1999 and 1998 and the period from
inception (November 30, 1990) to March 31, 1999, the statement of
shareholders' equity for the three month period ended March 31, 1999,
and the statements of cash flows for the three months ended March 31,
1999 and 1998 and the period from inception (November 30, 1990) to
March 31, 1999 have been prepared by the Company without audit. In the
opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial
position, results of operations, shareholders' equity and cash flows at
March 31, 1999 and for all periods presented have been made. The
balance sheet as of December 31, 1998 is derived from the Company's
audited financial statements as of that date. The results of operations
for the period ended March 31, 1999 are not necessarily indicative of
the operating results anticipated for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted as permitted by
regulations of the Securities and Exchange Commission. Certain
previously furnished amounts have been reclassified to conform with
presentations made during the current periods. It is suggested that
these interim condensed financial statements be read in conjunction
with the annual audited financial statements and notes thereto included
in the Company's Form 10-K for the year (six months) ended December 31,
1998.
Certain Significant Risks and Uncertainties - The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Such management estimates include certain accruals.
Actual results could differ from those estimates.
8
The Company's operations are subject to a number of factors that can
affect its operating results and financial condition. Such factors
include, but are not limited to, the following: the results of clinical
trials of the Company's products; the Company's ability to obtain
United States Food and Drug Administration and foreign regulatory
approval to market its products; competition from products manufactured
and sold or being developed by other companies; the price of and demand
for Company products; the Company's ability to obtain additional
financing and the terms of any such financing that may be obtained; the
Company's ability to negotiate favorable licensing or other
manufacturing and marketing agreements for its products; the
availability of ingredients used in the Company's products; and the
availability of reimbursement for the cost of the Company's products
(and related treatment) from government health administration
authorities, private health coverage insurers and other organizations.
Development Stage Enterprise - Since inception, the Company has been
engaged in research and development activities in connection with the
development of synthetic plasma expanders, blood volume substitute
solutions and organ preservation products. The Company has limited
operating revenues and has incurred operating losses of $17,493,444
from inception to March 31, 1999. The successful completion of the
Company's product development program and, ultimately, achieving
profitable operations is dependent upon future events including
maintaining adequate capital to finance its future development
activities, obtaining regulatory approvals for the products it develops
and achieving a level of revenues adequate to support the Company's
cost structure.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," (SFAS 133) which establishes accounting and
reporting standards for derivative instruments and for hedging
activities. SFAS 133 requires that entities recognize all derivatives
as either assets or liabilities and measure those instruments at fair
value. The Company adopted SFAS 133 in its financial statements in the
first quarter of the fiscal year ending December 31, 1999, with no
impact on the Company's financial position, results of operations or
cash flows.
3. SHAREHOLDERS' EQUITY
On March 9, 1999, the Company completed a subscription rights offering
raising $7,328,626 (less offering costs of $126,632), through the sale
of 751,654 common shares.
9
The Board of Directors of the Company adopted the 1992 Stock Option
Plan (the "Plan") in September 1992, which was approved by the
shareholders at the 1992 Annual Meeting of Shareholders on December 1,
1992. Under the Plan, as amended, the Company has reserved 1,800,000
common shares for issuance under options granted to eligible persons.
No options may be granted under the Plan more than ten years after the
date the Plan was adopted by the Board of Directors, and no options
granted under the Plan may be exercised after the expiration of ten
years from the date of grant.
Under the Plan, options to purchase common shares may be granted to
employees, directors and certain consultants at prices not less than
the fair market value at date of grant for incentive stock options and
not less than 85% of fair market value for nonstatutory stock options.
These options expire five to ten years from the date of grant and may
be fully exercisable immediately, or may be exercisable according to a
schedule or conditions specified by the Board of Directors or the
Option Committee. During the quarter ended March 31, 1999, no options
were issued to consultants or employees. As of March 31, 1999, 599,000
shares were available for future grants under the Option Plan; and
options to purchase 470,500 shares had been granted and were
outstanding at exercise prices ranging from $0.66 to $18.25.
4. LICENSE AGREEMENT
In April 1997, BioTime and Abbott Laboratories ("Abbott") entered into
an Exclusive License Agreement (the "License Agreement") under which
BioTime granted to Abbott an exclusive license to manufacture and sell
BioTime's proprietary blood plasma volume expander solution Hextend in
the United States and Canada for certain therapeutic uses.
Under the License Agreement, Abbott has agreed to pay the Company
license fees based upon achievement of specified milestones and product
sales. As of March 31, 1999, $1,900,000 of the license fees for the
achievement of milestones has been earned and accrued, including
revenue and the associated receivable of $250,000 recognized in the
first quarter of 1999 related to the achievement of a milestone during
the quarter. Up to $37,500,000 of additional license fees will be
payable based upon annual net sales of Hextend at the rate of 10% of
annual net sales if annual net sales exceed $30,000,000 or 5% if annual
net sales are between $15,000,0000 and $30,000,000. Abbott's obligation
to pay license fees on sales of Hextend will expire on the earlier of
January 1, 2007 or, on a country by country basis, when all patents
protecting Hextend in the applicable country expire or any third party
obtains certain regulatory approvals to market a generic equivalent
product in that country.
In addition to the license fees, Abbott will pay the Company a royalty
on annual net sales of Hextend. The royalty rate will be 5% plus an
additional .22% for each increment of $1,000,000 of annual net sales,
up to a maximum royalty rate of 36%. Abbott's obligation to pay
royalties on sales of Hextend will expire in the United States or
Canada when all patents protecting Hextend in the applicable country
expire and any third party obtains certain regulatory approvals to
market a generic equivalent product in that country.
Abbott has agreed that the Company may convert Abbott's exclusive
license to a non-exclusive license or may terminate the license
outright if certain minimum sales and royalty payments are not met. In
order to terminate the license outright, BioTime would pay a
termination fee in an amount ranging from the milestone payments made
by Abbott to an amount equal to three times prior year net sales,
depending upon when termination occurs. Abbott's exclusive license also
may terminate, without the payment of termination fees by the Company,
if Abbott fails to market Hextend. Management believes that the
probability of payments of any termination fee by the Company is
remote.
10
5. NET INCOME PER SHARE
During February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128). The Company adopted SFAS 128 in the second quarter
of fiscal 1998 and restated earnings per share (EPS) data for prior
periods to conform with current presentation.
SFAS 128 replaces current EPS reporting requirements and requires a
dual presentation of basic and diluted EPS. Basic EPS excludes dilution
and is computed by dividing net income (loss) by the weighted average
number of common shares outstanding during the period. Diluted EPS
reflects the potential dilution from securities and other contracts
which are exercisable or convertible into common shares.
Diluted EPS is computed by dividing net income (loss) by the weighted
average number of common shares that would have been outstanding during
the period assuming the issuance of common shares for all dilutive
potential common shares outstanding. As a result of operating losses,
there is no difference between the basic and diluted calculations of
EPS.
11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since its inception in November 1990, the Company has been engaged
primarily in research and development activities. The Company has not yet
generated significant operating revenues, and as of March 31, 1999 the Company
had incurred a cumulative net loss of $17,493,444. The Company's ability to
generate substantial operating revenue depends upon its success in developing
and marketing or licensing its plasma volume expanders and organ preservation
solutions and technology for medical use.
Most of the Company's research and development efforts have been
devoted to the development of the Company's first three blood volume replacement
products: Hextend, PentaLyte, and HetaCool. By testing and bringing all three
products to the market, BioTime can increase its market share by providing the
medical community with solutions to match patients' needs.
On March 31, 1999, the Company received approval from the U.S. Food and
Drug Administration (FDA) to market Hextend, the Company's physiologically
balanced blood plasma volume expander, for the treatment of hypovolemia.
Hypovolemia is a condition often associated with blood loss during surgery or
from injury. Hextend maintains circulatory system fluid volume and oncotic
pressure and keeps vital organs perfused during surgery. Hextend, approved for
large-volume use in major surgery, is the only blood plasma volume expander that
contains hetastarch, buffer, multiple electrolytes and glucose. Hextend is also
completely sterile to avoid risk of infection. The results of the Phase III
clinical trials on which the regulatory approval of Hextend was based are the
subject of a peer-reviewed journal (T.J. Gan et al., Anesthesia & Analgesia,
1999, Vol. 88, No. 5; 992-8).
BioTime has granted to Abbott an exclusive license to manufacture and
sell Hextend in the United States and Canada for all therapeutic uses other than
those involving hypothermic surgery, or the replacement of substantially all of
a patient's circulating blood volume. BioTime has retained all rights to
manufacture, sell or license Hextend and other products in all other countries.
Abbott also has a right to obtain licenses to manufacture and sell other BioTime
products.
12
Under the License Agreement, Abbott has agreed to pay BioTime license
fees based upon product sales and the achievement of certain milestones. So far,
Company has earned and accrued $1,900,000 of license fee milestone payments. Up
to $37,500,000 of the license fees will be payable based upon annual net sales
of Hextend at the rate of 10% of annual net sales if annual net sales exceed
$30,000,000 or 5% if annual net sales are between $15,000,000 and $30,000,000.
In addition to the license fees, Abbott will pay BioTime a royalty on total
annual net sales of Hextend. The royalty rate will be 5% plus an additional .22%
for each $1,000,000 of annual net sales, up to a maximum royalty rate of 36%.
The royalty rate for each year will be applied on a total net sales basis so
that once the highest royalty rate for a year is determined, that rate will be
paid with respect to all sales for that year. Abbott's obligation to pay
royalties on sales of Hextend will expire in the United States or Canada when
all patents protecting Hextend in the applicable country expire and any third
party obtains certain regulatory approvals to market a generic equivalent
product in that country. Abbott has also agreed to manufacture Hextend for sale
by BioTime in the event that Abbott's exclusive license is terminated prior to
expiration.
The Company intends to enter global markets through licensing
agreements with overseas pharmaceutical companies. By licensing its products
abroad, the Company will avoid the capital costs and delays inherent in
acquiring or establishing its own pharmaceutical manufacturing facilities and
establishing an international marketing organization. A number of pharmaceutical
companies in Europe, Asia and other markets around the world have expressed
their interest in obtaining licenses to manufacture and market the Company's
products. The Company is continuing to meet with representatives of interested
companies to discuss potential agreements.
The Company is also pursuing a global clinical trial strategy, the goal
of which is to permit the Company to obtain regulatory approval for its products
as quickly and economically as practicable. For example, the United States Phase
III clinical trials of Hextend involved 120 patients and were completed in less
than 12 months. Although regulatory requirements vary from country to country,
the Company may be able to file applications for foreign regulatory approval of
its products based upon the results of the United States clinical trials. Based
upon discussions with the Canadian Bureau of Pharmaceutical Assessment, the
Company plans to file for Canadian market approval based the results of its
United States clinical trials. Regulatory approvals for countries that are
members of the European Union may be obtained through a mutual recognition
process. The Company has determined that several member nations would accept an
application based upon the United States clinical trials. If approvals based
upon those trials can be obtained in the requisite number of member nations,
then the Company would be permitted to market Hextend in all 16 member nations.
In order to commence clinical trials for regulatory approval of new
products, such as PentaLyte and HetaCool, or new therapeutic uses of Hextend, it
will be necessary for the Company to prepare and file with the FDA an
Investigational New Drug Application ("IND") or an amendment to expand the
present IND for additional Hextend studies. Filings with foreign regulatory
agencies will be required to commence clinical trials overseas. The cost of
preparing those regulatory filings and conducting those clinical trials is not
presently determinable, but could be substantial. It will be necessary for the
Company to obtain additional funds in order to complete any clinical trials that
may begin for its new products or for new uses of Hextend. The Company plans to
negotiate product licensing and marketing agreements that require overseas
licensees and distributors of Company products to bear regulatory approval and
clinical trial costs for their territories.
13
In addition to developing clinical trial programs, the Company plans to
continue to provide funding for its laboratory testing programs at selected
universities, medical schools and hospitals for the purpose of developing
additional uses of Hextend, PentaLyte, HetaCool, and other new products, but the
amount of research that will be conducted at those institutions will depend upon
the Company's financial status. Because the Company's research and development
expenses, clinical trial expenses, and production and marketing expenses will be
charged against earnings for financial reporting purposes, management expects
that losses from operations will continue to be incurred for the foreseeable
future.
Year 2000 Considerations
The Company has reviewed its internal computer and software systems and
has determined that it is highly unlikely that any of those systems will be
adversely affected by problems associated with the year 2000. Accordingly, the
Company does not expect to incur any material expense in bringing its computer
systems into year 2000 compliance. The so-called "year 2000 problems" may arise
if computer programs do not properly recognize years that begins with "20"
instead of "19." If not corrected, computer applications that are affected by
the year 2000 problem could fail or create erroneous results.
The Company relies upon data analysis provided by independent third
parties that conduct tests on Company products and compile and analyze data from
Company laboratory studies and clinical trials. The Company is asking its third
party contractors to inform the Company's management whether their systems will
be adversely affected by the year 2000 problem and what plans they have to
remedy any such problems in a timely manner.
Because the Company does not have its own pharmaceutical production
facilities, it will rely upon Abbott and others to manufacture and distribute
Company products. If year 2000 problems were to impede the ability of those
companies to manufacture and distribute Company products or raw materials used
in the manufacture of Company products, future sales of Company products could
be adversely affected. BioTime does not have a contingency plan to address those
problems if they were to arise, and it may not be able to replace Abbott or any
other company that may obtain a license to manufacture and distribute BioTime
products. Abbott has announced the implementation of a program to assess and
remedy any year 2000 problems that may affect its operations, and has asked its
key suppliers to certify that their systems are year 2000 compliant. The results
of the year 2000 compliance programs implemented by Abbott and its suppliers are
not presently known.
Hextend(R) and PentaLyte(R) are registered trademarks, and HetaCool(TM) is a
trademark, of BioTime.
14
Results of Operations
Revenues
From inception (November 30, 1990) through March 31, 1999, the Company
recognized $1,900,000 of license fee revenues. For the three months ended March
31, 1999, the Company recognized revenues of $437,500, comprised of amortization
of deferred license fees from the $1,000,000 signing payment received under the
License Agreement with Abbott, and $250,000 for the achievement of a certain
milestone. For the three months ended March 31, 1998, the Company recognized
revenue of $125,000, comprised of amortization of deferred license fees from the
signing payment. See Note 4 to the accompanying financial statements.
Operating Expenses
From inception (November 30, 1990) through March 31, 1999, the Company
incurred $12,421,472 of research and development expenses, including salaries,
supplies and other related expense items. Research and development expenses were
$739,484 for the three months ended March 31, 1999, compared to $878,422 for the
three months ended March 31, 1998. The decrease in research and development
expenses in 1999 is attributable primarily to a decrease in basic laboratory
research projects and a focus on regulatory applications and planning new
clinical trials of the Company's products. It is expected that research and
development expenses will increase in the future as the Company commences
additional clinical trials of Hextend in the United States and abroad, and
commences clinical studies of other products.
From inception (November 30, 1990) through March 31, 1999, the Company
incurred $8,303,214 of general and administrative expenses. General and
administrative expenses were $513,450 for the three months ended March 31, 1999,
compared to $390,904 for the three months ended March 31, 1998. The increase in
1999 is primarily attributable to increased personnel costs, and an increase in
the general operations of the Company.
Interest and Other Income
From inception (November 30, 1990) through March 31, 1999, the Company
generated $1,331,242 of interest and other income. For the three months ended
March 31, 1999, the Company generated $28,495 of interest and other income,
compared to $72,788 for the three months ended March 31, 1998. The decrease in
interest income in 1999 is attributable to a lower average balance of cash and
cash equivalents, prior to the completion of the Company's subscription rights
offering on March 9, 1999.
15
Liquidity and Capital Resources
Since inception, the Company has primarily financed its operations
through the sale of equity securities and licensing fees, and at March 31, 1999
the Company had cash and cash equivalents of $8,609,463. On March 9, 1999, the
Company completed the sale of 751,654 common shares through a subscription
rights offer and raised an additional $7,328,626, before deducting expenses of
the offer. The Company expects that its cash on hand will be sufficient to
finance its operations beyond the next 12 months. However, additional funds may
be required for the successful completion of the Company's product development
activities. The Company plans to obtain financing for its future operations
through royalties and licensing fees from Abbott, from licensing fees from other
pharmaceutical companies, and/or additional sales of equity or debt securities.
Sales of additional equity securities could result in the dilution of the
interests of present shareholders.
Under its License Agreement with Abbott, the Company has earned and
accrued $1,900,000 of license fees for signing the agreement and achieving
certain milestones. Additional license fees and royalties will become payable
based upon product sales.
License fees and royalties will also be sought from Abbott or other
pharmaceutical companies for United States and Canadian licenses of new products
and uses of Hextend that are not covered by Abbott's license, and for licenses
to manufacture and market the Company's products abroad.
The amount of license fees and royalties that may be earned through the
licensing and sale of the Company's products, as well as the future availability
and terms of equity and debt financings, are uncertain. The unavailability or
inadequacy of financing or revenues to meet future capital needs could force the
Company to modify, curtail, delay or suspend some or all aspects of its planned
operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company did not hold any market risk sensitive instruments as of March 31,
1999, December 31, 1998, or March 31, 1998.
16
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
Numbers Description
- ------- -----------
3.1 Articles of Incorporation, as Amended.+
3.3 By-Laws, As Amended.#
4.1 Specimen of Common Share Certificate.+
10.1 Lease Agreement dated July 1, 1994 between the Registrant and Robert
and Norah Brower, relating to principal executive offices of the
Registrant.*
10.2 Employment Agreement dated June 1, 1996 between the Company and
Paul Segall.++
10.3 Employment Agreement dated June 1, 1996 between the Company and
Hal Sternberg.++
10.4 Employment Agreement dated June 1, 1996 between the Company and
Harold Waitz.++
10.5 Employment Agreement dated June 1, 1996 between the Company and
Judith Segall.++
10.6 Employment Agreement dated June 1, 1996 between the Company and
Victoria Bellport.++
10.7 Intellectual Property Agreement between the Company and Paul Segall.+
10.8 Intellectual Property Agreement between the Company and
Hal Sternberg.+
10.9 Intellectual Property Agreement between the Company and Harold Waitz.+
10.10 Intellectual Property Agreement between the Company and Judith Segall.+
10.11 Intellectual Property Agreement between the Company and
Victoria Bellport.+
10.12 Agreement between CMSI and BioTime Officers Releasing Employment
Agreements, Selling Shares, and Transferring Non-Exclusive License.+
10.13 Agreement for Trans Time, Inc. to Exchange CMSI Common Stock for
BioTime, Inc. Common Shares.+
17
10.14 1992 Stock Option Plan, as amended.##
10.15 Employment Agreement dated April 1, 1997 between the Company and
Ronald S. Barkin.^
10.16 Intellectual Property Agreement between the Company and
Ronald S. Barkin.^
10.17 Addenda to Lease Agreement between the Company and Donn Logan.++
10.18 Amendment to Employment Agreement between the Company and
Paul Segall.**
10.19 Amendment to Employment Agreement between the Company and
Hal Sternberg.**
10.20 Amendment to Employment Agreement between the Company and
Harold Waitz.**
10.21 Amendment to Employment Agreement between the Company and
Judith Segall.**
10.22 Amendment to Employment Agreement between the Company and
Victoria Bellport.**
10.23 Amendment to Employment Agreement between the Company and
Ronald S. Barkin.**
27 Financial Data Schedule**
+Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1998.
+ Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992, respectively.
# Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992, respectively.
* Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1994.
++ Incorporated by reference to the Company's Form 10-K for the fiscal year
ended June 30, 1996.
^ Incorporated by reference to the Company's Form 10-Q for the quarter ended
March 31, 1997.
## Incorporated by reference to Registration Statement on Form S-8, File Number
333-30603 filed with the Securities and Exchange Commission on July 2, 1997.
++Incorporated by reference to the Company's Form 10-K for the fiscal year ended
December 31, 1998.
** Filed herewith.
18
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on April 5, 1999, reporting under Item 5
FDA approval of Hextend.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOTIME, INC.
/s/Paul Segall
Date: May 11, 1999 -------------------------------
Paul Segall
Chief Executive Officer
/s/Victoria Bellport
Date: May 11, 1999 -------------------------------
Victoria Bellport
Chief Financial Officer
20
Exhibits Index
Exhibit
Numbers Description
- ------- -----------
3.1 Articles of Incorporation, as Amended.+
3.3 By-Laws, As Amended.#
4.1 Specimen of Common Share Certificate.+
10.1 Lease Agreement dated July 1, 1994 between the Registrant and Robert
and Norah Brower, relating to principal executive offices of the
Registrant.*
10.2 Employment Agreement dated June 1, 1996 between the Company and
Paul Segall.++
10.3 Employment Agreement dated June 1, 1996 between the Company and
Hal Sternberg.++
10.4 Employment Agreement dated June 1, 1996 between the Company and
Harold Waitz.++
10.5 Employment Agreement dated June 1, 1996 between the Company and
Judith Segall.++
10.6 Employment Agreement dated June 1, 1996 between the Company and
Victoria Bellport.++
10.7 Intellectual Property Agreement between the Company and Paul Segall.+
10.8 Intellectual Property Agreement between the Company and
Hal Sternberg.+
10.9 Intellectual Property Agreement between the Company and Harold Waitz.+
10.10 Intellectual Property Agreement between the Company and Judith Segall.+
10.11 Intellectual Property Agreement between the Company and
Victoria Bellport.+
10.12 Agreement between CMSI and BioTime Officers Releasing Employment
Agreements, Selling Shares, and Transferring Non-Exclusive License.+
10.13 Agreement for Trans Time, Inc. to Exchange CMSI Common Stock for
BioTime, Inc. Common Shares.+
21
10.14 1992 Stock Option Plan, as amended.##
10.15 Employment Agreement dated April 1, 1997 between the Company and
Ronald S. Barkin.^
10.16 Intellectual Property Agreement between the Company and
Ronald S. Barkin.^
10.17 Addenda to Lease Agreement between the Company and Donn Logan.++
10.18 Amendment to Employment Agreement between the Company and
Paul Segall.**
10.19 Amendment to Employment Agreement between the Company and
Hal Sternberg.**
10.20 Amendment to Employment Agreement between the Company and
Harold Waitz.**
10.21 Amendment to Employment Agreement between the Company and
Judith Segall.**
10.22 Amendment to Employment Agreement between the Company and
Victoria Bellport.**
10.23 Amendment to Employment Agreement between the Company and
Ronald S. Barkin.**
27 Financial Data Schedule**
+Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1998.
+ Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992, respectively.
# Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992, respectively.
* Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1994.
++ Incorporated by reference to the Company's Form 10-K for the fiscal year
ended June 30, 1996.
^ Incorporated by reference to the Company's Form 10-Q for the quarter ended
March 31, 1997.
## Incorporated by reference to Registration Statement on Form S-8, File Number
333-30603 filed with the Securities and Exchange Commission on July 2, 1997.
++Incorporated by reference to the Company's Form 10-K for the fiscal year ended
December 31, 1998.
** Filed herewith.
22