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, 1997
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. 3,203,193 common
shares, no par value, as of May 14, 1997.
1
PART 1--FINANCIAL INFORMATION
Item 1. Financial Statements
BIOTIME, INC,
(A Development Stage Company)
CONDENSED BALANCE SHEETS
(Unaudited)
March 31, June 30,
ASSETS 1997 1996
-------------- ----------------
CURRENT ASSETS
Cash and cash equivalents $ 7,345,433 $ 2,443,121
Research and development supplies 150,000 200,000
Prepaid expenses and other current assets 128,929 214,094
-------------- ----------------
Total current assets 7,624,362 2,857,215
EQUIPMENT, Net of accumulated depreciation of $127,005 and $98,219 80,228 101,559
OTHER ASSETS 39,422 10,048
-------------- ----------------
TOTAL ASSETS $ 7,744,012 $ 2,968,474
============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES--Accounts payable $ 101,871 $ 129,229
-------------- ----------------
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 5,000,000 shares; issued
and outstanding 3,203,193 and 2,756,521 17,630,596 10,834,575
Contributed Capital 93,972 93,972
Deficit accumulated during development stage (10,082,427) (8,089,302)
-------------- ----------------
Total shareholders' equity 7,642,141 2,839,245
-------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,744,012 $ 2,968,474
============== ================
See notes to condensed financial statements.
2
BIOTIME, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended Period from Inception
March 31, March 31, (November 30, 1990)
1997 1996 1997 1996 to March 31, 1997
-------------- ------------ --------------- ------------- -----------------
EXPENSES:
Research and development $ (392,237) $ (253,911) $ (1,310,062) $ (793,769) $ (6,083,090)
General and administrative (174,673) (188,515) (769,656) (528,519) (4,790,431)
-------------- ------------ --------------- ------------- ----------------
Total expenses (566,910) (442,426) (2,079,718) (1,322,288) (10,873,521)
-------------- ------------ --------------- ------------- ----------------
INCOME:
Interest 43,752 28,696 83,362 105,296 762,060
Other 2,876 500 3,231 2,960 53,865
-------------- ------------ --------------- ------------- ----------------
Total income 46,628 29,196 86,593 108,256 815,925
-------------- ------------ --------------- ------------- ----------------
NET LOSS $ (520,282) $ (413,230) $ (1,993,125) $ (1,214,032) $ (10,057,596)
============== ============ =============== ============= ================
NET LOSS PER SHARE $ ( .17) $ ( .16) $ (.69) $ (.47) $ (4.89)
============== ============ =============== ============= ================
NUMBER OF SHARES USED FOR
CALCULATION OF NET LOSS
PER SHARE 3,068,954 2,591,014 2,877,910 2,591,581 2,057,624
============== ============ =============== ============= ================
See notes to condensed financial statements.
3
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Series A Convertible Deficit
Preferred Shares Common Shares Accumulated
--------------------- ---------------------- During
Number of Number of Contributed Developmemt
Shares Amount Shares Amount Capital Stage
--------- --------- --------- ---------- ----------- ---------------
BALANCE, November 30, 1990
(date of inception)
NOVEMBER 1990
Common shares issued for cash 437,587 $ 263
DECEMBER 1990:
Common shares issued for
stock of a separate entity at fair value 350,070 137,400
Contributed equipment at appraised
value $ 16,425
Contributed cash 77,547
MAY 1991:
Common shares issued for cash
less offering costs 33,725 54,463
Common shares issued for stock
of a separate entity at fair value 33,340 60,000
JULY 1991:
Common shares issued for
services performed 10,000 18,000
AUGUST-DECEMBER 1991
Preferred shares issued for
cash less offering costs
of $125,700 120,000 $474,300
MARCH 1992:
Common shares issued for
cash less offering costs of $1,015,873 724,500 4,780,127
Preferred shares converted
into common shares (120,000) (474,300) 120,000 474,300
Dividends declared and paid
on preferred shares $(24,831)
MARCH 1994:
Common shares issued for cash less
offering costs of $865,826 935,200 3,927,074
NET LOSS SINCE INCEPTION (3,721,389)
--------- --------- --------- ----------- --------- -----------
BALANCE AT JUNE 30, 1994 $ -- 2,644,422 $ 9,451,627 $ 93,972 $(3,746,220)
See notes to financial statements. (Continued)
4
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Series A Convertible Deficit
Preferred Shares Common Shares Accumulated
-------------------- ------------------------ During
Number of Number of Contributed Development
Shares Amount Shares Amount Capital Stage
--------- --------- ------------ ---------- ---------- ---------------
AUGUST 1994 - JUNE 1995
Common shares repurchased
with cash (84,600) $(190,029)
NET LOSS (2,377,747)
--------- --------- --------- ----------- -------- --------------
BALANCE AT JUNE 30, 1995 -- $ -- 2,559,822 $ 9,261,598 $ 93,972 $ (6,123,967)
JULY - SEPTEMBER 1995
Common shares repurchased
with cash (6,200) 12,693)
Common shares warrants and options
granted for services 356,000
APRIL - JUNE 1996
Common shares issued for
cash (exercise of options and warrants) 165,507 1,162,370
Common shares issued for cash
(lapse of recission) 37,392 67,300
NET LOSS (1,965,335)
--------- --------- --------- ----------- --------- -------------
BALANCE AT JUNE 30, 1996 -- $ -- 2,756,521 $10,834,575 $ 93,972 $ (8,089,302)
JULY - DECEMBER 1996
Common shares issued for cash
(exercise of options and warrants) 74,563 524,458
Common shares warrants and options
granted for service (Note 2) 105,000
JANUARY - MARCH 1997
Common shares issued for cash
(exercise of options and warrants) 89,000 670,030
Common shares issued for cash less 5,496,533
offering costs of $165,647 283,109
NET LOSS (1,993,125)
--------- --------- ---------- ------------ --------- ------------
BALANCE AT MARCH 31, 1997 -- $ -- 3,203,193 $ 17,630,596 $ 93,972 $ (10,082,427)
========= ========= ========== ============ ========= ==============
See notes to financial statements. (Concluded)
5
BIOTIME, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended Period from Inception
March 31, (November 30, 1990) to
1997 1996 March 31, 1997
------------ ------------- -------------------
OPERATING ACTIVITIES:
Net loss $(1,993,125) $(1,214,032) $(10,057,596)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 30,451 26,886 127,005
Common shares issued for services 190,685 -- 376,617
Inventory reserves 50,000 -- 50,000
Changes in operating assets and
liabilities:
Research and development supplies -- (200,000) (200,000)
Prepaid and other assets (30,243) (40,805) (53,831)
Accounts payable (27,358) (215,709) 101,871
------------ ----------- ------------
Net cash used in operating activities (1,779,590) (1,643,660) (9,655,934)
------------ ----------- ------------
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 (9,119) (4,929) (192,472)
------------ ----------- ------------
Net cash provided by (used in) investing activities (9,119) (4,929) (7,275)
------------ ----------- ------------
FINANCING ACTIVITIES:
Issuance of preferred shares for cash -- -- 600,000
Preferred shares placement costs -- -- (125,700)
Issuance of common shares for cash 5,662,180 -- 16,373,106
Net proceeds from exercise of common share options
and warrants 1,194,488 -- 2,356,858
Common shares placement costs (165,647) -- (2,047,346)
Contributed capital - cash -- -- 77,547
Dividends paid on preferred shares -- -- (24,831)
Repurchase common shares -- (14,420) (200,992)
------------ ----------- ------------
Net cash provided by (used in) financing activities 6,691,021 (14,420) 17,008,642
------------ ----------- ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 4,902,312 (1,663,009) 7,345,433
CASH AND CASH EQUIVALENTS:
At beginning of period 2,443,121 3,440,896 --
------------ ----------- ------------
At end of period $ 7,345,433 $1,777,887 $ 7,345,433
============ =========== ============
See notes to condensed financial statements. (Continued)
6
BIOTIME, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended Period from Inception
March 31, (November 30, 1990)
1997 1996 to March 31, 1997
---------- --------- -------------------
NONCASH FINANCING AND
INVESTING ACTIVITIES:
Receipt of contributed equipment -- -- $ 16,425
Issuance of common shares
in exchange for shares of
common stock of Cryomedical
Sciences, Inc. in a stock-for-stock
transaction -- -- 197,400
Granting of options and warrants for services 105,000 -- 461,000
Accrued public offering costs -- -- 54,458
(Concluded)
See notes to condensed financial statements.
7
BIOTIME, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
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.
The condensed financial statements presented have been prepared by the
Company without audit and, in the opinion of management, reflect all
adjustments necessary (consisting only of normal recurring adjustments)
to present fairly the financial position, results of operations and
cash flows at March 31, 1997 and for all periods presented. The results
of operations for any interim period are not necessarily indicative of
results for a full year.
The balance sheet as of June 30, 1996, has been derived from the
financial statements that have been audited by the Company's
independent public accountants. The condensed financial statements and
notes are presented as permitted by the Securities and Exchange
Commission and do not contain certain information included in the
annual financial statements and notes of the Company. It is suggested
that the accompanying condensed financial statements be read in
conjunction with the audited financial statements and the notes thereto
contained in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996, filed with the Securities and Exchange
Commission.
Estimates - the preparation of the Company's condensed financial
statements in conformity with generally accepted accounting principles
necessarily requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities in the condensed balance sheet dates
and the reported amounts of income and expenses for the periods
presented.
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 substitute solutions
and organ preservation products. The Company has not had any
significant operating revenues and has incurred operating losses of
$10,057,596 from inception to March 31, 1997. 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
8
of sales adequate to support the Company's cost structure.
Cash and Cash Equivalents - the Company considers cash, money market
funds, and U.S. Government securities with original maturities of three
months or less to be cash and cash equivalents.
2. SHAREHOLDERS' EQUITY
On February 5, 1997, the Company completed a subscription rights
offering raising $5,662,180 (less offering costs of $165,647), through
the sale of 283,109 Common Shares.
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 400,000
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.
At March 31, 1997, options for the purchase of 245,000 shares under the
Plan were held by employees, officers, directors, members of the
scientific advisory board and certain consultants. Such options are or
will become exercisable at prices ranging from $1.99 to $18.81
beginning from one to two years after the grant date and expire after
five to ten years from the grant date. Certain options require the
achievement of performance criteria. At March 31, 1997, 196,000 options
were currently exercisable at prices ranging from $1.99 to $18.81.
Options for 103,000 common shares have been exercised as of March 31,
1997.
The Board of Directors has approved an amendment to the Plan that would
make an additional 200,000 Common Shares available for future grants of
options. The amendment has been submitted to the Company's shareholders
for approval at the annual meeting of shareholders to be held on May
23, 1997.
In September 1996, the Company entered into an agreement with an
individual to act as an advisor to the Company. In exchange for
services, as defined, to be rendered by the advisor through September
1999, the Company issued warrants, with five year terms, to purchase
40,000 common shares at a price of $18.75 per share. Warrants for
25,000 common shares vested and became exercisable and transferable
when issued; warrants for the remaining 15,000 common shares vest
ratably through September 1997 and become exercisable and transferable
as vesting occurs. The estimated value of the services to be performed
is $60,000 and that amount has been capitalized and is being amortized
over the term of the agreement.
9
During September 1995, the Company entered into an agreement with a
firm to act as its financial advisor. In exchange for financial
consulting services associated in part with a plan to secure additional
capital, the Company issued to the financial advisor warrants to
purchase 100,000 common shares at a price of $6 per share, and the
Company agreed to issue additional warrants to purchase up to an
additional 200,000 common shares at a price equal to the greater of (a)
150% of the average market price of the common shares during the three
months prior to grant or (b) $6 per share. The additional warrants are
to be issued in equal quarterly installments over a two year period,
beginning October 15, 1995. The Company may terminate the financial
advisory agreement on 30 days notice, in which case the next warrant
issuance would be accelerated to the date on which notice of
termination is given, but no additional warrants would be issued.
Through March 31, 1997, the advisor had received warrants to purchase
250,000 Common Shares; 150,000 of which are exercisable at a price of
$6 per share, 25,000 of which are exercisable at a price of $7.32 per
share, 25,000 of which are exercisable at a price of $30.04 per share,
25,000 of which are exercisable at $29.33 per share, and 25,000 of
which are exercisable at $32.65 per share. As of April 15, 1997, the
advisor received warrants to purchase an additional 25,000 shares at a
price of $49.01 per share.
During the quarter ended March 31, 1997, the Company recognized $50,136
in amortization expense for capitalized service costs related to
consulting agreements.
3. RECENTLY ISSUED ACCOUNTING STANDARD
During February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128). The Company is required to adopt SFAS 128 in the
second quarter of fiscal 1998 and will restate at that time earnings
per share (EPS) data for prior periods to conform with SFAS 128.
Earlier application is not permitted.
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 available to common shareholders
by the weighted average number of common shares outstanding during the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common shares were exercised or
converted to common shares.
If SFAS 128 had been in effect during the current and prior periods,
basic EPS and diluted EPS would not have been significantly different
than primary EPS and fully diluted EPS currently reported for the
period. Fully diluted EPS, as with diluted EPS, is not reported due to
its antidilutive affect on EPS.
10
4. SUBSEQUENT EVENTS
On April 23, 1997, BioTime and Abbott Laboratories entered into an
Exclusive License Agreement under which BioTime has granted to Abbott
Laboratories an exclusive license to manufacture and sell BioTime's
proprietary blood plasma volume expander solution Hextend(R) in the
United States and Canada for all therapeutic uses other than
hypothermic surgery, or for use in other procedures involving
replacement of substantially all of a patient's circulating blood
volume. BioTime has retained all rights to manufacture, sell or license
Hextend(R) and other products in all other countries.
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, 1997 the Company had
incurred a cumulative net loss of $10,057,596.
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,(R) PentaLyte,TM and HetaCool.TM The Company is presently conducting a
Phase III clinical trial of Hextend(R) in human patients. The clinical trial
will involve approximately 150 patients and is designed to test whether
Hextend(R) can be used to treat hypovolemia (loss of blood volume) by adequately
maintaining blood pressure and volume during high blood loss surgery. These
clinical trials began in October 1996 and are being conducted at the Duke
University Medical Center in Durham, North Carolina and at Mt. Sinai School of
Medicine in New York, New York. The trials are proceeding in accordance with the
Company's expectations. If the clinical trials are successful, the Company will
prepare a New Drug Application for Food and Drug Administration ("FDA") approval
to manufacture and market Hextend(R).
Additional studies are being designed for new products under development and
to assess the safety and efficacy of Hextend(R) in other surgical applications.
In order to commence clinical trials of new products and certain new therapeutic
uses of Hextend,(R) 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 Hextend.(R) The cost of preparing those IND filings
and conducting those clinical trials is not presently determinable, but could be
substantial. It may be
11
necessary for the Company to obtain additional financing in order to complete
any clinical trials that may begin for its new products or for new uses of
Hextend.(R)
On April 23, 1997, BioTime and Abbott Laboratories ("Abbott") entered into
an Exclusive License Agreement (the "License Agreement") under which BioTime has
granted to Abbott an exclusive license to manufacture and sell Hextend(R) in the
United States and Canada for all therapeutic uses other than hypothermic
surgery, or for use in other procedures involving 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.
Under the License Agreement, Abbott has agreed to pay BioTime up to
$40,000,000 in license fees based upon product sales and the achievement of
certain milestones, and to provide assistance to BioTime in connection with the
Company's Phase III clinical trials of Hextend(R). In addition to the license
fees, Abbott will pay BioTime a royalty on annual net sales of Hextend.(R) 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%. Abbott's obligation to pay
royalties on sales of Hextend(R) will expire in the United States or Canada when
all patents protecting Hextend(R) 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(R) for
sale by BioTime in the event that Abbott's exclusive license is terminated prior
to expiration.
As part of the Company's strategy to enter global markets, a focus group, in
which physicians, surgeons and scientists from several countries have been
invited to participate, will be held in England during May 29-30, 1997. At the
focus group, the Company will present pharmacological data gathered through
laboratory and clinical testing of Hextend(R) and laboratory testing of other
products. Feedback from the focus group participants will be used by the Company
in the development of clinical trial and marketing programs for domestic and
international markets.
Following the focus group, visits have been scheduled with European-based
companies which have expressed interest in licensing the Company's products. In
addition, discussions are ongoing between the Company and a number of other
overseas and multinational companies for a license to manufacture and market the
Company's products in Europe, Asia, Latin America and other parts of the world.
The Company plans to continue to provide funding for its laboratory testing
programs at selected medical schools and hospitals for the purpose of developing
additional uses of Hextend,(R) PentaLyte,TM HetaCool,TM and other new products,
but the amount of research that will be conducted at those institutions will
depend upon the Company's financial status as will the funding required for
clinical testing of new products.
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.
Results of Operations
Revenues
From inception (November 30, 1990) through March 31, 1997, the Company
generated $815,925 of revenues, comprised of $53,865 from the sale of products
and services, and $762,060 in interest. For the three months ended March 31,
1997, the Company generated total revenues of $46,628, compared with $29,196
generated during the three months ended March 31, 1996. For the nine months
ended March 31, 1997, the Company generated $86,593 of revenues,
12
compared with $108,256 generated for the nine months ended March 31, 1996.
Substantially all of the Company's revenues during those periods was from
interest income. The increase in interest income for the three months ended
March 31, 1997 is attributable to the increase in cash and cash equivalents from
the subscription rights offering, which was completed February 5, 1997, raising
$5,662,180 (less offering costs of $165,647). The decrease in interest income
for the nine months ended March 31, 1997 is due to the overall decrease in cash
from 1996 to 1997, until the subscription rights offering was completed and
proceeds were received in February 1997. Limited marketing of the Company's
laboratory research equipment, through advertisements in trade publications and
sales to distributors, has resulted in sales of a small number of microcannulas.
Although the Company may continue to market its laboratory research equipment,
and to promote its ability to perform research services, the Company's ability
to generate substantial operating revenue depends upon its success in developing
and marketing its blood substitute and organ preservation solutions and
technology for medical use.
Operating Expenses
From inception (November 30, 1990) through March 31, 1997, the Company
incurred $6,083,090 of research and development expenses, including salaries,
supplies and other expense items. Research and development expenses increased to
$392,237 for the three months ended March 31, 1997, from $253,911 for the three
months ended March 31, 1996. Research and development expenses also increased,
to $1,310,062 for the nine months ended March 31, 1997, from $793,769 for the
nine months ended March 31, 1996. The increase in research and development
expenses is attributable to ongoing Phase III human clinical trials, and
initiation of a second study site for those trials. It is expected, however,
that research and development expenses will increase as the Company continues
clinical testing of Hextend(R), and commences clinical studies of other
products.
From inception (November 30, 1990) through March 31, 1997, the Company
incurred $4,790,431 of general and administrative expenses. General and
administrative expenses decreased slightly to $174,673 for the three months
ended March 31, 1997 from $188,515 for the three months ended March 31, 1996.
General and administrative expenses increased to $769,656 for the nine months
ended March 31, 1997, from $528,519 for the nine months ended March 31, 1995.
The increase in general and administrative expenses is primarily attributable to
an amortization expense associated with agreements the Company entered into with
certain financial advisors and consultants in exchange for warrants to purchase
the Company's common shares (See Note 2 to the accompanying financial
statements).
Liquidity and Capital Resources
Since inception, the Company has financed its operations through the sale of
equity securities, and at March 31, 1997, the Company had cash and cash
equivalents of over $7,000,000. Management believes that additional funds may be
required for the successful completion of the
13
Company's product development activities. The Company plans to obtain financing
for its future operations through additional sales of equity or debt securities,
and through the licensing of its products to pharmaceutical companies.
Under its License Agreement with Abbott, the Company has received $1,000,000
for signing the agreement, and is entitled to receive an additional $400,000 in
license fees during the fiscal quarter ending June 30, 1997, based upon the
achievement of a milestone pertaining to the allowance of certain patent claims
pending. An additional $1,100,000 of license fees under the License Agreement
will become payable in installments upon the achievement of specific milestones
pertaining to the filing and approval of a New Drug Application for Hextend,(R)
and the commencement of sales of the product. Up to $37,500,000 of additional
license fees will be payable based upon annual net sales of Hextend(R), 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 licensing fees on sales of Hextend(R) will expire on the earlier of
January 1, 2007 or, on a country by country basis, when all patents protecting
Hextend(R) 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 license fees, the Company will receive royalties upon the sale of
Hextend(R).
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(R) that are not covered by Abbott's license, and for
licenses to manufacture and market the Company's products abroad.
The future availability and terms of equity and debt financings, and the
amount of license fees and royalties that may be earned through the licensing
and sale of the Company's products cannot be predicted. 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.
14
Statements contained in this report that are not historical facts may
constitute forward-lloking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
discussed. In addition to the factors discussed elsewhere in this report, the
Company's operations are subject to a number of risks and uncertainties,
including the results of clinical trials of Hextend(R) and any other products
for which clinical trials may commence, the Company's ability to obtain FDA and
foreign regulatory approval to market Company products, the ability of the
Company to enter into additional product license agreements with pharmaceutical
companies, the results of laboratory tests of products under development,
competition from products manufactured and sold or being developed by other
companies, and the price of and demand for any products that are ultimately sold
by the Company or its licensees.
The market price of the Company's Common Shares, like that of the common
stock of many biotechnology companies, has been highly volatile. The price of
such securities may rise or fall rapidly in response to certain events such as
the commencement or completion of clinical trials, FDA and foreign regulatory
actions, the development of competing products, the licensing of Copany
products, earnings or losses reported by the Company, and the content of
securities analyst reports concerning the Company.
15
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
- -------- -----------
10.1 Exclusive License Agreement, dated April 23, 1997, between
BioTime, Inc. and Abbott Laboratories. ^^
10.2 Employment Agreement, dated April 1, 1997, between BioTime,Inc.
and Ronald S. Barkin.++
27 Financial Data Schedule.++
++Filed herewith.
^^Incorporated by reference to Exhibit 99.1 of the Company's Report on Form 8-K,
filed with the Securities and Exchange Commission on April 24, 1997.
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K on April 24, 1997, containing Item 5.
Other Events, and Item 7. Exhibits.
16
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 E. Segall
Date: May 14, 1997 -------------------------------------------
Paul E. Segall
Chief Executive Officer
/s/ Victoria Bellport
Date: May 14, 1997 -------------------------------------------
Victoria Bellport
Chief Financial Officer
17
Exhibit Index
- -------------
Exhibit
Number Description
- -------- -----------
10.1 Exclusive License Agreement, dated April 23, 1997, between
BioTime, Inc. and Abbott Laboratories. ^^
10.2 Employment Agreement, dated April 1, 1997, between BioTime,Inc.
and Ronald S. Barkin.++
27 Financial Data Schedule.++
++Filed herewith.
^^Incorporated by reference to Exhibit 99.1 of the Company's Report on Form 8-K,
filed with the Securities and Exchange Commission on April 24, 1997.
18
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made April 1, 1997 by and between BioTime, Inc. (the
"Company"), and Ronald S. Barkin, Esq. (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee, and Employee is
willing to accept such employment, all on the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment with the Company on the terms and conditions herein set
forth.
2. Term of Agreement. This Agreement shall commence on April 1, 1997
and shall continue in effect until March 31, 2002 (the "Expiration Date"),
unless terminated pursuant to the express provisions of this Agreement.
3. Renewal. This Agreement shall be renewed automatically for an
additional one (1) year period on April 1, 2002 and on each anniversary thereof,
unless one party gives the other advance written notice of non-renewal at least
sixty (60) days prior to such date. Either party may elect not to renew this
Agreement with or without cause.
4. Position; Duties. Employee shall be employed in the position and
shall perform the duties and functions set forth on EXHIBIT A, and such
additional duties and functions as are normally carried out by an executive in a
comparable position with a developer of pharmaceutical or medical products, and
as the Board of Directors or a duly authorized officer of the Company shall from
time to time reasonably determine. Employee shall devote his or her best
efforts, skills and abilities to the Company's business pursuant to, and in
accordance with, reasonable business policies and procedures, as fixed from time
to time by the Board of Directors of the Company (the "Board of Directors").
Employee covenants and agrees that he or she will faithfully adhere to and
fulfill such policies as are established from time to time by the Board of
Directors.
5. Compensation
5.1 Salary and Bonuses. During the term of this Agreement, the
Company shall pay to the Employee:
1
5.1.1 Base Salary. A base annual salary (the "Base Salary") in
the following amounts: Ninety-Two Thousand Dollars ($92,000) during the year
beginning April 1, 1997 and ending on March 31, 1998; Ninety-Nine Thousand
Dollars ($99,000) during the year beginning April 1, 1998 and ending on March
31, 1999; One Hundred Six Thousand Dollars ($106,000) during the year beginning
April 1, 1999 and ending March 31, 2000; One Hundred Thirteen Thousand Dollars
($113,000) during the year beginning April 1, 2000 and ending March 31, 2001;
and One Hundred Twenty Thousand Dollars ($120,000) during the year beginning
April 1, 2001 and ending March 31, 2002; and One Hundred Twenty-Seven Thousand
Dollars ($127,000.00) during the year beginning April 1, 2002 and ending March
31, 2003. The Base Salary shall be payable in equal semi-monthly installments or
in such other installments as may be agreed upon between the parties. The Base
Salary may be increased from time to time in the discretion of the Board of
Directors.
5.1.2 The Company shall pay all premiums on Employee's present
disability policy.
5.1.3 Bonuses. The Company may pay Employee such bonuses, if
any, as the Board of Directors may, from time to time determine.
5.2 Benefit Plans. Employee shall be eligible (to the extent
he or she qualifies) to participate in any retirement, pension, life, health,
accident and disability insurance, stock option plan or other similar employee
benefit plans which may be adopted by the Company (or any other member of a
consolidated group of which the Company is a part) for its executive officers or
other employees.
5.3 Expense Reimbursement. The Company shall reimburse
Employee for all reasonable expenses incurred by Employee in connection with the
performance of his or her employment duties, subject to the Company's policies
and procedures in effect from time to time, and provided that Employee submits
supporting vouchers.
5.4 Vacation; Sick Leave. Employee shall be entitled to four
weeks of vacation, without reduction in compensation, during each calendar year.
Such vacation shall be taken at such time as is consistent with the needs and
policies of the Company. All vacation days shall accrue based upon days of
service. The Company may, from time to time, adopt policies governing the
disposition of unused vacation days remaining at the end of the Company's fiscal
year; which policies may govern whether unused vacation days will be paid, lost,
or carried over into subsequent fiscal years. Employee shall also be entitled to
leave from work, without reduction in compensation, due to illness to the extent
allowed by the Company consistent with its policies and procedures and subject
to the provisions of this Agreement governing termination due to disability,
sickness or illness.
2
6. Termination. This Agreement shall terminate prior to the Expiration
Date upon the happening of any of the following events:
6.1 Death. Automatically and without notice upon the death of
Employee;
6.2 Voluntary Termination by Employee. By Employee voluntarily
leaving the employ of the Company with or without the consent of the Company
(which Employee shall be entitled to do upon thirty (30) days written notice);
6.3 Disability. Upon written notice of termination from the
Company to Employee, after Employee becomes disabled, either totally or
partially, for a period of ninety (90) days during any one hundred fifty (150)
day period, so that he or she is prevented from performing his or her principal
duties pursuant to this Agreement; provided, that the Company's obligation to
pay the compensation due under Section shall continue until this Agreement is so
terminated.
6.4 For Cause. Upon discharge of Employee, on written notice,
by the Board of Directors on grounds of: (i) conviction of a crime of moral
turpitude; (ii) deliberate failure to carry out the reasonable policies of the
Board of Directors, as they may relate to Employee's duties under this
Agreement; (iii) chronic alcohol or drug abuse; (iv) fraud, embezzlement or
misappropriation of Company assets; (v) disloyal, dishonest or illegal conduct
in the course of his or her employment; or (vi) a material default or breach of
any of the covenants made by Employee in this Agreement. The written notice
delivered by the Board of Directors shall specify the ground for termination and
shall be supported by a statement of all relevant facts constituting cause for
termination. Any termination under this Section shall be deemed a termination
for "cause".
6.5 Notice and Opportunity to Cure. If the Company intends to
terminate this Agreement under clause (ii) or (vi) of Section , and if all of
Employee's acts or omissions giving rise to such determination to terminate this
Agreement are, in the reasonable determination of the Board of Directors,
susceptible to substantially complete cure by Employee within a period of thirty
(30) days, the written notice given to Employee pursuant to Section shall state
that the effective date of termination shall be thirty (30) days from the date
of such notice, and such notice shall be rescinded if Employee effects a
substantially complete cure within such thirty (30) day period.
6.6 Payment of Compensation After Termination . Upon the
occurrence of any events set forth in Sections through hereof or Section , the
Company shall be obligated to pay to Employee (or Employee's estate in the event
of Employee's death) (i) the compensation due him or her under Section up to the
3
date of termination; (ii) any unpaid bonus previously awarded by the Board of
Directors; and (iii) compensation for any earned but unused vacation, which
compensation shall be paid at the Base Salary rate in effect at the time such
unused vacation accrued.
6.7 Payment Upon Termination by the Company Without Cause. In
the event this Agreement is terminated by the Company for a reason other than
one of those set forth in Section or Section or Section , the Company shall be
required to continue to pay Employee, as severance compensation, the
compensation due him or her under Section , for the unexpired term of this
Agreement (without regard to Section 3). Such severance compensation shall be
paid for a period equal to the number of weeks remaining in the unexpired term
of this Agreement (without regard to Section ). Employee may elect to receive
the severance compensation (or such part of the severance compensation as shall
then remain unpaid) in a lump sum. Such election may be made by written notice
to the Company, and if such election is made the lump sum shall be paid by the
Company within ten (10) days after such notice.
6.8 Change of Control. Notwithstanding the foregoing, the
Company or its successor, or Employee may terminate this Agreement, with or
without cause, in connection with a Change of Control of the Company. In the
event of such a termination, the Company shall pay Employee on the date of
termination a lump sum payment equal to the greater of (a) 2.99 times Employee's
"Base Amount" and (b) the compensation due him or her under Section for the
unexpired term of this Agreement (without regard to Section ). Such payment
shall be in addition to any unpaid amounts otherwise then due Employee under
Section of this Agreement. Any termination of this Agreement, except termination
under Sections through , within twelve months after either (i) the earliest date
on which the Company enters into a letter of intent, memorandum of agreement, or
similar document leading to a Change of Control, or (ii) the effective date of a
Change of Control, shall be deemed conclusively to be a termination in
connection with a Change of Control. If the Company or its successor causes a
material reduction in Employee's responsibilities or compensation after a Change
of Control, then Employee may at Employee's option terminate this Agreement
under Section any time within one hundred eighty (180) days after such
reduction, and such resignation shall be deemed a termination by the Company in
connection with a Change of Control and shall entitle Employee to the benefits
of this Section . For purposes of this Agreement, the following definitions
shall apply.
6.8.1 "Change of Control" means (i) the acquisition of Voting
Securities of the Company by a Person or an Affiliated Group entitling the
holder thereof to elect a majority of the directors of the Company; provided,
that an increase in the amount of Voting Securities held by a Person or
Affiliated Group who previously held sufficient Voting Securities to elect a
majority of the directors shall not constitute
4
a Change of Control; and provided, further, that an acquisition of Voting
Securities by one or more Persons acting as an underwriter in connection with a
sale or distribution of such Voting Securities shall not constitute a Change of
Control under this clause (i); (ii) the sale of all or substantially all of the
assets of the Company; or (iii) a merger or consolidation of the Company with or
into another corporation or entity in which the stockholders of the Company
immediately before such merger or consolidation do not own, in the aggregate,
Voting Securities of the surviving corporation or entity (or the ultimate parent
of the surviving corporation or entity) entitling them, in the aggregate (and
without regard to whether they constitute an Affiliated Group) to elect a
majority of the directors or persons holding similar powers of the surviving
corporation or entity (or the ultimate parent of the surviving corporation or
entity); provided, however, that in no event shall any transaction described in
clauses (i), (ii) or (iii) be a Change of Control if all of the Persons
acquiring Voting Securities or assets of the Company or merging or consolidating
with the Company are one or more direct or indirect subsidiary or parent
corporations of the Company.
6.8.2 "Voting Securities" means shares of capital stock or
other equity securities entitling the holder thereof to regularly vote for the
election of directors (or for person performing a similar function if the issuer
is not a corporation), but does not include the power to vote upon the happening
of some condition or event which has not yet occurred.
6.8.3 "Person" means any natural person or any corporation,
partnership, limited liability company, trust, unincorporated business
association or other entity.
6.8.4 "Affiliated Group" means (i) a Person and one or more
other Persons in control of, controlled by, or under common control with such
Person; and (ii) two or more Persons who, by written agreement among them, act
in concert to acquire Voting Securities entitling them to elect a majority of
the directors of the Company.
7. Renegotiation. Employee shall be entitled to seek a modification of
this Agreement prior to the Expiration Date if the market value of the Company's
outstanding capital stock exceeds $100,000,000. The Company will negotiate in
good faith with Employee in connection with any such request by the Employee for
such a modification of this Agreement.
8. Intellectual Property Agreement. Employee acknowledges that the
Intellectual Property Agreement concurrently executed and delivered by Employee
shall remain in effect and shall not be affected by the terms of this Agreement
or the termination of this Agreement.
5
9. Entire Agreement. The provisions of this Agreement, including the
exhibits attached to this Agreement, constitute the entire agreement between
Employee and the Company with respect to the subject matter of this Agreement,
and supersede any prior oral understanding. No modification, supplement or
discharge of this Agreement shall be effective unless in writing and executed on
behalf of the party to be charged.
10. Waiver. No waiver by either party of any condition, term or
provision of this Agreement shall be deemed to be a waiver of any proceeding or
succeeding breach of the same or of any other condition, term or provision of
this Agreement.
11. Assignability. This Agreement, and the rights and obligations of
the parties under this Agreement, may not be assigned by Employee. The Company
may assign any of its rights and obligations under this Agreement to any
successor or surviving corporation resulting from a merger, consolidation, sale
of assets or stock, or other corporate reorganization, upon condition that the
assignee shall assume, either expressly or by operation of law, all of the
Company's obligations under this Agreement.
12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13. Construction. This Agreement shall be construed in accordance with
the laws of the State of California.
14. Survival. This Section and the covenants and agreements contained
in Sections 5.3, 6.6, 6.7, and 6.8 of this Agreement shall survive termination
of Employee's employment.
15. Notices. Any notices or other communication required or permitted
to be given under this Agreement shall be in writing and shall be sent by United
States mail, first class certified or registered postage prepaid, return receipt
requested, or personally delivered to the parties at the following addresses:
To the Company: BioTime, Inc.
935 Pardee Street
Berkeley, California 94710
Attention: President
To Employee: Ronald S. Barkin, Esq.
935 Pardee Street
Berkeley, California 94710
6
A notice sent by certified or registered mail shall be deemed delivered on the
fourth day after deposit in the United States mail, postage prepaid, and
addressed as aforesaid. Any party may change its address for notice by giving
notice to the other party in the manner provided in this Section.
16. Unenforceable Provisions. If all or part of any one or more of the
provisions contained in this Agreement is for any reason held to be invalid,
illegal, or unenforceable in any respect, the invalidity, illegality, or
unenforceability shall not affect any other provisions, and this Agreement shall
be equitably construed as if it did not contain the invalid, illegal, or
unenforceable provision.
17. Section Headings. Section headings are for the convenience of the
parties and do not form a part of this Agreement.
18. Section and Other References. References in this Agreement to
Sections, subsections, and Exhibits are references to sections and subsections
in this Agreement and exhibits attached to this Agreement unless specified
otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
/s/ Ronald S. Barkin
EMPLOYEE: _______________________________
Ronald S. Barkin, Esq.
COMPANY: BIOTIME, INC.
By: __________________________
Title: __________________________
7
EXHIBIT A
DUTIES AND RESPONSIBILITIES
The Executive Vice President shall participate in formulating the Company's
operating and financial plans in conjunction with the Board of Directors and the
Corporate Officers. In such capacity, and subject to the ultimate authority of
the Board of Directors, the Executive Vice President shall assist in the review
and approval or disapproval of proposed plans, programs, and contracts for joint
ventures and investments in other corporations, partnerships and similar
entities, and for obtaining debt and equity financing for the Company. As
requested by the Board of Directors or the Chief Executive Officer, the
Executive Vice President shall represent the Company in the negotiation of
contracts and agreements with third parties, including, but not limited to,
license distribution and manufacturing contracts in regulatory matters involving
government or administrative bodies having jurisdiction over the Company or its
operations, in obtaining debt and equity financing, and in other aspects of the
Company's affairs.
1
5
3-MOS
JUN-30-1997
JAN-01-1997
MAR-31-1997
7,345,433
0
0
0
0
7,624,362
80,228
127,005
7,744,012
101,871
0
0
0
17,630,596
0
7,744,012
0
0
0
0
(566,910)
0
0
(520,282)
0
0
0
0
0
(520,282)
(0.17)
0
