SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2008
OR
o 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)
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California
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94-3127919
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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1301
Harbor Bay Parkway, Suite 100
Alameda,
California 94502
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code (510) 521-3390
Securities
registered pursuant to Section 12(b) of the Act:
None
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Securities
registered pursuant to Section 12(g) of the Act
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Title
of class
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Common
Shares, no par value
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Title
of class
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Common
Share Purchase Warrants
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No x
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 o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer o Accelerated filer o
Non-accelerated filer o (Do not check if
a smaller reporting company) Smaller reporting
company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes o No x
The
approximate aggregate market value of voting common shares held by
non-affiliates computed by reference to the price at which common shares were
last sold as of March 5, 2009 was $25,292,673. Shares held
by each executive officer and director and by each person who beneficially owns
more than 5% of the outstanding common shares have been excluded in that such
persons may under certain circumstances be deemed to be
affiliates. This determination of affiliate status is not necessarily
a conclusive determination for other purposes.
The
number of common shares outstanding as of February 26, 2009 was
25,213,569
Documents
Incorporated by Reference
None
BioTime,
Inc.
Table
of Contents
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| Item 7A | Quantitative and Qualitative Disclosures about Market Risk |
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| PART III | ||
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56
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63
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| PART IV | ||
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67
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| Signatures |
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2
Statements
made in this Form 10-K that are not historical facts may constitute
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those
discussed. Words such as “expects,” “may,” “will,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions
identify forward-looking statements. See “Risk Factors” and Note 1 to
Financial Statements.
Overview
We are a
biotechnology company engaged in two areas of biomedical research and product
development. First, we historically have developed blood plasma
volume expanders, and related technology for use in surgery, emergency trauma
treatment and other applications. Our lead blood plasma expander
product, Hextend®, is a
physiologically balanced intravenous solution used in the treatment of
hypovolemia. Hypovolemia is a condition caused by low blood volume,
often from blood loss during surgery or from injury. Hextend
maintains circulatory system fluid volume and blood pressure and keeps vital
organs perfused during surgery and trauma care.
Our
regenerative medicine business is operated through our wholly owned subsidiary
Embryome Sciences, Inc. Regenerative medicine refers to therapies
based on human embryonic stem (“hES”) cell technology that are designed to
rebuild cell and tissue function lost due to degenerative disease or
injury. These novel stem cells provide a means of manufacturing every
cell type in the human body and therefore show considerable promise for the
development of a number of new therapeutic products. We are focusing our current
efforts in the regenerative medicine field on the development and sale of
advanced human stem cell products and technology that can be used by researchers
at universities and other institutions, at companies in the bioscience and
biopharmaceutical industries, and at other companies that provide research
products to companies in those industries. These research-only markets generally
can be marketed without regulatory (FDA) approval, and are therefore relatively
near-term business opportunities when compared to therapeutic products. We may
also initiate development programs for human therapeutic applications should it
be determined that it is practical to raise the required capital or partner with
a third party on terms acceptable to the company.
Our
operating revenues have been derived almost exclusively from royalties and
licensing fees related to the sale of our plasma volume expander products,
primarily Hextend. We began to make our first stem cell research
products available during 2008 but we have not yet generated significant
revenues in that business segment. Our ability to generate
substantial operating revenue depends upon our success in developing and
marketing or licensing our plasma volume expanders and stem cell products and
technology for medical and research use.
Products for Stem Cell
Research
We are
developing products and technology for use in the new field of regenerative
medicine. Regenerative medicine refers to therapies based on human
embryonic stem (“hES”) cell technology. Since these cells have the ability to
transform into all of the cells of the human body (a property called pluripotency),
they enable the manufacture of a host
3
of new
products of interest to medical researchers such as cells designed to
rebuild cell and tissue function lost due to degenerative disease or injury and
cell lines for basic research and discovery of new drugs. Since
embryonic stem cells can now be derived in a noncontroversial manner, they are
increasingly likely to be utilized in a wide array of future research programs
in the attempt to restore the function of organs and tissues damaged by
degenerative diseases such as heart failure, stroke, Parkinson’s disease,
macular degeneration, diabetes, as well as many others.
In our
subsidiary Embryome Sciences, Inc., we are working to merge new technologies in
the study of DNA (genomics) with the biology of embryonic stem cells to provide
scientists with a detailed "roadmap" of the human developmental tree, the
factors to push the cells into desired lineages, and tools to purify the desired
cell types. This detailed map of the embryome
is expected to allow scientists to better characterize the cells they produce,
facilitate the purification of product, and thereby reduce the chances of
contaminating cell types causing complications in patients. Embryome Sciences
launched a first draft of this map in its online database Embryome.com in 2008
and intends to continuously improve the content of this site to aid researchers
and to familiarize scientists with a growing catalog of our research
products.
We plan
to focus our efforts in the regenerative medicine field on the development and
sale of advanced human stem cell products and technologies that can be used
by researchers at universities and other institutions, at companies in the
bioscience and biopharmaceutical industries, and at other companies that provide
research products to companies in those industries. By focusing our
resources on products and technologies that will be used by researchers and drug
developers at larger institutions and corporations, we believe that we will be
able to commercialize products more quickly, and using less capital, than
developing therapeutic products ourselves. We may also attempt to
develop our own human stem cell products for diagnostic and therapeutic uses in
the future, if we believe that we have sufficient resources to do so or if we
can do so in collaboration with other companies or institutions.
We have
already introduced our first stem cell research products, and we are
implementing plans to develop additional research products over the next two
years.
Embryome
Database
The
future challenge for regenerative medicine is to navigate the complexity of
human development, to identify the many hundreds of cell types coming from
embryonic stem cells, and to manufacture purified populations of desired cell
types. To assist researchers in attaining these goals, we are
creating a detailed “map” of the human and mouse embryome that will take the
form of a relational database intended to permit researchers to chart the cell
lineages of human development, the genes expressed in those cell types, and
antigens present on the cell surface of those cells that can be used in
purification. Our embryome map database is now available at our
website embryome.com.
4
ESpan™
Cell Growth Media
We are
also now marketing a line of cell growth media products called ESpanTM. These
growth media are optimized for the growth of primitive human embryonic
progenitor cell types. In both the laboratory setting where basic research on
stem cells is performed as well as the commercial sector where stem cells are
scaled up for the manufacture of cell-based therapies or for the identification
of new drugs, cells need to be propagated in liquid media. We expect that rather
than propagating hES cells in large quantities, many end users will instead
propagate cells using media optimized for the propagation of embryonic
progenitor cells created from hES cells.
ESpy™
Cell Lines
Additional
new products that we have targeted for development are ESpyTM cell
lines, which will be derivatives of hES cells that send beacons of light in
response to the activation of particular genes. The ESpy™ cell lines
will be developed in conjunction with Lifeline using the ACTCellerate technology
licensed from Advanced Cell Technology, Inc. (“ACT”) and other technology
sublicensed from Lifeline.
Other
New Products Planned
We also
plan to bring to market other new growth and differentiation factors and kits
that will permit researchers to manufacture specific cell types from embryonic
stem cells, and purification tools useful to researchers in the quality control
of products for regenerative medicine. As new products are developed,
they will become available for purchase on embryome.com.
Human
embryonic stem cell technology is approximately 10 years old and evolving
rapidly. As a result, we cannot accurately forecast the amount of revenue that
the new products we offer might generate.
Licensed
Stem Cell Technology and Stem Cell Product Development Agreements
We have
obtained the right to use stem cell technology that we believe has great
potential in our product development efforts, and that may be useful to other
companies that are engaged in the research and development of stem cell products
for human therapeutic and diagnostic use. We have also entered into
an agreement to produce and market stem cell products jointly with Lifeline,
which also provides us with a license to use certain technology owned or
licensed by them.
Licensed
Patents
We have
entered into a Commercial License and Option Agreement with Wisconsin Alumni
Research Foundation (“WARF”). The WARF license permits us to use
certain patented and patent pending technology belonging to WARF, as well as
certain stem cell materials, for research and development purposes, and for the
production and marketing of “research products” and “related
products.” “Research products” are products used as research tools,
including in
5
drug
discovery and development. “Related products” are products other than
research products, diagnostic products, or therapeutic
products. “Diagnostic products” are products or services used in the
diagnosis, prognosis, screening or detection of disease in
humans. “Therapeutic products” are products or services used in the
treatment of disease in humans.
Under
the WARF license agreement, we will pay WARF a license fee of $225,000 in cash
and $70,000 worth of our common shares. The first installment of cash
in the amount of $10,000 was paid during February 2008, the common shares will
be issued during March 2009, and the remaining $215,000 is due on the earlier of
(i) thirty (30) days after we raise $5,000,000 or more of new equity financing,
or (ii) March 2, 2010. A maintenance fee of $25,000 will be due
annually on March 2 of each year during the term of the WARF License beginning
March 2, 2010.
We will
pay WARF royalties on the sale of products and services under the WARF
license. The royalty will be 4% on the sale of research products and
2% on the sale of related products. The royalty is payable on sales
by us or by any sublicensee. The royalty rate is subject to certain
reductions if we also become obligated to pay royalties to a third party in
order to sell a product.
We will
also pay WARF $25,000 toward reimbursement of the costs associated with
preparing, filing, and maintaining the licensed WARF patents. That
fee is payable in two installments. The first installment of $5,000
was paid during February 2008, and the remaining $20,000 is due on the earlier
of (i) thirty (30) days after we raise $5,000,000 or more of new equity
financing, or (ii) March 2, 2010.
We have
an option to negotiate with WARF to obtain a license to manufacture and market
therapeutic products, excluding products in certain fields of
use. The issuance of a license for therapeutic products would depend
upon our submission and WARF’s acceptance of a product development plan, and our
reaching agreement with WARF on the commercial terms of the license such as a
license fee, royalties, patent reimbursement fees, and other contractual
matters.
The WARF
license shall remain in effect until the expiration of the latest expiration
date of the licensed patents. However, we may terminate the WARF
license prior to the expiration date by giving WARF at least ninety days written
notice, and WARF may terminate the WARF license if we (a) fail to make any
payment to WARF, (b) fail to submit any required report to WARF, (c) commit any
breach of any other covenant in the WARF license that is not remedied within
ninety days after written notice from WARF, or (d) commit any act of bankruptcy,
become insolvent, are unable to pay our debts as they become due, file a
petition under any bankruptcy or insolvency act, or have any such petition filed
against us which is not dismissed within sixty days, or offers its creditors any
component of the patents or materials covered by the WARF license.
Lifeline
We have
entered into a Product Production and Distribution Agreement with Lifeline for
the
production and marketing of embryonic progenitor cells or progenitor cell lines,
and products derived from those embryonic progenitor cells. The
products developed under the agreement with Lifeline will be produced and sold
for research purposes, such as drug discovery and drug development
uses.
6
The
proceeds from the sale of products to certain distributors with which Lifeline
has a pre-existing relationship will be shared equally by us and Lifeline, after
deducting royalties payable to licensors of the technology used, and certain
production and marketing costs. The proceeds from products produced
for distribution by both us and Lifeline, and products produced by one party at
the request of the other party, will be shared in the same
manner. Proceeds from the sale of other products, which are produced
for distribution by one party, generally will be shared 90% by the party that
produced the product for distribution, and 10% by the other party after
deducting royalties payable to licensors of technology used. In the
case of the sale of these products, the party that produces the product and
receives 90% of the sales proceeds will bear all of the production and marketing
costs of the product.
The
products will be produced using technology and stem cell lines licensed from
WARF, technology developed by us, technology developed by Lifeline, and
technology licensed from ACT. WARF and ACT will receive royalties
from the sale of the products developed using their licensed technology and stem
cells.
We paid
Lifeline $250,000 to facilitate their product production and marketing
efforts. We will be entitled to recover that amount from the share of
product sale proceeds that otherwise would have been allocated to
Lifeline.
ACTCellerate™
Technology
We have
entered into a license agreement with ACT under which we acquired exclusive
world-wide rights to use ACT’s “ACTCellerate” technology for methods to
accelerate the isolation of novel cell strains from pluripotent stem
cells. The licensed rights include pending patent applications,
know-how, and existing cells and cell lines developed using the
technology.
The
licensed technology is designed to provide a large-scale and reproducible method
of isolating clonally purified human embryonic progenitor cell lines, many of
which may be capable of extended propagation in vitro. Initial
testing suggests that the technology may be used to isolate at least 140
distinct clones that contain many previously uncharacterized cell types derived
from all germ layers that display diverse embryo- and site-specific homeobox
gene expression. Despite the expression of many oncofetal genes, none
of the human embryonic progenitor cell lines tested led to tumor formation when
transplanted into immunocompromised mice. The cell lines studied
appear to have a finite replicative lifespan but have longer telomeres than most
fetal- or adult-derived cells, which may facilitate their use in the manufacture
of purified lineages for research and human therapy. Information
concerning the technology was published in the May 2008 edition of the journal
Regenerative Medicine.
We may
use the licensed technology and cell lines for research purpose and for the
development of therapeutic and diagnostic products for human and veterinary
use. We also have the right
to grant sublicenses.
7
We paid
ACT a $250,000 license fee and will pay an 8% royalty on sales of products,
services, and processes that utilize the licensed technology. Once a
total of $1,000,000 of royalties has been paid, no further royalties will be
due.
ACT may
reacquire royalty free, world wide licenses to use the technology for retinal
pigment epithelial cells, hemangioblasts, and myocardial cells, on an exclusive
basis, and for hepatocytes, on a non-exclusive basis, for human therapeutic
use. ACT will pay us $5,000 for each license that it elects to
reacquire.
iPS
Technology
We have
entered into a license agreement and a sublicense agreement with ACT under which
we acquired world-wide rights to use an array of ACT technology and technology
licensed by ACT from affiliates of Kirin Pharma Company, Limited. The
ACT license and Kirin sublicense permit the commercialization of products in
human therapeutic and diagnostic product markets.
The
licensed technology covers methods to transform cells of the human body, such as
skin cells, into an embryonic state in which the cells will be
pluripotent. This new technology is sometimes referred to as induced
pluripotent stem cell (iPS) technology. Because iPS technology does
not involve human embryos or egg cells, and classical cloning techniques are not
employed, the use of iPS technology may eliminate some ethical concerns that
have been raised in connection with the procurement and use of human embryonic
stem cells in scientific research and product development.
The
portfolio of licensed patents and patent applications covers methods to produce
iPS cells that do not carry viral vectors or added genes. Other iPS
technology currently being practiced by other researchers utilizes viruses and
genes that are likely incompatible with human therapeutic uses. We
believe that technologies that facilitate the reprogramming of human cells to
iPS cells without using viruses could be advantageous in the development of
human stem cell products for use in medicine.
The Kirin
sublicense covers patent application for methods for cloning mammals using
reprogrammed donor chromatin or donor cells and methods for altering cell
fate. These patent applications relate to technology to alter the
state of a cell, such as a human skin cell, by exposing the cell’s DNA to the
cytoplasm of another reprogramming cell with differing properties. We
may use this licensed technology for all human therapeutic and diagnostic
applications.
A second
series of patent applications licensed nonexclusively from ACT includes
technologies for the use of reprogramming cells that over-express RNAs for the
genes OCT4, SOX2, Nanog, cMYC, and other factors known to be useful in iPS
technology, methods of resetting cell lifespan by extending the length of
telomeres, the use of the cytoplasm of undifferentiated cells to reprogram human
cells, the use of a cell bank of hemizygous O- cells,
8
methods
of screening for differentiation agents, and stem cell-derived endothelial cells
modified to disrupt tumor angiogenesis. We may use this technology in
commercializing the patents licensed under the Kirin Sublicense.
The ACT
license also includes patent applications for other uses. One
licensed patent application covers a method of differentiation of morula or
inner cell mass cells and a method of making lineage-defective embryonic stem
cells. That technology can be used in producing embryonic progenitor
cells without the utilization of embryonic stem cell lines. Another
licensed patent application covers novel culture systems for ex vivo development that
contains technology for utilizing avian cells in the production of stem cell
products free of viruses and bacteria.
ACT
iPS License Provisions
Under the
ACT license, we paid ACT a $200,000 license fee and will pay a 5% royalty on
sales of products, services, and processes that utilize the licensed ACT
technology. Once a total of $600,000 of royalties has been paid, no
further royalties will be due. We will also pay 20% of any fees or
other payments, other than equity investments, research and development costs,
loans and royalties, received by us from sublicensing the ACT technology to
third parties.
We may
use the licensed technology and cell lines for research purpose and for the
development of therapeutic and diagnostic products for human and veterinary use,
excluding (a) human and non-human animal cells for commercial research use,
including small molecule and other drug testing and basic research and (b) human
cells for therapeutic and diagnostic use in the treatment of human diabetes,
liver diseases, retinal diseases and retinal degenerative diseases, other than
applications involving the use of cells in the treatment of tumors where the
primary use of the cells is the destruction or reduction of tumors and does not
involve regeneration of tissue or organ function. The exclusions from
the scope of permitted uses under the ACT license will lapse if ACT’s license
with a third party terminates or if the third party no longer has an exclusive
license from ACT for those uses.
Our
license to use some of the ACT technology is non-exclusive, and is limited to
use in conjunction with the technology sublicensed from ACT under the Kirin
sublicense, and may not be sublicensed to third parties other than subsidiaries
and other affiliated entities. We do have the right to grant
sublicenses to the other licensed ACT technology.
We will
have the right to prosecute the patent applications and to enforce all patents,
at our own expense, except that ACT is responsible for prosecuting patent
applications for the non-exclusively licensed technology at its own
expense. We will have the right to patent any new inventions arising
from the use of the licensed patents and technology.
We will
indemnify ACT for any products liability claims arising from products made by us
and our sublicensees.
The
licenses will expire in twenty years or upon the expiration of the last to
expire of the licensed patents, whichever is later.
9
Kirin
Sublicense Provisions
Under the
Kirin sublicense, we paid ACT a $50,000 license fee and will pay a 3.5% royalty
on sales of products, services, and processes that utilize the licensed ACT
technology, and 20% of any fees or other payments, other than equity
investments, research and development costs, loans and royalties we may receive
from sublicensing the Kirin technology to third parties. We will also pay to ACT
or to an affiliate of Kirin, annually, the amount, if any, by which royalties
payable by ACT under its license agreement with Kirin are less than the $50,000
annual minimum royalty due. Those payments will be credited against
other royalties payable to ACT under the Kirin sublicense.
We may
use the sublicensed technology for the development of therapeutic and diagnostic
human cell products, including both products made, in whole or in part, of human
cells, and products made from human cells. We have the right to grant
further sublicenses.
We will
indemnify ACT for any products liability claims arising from products made by us
and our sublicensees.
The
licenses will expire in upon the expiration of the last to expire of the
licensed patents, or May 9, 2016 is no patents are issued.
Stem
Cell Agreement with Reproductive Genetics Institute
We have
entered into a Stem Cell Agreement with Reproductive Genetics Institute (“RGI”)
pursuant to which we obtained the non-exclusive right to acquire RGI’s
proprietary stem cell lines. The Stem Cell Agreement grants us rights
to market new human embryonic stem cell (hES) lines selected by us from 294 hES
lines derived by RGI. We will initially select 10 RGI hES cell lines,
and may add additional cell lines at our option. We will receive starting
cultures of the cell lines we select, and will scale up those cell lines for
resale as research products. Because our rights are non-exclusive, RGI
will retain the right to market and use its stem cell lines for its own
account. RGI is a leading fertility center that screens embryos for
genetic disorders, such as cystic fibrosis and muscular dystrophy prior to
implantation. The RGI hES lines include both normal cells and 88 cell
lines identified as carrying a host of inherited genetic disease genes, some of
which we plan to sell as research products to universities and companies in the
bio-science and pharmaceutical industries.
We will
pay RGI a royalty in the amount of 7% of net sales on RGI derived cells sold for
research purposes, such as the use of cells to test potential new drugs or
diagnostic products. The Stem Cell Agreement requires us to sell the RGI
cells for a minimum price of $7,500 per ampule of cells. We also
agreed to sell to RGI any cells that we derive from RGI stem cells at a price
equal to 50% of the lowest price at which we sell those cells to third
parties.
We will
be marketing the acquired cells for research purposes only. However,
the Stem Cell Agreement allows us and RGI to develop therapeutic or diagnostic
uses of the cells, subject to approval by a joint steering committee composed of
Embryome Sciences and RGI officers. In the absence of an agreement by
the steering committee for a different revenue sharing arrangement, and provided
that we are successful in developing and commercializing
10
one or
more of those products for therapeutic or diagnostic uses, we would pay RGI a
royalty based on net sales of each product. The royalty rate would be
50% of net sales of the product, minus one-half of any other royalties required
to be paid to third parties. None of the RGI cells have been approved
by the Food and Drug Administration or any equivalent foreign regulatory agency
for use in the treatment of disease, and we do not have any specific plans for
the development of RGI stem cells for use in the treatment or diagnosis of
disease in humans.
We have
agreed to issue RGI 32,259 of our common shares, no par value, as a license fee
for the use of RGI’s proprietary technology related to the first 10 cell types
acquired by us under the Stem Cell Agreement. If we elect to acquire
more than 10 cell types, we will issue RGI an additional number of BioTime
common shares having a market value of $5,000 for each additional cell type that
we choose to acquire. The market value of our common shares will be
based on the closing price of the shares on the OTC-Bulletin Board market on the
date Embryome we elect to acquire the additional cell types.
Plasma
Volume Expanders and Related Products
Hextend
Our first
product, Hextend, is a physiologically balanced blood plasma volume expander,
for the treatment of hypovolemia. Hypovolemia is a condition caused
by low blood volume, often from blood loss during surgery or from
injury. Hextend maintains circulatory system fluid volume and blood
pressure and helps sustain vital organs during surgery. Hextend,
approved for use in major surgery, is the only blood plasma volume expander that
contains lactate, multiple electrolytes, glucose, and a medically approved form
of starch called hetastarch. Hextend is sterile to avoid risk of
infection. Health insurance reimbursements and HMO coverage now
include the cost of Hextend used in surgical procedures.
Hextend
is part of the U.S. Armed Forces Tactical Combat Casualty Care protocol and is
used to treat battlefield casualties. Hextend is also currently being
used to treat hypovolemia subsequent to trauma or low blood pressure due to
shock by emergency room physicians. After appropriate clinical
testing and regulatory approval, it may be used by paramedics to treat acute
blood loss in trauma victims being transported to the hospital.
Hextend
is also being used in surgery with cardio-pulmonary bypass
circuits. In order to perform heart surgery, the patient’s heart must
be stopped and a mechanical apparatus is used to oxygenate and circulate the
blood. The cardio-pulmonary bypass apparatus requires a blood
compatible fluid such as Hextend to commence and maintain the process of
diverting the patient’s blood from the heart and lungs to the mechanical
oxygenator and pump. In a clinical trial conducted in 2001, cardiac
surgery patients treated with Hextend, maintained more normal kidney function,
experienced less pain and nausea, showed less deep venous thrombosis, avoided
dialysis, and had shorter delay times to first meal compared to those treated
with other fluids.
11
An
important goal of the Hextend development program was to produce a product that
can be used in multi-liter volumes. The safety related secondary
endpoints targeted in the U.S. clinical study included those involving
coagulation. We believe that the low incidence of adverse events
related to blood clotting in the Hextend patients demonstrates that Hextend may
be safely used in amounts exceeding 1.5 liters. An average of 1.6
liters of Hextend was used in the Phase III clinical trials, with an average of
two liters for patients who received transfused blood products.
Hextend
is being distributed in the United States by Hospira, Inc. (“Hospira”) and in
South Korea by CJ CheilJedang Corp. (“CJ”) under exclusive licenses from
us. Hospira also has the right to obtain regulatory approval and
market Hextend in Latin America and Australia.
We are
also developing another blood volume replacement product,
PentaLyte®. It, like Hextend, has been formulated to maintain the
patient’s tissue and organ function by sustaining the patient’s fluid volume and
physiological balance.
PentaLyte
PentaLyte
is our proprietary pentastarch-based synthetic plasma expander, designed
especially for use when a faster elimination of the starch component is desired
and acceptable. Although Hextend can be used in these cases, some
physicians appear to prefer a solution which can be metabolized faster and
excreted earlier when the longer term protection provided by Hextend is not
required. PentaLyte combines the physiologically balanced Hextend
formulation with pentastarch that has a lower molecular weight and degree of
substitution than the hetastarch used in Hextend. Plasma expanders
containing pentastarch are currently widely used around the
world. Our present plan is to seek approval of PentaLyte for use in
the treatment of hypovolemia. We have conducted a Phase II clinical
study using PentaLyte in cardiac surgery for that purpose.
We have
conducted a Phase II clinical trial using PentaLyte in the treatment of
hypovolemia in cardiac surgery. PentaLyte contains a lower molecular
weight hydroxyethyl starch than Hextend, and is more quickly
metabolized. PentaLyte is designed for use when short lasting volume
expansion is desirable. Our ability to complete clinical studies of
PentaLyte will depend on our cash resources and the costs involved, which are
not presently determinable.
Products
for Hypothermic Surgery and Tissue Preservation
We have devoted a portion of our
research and development efforts and funds on the development of a plasma volume
replacement solution for use in hypothermic surgery, and a solution intended to
permit the long term storage of tissues and potentially entire organs at very
cold temperatures.
During
open-heart surgery and surgical procedures for the treatment of certain
cardiovascular conditions such as large aneurysms, cardiovascular abnormalities
and damaged blood vessels in the brain, surgeons must temporarily interrupt the
flow of blood through the body. Interruption of blood flow can be
maintained only for short periods of time at normal body temperatures because
many critical organs, particularly the brain, are quickly damaged by the
resultant loss of oxygen. Surgeons are already using Hextend and
a
12
variety
of other solutions to carry out certain limited procedures involving shorter
term (up to nearly one hour) arrest of brain and heart function at temperatures
between 15o and
25o
C. We had been developing HetaCool®, a plasma volume expander based
on Hextend, to facilitate the cooling of a patient’s body and maintaining body
temperatures closer to the ice point for extended periods of time to facilitate
complex, time consuming surgical procedures. We were also developing
HetaFreeze® and other freeze-protective solutions to allow the extension of time
during which organs and tissues can be stored for future transplant or surgical
grafting.
Due to the considerable costs of
subsequent product development for HetaCool® and HetaFreeze® and the relatively
near-term opportunities we expect for our new products in the field of
regenerative medicine, we plan to expend additional resources on research and
development for HetaCool® and HetaFreeze® only if we are able to obtain funding
targeted for those research programs or if we are able to enter into
arrangements with co-developers able to finance additional product
development.
The
Market for Plasma Volume Expanders
Approximately
10,000,000 surgeries take place in the United States each year, and blood
transfusions are required in approximately 3,000,000 of those
cases. Transfusions are also required to treat patients suffering
severe blood loss due to traumatic injury. Many more surgical and
trauma cases do not require blood transfusions but do involve significant
bleeding that can place the patient at risk of suffering from shock caused by
the loss of fluid volume (hypovolemia) and physiological
balance. Whole blood and packed red cells generally cannot be
administered to a patient until the patient’s blood has been typed and
sufficient units of compatible blood or red cells can be
located. Periodic shortages of supply of donated human blood are not
uncommon, and rare blood types are often difficult to locate. The use
of human blood products also poses the risk of exposing the patient to
blood-borne diseases such as AIDS and hepatitis.
Due to
the risks and cost of using human blood products, even when a sufficient supply
of compatible blood is available, physicians treating patients suffering blood
loss are generally not permitted to transfuse red blood cells until the
patient’s level of red blood cells has fallen to a level known as the
“transfusion trigger.” During the course of surgery, while blood
volume is being lost, the patient is infused with plasma volume expanders to
maintain adequate blood circulation. During the surgical procedure,
red blood cells are not generally replaced until the patient has lost
approximately 45% to 50% of his or her red blood cells, thus reaching the
transfusion trigger at which point the transfusion of red blood cells may be
required. After the transfusion of red blood cells, the patient may
continue to experience blood volume loss, which will be replaced with plasma
volume expanders. Even in those patients who do not require a
transfusion, physicians routinely administer plasma volume expanders to maintain
sufficient fluid volume to permit the available red blood cells to circulate
throughout the body and to maintain the patient’s physiological
balance.
13
Several
units of fluid replacement products are often administered during
surgery. The number of units will vary depending upon the amount of
blood loss and the kind of plasma volume expander
administered. Crystalloid products must be used in larger volumes
than colloid products such as Hextend.
Uses
and Benefits of Hextend and PentaLyte
Hextend
and PentaLyte have been formulated to maintain the patient’s tissue and organ
function by sustaining the patient’s fluid volume and physiological
balance. Both products are composed of a hydroxyethyl starch,
electrolytes, sugar and lactate in an aqueous base. Hextend uses a
high molecular weight hydroxyethyl starch (hetastarch) whereas PentaLyte uses a
lower, molecular weight hydroxyethyl starch (pentastarch). The
hetastarch is retained in the blood longer than the pentastarch, which may make
Hextend the product of choice when a larger volume of plasma expander or blood
replacement solution for low temperature surgery is needed, or where the
patient’s ability to restore his own blood proteins after surgery is
compromised. PentaLyte, with pentastarch, would be eliminated from
the blood faster than Hextend and might be used when less plasma expander is
needed or where the patient is more capable of quickly restoring lost blood
proteins. We believe that by testing and bringing these products to
the market, we can increase our market share by providing the medical community
with solutions to match patients’ needs.
Certain
clinical test results indicate that Hextend is effective at maintaining blood
calcium levels when used to replace lost blood volume. Calcium can be
a significant factor in regulating blood clotting and cardiac
function. Clinical studies have also shown that Hextend maintains
acid-base better than saline-based surgical fluids. We expect that
PentaLyte will also be able to maintain blood calcium levels and acid-base
balance based upon the fact that the electrolyte formulation of PentaLyte is
identical to that of Hextend.
Albumin
produced from human plasma is also used as plasma volume expander, but it is
expensive and subject to supply shortages. Additionally, an FDA
warning has cautioned physicians about the risk of administering albumin to
seriously ill patients.
We have
not attempted to synthesize potentially toxic and costly oxygen-carrying
molecules such as hemoglobin because the loss of fluid volume and physiological
balance may contribute as much to shock as the loss of the oxygen-carrying
component of the blood. Surgical and trauma patients are routinely
given supplemental oxygen and retain a substantial portion of their own red
blood cells. Whole blood or packed red blood cells are generally not
transfused during surgery or in trauma care until several units of plasma volume
expanders have been administered and the patient’s blood cell count has fallen
to the transfusion trigger. Therefore, the lack of oxygen-carrying
molecules in BioTime solutions should not pose a significant contraindication to
use.
However,
our scientists have conducted laboratory animal experiments in which they have
shown that Hextend can be successfully used in conjunction with a
hemoglobin-based oxygen carrier solution approved for veterinary purposes to
completely replace the animal’s circulating blood volume without any subsequent
transfusion and without the use of supplemental oxygen. By diluting
these oxygen carrier solutions, Hextend may reduce the potential toxicity and
costs associated with the use of those products. Once
such
14
solutions
have received regulatory approval and become commercially available, this sort
of protocol may prove valuable in markets in parts of the developing world where
the blood supply is extremely unsafe. These applications may also be
useful in combat where logistics make blood use impracticable.
Research
and Development Strategy
A
significant part of our business activities are devoted to research and
development in both the plasma volume expander and stem cell segments of our
business. During 2007 and 2008, we spent $967,864 and $1,706,214,
respectively, on research and development. While we utilize our own
proprietary technology in both our plasma volume expander and stem cell research
and development programs, we presently rely to a significant extent upon
technology licensed from others in our stem cell research and development
efforts. See “Licensed Stem Cell Technology and Stem Cell Product
Development Agreements.”
Stem
Cell Research Products
Human
embryonic stem cells are capable of becoming all of the thousands of different
cell types in the body. Since embryonic stem cells can now be derived
in a noncontroversial manner, they are increasingly likely to be utilized in a
wide array of future therapies to restore the function of organs damaged by
degenerative diseases such as heart failure, stroke, and diabetes.
We are
focusing our current efforts in the regenerative medicine field on the
development and sale of advanced human stem cell products and technology that
can be used by researchers at universities and other institutions, at companies
in the bioscience and biopharmaceutical industries, and at other companies that
provide research products to companies in those industries. By
focusing our resources on products and technology that will be used by
researchers and drug developers at larger institutions and corporations, we
believe that we will able to commercialize products more quickly, using less
capital, than developing therapeutic products our selves. We may also
attempt to develop our own human stem cell products for diagnostic and
therapeutic uses in the future, if we believe that we have sufficient
resources to do so or if we can do so in collaboration with other companies or
institutions.
We have
obtained the rights to use and market stem cell lines developed by other
companies. We believe that obtaining rights to these cell lines has
given us a “jump start” in assembling an array of products for stem cell
research. Our plan is to produce these cells in commercial quantities
and offer them for sale to researchers. We may also derive new stem
cell lines and we are working on the development of new products derived from
human stem cells, such as ESpyTM cell
lines, which will be derivatives of hES cells that send beacons of light in
response to the activation of particular genes.
15
We are
also working to develop new growth and differentiation factors that will permit
researchers to manufacture specific cell types from embryonic stem cells, and
purification tools useful to researchers in quality control of products for
regenerative medicine.
Licensing
Hospira
Hospira
has the exclusive right to manufacture and sell Hextend in the United States,
Canada, Latin America and Australia under a license agreement with
us. Hospira is presently marketing Hextend in the United
States. Hospira’s license applies to all therapeutic uses other than
those involving hypothermic surgery where the patient’s body temperature is
lower than 12°C (“Hypothermic Use”), or replacement of substantially all of a
patient’s circulating blood volume (“Total Body Washout”).
Hospira
pays us a royalty on total annual net sales of Hextend. The royalty
rate is 5% plus an additional .22% for each $1,000,000 of annual net sales, up
to a maximum royalty rate of 36%. The royalty rate for each year is
applied on a total net sales basis. Hospira’s obligation to pay
royalties on sales of Hextend will expire on a country by country basis when all
patents protecting Hextend in the applicable country expire and any third party
obtains certain regulatory approvals to market a generic equivalent product in
that country. The relevant composition patents begin to expire in
2014 and the relevant methods of use patents expire in 2019.
We have
the right to convert Hospira’s exclusive license to a non-exclusive license or
to terminate the license outright if certain minimum sales and royalty payments
are not met. In order to terminate the license outright, we would pay
a termination fee in an amount ranging from the milestone payments we received
to an amount equal to three times prior year net sales, depending upon when
termination occurs. Hospira has agreed to manufacture Hextend for
sale by us in the event that the exclusive license is terminated.
Hospira
has certain rights to acquire additional licenses to manufacture and sell our
other plasma expander products in their market territory. If Hospira
exercises these rights to acquire a license to sell such products for uses other
than Hypothermic Surgery or Total Body Washout, in addition to paying royalties,
Hospira will be obligated to pay a license fee based upon our direct and
indirect research, development and other costs allocable to the new
product. If Hospira desires to acquire a license to sell any of our
products for use in Hypothermic Surgery or Total Body Washout, the license fees
and other terms of the license will be subject to negotiation between the
parties. For the purpose of determining the applicable royalty rates,
net sales of any such new products licensed by Hospira will be aggregated with
sales of Hextend. If Hospira does not exercise its right to acquire a
new product license, we may manufacture and sell the product ourselves or we may
license others to do so.
The
foregoing description of the Hospira license is a summary only and is qualified
in all respects by reference to the full text of the Hospira license
agreement.
16
CJ
CJ
markets Hextend in South Korea under an exclusive license from us. CJ
paid us a license fee to acquire their right to market Hextend. CJ
also pays us a royalty on sales of Hextend. The royalty will range
from $1.30 to $2.60 per 500 ml unit of product sold, depending upon the price
approved by Korea’s National Health Insurance. CJ is also responsible
for obtaining the regulatory approvals required to manufacture and market
PentaLyte, including conducting any clinical trials that may be required, and
will bear all related costs and expenses.
The
foregoing description of the CJ license is a summary only and is qualified in
all respects by reference to the full text of the CJ license
agreement.
Summit
We have
entered into agreements with Summit to develop Hextend and PentaLyte in Japan,
the People’s Republic of China, and Taiwan. Summit has sublicensed to
Maruishi the right to manufacture and market Hextend in Japan, and the right to
manufacture and market Hextend and PentaLyte in China and Taiwan. The
licenses do not include Hypothermic Use.
Under the
sublicense, Maruishi will complete clinical trials required and obtain
regulatory approval to market the licensed products. Summit will also
participate in the clinical trial and regulatory approval process. A
Phase III clinical trial using Hextend in surgery is being conducted in Japan
and Summit plans to seek regulatory approval to market Hextend upon completion
of that study. Maruishi will not be obligated to begin to seek
regulatory approval of Hextend or PentaLyte in China and Taiwan earlier than six
months after the results of the Phase II study of Hextend in Japan or our Phase
II study of PentaLyte in the United States are made available to them, or March
2009, whichever is later.
The
revenues from licensing fees, royalties, and net sales, and any other payments
made for co-development, manufacturing, or marking rights to Hextend and
PentaLyte in Japan will be shared between BioTime and Summit as follows: 40% to
us and 60% to Summit. Net sales means the gross revenues from the
sale of a product, less rebates, discounts, returns, transportation costs, sales
taxes and import/export duties.
Summit
paid us fees for the right to co-develop Hextend and PentaLyte in Japan, and
Summit has also paid us a share of a sublicense fee payment from
Maruishi. Additional milestone payments of 100,000,000 yen each, of
which BioTime will receive 40%, are payable by Maruishi to Summit when a new
drug application for Hextend is filed in Japan and when the new drug application
is approved. We will also be entitled to receive 40% of the royalties
paid by Maruishi to Summit on sales in Japan. Royalties will range
from 12% to 20% of net sales, depending upon the amount of Hextend
sold. The royalty rates are subject to reduction if Summit does not
complete its participation in the new drug application, or if Summit elects to
co-market Hextend in Japan. However, if Summit sells Hextend, we will
also be entitled to receive 40% of Summit’s net sales revenues.
We will
pay to Summit 8% of all net royalties that we receive from the sale of PentaLyte
in the United States, plus 8% of any license fees that we receive in
consideration of granting a license to develop, manufacture and market PentaLyte
in the United States.
17
Net
royalties means royalty payments received during a calendar year, minus the
following costs and expenses incurred during such calendar year: (a) all taxes
assessed (other than taxes determined with reference to our net income) and
credits given or owed by us in connection with the receipt of royalties on the
sale of PentaLyte in the United States, and (b) all fees and expenses payable by
us to the United States Food and Drug Administration (directly or as a
reimbursement of any licensee) with respect to PentaLyte.
Summit
paid us a fee to acquire the China and Taiwan license. We also will
be entitled to receive 50% of the royalties and milestone payments payable to
Summit by its third-party sublicensee, Maruishi. Milestone payments
of 20,000,000 yen are payable by Maruishi when the first new drug application
for Hextend is filed and when the first clinical study of PentaLyte begins under
the sublicense. An additional milestone payment of 30,000,000 yen is
payable by Maruishi when the first new drug application for PentaLyte is filed
under the sublicense.
The
foregoing description of the Summit agreement is a summary only and is qualified
in all respects by reference to the full text of the Summit
agreements.
Manufacturing
Arrangements
Hospira
manufactures Hextend for use in the North American market, and CJ manufactures
Hextend for use in South Korea. NPBI International, BV, a Netherlands
company (“NPBI”), has manufactured batches of Hextend for our use in seeking
regulatory approval in Europe. Hospira, CJ, and NPBI have the
facilities to manufacture Hextend and other BioTime products in commercial
quantities. If Hospira and CJ choose not to manufacture and market
other BioTime products, and if NPBI declines to manufacture BioTime products on
a commercial basis, other manufacturers will have to be found that would be
willing to manufacture products for us or any licensee of our
products.
Facilities
Required – Plasma Volume Expanders
Any
products that are used in clinical trials for regulatory approval in the United
States or abroad, or that are approved by the FDA or foreign regulatory
authorities for marketing, have to be manufactured according to “good
manufacturing practices” (“GMP”) at a facility that has passed regulatory
inspection. In addition, products that are approved for sale will
have to be manufactured in commercial quantities, and with sufficient stability
to withstand the distribution process, and in compliance with such domestic and
foreign regulatory requirements as may be applicable. The active
ingredients and component parts of the products must be medical grade or
themselves manufactured according to FDA-acceptable “good manufacturing
practices.”
We do not
have facilities to manufacture our plasma volume expander products in commercial
quantities, or under GMP. Acquiring a manufacturing facility would
involve significant expenditure of time and money for design and construction of
the facility, purchasing equipment, hiring and training a production staff,
purchasing raw material and attaining an efficient level of
production. Although we have not determined the cost of
constructing
18
production
facilities that meet FDA requirements, we expect that the cost would be
substantial, and that we would need to raise additional capital in the future
for that purpose. To avoid the incurrence of those expenses and
delays, we are relying on Hospira and CJ for the production of Hextend, but
there can be no assurance that satisfactory arrangements will be made for any
new products that we may develop.
Facilities
Required—Stem Cell Products
We
recently acquired, under a sublease, an 11,000 square foot tissue culture
facility in Alameda, California. The facility is GMP capable and has
previously been certified as Class 1000 and Class 10,000 laboratory space, and
includes cell culture and manufacturing equipment previously validated for use
in GMP manufacture of cell based products. Our subsidiary, Embryome
Sciences will use the facility for the production of embryonic progenitor cells,
progenitor cell lines, and products derived from those embryonic progenitor cell
lines.
Raw
Materials
Although
most ingredients in the products we are developing are readily obtainable from
multiple sources, we know of only a few manufacturers of the hydroxyethyl
starches that serve as the primary drug substance in Hextend and
PentaLyte. Hospira and CJ presently have a source of supply of the
hydroxyethyl starch used in Hextend and PentaLyte and have agreed to maintain a
supply sufficient to meet market demand for Hextend in the countries in which
they market the product. We believe that we will be able to obtain a
sufficient supply of starch for our needs in the foreseeable future, although we
do not have supply agreements in place. If for any reason a
sufficient supply of hydroxyethyl starch could not be obtained, we or a licensee
would have to acquire a manufacturing facility and the technology to produce the
hydroxyethyl starch according to good manufacturing practices. We
would have to raise additional capital to participate in the development and
acquisition of the necessary production technology and facilities, which may not
be feasible. The use of a different hydroxyethyl starch could require
us or a licensee to conduct additional clinical trials for FDA or foreign
regulatory approval to market Hextend with the new starch.
If
arrangements cannot be made for a source of supply of hydroxyethyl starch, we
would have to reformulate our solutions to use one or more other starches that
are more readily available. In order to reformulate our products, we
would have to perform new laboratory and clinical testing to determine whether
the alternative starches could be used in a safe and effective synthetic plasma
volume expander, low temperature blood substitute or organ preservation
solution. We or our licensees would also have to obtain new
regulatory approvals from the FDA and foreign regulatory agencies to market the
reformulated product. If needed, such testing and regulatory
approvals would require the incurrence of substantial cost and delay, and there
is no certainty that any such testing would demonstrate that an alternative
ingredient, even if chemically similar to the one currently used, would be safe
or effective.
19
Marketing
Stem
Cell Research Products
In
addition to our work with plasma volume expanders, we plan to focus on near-term
commercialization opportunities in regenerative medicine. We believe
that the development of products for use in stem cell research provides an
opportunity to commercialize products more quickly, using less capital, than
developing therapeutic products requiring regulatory (FDA)
approval. Our plan is to market to companies and academic researchers
in the stem cell industry some of the tools they need to attain their
goals. We plan to directly market products ourselves, as well as
pursuing third party agreements to exclusively market in some instances, or
co-market our stem cell research products.
Our
ability to commercialize our planned stem cell research products is dependent
upon the success of our research and development program, and our ability to
obtain the capital needed for the financing of that program. We may
also enter into collaborative product development and marketing arrangements
with other companies in the stem cell industry if such opportunities arise on
terms acceptable to us.
The
market for our stem cell products may be impacted by the amount of Federal
funding available for research in the development of stem cell
therapies.
Plasma
Volume Expanders
Hextend
is being distributed in the United States by Hospira and in South Korea by CJ
under exclusive licenses from us. Hospira also has the right to
obtain licenses to manufacture and sell other BioTime products. We
have granted Hospira the right to market Hextend in Latin America and Australia,
we have granted CJ the right to market PentaLyte in South Korea, and we have
licensed to Summit the right to market Hextend and PentaLyte in Japan, China and
Taiwan, but our licensees will have to first obtain the foreign regulatory
approvals required to sell our product in those countries.
Because
Hextend is a surgical product, sales efforts must be directed to physicians and
hospitals. The Hextend marketing strategy is designed to reach its
target customer base through sales calls and an advertising campaign focused on
the use of a plasma-like substance to replace lost blood volume and the ability
of Hextend to support vital physiological processes.
Hextend
competes with other products used to treat or prevent hypovolemia, including
albumin, generic 6% hetastarch solutions, and crystalloid
solutions. The competing products have been commonly used in surgery
and trauma care for many years, and in order to sell Hextend, physicians must be
convinced to change their product loyalties. Although albumin is
expensive, crystalloid solutions and generic 6% hetastarch solutions sell at low
prices. In order to compete with other products, particularly those
that sell at lower prices, Hextend will have to be recognized as providing
medically significant advantages.
20
The FDA
has required the manufacturers of 6% hetastarch in saline solutions to change
their product labeling by adding a warning stating that those products are not
recommended for use as a cardiac bypass prime solution, or while the patient is
on cardiopulmonary bypass, or in the immediate period after the pump has been
disconnected. We have not been required to add that warning to the
labeling of Hextend. An article discussing this issue entitled “6%
Hetastarch in Saline Linked to Excessive Bleeding in Bypass Surgery” appeared in
the December 2002 edition of Anesthesiology
News. We understand that a number of hospitals have switched
from 6% hetastarch in saline to Hextend due to these concerns.
As part
of the marketing program, a number of studies have been conducted that show the
advantages of receiving Hextend and other BioTime products during
surgery. As these studies are completed, the results are presented at
medical conferences and articles written for publication in medical
journals. We are also aware of independent studies using Hextend that
are being conducted by physicians and hospitals who may publish their findings
in medical journals or report their findings at medical
conferences. The outcome of future medical studies and timing of the
publication or presentation of the results could have an effect on Hextend
sales.
Patents
and Trade Secrets
We
currently hold 25 issued United States patents having composition and methods of
use claims covering our proprietary solutions, including Hextend and
PentaLyte. The most recent U.S. patents were issued during
2002. Some of our allowed claims in the United States, which include
the composition and methods of use of Hextend and PentaLyte, are expected to
remain in force until 2014 in the case of the composition patents and 2019 in
the case of the methods of use patents. Patents covering certain of
our solutions have also been issued in several countries of the European Union,
Australia, Israel, Russia, South Africa, South Korea, Japan, China, Hong Kong,
Taiwan and Singapore, and we have filed patent applications in other foreign
countries for certain products, including Hextend, HetaCool, and
PentaLyte. Certain device patents describing our hyperbaric (high
pressure oxygen) chamber, and proprietary microcannula (a surgical tool) have
also been issued in the United States and overseas, both of which - although
only used in research so far - have possible indications in clinical
medicine.
There is
no assurance that any additional patents will be issued. There is
also the risk that any patents that we hold or later obtain could be challenged
by third parties and declared invalid or infringing of third party claims.
Further, the enforcement of patent rights often requires litigation against
third party infringers, and such litigation can be costly to
pursue.
In
addition to patents, we rely on trade secrets, know-how and continuing
technological advancement to maintain our competitive position. We
have entered into intellectual property, invention and non-disclosure agreements
with our employees and it is our practice to enter into confidentiality
agreements with our consultants. There can be no assurance, however,
that these measures will prevent the unauthorized disclosure or use of our trade
secrets and know-how, or that others may not independently develop similar trade
secrets and know-how or obtain access to our trade secrets, know-how or
proprietary technology.
21
Competition
Plasma
Volume Expanders
Our
plasma volume expander solutions will compete with products currently used to
treat or prevent hypovolemia, including albumin, other colloid solutions, and
crystalloid solutions presently manufactured by established pharmaceutical
companies, and with human blood products. Some of these products, in
particular crystalloid solutions, are commonly used in surgery and trauma care
and sell at low prices. In order to compete with other products,
particularly those that sell at lower prices, our products will have to be
recognized as providing medically significant advantages. Like
Hextend, the competing products are being manufactured and marketed by
established pharmaceutical companies that have large research facilities,
technical staffs and financial and marketing resources. B.Braun
presently markets Hespan, an artificial plasma volume expander containing 6%
hetastarch in saline solution. Hospira and Baxter International
manufacture and sell a generic equivalent of Hespan. As a result of
the introduction of generic plasma expanders and new proprietary products,
competition in the plasma expander market has intensified and wholesale prices
have declined. Hospira, which markets Hextend in the United States,
is also the leading seller of generic 6% hetastarch in saline solution and
recently obtained the right to sell Voluven®, a plasma volume expander
containing a 6% low molecular weight hydroxyethyl starch in saline solution.
Sanofi-Aventis, Baxter International, and Alpha Therapeutics sell albumin, and
Hospira, Baxter International, and B.Braun sell crystalloid
solutions.
To
compete with new and existing plasma expanders, we have developed products that
contain constituents that may prevent or reduce the physiological imbalances,
bleeding, fluid overload, edema, poor oxygenation, and organ failure that can
occur when competing products are used. To compete with existing
organ preservation solutions, we have developed solutions that can be used to
preserve all organs simultaneously and for long periods of time.
A number
of other companies are known to be developing hemoglobin and synthetic red blood
cell substitutes and technologies. Our products have been developed
for use either before red blood cells are needed or in conjunction with the use
of red blood cells. In contrast, hemoglobin and other red blood cell
substitute products are designed to remedy hypoxia and similar conditions that
may result from the loss of oxygen-carrying red blood cells. Those
products would not necessarily compete with our products unless the oxygenating
molecules were included in solutions that could replace fluid volume and prevent
or reduce the physiological imbalances as effectively as our
products. Generally, red blood cell substitutes are more expensive to
produce and potentially more toxic than Hextend and PentaLyte.
The
competition we face is likely to intensify further as new products and
technologies reach the market. Superior new products are likely to
sell for higher prices and generate higher profit margins once acceptance by the
medical community is achieved. Those companies that are successful in
introducing new products and technologies to the market first may gain
significant economic advantages over their competitors in the establishment of a
customer base and track record for the performance of their products and
technologies. Such companies will also benefit from revenues from
sales that could be used to strengthen their research and
22
development,
production, and marketing resources. All companies engaged in the
medical products industry face the risk of obsolescence of their products and
technologies as more advanced or cost effective products and technologies are
developed by their competitors. As the industry matures, companies
will compete based upon the performance and cost effectiveness of their
products.
Products
for Stem Cell Research
The stem
cell industry is characterized by rapidly evolving technology and intense
competition. Our competitors include major multinational
pharmaceutical companies, specialty biotechnology companies, and chemical and
medical products companies operating in the fields of regenerative medicine,
cell therapy, tissue engineering, and tissue regeneration. Many of
these companies are well-established and possess technical, research and
development, financial, and sales and marketing resources significantly greater
than ours. In addition, certain smaller biotech companies have formed
strategic collaborations, partnerships, and other types of joint ventures with
larger, well established industry competitors that afford these companies’
potential research and development and commercialization
advantages. Academic institutions, governmental agencies, and other
public and private research organizations are also conducting and financing
research activities which may produce products directly competitive to those we
are developing.
We
believe that some of our competitors are trying to develop stem and progenitor
cell-based technologies which may compete with our potential stem cell products
based on efficacy, safety, cost, and intellectual property
positions.
We may
also face competition from companies that have filed patent applications
relating to the cloning or differentiation of stem cells. We may be
required to seek licenses from these competitors in order to commercialize
certain of our proposed products, and such licenses may not be
granted.
Government
Regulation
FDA
and Foreign Regulation
The FDA
and foreign regulatory authorities will regulate our proposed products as drugs,
biologicals, or medical devices, depending upon such factors as the use to which
the product will be put, the chemical composition and the interaction of the
product on the human body. In the United States, products that are
intended to be introduced into the body, such as blood substitute solutions for
low temperature surgery and plasma expanders, will be regulated as drugs and
will be reviewed by the FDA staff responsible for evaluating
biologicals.
Our
domestic human drug products will be subject to rigorous FDA review and approval
procedures. After testing in animals, an Investigational New Drug
Application (IND) must be filed with the FDA to obtain authorization for human
testing. Extensive clinical testing, which is generally done in three
phases, must then be undertaken at a hospital or medical center to demonstrate
optimal use, safety and efficacy of each product in humans. Each
clinical study is
23
conducted
under the auspices of an independent Institutional Review Board
(“IRB”). The IRB will consider, among other things, ethical factors,
the safety of human subjects and the possible liability of the
institution. The time and expense required to perform this clinical
testing can far exceed the time and expense of the research and development
initially required to create the product. No action can be taken to
market any therapeutic product in the United States until an appropriate New
Drug Application (“NDA”) has been approved by the FDA. Even after
initial FDA approval has been obtained, further studies may be required to
provide additional data on safety or to gain approval for the use of a product
as a treatment for clinical indications other than those initially
targeted. In addition, use of these products during testing and after
marketing could reveal side effects that could delay, impede, or prevent FDA
marketing approval, resulting in a FDA-ordered product recall, or in FDA-imposed
limitations on permissible uses.
The FDA
regulates the manufacturing process of pharmaceutical products, requiring that
they be produced in compliance with “good manufacturing
practices.” See “Manufacturing.” The FDA also regulates
the content of advertisements used to market pharmaceutical
products. Generally, claims made in advertisements concerning the
safety and efficacy of a product, or any advantages of a product over another
product, must be supported by clinical data filed as part of an NDA or an
amendment to an NDA, and statements regarding the use of a product must be
consistent with the FDA approved labeling and dosage information for that
product.
Sales of
pharmaceutical products outside the United States are subject to foreign
regulatory requirements that vary widely from country to
country. Even if FDA approval has been obtained, approval of a
product by comparable regulatory authorities of foreign countries must be
obtained prior to the commencement of marketing the product in those
countries. The time required to obtain such approval may be longer or
shorter than that required for FDA approval.
The
United States government and its agencies have until recently refused to fund
research which involves the use of human embryonic tissue. President
Bush issued Executive Orders on August 9, 2001 and June 20, 2007 that permitting
federal funding of research on human embryonic stem cells using only the limited
number of embryonic stem cell lines that had already been created as of August
9, 2001. On March 9, 2009, President Obama rescinded President Bush’s
August 9, 2001 and June 20, 2007 Executive Orders and instructed the National
Institutes of Health to review existing guidance on human stem cell research,
including provisions establishing appropriate safeguards, and to issue new
guidance on research consistent with President’s new Executive Order and
existing law. The White House has announced that the NIH is expected
to publish new guidelines for public comment and to implement final new
guidelines within 120 days of the March 9, 2009 Executive Order.
In
addition to President Obama’s Executive Order, a bipartisan bill has been
introduced in the United States Senate that would allow Federal funding of hES
research. The Senate bill is identical to one that was previously
approved by both Houses of Congress but vetoed by President Bush. The
Senate Bill provides that human embryonic stem cells will be eligible for use in
research conducted or supported by federal funding if the cells meet each of the
following guidelines: (1) the stem cells were derived from human embryos that
have been donated from in
24
vitro
fertilization clinics, were created for the purposes of fertility treatment, and
were in excess of the clinical need of the individuals seeking such treatment;
(2) prior to the consideration of embryo donation and through consultation with
the individuals seeking fertility treatment, it was determined that the embryos
would never be implanted in a woman and would otherwise be discarded, and (3)
the individuals seeking fertility treatment donated the embryos with written
informed consent and without receiving any financial or other inducements to
make the donation. The Senate Bill authorizes the NIH to adopt
further guidelines consistent with the legislation.
California
State Regulations
The state
of California has adopted legislation and regulations that requires institutions
that conduct stem cell research to notify, and in certain cases obtain approval
from, a Stem Cell Research Oversight Committee (“SCRO Committee”) before
conducting the research. Advanced notice but not approval of the SCRO
Committee is required in the case of in vitro research that does
not derive new stem cell lines. Research that derives new stem cell
lines, or that involves fertilized human oocytes or blastocysts, or that
involves clinical trials or the introduction of stem cells into humans, or that
involves introducing stem cells into animals, requires advanced approval by the
SCRO Committee. Clinical trials may also entail approvals from an
institutional review board (IRB) at the medical center at which the study is
conducted, and animal studies may require approval by an Institutional Animal
Care and Use Committee.
All human
pluripotent stem cell lines that will be used in Embryome Sciences research must
be acceptably derived. To be acceptably derived, the pluripotent stem
cell line must have either:
|
|
·
|
Been
listed on the National Institutes of Health Human Embryonic Stem Cell
Registry, or
|
|
|
·
|
Been
deposited in the United Kingdom Stem Cell Bank,
or
|
|
|
·
|
Been
derived by, or approved for use by, a licensee of the United Kingdom Human
Fertilisation and Embryology Authority,
or
|
|
|
·
|
Been
derived in accordance with the Canadian Institutes of
Health Research Guidelines for Human Stem Cell Research under
an application approved by the National Stem Cell Oversight Committee,
or
|
|
|
·
|
Been
derived under the following
conditions:
|
(a) Donors
of gametes, embryos, somatic cells or human tissue gave voluntary and informed
consent.
(b) Donors
of gametes, embryos, somatic cells or human tissue did not receive valuable
consideration. This provision does not prohibit reimbursement for permissible
expenses as determined by an IRB.
25
(c) A
person may not knowingly, for valuable consideration, purchase or sell gametes,
embryos, somatic cells, or human tissue for research purposes. This provision
does not prohibit reimbursement for permissible expenditures as determined by an
IRB or Committee. “Permissible expenditures” means necessary and
reasonable costs directly incurred as a result of persons, not including human
subjects or donors, providing gametes, embryos, somatic cells, or human tissue
for research purposes. Permissible expenditures may include but are not limited
to costs associated with processing, quality control, storage, or transportation
of materials.
(d) Donation
of gametes, embryos, somatic cells or human tissue was overseen by an IRB (or,
in the case of foreign sources, an IRB-equivalent).
(e) Individuals
who consented to donate stored gametes, embryos, somatic cells or human tissue
were not reimbursed for the cost of storage prior to the decision to
donate.
California
regulations also require that certain records be maintained with respect to stem
cell research and the materials used, including:
|
|
·
|
A
registry of all human stem cell research conducted, and the source(s) of
funding for this research.
|
|
|
·
|
A
registry of human pluripotent stem cell lines derived or imported, to
include, but not necessarily limited
to:
|
(a) The
methods utilized to characterize and screen the materials for
safety;
(b) The
conditions under which the materials have been maintained and
stored;
(c) A
record of every gamete donation, somatic cell donation, embryo donation, or
product of somatic cell nuclear transfer that has been donated,
created, or used.
(d) A
record of each review and approval conducted by the SCRO Committee.
California
Proposition 71
In
November 2004, California State Proposition 71 (“Prop. 71”), the California
Stem Cell Research and Cures Initiative, was adopted by state-wide
referendum. Prop. 71 provides for a state-sponsored program designed
to encourage stem cell research in the State of California, and to finance such
research with State funds totaling approximately $295 million annually for 10
years beginning in 2005. This initiative creates the California
Institute for Regenerative Medicine, which will provide grants, primarily but
not exclusively, to academic institutions to advance both hES cell research and
adult stem cell research. As stated above, hES cell research is now
one of our primary areas of focus.
26
We expect
to benefit from collaborations with academic and other institutions eligible for
Prop. 71 funding for research in the use of hES cells for various diseases and
conditions.
Employees
As of
December 31, 2008, we employed eleven persons on a full-time basis and one
person on a part-time basis. Five full-time employees hold Ph.D.
Degrees in one or more fields of science.
Our
offices and laboratory facilities are located at 1301 Harbor Bay Parkway, in
Alameda, California where we occupy approximately 11,000 square feet of office
and research laboratory spaced. The facility is GMP capable and has
previously been certified as Class 1000 and Class 10,000 laboratory space, and
includes cell culture and manufacturing equipment previously validated for use
in GMP manufacture of cell based products. We will use the facility
for the production of embryonic progenitor cells, progenitor cell lines, and
products derived from those embryonic progenitor cell lines.
This
facility is occupied under a sublease. Base monthly rent is $22,000
during 2008, and will be $22,600 during 2009, and $23,340 during
2010. In addition to base rent, we pay a pro rata share of real
property taxes and certain costs related to the operation and maintenance of the
building in which the subleased premises are located.
We also
lease approximately 5,244 square feet of office and laboratory space in Heritage
Square in Emeryville, California under a lease that will expire on May 31, 2010,
with a five year extension option. This property was our principal
office and laboratory facility until we moved to our present Alameda
facility. We plan to sublease this property if a suitable subtenant
can be located. We presently pay monthly rent, including other
charges, in the amount of $15,551. Our rent will increase by 3% each
year during the initial five year term. In addition to rent, we pay
our pro rata share of operating expenses and real estate taxes for the building
in which our space is located or for the Heritage Square project as a whole, as
applicable, based upon the ratio that the number of square feet we rent bears to
the total number of square feet in the building or project.
We are
not presently involved in any material litigation or proceedings, and to our
knowledge no such litigation or proceedings are contemplated.
None.
27
BioTime
common shares were traded on the American Stock Exchange from August 31, 1999
until July 14, 2005, and have been quoted on the OTC Bulletin Board under the
symbol BTIM since July 15, 2005.
The
following table sets forth the range of high and low sale or bid prices for the
common shares for the fiscal years ended December 31, 2007 and 2008 based on
transaction data as reported by the OTC Bulletin Board:
|
Quarter Ended
|
High
|
Low
|
||||||
|
March
31, 2007
|
0.75 | 0.25 | ||||||
|
June
30, 2007
|
0.75 | 0.37 | ||||||
|
September
30, 2007
|
0.50 | 0.27 | ||||||
|
December
31, 2007
|
0.69 | 0.26 | ||||||
|
March
31, 2008
|
0.44 | 0.25 | ||||||
|
June
30, 2008
|
0.62 | 0.29 | ||||||
|
September
30, 2008
|
1.87 | 0.48 | ||||||
|
December
31, 2008
|
2.43 | 0.70 | ||||||
Over-the-counter
market quotations may reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
As of
March 10, 2009, there were 6,676 holders of the common shares.
BioTime
has paid no dividends on its common shares since its inception and does not plan
to pay dividends on its common shares in the foreseeable future. We
are also prohibited from paying dividends under the terms of a Revolving Line of
Credit Agreement.
The
following table shows certain information concerning the options and warrants
outstanding and available for issuance under all of our compensation plans and
agreements as of December 31, 2008.
|
Plan
Category
|
Number
of Shares to be Issued Upon Exercise of Outstanding Options, Warrants, and
Rights
|
Weighted
Average Exercise Price of the Outstanding Options, Warrants, and
Rights
|
Number
of Shares Remaining Available for Future Issuance Under Equity
Compensation Plans
|
|
Equity
Compensation Plans Approved by Shareholders
|
1,986,302
|
$1.30
|
73,198
|
|
Equity
Compensation Plans Not Approved By Shareholders*
|
2,048,697
|
$0.92
|
697,970
|
*We have
granted 1,302,030 stock options to certain officers subject to shareholder
approval of an amendment of our 2002 Employee Stock Option Plan which made an
additional 2,000,000 common shares available under the Plan. We
intend to submit that amendment to our shareholders for approval at our next
annual meeting. We have granted 246,667 warrants to certain
consultants for providing services to us, and we have granted 250,000 warrants
to an investment banker for arranging a portion of the loans under our Revolving
Line of Credit Agreement.
During the
period from November 19, 2008 through December 31, 2008, we granted 15,906
common shares to new lenders who provided additional credit to us under the
Revolving Line of Credit, and we issued 118,750 warrants to purchase common
shares to a consultant for services in obtaining financing under the Revolving
Line of Credit. These shares and warrants were issued without
registration under the Securities Act of 1933, as amended, in reliance upon the
exemption provided by Section 4(2) thereunder.
28
Not
applicable.
Plasma
Volume Expander Products
Our
operating revenues have been derived almost exclusively from royalties and
licensing fees related to our plasma volume expander products, primarily
Hextend. Hextend has become the standard plasma volume expander at a
number of prominent teaching hospitals and leading medical centers and is part
of the Tactical Combat Casualty Care protocol. We believe that as
Hextend use proliferates within the leading U.S. hospitals, other smaller
hospitals will follow their lead, contributing to sales growth.
Under our
license agreements, Hospira and CJ will report sales of Hextend and pay us the
royalties and license fees due on account of such sales after the end of each
calendar quarter. We recognize such revenues in the quarter in which
the sales report is received, rather than the quarter in which the sales took
place.
Royalties
on sales of Hextend that occurred during the fourth quarter of 2007 through the
third quarter of 2008 are reflected in our financial statements for the year
ended December 31, 2008. We received $1,203,453 in royalties from Hextend sales
by Hospira during 2008. This represents an increase of 55% from
$776,679 in royalties from Hospira on Hextend sales in 2007. The
increase is largely due to an increase in both sales to the military and sales
to hospitals, which were augmented by an increase in the average unit sales
price to hospitals. In addition, we received royalties from CJ in the
amount of $74,796 for the period ended December 31, 2008 and $46,952 for the
period ended December 31, 2007 which were included in license fees during the
financial statements for the periods ended December 31, 2008 and 2007,
respectively.
We
received royalties of $219,913 on sales of Hextend by Hospira and CJ that
occurred during the fourth quarter of 2008. These royalties will be
reflected in our financial statements for the first quarter of
2009. This represents a 32% decrease from royalties of
$323,581 received during the same period last year. The decrease
is generally due to a decrease in both sales to the military and sales to
hospitals, despite an increase in the average unit sales price to
hospitals.
During
the year ended December 31, 2006, we received $500,000 from Summit for the right
to co-develop Hextend and PentaLyte in Japan, China, and Taiwan. A
portion of the cash payment will be a partial reimbursement of BioTime’s
development costs of Hextend and a portion will be a partial reimbursement of
BioTime’s development costs of PentaLyte. This payment is reflected
on our balance sheet as deferred revenue. See Note 4 to financial
statements for further discussion of the appropriate accounting.
29
Stem
Cells and Products for Regenerative Medicine Research
We are
conducting our stem cell business through our new, wholly-owned subsidiary,
Embryome Sciences. We plan to focus our initial efforts in the
regenerative medicine field on the development and sale of advanced human stem
cell products and technology for diagnostic, therapeutic and research
use. Our initial marketing efforts will be directed to researchers at
universities and other institutions, to companies in the bioscience and
biopharmaceutical industries, and to other companies that provide research
products to companies in those industries.
Embryome
Sciences has already introduced its first stem cell research products, and is
implementing plans to develop additional research products over the next two
years. Our first products include a relational database, available at
our website embryome.com, that will permit researchers to chart the cell
lineages of human development, the genes expressed in those cell types, and
antigens present on the cell surface of those cells that can be used in
purification. This database will provide the first detailed map of
the embryome, thereby aiding researchers in navigating the complexities of human
development and in identifying the many hundreds of cell types coming from
embryonic stem cells.
Embryome
Sciences is also now marketing cell growth media called ESpanTM in
collaboration with Lifeline. These growth media are designed for the
growth of human embryonic progenitor cells. Additional new products
that Embryome Sciences has targeted for development are ESpyTM cell
lines, which will be derivatives of hES cells that send beacons of light in
response to the activation of particular genes. The ESpy™ cell lines
will be developed in conjunction with Lifeline using the ACTCellerate technology
licensed from ACT and other technology sublicensed from
Lifeline. Embryome Sciences also plans to bring to market other new
growth and differentiation factors that will permit researchers to manufacture
specific cell types from embryonic stem cells, and purification tools useful to
researchers in quality control of products for regenerative
medicine. As new products are developed, they will become available
for purchase on embryome.com.
Since we
are in the process of launching our first products for stem cell research, we
cannot predict the amount of revenue that the new products we offer might
generate. We did not receive significant revenues from stem cell
product sales during 2008.
Results
of Operations
Year
Ended December 31, 2008 and Year Ended December 31, 2007
For the
year ended December 31, 2008, we recognized $1,203,453 of royalty revenues on
the sale of Hextend by Hospira, compared with $776,679 recognized for the year
ended December 31, 2007. This 55% increase in royalties is
attributable to an increase in Hextend sales. The increase is largely
due to an increase in both sales to the military and sales to hospitals, which
were augmented by an increase in the average unit sales price to
hospitals.
30
Under our
License Agreement, Hospira reports sales of Hextend and pays us the royalties
and license fees due on account of such sales within 90 days after the end of
each calendar quarter. We recognize such revenues in the quarter in
which the sales report is received, rather than the quarter in which the sales
took place, as we do not have sufficient sales history to accurately predict
quarterly sales. For example, royalties on sales made during the
fourth quarter of 2008 will not be recognized until the first quarter of fiscal
year 2009.
We
recognized $277,999 and $255,549 of license fees from CJ and Summit during 2008
and 2007, respectively. Full recognition of license fees other than
royalties from CJ has been deferred, and is being recognized over the life of
the contract, which has been estimated to last until approximately 2019 based on
the current expected life of the governing patent covering our products in Korea
and Japan. Royalties of $74,796 and $46,952 from Hextend sales by CJ
were included in license fees during 2008 and 2007, respectively.
Research
and development expenses increased to $1,706,214 for the year ended December 31,
2008, from $967,864 for the year ended December 31, 2007. The
increase is primarily attributable to our entry into the stem cell field, and
includes increases of approximately $382,000 in salaries and other payroll
related expenses charged to research and development, $271,000 in rent charged
to research and development, $53,000 in laboratory expense, $128,000 in
laboratory supplies, offset by decrease of approximately $102,000 in outside
research expenses. Research and development expenses include
laboratory study expenses, salaries, rent, manufacturing of solution for trials,
and consultants’ fees.
General
and administrative expenses increased to $2,620,210 for the year ended December
31, 2008 from $1,300,630 for the year ended December 31, 2007. This
change reflects an increase of approximately $337,000 in general and
administrative consulting expenses, $379,000 in stock based compensation
expenses, $470,000 stock appreciation rights compensation expenses, $68,000 in
rent allocable to general and administration expenses, $78,000 in travel and
entertainment expenses, $70,000 in legal expenses, $50,000 in royalty expenses,
$38,000 in outside services expenses, $32,000 in patent and license expenses,
$18,000 in salaries and other payroll related expenses, $17,000 in office
expenses, $12,000 in depreciation expenses offset by decrease of approximately
$16,000 in accounting expenses. General and administrative expenses
include salaries allocated to general and administrative accounts, scientific
consulting fees, expenditures for patent costs, trademark expenses, insurance
costs allocated to general and administrative expenses, stock exchange-related
costs, depreciation expense, shipping expenses, marketing costs, and other
miscellaneous expenses. Stock based compensation
increased during 2008 in large part due to our common shares trading at prices
higher than the prices that prevailed during 2007.
Interest
and Other Income (Expense)
Our
interest expense increased by approximately $733,000 during 2008 primarily due
to interest incurred on our lines of credit (See Note 3) and approximately
$330,000 relating to the beneficial conversion of the line of credit debt and
accrued interest into common stock.
For the
year ended December 31, 2008, other income decreased to $7,518 from $16,926 for
the year ended December 31, 2007. The difference is chiefly
attributable to decrease by approximately
$5,700 in interest income due to lower cash balances and decrease by
approximately $5,000 in microcannula sales.
31
Taxes
At
December 31, 2008 we had a cumulative net operating loss carryforward of
approximately $46,580,000 for federal
income tax purposes and $15,818,000 for state income tax
purposes. Our effective tax rate differs from the statutory rate
because we have recorded a 100% valuation allowance against our deferred tax
assets, as we do not consider realization to be more likely than
not.
Liquidity
and Capital Resources
We need
to obtain additional debt or equity capital in order to finance our
operations. Since inception, we have primarily financed our
operations through the sale of equity securities, licensing fees, royalties on
product sales by our licensees, and borrowings. The amount of license
fees and royalties that may be earned through the licensing and sale of our
products and technology, the timing of the receipt of license fee payments, and
the future availability and terms of equity financing, are
uncertain. The unavailability or inadequacy of financing or revenues
to meet future capital needs could force us to modify, curtail, delay or suspend
some or all aspects of our planned operations. Sales of additional
equity securities could result in the dilution of the interests of present
shareholders.
During
2008 we received approximately $1,300,000 of cash in our
operations. Our sources of that cash were approximately $1,200,000 of
royalty revenues from Hospira and approximately $75,000 from
CJ. During the same period our total research and development
expenditures were approximately $1,700,000 and our administrative expenditures
were approximately $2,600,000.
We have a
Revolving Line of Credit Agreement (the “Credit Agreement”) with certain private
lenders that is collateralized by a security interest in our right to receive
royalty and other payments under our license agreement with
Hospira. The Credit Agreement was first implemented during 2006 and
has been amended from time to time since then, including amendments that
increased the amount of credit available to us. The Credit Agreement
permits us to borrow up to $3,500,000, and as of March 6, 2009, BioTime had
outstanding Credit Agreement loans of $3,330,000.
Current
loans under the Credit Agreement bear interest at the rate of 12% per annum and
will mature on April 15, 2009, at which time the outstanding principal balance
of the loans plus accrued interest will be due and payable. Our
ability to continue in operation depends on our obtaining a renewal of the
Credit Agreement that will extend the maturity date of the loan and increase the
amount of credit available to us.
32
The Credit Agreement
lenders were given the right to exchange their line of credit promissory notes
for our common shares and/or for common stock of our subsidiary, Embryome
Sciences. The applicable price at which a lender’s promissory note
may be exchanged for our shares or Embryome Sciences shares is determined based
upon the date the lender made their loan commitment and date on which the exchange
takes place. Currently, lenders may exchange their notes for our
common shares at prices ranging from $1.25 to $1.50 per share, or for Embryome
Sciences shares at prices ranging from $2.25 to $2.50 per
share. Prior to November 15, 2008 the notes could be exchanged for
BioTime shares at a price of $1.00 per share. As of November 17, 2008
certain lenders elected to exchange, in the aggregate, $1,050,000 of principal
and $62,015 of accrued interest on their loans for 1,112,014 BioTime common
shares. We have recorded the beneficial conversion feature charge of
approximately $330,000 which is included in the interest expense.
In consideration for
making the additional credit available and for extending the maturity date of
outstanding loans, we agreed to issue the lenders a number of common shares
having an aggregate market value equal to six percent (6%) of the lender’s loan
commitment. As of March 6, 2009 we had issued a total of 107,353
common shares to lenders who received promissory notes maturing in April
2009.
In
November 2008, Embryome Sciences borrowed $275,000 from certain private lenders.
As consideration for arranging the loans, we issued warrants to purchase up to
277,919 common shares. The warrants will be exercisable at a price of
$2.00 per share, and will expire on October 31, 2010 if not exercised prior to
that date. The Embryome Sciences lenders subsequently joined as
lenders under our Credit Agreement and accepted a promissory note from us in
satisfaction of Embryome Sciences’ loan obligation.
We also
obtained a line of credit from American Express in August 2004, which allows for
borrowings up to $25,300. As of December 31, 2008, we had drawn
$21,700 against this line. See Note 3 to the condensed consolidated
financial statements for additional information.
We also
secured a line of credit from Advanta in November 2006, which allows for
borrowings up to $35,000. As of December 31, 2008, we had drawn the
entire line of credit. See Note 3 to our consolidated financial
statements for additional information.
As of
December 31, 2008, the deferred debt discount was approximately $243,000, which
will be amortized over the remaining period of underlying outstanding
debt.
We had no
contractual obligations as of December 31, 2008, with the exception of a fixed,
non-cancelable operating lease on our office and laboratory facilities in
Alameda, California and in Emeryville, California. In April 2008, we
entered into a sublease of office and research laboratory space in Alameda,
California. We moved our headquarters from the Emeryville location to
this new facility. The sublease expires on November 30,
2010. Base monthly rent will be $22,600 during 2009, and $23,339.80
during 2010. In addition to base rent, we pay a pro rata share of
real property taxes and certain costs related to the operation and maintenance
of the building in which the subleased premises are located. Under
the Emeryville lease, we are committed to make payments of $15,885 per month,
increasing 3% annually, plus our pro rata share of operating costs for the
building and office complex, through May 31, 2010.
We will
depend upon royalties from the sale of Hextend by Hospira and CJ as our
principal source of revenues for the near future. Those royalty
revenues will be supplemented by any revenues that we may receive from our stem
cell research products, and by license fees if we enter into new commercial
license agreements for our products.
33
The
amount and pace of research and development work that we can do or sponsor, and
our ability to commence and complete the clinical trials that are required in
order for us to obtain FDA and foreign regulatory approval of products, depend
upon the amount of money we have. Future research and clinical study
costs are not presently determinable due to many factors, including the inherent
uncertainty of these costs and the uncertainty as to timing, source, and amount
of capital that will become available for these projects. We have
already curtailed the pace of our plasma volume expander development efforts due
to the limited amount of funds available, and we may have to postpone further
laboratory and clinical studies, unless our cash resources increase through
growth in revenues, the completion of licensing agreements, additional equity
investment, borrowing, or third party sponsorship.
We did
not hold any market risk sensitive instruments as of December 31, 2008 or
December 31, 2007.
34
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Shareholders of
BioTime,
Inc.
We have
audited the accompanying consolidated balance sheets of BioTime, Inc. and
Subsidiary (collectively, the “Company”) as of December 31, 2008 and 2007, and
the related consolidated statements of operations, shareholders’ deficit, and
cash flows of the years then ended. These consolidated financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of BioTime, Inc. and Subsidiary
as of December 31, 2008 and 2007, and the results of their operations and their
cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, the Company has a working capital
deficit of $3,269,643, a shareholders’ deficit of $4,346,814 and an accumulated
deficit of $47,625,392. These conditions, among others, raise substantial doubt
about the Company’s ability to continue as a going concern. Management’s plans
in regard to these matters are also described in Note 1. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/
Rothstein, Kass & Company, P.C.
Roseland,
New Jersey
March
17, 2009
35
BIOTIME,
INC.
CONSOLIDATED BALANCE SHEET
| December 31, 2008 |
December
31,
2007
|
||||||
|
ASSETS
|
|||||||
|
CURRENT
ASSETS
|
|||||||
|
Cash
and cash equivalents
|
$ |
12,279
|
$ | 9,501 | |||
|
Prepaid
expenses and other current assets
|
96,595
|
67,125 | |||||
|
Total
current assets
|
108,874
|
76,626 | |||||
|
Equipment,
net of accumulated depreciation of $602,510 and $585,765 in
2008 and 2007, respectively
|
105,607
|
12,480 | |||||
|
Deferred
license fees
|
750,000
|
||||||
| Deposits |
|
70,976
|
20,976 | ||||
|
TOTAL
ASSETS
|
$ |
1,035,457
|
$ | 110,082 | |||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
|||||||
|
CURRENT
LIABILITIES
|
|||||||
|
Accounts
payable and accrued liabilities
|
$ |
1,179,914
|
$ | 480,374 | |||
|
Lines
of credit payable, net
|
1,885,699
|
716,537 | |||||
|
Deferred
license revenue, current portion
|
312,904
|
261,091 | |||||
|
Total
current liabilities
|
3,378,517
|
1,458,002 | |||||
|
Stock
appreciation rights compensation liability
|
483,688
|
13,151 | |||||
|
Deferred
rent, net of current portion
|
3,339
|
9,636 | |||||
| Deferred license revenue, net of current portion |
1,516,727
|
1,740,702 | |||||
|
Total
long-term liabilities
|
2,003,754
|
1,763,489 | |||||
|
COMMITMENTS
AND CONTINGENCIES
|
|||||||
|
SHAREHOLDERS'
DEFICIT:
|
|||||||
|
Common
Shares, no par value, authorized 50,000,000 shares; issued and outstanding
shares; 25,076,798 and 23,034,374 in 2008 and 2007,
respectively
|
43,184,606
|
40,704,136 | |||||
|
Contributed
capital
|
93,972
|
93,972 | |||||
|
Accumulated
deficit
|
(47,625,392)
|
(43,844,497 | ) | ||||
|
Total
shareholders' deficit
|
(4,346,814)
|
(3,046,389 | ) | ||||
|
TOTAL
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
$ |
1,035,457
|
$ | 110,082 | |||
See
notes to consolidated financial statements.
36
BIOTIME,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
Year
Ended
December
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
REVENUE:
|
||||||||
|
License
fees
|
$ | 277,999 | $ | 255,549 | ||||
|
Royalty
from product sales
|
1,203,453 | 776,679 | ||||||
|
Grant
income
|
22,340 | 13,893 | ||||||
|
Total
revenue
|
1,503,792 | 1,046,121 | ||||||
|
EXPENSES:
|
||||||||
|
Research
and development
|
(1,706,214 | ) | (967,864 | ) | ||||
|
General
and administrative
|
(2,620,210 | ) | (1,300,630 | ) | ||||
|
Total
expenses
|
(4,326,424 | ) | (2,268,494 | ) | ||||
|
Loss
from operations
|
(2,822,632 | ) | (1,222,373 | ) | ||||
|
OTHER
INCOME (EXPENSES):
|
||||||||
|
Interest
expense
|
(965,781 | ) | (232,779 | ) | ||||
|
Other
income
|
7,518 | 16,926 | ||||||
|
Total
net other income (expenses)
|
(958,263 | ) | (215,853 | ) | ||||
|
NET
LOSS
|
$ | (3,780,895 | ) | $ | (1,438,226 | ) | ||
|
BASIC
AND DILUTED LOSS PER COMMON SHARE
|
$ | (0.16 | ) | $ | (0.06 | ) | ||
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:BASIC AND
DILUTED
|
23,749,933 | 22,853,278 | ||||||
See notes to consolidated financial statements.
37
BIOTIME,
INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' DEFICIT
|
Common
Shares
|
||||||||||||||||||||
|
Number
of
Shares
|
Amount
|
Contributed
Capital
|
Accumulated
Deficit
|
Total
Shareholders’
Deficit
|
||||||||||||||||
|
BALANCE
AT JANUARY 1, 2007
|
22.574,374 | $ | 40,447,078 | $ | 93,972 | $ | (42,406,271 | ) | $ | (1,865,221 | ) | |||||||||
|
Common
shares issued for line of credit
|
200,00 | 106,000 | 106,000 | |||||||||||||||||
|
Shares
granted for services
|
260,000 | 103,000 | 103,000 | |||||||||||||||||
|
Options
granted under FASB 123(R)
|
48,058 | 48,058 | ||||||||||||||||||
|
NET
LOSS
|
(1,438,226 | ) | (1,438,226 | ) | ||||||||||||||||
|
BALANCE
AT DECEMBER 31, 2007
|
23,034,374 | 40,704,136 | 93,972 | (43,844,497 | ) | (3,046,389 | ) | |||||||||||||
|
Common
shares issued for line of credit
|
580,410 | 273,200 | 273,200 | |||||||||||||||||
|
Common
shares issued for conversion of line credit and accrued
interest
|
1,112,014 | 1,442,409 | 1,442,409 | |||||||||||||||||
| Shares granted for services | 225,000 | 137,250 | 137,250 | |||||||||||||||||
| Shares issued to investors | 100,000 | 100,000 | 100,000 | |||||||||||||||||
| Exercise of options | 25,000 | 8,000 | 8,000 | |||||||||||||||||
|
Stock
options granted for compensation
|
134,518 | 134,518 | ||||||||||||||||||
| Warrants issued for lines of credit | 225,951 | 225,951 | ||||||||||||||||||
| Warrants issued for services | 159,142 | 159,142 | ||||||||||||||||||
|
NET
LOSS
|
(3,780,895 | ) | (3,780,895 | ) | ||||||||||||||||
|
BALANCE
AT DECEMBER 31, 2008
|
25,076,798 | $ | 43,184,606 | $ | 93,972 | $ | (47,625,392 | ) | $ | (4,346,814 | ) | |||||||||
See notes
to consolidated financial statements.
38
BIOTIME,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Year
Ended
December
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net
loss
|
$ | (3,780,895 | ) | $ | (1,438,226 | ) | ||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
|
Depreciation
and amortization
|
16,745 | 4,833 | ||||||
|
Amortization
of deferred license revenues
|
(277,999 | ) | (255,549 | ) | ||||
|
Amortization
of deferred finance cost on lines of credit
|
321,514 | 61,486 | ||||||
|
Amortization
of deferred consulting fees
|
19,409 | – | ||||||
|
Interest
on royalty obligation
|
– | 129,458 | ||||||
|
Interest
on lines of credit
|
– | 21,600 | ||||||
|
Beneficial conversion feature on notes and interest
|
330,394 | – | ||||||
|
Common
stock issued for services
|
137,250 | – | ||||||
|
Warrants
issued for services
|
52,393 | – | ||||||
|
Stock-based
compensation
|
134,518 | 151,059 | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable, net
|
754 | 3,675 | ||||||
|
Prepaid
expenses and other current assets
|
57,115 | (33,632 | ) | |||||
|
Accounts
payable and accrued expenses
|
699,539 | 46,441 | ||||||
| Interest on lines of credit | 114,938 | 21,600 | ||||||
|
Deferred
license revenue
|
105,840 | 53,987 | ||||||
|
Deferred
rent
|
(6,297 | ) | 1,737 | |||||
|
Stock
appreciation rights compensation liability
|
470,537 | 13,151 | ||||||
|
Net
cash used in operating activities
|
(1,604,245 | ) | (1,239,980 | ) | ||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Payments
of license fees
|
(750,000 | ) | – | |||||
|
Purchase
of equipment
|
(109,872 | ) | (6,473 | ) | ||||
|
Security
deposit
|
(50,000 | ) | – | |||||
|
Net
cash used in investing activities
|
(909,872 | ) | (6,473 | ) | ||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Repayments
of lines of credit
|
(16,085 | ) | – | |||||
|
Borrowings
under lines of credit
|
2,424,980 | 694,937 | ||||||
|
Issuance
of common shares for cash
|
108,000 | – | ||||||
|
Net
cash provided by financing activities
|
2,516,895 | 694,937 | ||||||
|
NET CHANGE
IN CASH AND CASH EQUIVALENTS
|
2,778 | (551,516 | ) | |||||
|
CASH
AND CASH EQUIVALENTS:
|
||||||||
|
At
beginning of year
|
9,501 | 561,017 | ||||||
|
At
end of year
|
$ | 12,279 | $ | 9,501 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: cash paid during year for interest | $ | 157,620 | $ | 81,721 | ||||
|
SUPPLEMENTAL
SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
|
||||||||
|
Issuance
of stock related to conversion of line of credit and accrued
interest
|
$ | 1,442,409 | $ | 106,000 | ||||
|
Common
shares issued for line of credit
|
$ | 273,200 | $ | – | ||||
|
Warrants
issued for line of credit
|
$ | 225,951 | $ | – | ||||
|
Warrants
issued for services
|
$ | 106,749 | $ | – | ||||
See notes
to consolidated financial statements.
39
BIOTIME,
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
and basis of presentation
General - BioTime, Inc. was
organized November 30, 1990 as a California corporation. BioTime is a biomedical
organization engaged in the development of synthetic plasma expanders and blood
volume substitute solutions for use in surgery, trauma care, organ transplant
procedures, and other areas of medicine. In December 2007, BioTime
formed Embryome Sciences, Inc., a wholly-owned subsidiary organized to enter the
field of regenerative medicine where we plan to develop stem cell related
products and technology for diagnostic, therapeutic, and research
use.
Principles of Consolidation and
Presentation – The accompanying consolidated financial statements include
the accounts of Embryome Sciences, Inc., a wholly-owned subsidiary of
BioTime. All material intercompany accounts and transactions have
been eliminated in consolidation. The consolidated financial
statements are presented in accordance with accounting principles generally
accepted in the United States and with the accounting and reporting requirements
of Regulation S-X of the SEC.
Certain Significant Risks and
Uncertainties - BioTime’s operations are subject to a number of factors
that can affect its operating results and financial condition. Such factors
include but are not limited to the following: the results of clinical trials of
BioTime’s pharmaceutical products; BioTime’s ability to obtain United States
Food and Drug Administration and foreign regulatory approval to market its
pharmaceutical products; BioTime’s ability to develop new stem cell research
products and technologies; competition from products manufactured and sold or
being developed by other companies; the price of and demand for BioTime
products; BioTime’s ability to obtain additional financing and the terms of any
such financing that may be obtained; BioTime’s ability to negotiate favorable
licensing or other manufacturing and marketing agreements for its products; the
availability of ingredients used in BioTime’s products; and the availability of
reimbursement for the cost of BioTime’s pharmaceutical products (and related
treatment) from government health administration authorities, private health
coverage insurers and other organizations.
Going Concern - At December
31, 2008, BioTime had $12,279 of cash on hand and negative working capital of
$3,269,643, a shareholders’ deficit of $4,346,814 and an accumulated deficit of
$47,625,392. BioTime will continue to need additional capital and
greater revenues to continue its current operations and to continue to conduct
its product development and research programs. Sales of additional equity
securities could result in the dilution of the interests of present
shareholders. BioTime is also continuing to seek new agreements with
pharmaceutical companies to provide product and technology licensing fees and
royalties. The availability and terms of equity financing and new
license agreements are uncertain. The unavailability or inadequacy of
additional financing or future revenues to meet capital needs could force
BioTime to modify, curtail, delay or suspend some or all aspects of its planned
operations. Additionally, in November
2008, BioTime’s line of credit for working capital was increased and the
maturity date was extended (see Note 3). BioTime will continue to
seek additional financing or capital as well as additional licensing revenues
from its current and future patents. In view of the matters described
above, BioTime’s continued operations are dependent on its ability to raise
additional capital, obtain additional financing, and succeed in
40
generating
more revenue from its operations. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts and classification of liabilities
should the company be unable to continue as a going concern.
2. Summary
of Significant Accounting Policies
Financial Statement Estimates
- - The preparation of consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Revenue recognition – BioTime
complies with the Securities and Exchange Commission’s (“SEC”) Staff Accounting
Bulletin (“SAB”) No. 101, Revenue Recognition, as amended by SAB No. 104.
Royalty and license fee revenues consist of product royalty payments and fees
under license agreements and are recognized when earned and reasonably
estimable. BioTime recognizes revenue in the quarter in which the
royalty report is received rather than the quarter in which the sales took
place, as it does not have sufficient sales history to accurately predict
quarterly sales. Up-front nonrefundable fees where BioTime has no
continuing performance obligations are recognized as revenues when collection is
reasonably assured. In situations where continuing performance
obligations exist, up-front nonrefundable fees are deferred and amortized
ratably over the performance period. If the performance period cannot
be reasonably estimated, BioTime amortizes nonrefundable fees over the life of
the contract until such time that the performance period can be more reasonably
estimated. Milestones, if any, related to scientific or technical
achievements are recognized in income when the milestone is accomplished if (a)
substantive effort was required to achieve the milestone, (b) the amount of the
milestone payment appears reasonably commensurate with the effort expended and
(c) collection of the payment is reasonably assured.
Grant
income is recognized as revenue when earned.
Cash and cash equivalents –
BioTime considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Concentrations of credit risk
- - Financial instruments that potentially subject BioTime to significant
concentrations of credit risk consist primarily of cash and cash
equivalents. BioTime limits the amount of credit exposure of cash
balances by maintaining its accounts in high credit quality financial
institutions. Cash equivalent deposits with financial institutions
may, at times, exceed federally issued limits; however, BioTime has not
experienced any losses on such accounts.
41
Equipment - Equipment is
stated at cost. Equipment is being depreciated using the straight-line method
over a period of thirty-six to eighty-four months.
Deferred costs – Certain
costs incurred in obtaining the line of credit have been deferred and are being
amortized over the term of the line of credit agreements.
Patent costs - Patent costs
associated with obtaining patents on products being developed are expensed as
general and administrative expenses when incurred. These costs totaled $120,054
and $103,204, for the years ended December 31, 2008 and 2007,
respectively. This accounting is in compliance with Statement of
Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible
Assets.
Research and development –
BioTime complies with the accounting requirements of SFAS No.2, Accounting for
Research and Development Costs. Research and development costs are expensed when
incurred and consist principally of salaries, payroll taxes, research and
laboratory fees, hospital and consultant fees related to clinical trials, and
BioTime’s PentaLyte solution for use in human clinical trials.
Income Taxes - BioTime
accounts for income taxes in accordance with SFAS No. 109, Accounting for Income
Taxes, which prescribes the use of the asset and liability method whereby
deferred tax asset or liability account balances are calculated at the balance
sheet date using current tax laws and rates in effect. Valuation
allowances are established when necessary to reduce deferred tax assets when it
is more likely than not that a portion or all of the deferred tax assets will
not be realized. Effective January 1, 2007, the Company adopted the
provisions of the FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109 ("FIN
48"). There were no unrecognized tax benefits as of January 1, 2007
and as of December 31, 2007 and 2008. FIN 48 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition
and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be
more-likely-than-not sustainable upon examination by taxing
authorities. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. No
amounts were accrued for the payment of interest and penalties for the years
ended December 31, 2007 and 2008. Management is currently unaware of
any issues under review that could result in significant payments or
accruals.
Stock-based Compensation - On
January 1, 2006, BioTime adopted SFAS No. 123 (revised 2004), Share-Based
Payment (“SFAS 123(R)”) which requires the measurement and recognition of
compensation expense for all share-based payment awards made to directors and
employees including employee stock options based on estimated fair values. SFAS
123(R) supersedes BioTime's previous accounting using the intrinsic value method
under Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock
Issued to Employees for periods beginning in fiscal 2006. In March 2005, the SEC
issued SAB No. 107, Valuation of Share-Based Payment Arrangements for Public
Companies, which provides supplemental implementation guidance for SFAS 123(R).
BioTime has applied the provisions of SAB 107 in its adoption of SFAS
123(R). Upon adoption of SFAS 123 (R), BioTime has continued to
utilize the Black-Scholes Merton option pricing model which was previously used
for BioTime's proforma disclosures under SFAS 123. BioTime's determination of
fair value of share-based payment awards on the date of grant using an
option-pricing model is affected by BioTime's stock price as well as assumptions
regarding a number of highly complex and subjective variables. These
variables include, but are not limited to, BioTime's expected stock price
volatility over the term of the awards, and the actual and the projected
employee stock options exercise behaviors. The expected term of
options granted is derived from historical data on employee exercises and
post-vesting employment termination behavior. The risk-free rate is
based on the U.S Treasury rates in effect during the corresponding period of
grant. Because changes in the subjective assumptions can materially
affect the estimated value, in management's opinion, the existing valuation
models may not provide an accurate measure of the fair value of BioTime's
employee stock options. Although the fair value of employee stock
options is determined in accordance with SFAS 123(R) and SAB 107 using an
option-pricing model, that
value may
not be indicative of the fair value observed in a willing buyer/willing seller
market transaction.
42
Impairment of Long-Lived
Assets – In
accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, long-lived assets, including intangible assets, are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. If an impairment
indicator is present, the Company evaluates recoverability by a comparison of
the carrying amount of the assets to future undiscounted net cash flows expected
to be generated by the assets. If the assets are impaired, the impairment
recognized is measured by the amount by which the carrying amount exceeds the
estimated fair value of the assets.
Loss per share – BioTime
complies with the accounting and reporting requirements of SFAS No. 128,
“Earnings Per Share.” Basic net loss per share is computed by
dividing net loss available to common stockholders by the weighted-average
common shares outstanding for the period. Diluted net loss per share reflects
the weighted-average common shares outstanding plus the potential effect of
dilutive securities or contracts which are convertible to common shares such as
options, warrants, convertible debt, and preferred stock (using the treasury
stock method) and shares issuable in future periods, except in cases where the
effect would be anti-dilutive. Diluted loss per share for the years
ended December 31, 2008 and 2007 excludes any effect from 3,538,332 options and
8,344,534 warrants; 3,333,332 options and 7,847,867 warrants, respectively, as
their inclusion would be antidilutive.
Fair value of financial
instruments - The fair value of the Company’s assets and liabilities,
which qualify as financial instruments under SFAS No. 107, Disclosures About
Fair Value of Financial Instruments, approximate the carrying amounts presented
in the accompanying Consolidated Balance Sheets.
Reclassification – Certain
prior year amounts have been reclassified to conform to the current year
presentation.
Recently adopted accounting pronouncements – On December
21, 2007, the SEC issued SAB No. 110, which amends SAB No. 107 to allow for the
continued use of the simplified method to estimate the expected term in valuing
stock options beyond December 31, 2007. The simplified method can
only be applied to certain types of stock options for which sufficient exercise
history is not available. BioTime has concluded that its historical
share option exercise experience does not provide a reasonable basis upon which
to estimate the expected term due to the significant structural changes in its
business. Therefore, BioTime will continue to use the "simplified" method in
developing its estimate of the expected term of the stock options granted under
its 1992 and 2002 Stock Option Plans.
In
September 2006, the Financial Accounting Standards Board (the “FASB”) issued
SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a
framework for measuring fair value under GAAP, and expands disclosures about
fair value measurements. SFAS No. 157 applies to other accounting
pronouncements that require or permit fair value measurements. The
new guidance is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and for interim periods within those fiscal
years. BioTime adopted SFAS No. 157 during the quarter ended March
31, 2008 which had no impact on its consolidated financial
statements. In October 2008, the FASB issued FSP No. 157-3,
Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active ("FSP 157-3"). FSP 157-3 clarifies the application of
SFAS 157 in a market that is not active and provides an example to illustrate
key considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. BioTime is still in
the process of evaluating the impact that FSP 157-3 will have on its related
financial assets.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities. SFAS No. 159 permits entities to choose
to measure many financial instruments, and certain other items, at fair value.
SFAS No. 159 was effective January 1, 2008. The adoption of SFAS No. 159 did not
have an impact on the consolidated financial statements since BioTime did not
elect the fair value option for any of its existing assets or
liabilities.
43
Recently issued accounting pronouncements – In December
2007, the FASB issued SFAS No. 141R (revised 2007), Business Combinations (“SFAS No. 141R”),
which replaces SFAS No. 141. SFAS No. 141R establishes the principles
and requirements for how an acquirer: (i) recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
and any non-controlling interest in the acquiree; (ii) recognizes and measures
the goodwill acquired in the business combination or a gain from a bargain
purchase; and (iii) determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination. Additionally, SFAS No. 141R requires that
acquisition-related costs be expensed as incurred. The provisions of
SFAS No. 141R will become effective for acquisitions completed on or after
January 1, 2009; however, the income tax provisions of SFAS No. 141R will become
effective as of that date for all acquisitions, regardless of the acquisition
date. SFAS No. 141R amends SFAS No. 109, to require the acquirer to
recognize changes in the amount of its deferred tax benefits recognizable due to
a business combination either in income from continuing operations in the period
of the combination or directly in contributed capital, depending on the
circumstances. SFAS No. 141R further amends SFAS No. 109 and FIN 48,
to require, subsequent to a prescribed measurement period, changes to
acquisition-date income tax uncertainties to be reported in income from
continuing operations and changes to acquisition-date acquiree deferred tax
benefits to be reported in income from continuing operations or directly in
contributed capital, depending on the circumstances. BioTime is
currently evaluating the impact SFAS No. 141R will have on its future business
combinations.
In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements—An Amendment of ARB No. 51. SFAS
No. 160 establishes new accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS No. 160 is effective for fiscal years beginning on
or after December 15, 2008. BioTime does not believe the adoption of
this statement will have a material effect on its consolidated financial
position, results of operations, and cash flows.
In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities—An Amendment of FASB Statement No. 133. SFAS No.
161 applies to all derivative instruments and related hedged items accounted for
under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. It requires entities to provide greater transparency
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under Statement No. 133
and its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, results of operations, and
cash flows. SFAS No. 161 is effective for fiscal years and interim
periods beginning after November 15, 2008. BioTime does not believe
the adoption of this statement will have a material effect on its consolidated
financial statements.
In May
2008, the FASB issued FASB Staff Position ("FSP") Emerging Issues Task Force
("EITF") No. 03-6-1, Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities ("EITF 03-6-1"). EITF 03-6-1
addresses whether
44
instruments granted in share-based payment transactions, with rights to dividends or dividend equivalents, are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share ("EPS") under the two-class method described in FASB Statement No. 128, "Earnings per Share." Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. In contrast, the right to receive dividends or dividend equivalents that the holder will forfeit if the award does not vest does not constitute a participation right. EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data). Early adoption of EITF 03-6-1 is prohibited. BioTime will adopt EITF 03-6-1 as of January 1, 2009, and does not currently believe that the adoption will have a material impact on its consolidated financial statements.
3. Lines
of Credit
BioTime
has a Revolving Line of Credit Agreement (the “Credit Agreement”) with certain
private lenders that is collateralized by a security interest in BioTime’s right
to receive royalty and other payments under its license agreement with
Hospira. The Credit Agreement was first implemented during 2006 and
has been amended from time to time since then, including amendments that
increased the amount of credit available. The Credit Agreement
permits BioTime to borrow up to $3,500,000.
Current
loans under the Credit Agreement bear interest at the rate of 12% per annum and
will mature on April 15, 2009, at which time the outstanding principal balance
of the loans plus accrued interest will be due and payable.
The
Credit Agreement lenders were given the right to exchange their line of credit
promissory notes for BioTime common shares and/or for common stock of BioTime’s
subsidiary, Embryome Sciences. The applicable price at which a
lender’s promissory note may be exchanged for BioTime shares or Embryome
Sciences shares is determined based upon the date the lender made their loan
commitment and date on which the exchange takes place. As of December
31, 2008, lenders could exchange their notes for BioTime common shares at prices
ranging from $1.25 to $1.50 per share, or for Embryome Sciences shares at prices
ranging from $2.25 to $2.50 per share. Prior to November 15, 2008 the
notes could be exchanged for BioTime shares at a price of $1.00 per
share. As of December 31, 2008 certain lenders elected to exchange,
in the aggregate, $1,050,000 of principal and $62,015 of accrued interest on
their loans for 1,112,014 BioTime common shares. BioTime has recorded
the beneficial conversion feature charge of approximately $330,000 which is
included in the interest expense.
45
In
consideration for making the additional credit available and for extending the
maturity date of outstanding loans, BioTime agreed to issue the lenders a number
of common shares having an aggregate market value equal to six percent (6%) of
the lender’s loan commitment. As of December 31, 2008, BioTime had
issued a total of 70,411 common shares to lenders who received promissory notes
maturing in April 2009.
In
November 2008, Embryome Sciences borrowed $300,000 from certain private
lenders. As consideration for arranging the loans, BioTime issued
warrants to purchase up to 156,667 common shares. The warrants will
be exercisable at a price of $2.00 per share, and will expire on October 31,
2010 if not exercised prior to that date. The Embryome Sciences
lenders subsequently joined as lenders under the BioTime Credit Agreement and
accepted a promissory note from BioTime in satisfaction of Embryome Sciences’
loan obligation. As part of that transition, the interest rate on
their loan amounts increased from 9.8% to 12%, and the lenders were issued a
total of 7,828 BioTime common shares.
BioTime
also obtained a line of credit from American Express in August 2004, which
allows for borrowings up to $25,300; at December 31, 2008, BioTime had drawn
$21,700 against this line. Interest is paid monthly on borrowings at a total
rate equal to the prime rate plus 3.99%; however, regardless of the prime rate,
the interest rate payable will at no time be less than 9.49%.
BioTime
also secured a line of credit from Advanta in November 2006, which allows for
borrowings up to $35,000; at December 31, 2008, BioTime had drawn the entire
$35,000 against this line. Interest is payable on borrowings at a
Variable Rate Index, which will at no time be less than 8.25%.
As of
December 31, 2008 and 2007, the deferred debt discount was approximately
$243,000 and $65,000, respectively, which will be amortized over the remaining
period of underlying outstanding debt.
4.
License Fees and Royalty Obligation
In
December 2004, BioTime entered into an agreement with Summit Pharmaceuticals
International Corporation (“Summit”) to co-develop Hextend and PentaLyte for the
Japanese market. Under the agreement, BioTime received $300,000 in
December 2004, $450,000 in April 2005, and $150,000 in October
2005. The payments represent a partial reimbursement of BioTime’s
development cost of Hextend and PentaLyte. In June 2005, following
BioTime’s approval of Summit’s business plan for Hextend, BioTime paid to Summit
a one-time fee of $130,000 for their services in preparing the
plan. The agreement states that revenues from Hextend and PentaLyte
in Japan will be shared between BioTime and Summit as follows: BioTime 40% and
Summit 60%. Additionally, BioTime will pay Summit 8% of all net
royalties received from the sale of PentaLyte in the United States.
The
accounting treatment of the payments from Summit falls under the guidance of
Emerging Issues Task Force (“EITF”) Issue No. 88-18, “Sales of Future
Revenues.” EITF 88-18 addresses the accounting treatment when an
enterprise (BioTime) receives cash from an investor (Summit) and agrees to pay
to the investor a specified percentage or amount of the revenue or a measure of
income of a particular product line, business segment, trademark, patent, or
contractual right. The Emerging Issues Task Force reached a consensus on six
independent factors that would require reclassification of the proceeds as
debt. BioTime met one of the factors: BioTime was
46
determined
to have had significant continuing involvement in the generation of the cash
flows to the investor due to BioTime’s supervision of the Phase II clinical
trials of PentaLyte. As a result, BioTime initially recorded the net
proceeds from Summit to date of $770,000 as long-term debt to comply with EITF
88-18 even though BioTime is not legally indebted to Summit for that
amount.
In July
2005, Summit sublicensed the rights to Hextend in Japan to
Maruishi. In consideration for the license, Maruishi agreed to pay
Summit a series of milestone payments: Yen 70,000,000, (or $593,390 based on
foreign currency conversion rates at the time) upon executing the agreement, and
Yen 100,000,000 upon regulatory filing in Japan, and Yen 100,000,000 upon
regulatory approval of Hextend in Japan. Consistent with the terms of
the BioTime and Summit agreement, Summit paid 40% of that amount, or $237,356,
to BioTime during October 2005. BioTime does not expect the
regulatory filing and approval milestones to be attained for several
years.
The
initial accounting viewed the potential repayment of the $770,000 imputed debt
to come only from the 8% share of US PentaLyte revenues generated by BioTime and
paid to Summit. BioTime first became aware of the terms of the
Maruishi and Summit agreement during the fourth quarter of 2005, prepared an
estimate of the future cash flows, and determined that Summit would earn a
majority of their return on investment from their agreement with Maruishi, and
not the 8% of BioTime’s U.S. PentaLyte sales. Considering this, the
$770,000 was viewed as a royalty obligation which will be reduced by Summit’s 8%
share of BioTime’s U.S. PentaLyte sales plus Summit’s 60% share of Japanese
revenue. Accordingly, BioTime recorded the entire amount paid by
Maruishi to Summit for the sublicense of $593,390 as deferred revenue, to be
amortized over the remaining life of the patent through
2019. BioTime’s 40% share of this payment was collected in October
2005 and the remaining 60% share was recorded as a reduction of the long-term
royalty obligation of BioTime to Summit. Interest on the long-term
royalty obligation was accrued monthly using the effective interest method
beginning October 2005, using a rate of 25.2% per annum, which BioTime has
determined is the appropriate interest rate when the future cash flows from the
transaction are considered.
In 2007,
BioTime completed its Phase II trials of PentaLyte, however was unable to find a
suitable licensing agreement for the product. At this time, BioTime
has deemed the continuation of the clinical trials necessary to bring this
product to market to be a significantly lower priority than it had been in the
past. Correspondingly, it is less likely that proceeds from the 8% of
PentaLyte US sales will be sufficient to pay down the Summit Royalty Obligation
prior to the expiration of the patents. As a result of this change in
accounting estimates, BioTime has reevaluated treatment of this
transaction. The transaction no longer meets any of the factors that
require it to fall under the guidance from EITF88-18. Consequently,
BioTime has reclassified the royalty obligation to deferred revenue and is
amortizing it over the remaining life of the underlying patents.
5. Shareholders’
Deficit
During
April 1998, BioTime initially entered into a financial advisory services
agreement with Greenbelt, Corp., a corporation controlled by Alfred D. Kingsley
and Gary K. Duberstein, who are also shareholders of BioTime. Until
2007, the agreement was renewed annually in March and covered the 12 months
ending March 31. The renewed agreement
47
for 2008
covers services provided from January 1 through December 31,
2008. Under the 2008 agreement, BioTime agreed to pay $135,000 in
cash and to issue 300,000 common shares for the twelve months ending December
31, 2008. Greenbelt permitted BioTime to defer paying the entire
$135,000 until January 2009. In return for Greenbelt allowing the
deferral, 60,000 common shares became issuable by BioTime to Greenbelt in
January 2009, the value of which was accrued for in BioTime’s financial
statements as of December 31, 2008. BioTime agreed to indemnify
Greenbelt and its officers, affiliates, employees, agents, assignees, and
controlling person from any liabilities arising out of or in connection with
actions taken on BioTime's behalf under the agreement.
Activity
related to the Greenbelt agreement is presented in the table below:
|
Balance
included in Accounts Payable at January 1
|
Add:
Cash-based
expense accrued
|
Add:
Stock-based
expense accrued
|
Less:
Cash
payments
|
Less:
Value
of stock-based payments
|
Balance
included in Accounts Payable at December 31,
|
|||||||||||||||||||
|
2008
|
$ | 90,000 | $ | 135,000 | $ | 366,750 | $ | (0 | ) | $ | (137,250 | ) | $ | 454,500 | ||||||||||
|
2007
|
$ | 108,000 | $ | 22,500 | $ | 62,500 | $ | (0 | ) | $ | (103,000 | ) | $ | 90,000 | ||||||||||
BioTime,
as part of rights offerings and other agreements, has issued warrants to
purchase its common stock. Activity related to warrants in 2008 and
2007 is presented in the table below:
|
Number
of Shares
|
Per
share warrant price
|
Weighted
Average Exercise Price
|
||||||||||
|
Outstanding,
January 1, 2007
|
7, 943,314 | $ | 2.00 | $ | 2.00 | |||||||
|
Expired
in 2007
|
(95,447 | ) | 1.34-3.92 | 2.17 | ||||||||
|
Shares
under warrants at December 31, 2007
|
7,847,867 | $ | 2.00 | 2.00 | ||||||||
|
Granted
in 2008
|
496,667 | $ | .68-2.00 | 1.98 | ||||||||
|
Outstanding,
December 31, 2008
|
8,344,534 | $ | 2.00 | $ | 2.00 | |||||||
At
December 31, 2008, 8,344,534 warrants to purchase common stock with a weighted
average exercise price of $1.98 and a weighted average remaining contractual
life of 1.87 years were outstanding.
In March
2006, the board of directors approved an increase in the authorized number of
common shares to 50,000,000 shares.
In
October 2007, BioTime granted certain executives options to purchase 2,000,000
of BioTime’s common shares (the “Options”) under BioTime’s 2002 Employee Stock
Option Plan, as amended (the “2002 Plan”). The Options are paired
with stock appreciation rights ("SARs")
48
with
respect to 1,302,030 shares. The exercise price of the Options and
the SARs is $0.50 per share. The Options and SARs will vest at the
rate of 1/60th of the number of Options or SARs granted at the end of each full
month of employment.
The
vested portion of the Option and SARs shall expire on the earliest of
(A) seven (7) years from the date of grant, (B) three months after the executive
ceases to be an employee of BioTime for any reason other than his death or
disability, or (C) one year after he ceases to be an employee of BioTime due to
his death or disability; provided that if he dies during the three month period
described in clause (B), the expiration date of the vested portion of this
Option shall be one year after the date of his death. In addition, if
a SAR is exercised, the vested portion of the Option shall expire as to a number
of shares for which the SAR was exercised, and the vested and unvested portion
of the SAR shall expire when the shareholders of BioTime approve an amendment to
the 2002 Plan increasing the number of common shares available under the 2002
Plan from 2,000,000 to 4,000,000 shares.
6. Stock
Option Plans
During
1992, BioTime adopted the 1992 Stock Option Plan (the "1992
Plan"). Options granted under the 1992 Plan expire five to ten years
from the date of grant and may be fully exercisable immediately, or may be
exercisable according to a schedule or conditions specified by the Board of
Directors or the Option Committee. As of December 31, 2008, options
to purchase 59,500 shares had been granted and were outstanding at an exercise
price of $11.75 under the 1992 Plan. At December 31, 2008, no options
were available for future grants under the 1992 Plan.
During
2002, BioTime adopted the 2002 Plan, which was amended during December 2004 to
reserve 2,000,000 common shares for issuance under options granted to eligible
persons. During October 2007 the Board of Directors approved an
amendment to the 2002 Plan that will permit the grant of options to purchase up
to an additional 2,000,000 common shares. The 2007 amendment is
subject to approval by BioTime’s shareholders. No options may be
granted under the 2002 Plan more than ten years after the date the 2002 Plan was
adopted by the Board of Directors, and no options granted under the 2002 Plan
may be exercised after the expiration of ten years from the date of
grant. Under the 2002 Plan, options to purchase common shares may be
granted to employees, directors and certain consultants at prices not less than
the fair market value at date of grant for incentive stock options and not less
than 85% of fair market value for other stock options. These options
expire five to ten years from the date of grant and may be fully exercisable
immediately, or may be exercisable according to a schedule or conditions
specified by the Board of Directors or the Compensation
Committee. The 2002 Plan also permits BioTime to sell common shares
to employees subject to vesting provisions under restricted stock agreements
that entitle BioTime to repurchase unvested shares at the employee’s cost upon
the occurrence of specified events, such as termination of
employment. BioTime may permit employees or consultants, but not
executive officers or directors, who purchase stock under restricted stock
purchase agreements to pay for their shares by delivering a promissory note that
is secured by a pledge of their shares. Under the 2002 Plan, as of
December 31, 2008, BioTime had granted to certain employees, consultants, and
directors, options to purchase a total of 1,926,802 common shares at exercise
prices ranging from $0.32 to $2.17 per share. There was also a grant
of 1,302,030 options to two executive officers in October 2007 that is subject
to shareholder approval of the 2007 amendment of the 2002
Plan.
49
On
January 1, 2006, BioTime adopted SFAS 123(R), which requires the measurement and
recognition for all share-based payment awards made to BioTime’s employees and
directors including employee stock options. The following table
summarizes stock-based compensation expense related to employee and director
stock options awards for the years ended December 31, 2008 and 2007, which was
allocated as follows:
|
Year
Ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
All
stock-based compensation expense:
|
||||||||
|
General
and Administrative
|
$ | 206,321 | $ | 48,058 | ||||
|
Stock
appreciation rights
|
470,537 | 13,151 | ||||||
|
All
stock-based compensation expense included in operating
expense
|
$ | 676,858 | $ | 61,209 | ||||
BioTime
adopted SFAS 123(R) using the modified prospective transition method, which
requires the application of the accounting standard as of January 1, 2006, the
first day of BioTime’s fiscal year 2006. BioTime’s financial
statements as of and for the year ended December 31, 2006, reflect the impact of
SFAS 123(R). As of December 31, 2008, total unrecognized compensation
costs related to unvested stock options was $330,874, which is expected to be
recognized as expense over a weighted average period of approximately 3.68
years.
For all
applicable periods, the value of each employee and director stock option was
estimated on the date of grant using the Black-Scholes Merton model for the
purpose of the pro forma financial disclosures in accordance with SFAS
123.
The
weighted-average estimated fair value of stock options granted during the years
ended December 31, 2008 and 2007 was $0.71 and $0.20 per share, respectively,
using the Black-Scholes Merton model with the following weighted-average
assumptions:
|
Year Ended
December 31, 2008
|
Year Ended
December 31, 2007
|
|||||||
|
Expected
lives in years
|
5
|
5 | ||||||
|
Risk
free interest rates
|
3.22 | % | 4.38 | % | ||||
|
Volatility
|
104 | % | 100 | % | ||||
|
Dividend
yield
|
0 | % | 0 | % | ||||
For
options granted prior to 2006 and valued in accordance with SFAS 123, the
expected life and the expected volatility of the stock options were based upon
historical data. Forfeitures of employee stock options were accounted
for on an as-incurred basis.
50
General
Option Information
A summary
of all option activity under the 1992 and 2002 option plans for the years ended
December
31, 2008 and 2007 is as follows:
|
Options
Available
for
Grant
|
Number
of
Options
Outstanding
|
Weighted
Average
Exercise
Price
|
||||||||||
|
January
1, 2007
|
407,836 | 1,811,664 | $ | 2.20 | ||||||||
|
Added
via Amendment to 2002 Plan1
|
2,000,000 | - | - | |||||||||
|
Granted1
|
(2,040,000 | ) | 2,040,000 | 0.50 | ||||||||
|
Forfeited/expired
|
358,332 | (518,332 | ) | 2.96 | ||||||||
|
December
31, 2007
|
726,168 | 3,333,332 | 1.72 | |||||||||
|
Granted2
|
(60,000 | ) | 310,000 | 1.28 | ||||||||
|
Exercised
|
- | (25,000 | ) | 0.32 | ||||||||
|
Forfeited/expired
|
80,000 | (80,000 | ) | 1.55 | ||||||||
|
December
31, 2008
|
746,168 | 3,538,332 | $ | 1.77 | ||||||||
1During
August 2007, the 2002 Stock Option Plan was amended to make 2,000,000 additional
common shares available for the grant of options.
2The
310,000 options outstanding includes 250,000 options which were granted outside
the 1992 and 2002 Stock Option Plans.
Additional
information regarding options outstanding as of December 31, 2008 is as
follows:
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||
|
Range
of
Exercise
Prices
|
Number
Outstanding
|
Weighted
Avg. Remaining Contractual Life (yrs)
|
Weighted
Avg. Exercise Price
|
Number
Exercisable
|
Weighted
Avg. Exercise Price
|
|||||
|
$.32-$.47
|
494,500
|
3.79
|
$0.33
|
494,500
|
$0.33
|
|||||
|
.50
|
2,000,000
|
5.75
|
.50
|
2,000,000
|
.50
|
|||||
|
.68-1.55
|
318,332
|
2.79
|
1.12
|
268,332
|
1.05
|
|||||
|
2.00-2.17
|
666,000
|
1.48
|
2.26
|
591,000
|
2.02
|
|||||
|
11.75
|
59,500
|
0.29
|
11.75
|
59,500
|
11.75
|
|||||
|
$0.32-$11.75
|
3,538,332
|
4.31
|
$1.05
|
3,413,332
|
$1.65
|
|||||
51
General
Stock Appreciation Rights Information
On
October 10, 2007, BioTime granted a total of 1,302,030 Stock Appreciation Rights
(“SARs”) to two new employees. The SARs have a weighted average
exercise price of $0.50 per share, and are being amortized over five
years. As of December 31, 2008, none of the SARs had expired or been
forfeited.
7. Commitments
and Contingencies
During
April 2008, BioTime relocated to Harbor Bay Parkway in Alameda, California under
a three year sublease. The sublease includes approximately 11,000
square feet of office and laboratory space and will expire on November 30,
2010. Base monthly rent was $22,000 during 2008 increasing to $22,600
during 2009, and to $23,340 during 2010. In addition to base rent,
BioTime pays a pro rata share of real property taxes and certain costs related
to the operation and maintenance of the building in which the subleased premises
are located.
BioTime
still makes payments on its lease of office and laboratory space at Heritage
Square in Emeryville, California. The lease will expire on May 31,
2010, with a five year extension option. This lease includes approximately 5,244
square feet of space and monthly base rent of approximately $11,400 during
2008. The rent will increase by 3% each lease year during the initial
five year term. In addition to rent, BioTime pays its pro rata share
of operating expenses and real estate taxes for the building in which its leased
space is located or for the Heritage Square project as a whole, as applicable,
based upon the ratio that the number of square feet BioTime leases bears to the
total number of square feet in the building or project.
Rent
expenses totaled $527,682 and $189,158 for the years ended December 31, 2008 and
2007, respectively. Remaining minimum annual lease payments under the
lease and sublease are as follows:
|
Year
|
Minimum
lease payments
|
|||
|
2009
|
$ | 411,853 | ||
|
2010
|
315,751 | |||
Indemnification – Under
BioTime’s bylaws, BioTime has agreed to indemnify its officers and directors for
certain events or occurrences arising as a result of the officer or director
serving in such capacity. The term of the indemnification period is for the
officer’s or director’s lifetime. The maximum potential amount of future
payments that BioTime could be required to make under the indemnification
provisions contained in BioTime’s bylaws is unlimited. However,
BioTime has a directors and officers liability insurance policy that limits its
exposure and enables it to recover a portion of any future amounts
paid. As a result of the insurance policy coverage, BioTime believes
the estimated fair value of these indemnification agreements is minimal and no
liabilities were recorded for these agreements as of December 31,
2008.
Under the
license agreements with Hospira and CJ, BioTime will indemnify Abbott
Laboratories (Hospira’s predecessor), Hospira, and/or CJ for any cost or expense
resulting from any third party claim or lawsuit arising from alleged patent
infringement, as defined, by Abbott, Hospira,
52
or CJ
relating to actions covered by the applicable license
agreement. Management believes that the possibility of payments under
the indemnification clauses is remote. Therefore, BioTime has not
recorded a provision for potential claims as of December 31, 2008. BioTime
enters into indemnification provisions under (i) agreements with other companies
in the ordinary course of business, typically with business partners, licensees,
licensors, contractors, hospitals at which clinical studies are conducted, and
landlords, and (ii) agreements with investors, underwriters, investment bankers,
and financial advisers. Under these provisions, BioTime generally
agrees to indemnify and hold harmless the indemnified party for losses suffered
or incurred by the indemnified party as a result of BioTime’s activities or, in
some cases, as a result of the indemnified party’s activities under the
agreement. These indemnification provisions often include
indemnifications relating to representations made by BioTime with regard to
intellectual property rights. These indemnification provisions
generally survive termination of the underlying agreement. In some
cases, BioTime has obtained liability insurance providing coverage that limits
its exposure for indemnified matters. The maximum potential amount of
future payments that BioTime could be required to make under these
indemnification provisions is unlimited. BioTime has not incurred
material costs to defend lawsuits or settle claims related to these
indemnification agreements. As a result, BioTime believes the
estimated fair value of these agreements is minimal. Accordingly,
BioTime has no liabilities recorded for these agreements as of December 31,
2008.
8. Income
Taxes
The
primary components of the net deferred tax assets at December 31, 2008 and 2007
were as follows:
|
Year
Ended December 31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Deferred
tax assets:
|
||||||||
|
Net
operating loss carryforwards
|
$ | 16,760,000 | $ | 16,198,000 | ||||
|
Research
& development and other credits
|
1,935,000 | 1,797,000 | ||||||
|
Other,
net
|
1,276,000 | 1,001,000 | ||||||
|
Total
|
19,971,000 | 18,996,000 | ||||||
|
Valuation
allowance
|
(19,971,000 | ) | (18,996,000 | ) | ||||
|
Net
deferred tax assets
|
$ | -0- | $ | -0- | ||||
Income
taxes differed from the amounts computed by applying the U.S. federal income tax
of 34% to pretax losses from operations as a result of the
following:
|
Year Ended December 31,
|
2008
|
2007
|
|
Computed
tax benefit at federal statutory rate
|
(34%)
|
(34%)
|
|
Permanent
differences
|
8%
|
4%
|
|
Losses
for which no benefit has been recognized
|
34%
|
39%
|
|
State
tax benefit, net of effect on federal income taxes
|
(6%)
|
(6%)
|
|
Research
and development and other credits
|
(2%)
|
(3%)
|
|
0%
|
0%
|
No tax
benefit has been recorded through December 31, 2008 because of the net operating
losses incurred and a full valuation allowance has been provided. A valuation
allowance is provided when it is more likely than not that some portion of the
deferred tax assets will not be realized. BioTime established a 100% valuation
allowance for all periods presented due to the uncertainty of realizing future
tax benefits from its net operating loss carryforwards and other deferred tax
assets.
As of
December 31, 2008, BioTime has net operating loss carryforwards of approximately
$46,580,000 for federal and $15,818,000 for state tax purposes, which expire
through 2028. In addition, BioTime has tax credit carryforwards for
federal and state tax purposes of $1,088,000 and $846,000, respectively, which
expire through 2028.
Internal
Revenue Code Section 382 places a limitation (the “Section 382 Limitation”) on
the amount of taxable income that can be offset by net operating loss (“NOL”)
carryforwards after a change in control (generally greater than 50% change in
ownership within a three-year period) of a loss corporation. California has
similar rules. Generally, after a control change, a loss corporation cannot
deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these
“change in ownership” provisions, utilization of the NOL and tax credit
carryforwards may be subject to an annual limitation regarding their utilization
against taxable income in future periods.
9. Enterprise-wide
Disclosures
Geographic
Area Information
Revenues,
including license fees and royalties, by geographic area are based on the
country of domicile of the counterparty to the agreement.
|
Year
ending December 31,
|
2008
|
2007
|
||||||
|
Revenues
|
||||||||
|
Domestic
|
$ | 1,225,793 | $ | 790,572 | ||||
|
Asia
|
277,999 | 255,549 | ||||||
|
Total
revenues
|
$ | 1,503,792 | $ | 1,046,121 | ||||
All of
BioTime’s assets are located at its Alameda, California facility.
53
BioTime
has two major customers comprising significant amounts of total revenues as
follows:
|
Year
ended December 31,
|
2008
|
2007
|
|
%
of Total Revenues
|
||
|
Hospira
|
80%
|
74%
|
|
CJ
Corp
|
8.8%
|
10%
|
10.
Subsequent Events
During
January and February 2009, BioTime received $1,380,000 under the Fourth
Amendment to the Credit Agreement. BioTime issued 36,942 common
shares equivalent in value to 6% of the Credit Agreement amounts committed and
received in January and February 2009.
In March
2009, BioTime amended its license agreement with the Wisconsin Alumni Research
Foundation (“WARF”). The amendment increased the license fee from
$225,000 to $295,000, of which $225,000 is payable in cash and $70,000 is
payable by delivering BioTime common shares having a market value of $70,000 as
of March 2, 2009. The amendment extends until March 2, 2010 the dates
for payment of the $215,000 balance of the cash license fee and $20,000 in
remaining reimbursement of costs associated with preparing, filing and
maintaining the Licensed Patents by WARF to January 3, 2010. The
commencement date for payment of the annual $25,000 license maintenance fee has
also been extended to March 2, 2010.
On
January 12, 2009, BioTime issued warrants to an individual to purchase 25,000
common shares at an exercise price of $2.00 per common share. These
warrants expire on October 31, 2010.
In
January 2009, 60,000 BioTime common shares became issuable to Greenbelt Corp for
the deferral of its first and second installment of cash fees of $45,000 each on
July 1, 2008 and on October 1, 2008 in accordance with its Financial Advisor
Agreement dated March 31, 2008. The value of these shares is
recognized in BioTime’s financial statements as of December 31,
2008.
In
January 2009, BioTime received royalties in the amount of $201,134 from Hospira
based on sales of Hextend made by Hospira in the fourth quarter of
2008. This revenue will be reflected in BioTime’s consolidated
financial statements for the first quarter of 2009.
In
January 2009, BioTime received royalties in the amount of $18,761 from CJ based
on sales of Hextend sales made by CJ in the fourth quarter of
2008. This revenue will be reflected in BioTime’s consolidated
statements for the first quarter of 2009.
In
February 2009, BioTime received $83,750 from the exercise of 57,500 options by
directors of the Company.
On
February 23, 2009, BioTime’s wholly owned subsidiary, Embryome Sciences, entered
into a Stem Cell Agreement with Reproductive Genetic Institute
(“RGI”). In partial consideration of the rights and licenses granted
to Embryome Sciences by RGI, BioTime agreed to issue to RGI 32,259
common shares of BioTime stock, which was equal to $50,000 worth of such common
shares on the Effective Date of the Stem Cell Agreement.
54
As of
February 27, 2009, $3,380,000 had been received by BioTime under the Credit
Agreement. Also as of that date, one lender had converted $50,000 of
BioTime’s Credit Agreement debt to him into BioTime common shares; leaving an
outstanding loan balance of $3,330,000 under the Credit Agreement.
Not
applicable.
It is
management’s responsibility to establish and maintain adequate internal control
over all financial reporting pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934 (the “Exchange Act”). Our management, including
our principal executive officer, our principal operations officer, and our
principal financial officer, have reviewed and evaluated the effectiveness of
our disclosure controls and procedures as of a date within ninety (90) days of
the filing date of this Form 10-K annual report. Following this
review and evaluation,
management collectively determined that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in reports that we file or submit under the Exchange Act (i) is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms, and (ii) is accumulated and communicated to management,
including our chief executive officer, our chief operations officer, and our
chief financial officer, as appropriate to allow timely decisions regarding
required disclosure.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during the period covered by this Annual Report on Form 10-K that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial
reporting, as defined in Exchange Act Rule 13a-15(f), is a process designed by,
or under the supervision of, our principal executive officer, our principal
operations officer, and our principal financial officer, and effected by our
Board of Directors, management, and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures
that:
|
·
|
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our
assets;
|
|
·
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being
made only in accordance with authorizations of our management and
directors; and
|
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial
statements.
|
|
|
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control
systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. The scope of management’s assessment of
the effectiveness of internal control over financial reporting includes our
consolidated subsidiary.
Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2008. Based on this assessment,
management believes that, as of that date, our internal control over financial
reporting was effective.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.
55
The names
and ages of our directors are as follows:
Michael D. West, Ph.D., 55,
became our Chief Executive Officer during October 2007, and has served on the
Board of Directors since 2002. Dr. West is
Adjunct Professor of Bioengineering at the University of California,
Berkeley. Dr. West has extensive academic and business experience in
age-related degenerative diseases, telomerase molecular biology and human
embryonic stem cell research and development. Prior to becoming our
Chief Executive Officer, Dr. West served as President and Chief Scientific
Officer of Advanced Cell Technology, Inc., a company he founded in 1998, that is
engaged in developing human stem cell technology for use in regenerative
medicine. , Dr. West also founded Geron Corporation of Menlo Park,
California, and from 1990 to 1998 he was a Director and Vice President, where he
initiated and managed programs in telomerase diagnostics, oligonucleotide-based
telomerase inhibition as anti-tumor therapy, and the cloning and use of
telomerase in telomerase-mediated therapy wherein telomerase is utilized to
immortalize human cells. From 1995 to 1998 he organized and managed
the research between Geron and its academic collaborators James Thomson and John
Gearhart that led to the first isolation of human embryonic stem and human
embryonic germ cells. Dr. West received a B.S. Degree from Rensselaer
Polytechnic Institute in 1976, an M.S. Degree in Biology from Andrews University
in 1982, and a Ph.D. from Baylor College of Medicine in 1989 concentrating on
the biology of cellular aging.
Hal Sternberg, Ph.D., 55, is
our Vice President of Research, and has served on the Board of Directors since
1990. Dr. Sternberg was a visiting scientist and research Associate
at the University of California at Berkeley from 1985-1988, where he supervised
a team of researchers studying Alzheimer’s Disease. Dr. Sternberg
received his Ph.D. from the University of Maryland in Biochemistry in
1982.
Harold Waitz, Ph.D., 66, is
our Vice President of Engineering and Regulatory Affairs, and has served on the
Board of Directors since 1990. He received his Ph.D. in Biophysics
and Medical Physics from the University of California at Berkeley in
1983.
Judith Segall, 55, is our Vice
President-Administration and Secretary, and has served on the Board of Directors
from 1990 through 1994, and from 1995 through the present date. Ms.
Segall received a B.S. in Nutrition and Clinical Dietetics from the University
of California at Berkeley in 1989.
Valeta Gregg, 55, joined the
Board of Directors during October 2004. Ms. Gregg is Vice President
and Assistant General Counsel, Patents of Regeneron Pharmaceuticals, Inc., a
Tarrytown, New York based company engaged in the development of pharmaceutical
products for the treatment of a number of serious medical conditions, including
cancer, diseases of the eye, rheumatoid arthritis and other inflammatory
conditions, allergies, asthma, and obesity. Prior to joining
Regeneron in 2002, Ms. Gregg worked as a patent attorney, at Klauber &
Jackson in Hackensack, New Jersey from 2001 to 2002, and for Novo Nordisk A/S
and
56
its
United States subsidiary from 1996 to 2001, and for Fish & Richardson, P.C.,
Menlo Park, California from 1994 to 1996. Ms. Gregg received her law
degree from University of Colorado School of Law in 1992 and received a Ph.D in
Biochemistry from the University of Alberta in 1982.
Robert N. Butler, MD, 82,
joined the Board of Directors during July 2008. Dr. Butler is the
founder, Chief Executive Officer, and President of the International Longevity
Center-USA, a non-profit international research, policy, and education
organization formed to educate individuals on how to live longer and better, and
advise society on how to maximize the benefits of today's age
boom. Dr. Butler was the first director of the National Institute on
Aging of the National Institutes of Health, where he helped educate the nation
about the dangers of Alzheimer’s disease. At the Mount Sinai School
of Medicine, he founded the nation’s first department of geriatrics where he is
Professor of Geriatrics and Adult Development. Dr. Butler won the
Pulitzer Prize for his book Why Survive? Being Old in
America and is co-author with Myrna I. Lewis of Aging and Mental Health as
well as The New Love and Sex
after 60. His latest book is The Longevity
Revolution.
Executive
Officers
Michael
West, Robert Peabody, Hal Sternberg, Harold Waitz, Judith Segall, and Steven
Seinberg are our only executive officers. There are no family
relationships among our directors or officers.
Robert W. Peabody, CPA, 54, is
our Senior Vice President and Chief Operating Officer. Prior to joining BioTime
in October 2007, Mr. Peabody served as Vice President-Grant Administration for
Advanced Cell Technology, Inc., and also served on their board of directors from
1998 to 2006. Prior to joining ACT, Mr. Peabody spent 14 years as a
Regional Controller for Ecolab, Inc., a Fortune 500 specialty chemical
manufacturer and service company. Mr. Peabody, along with Dr. West, was a
co-founder of Geron Corporation of Menlo Park, Ca. He has also been
an audit manager for Ernst and Young where he was on the audit staff serving the
firm's clients whose shares are publicly traded. Mr. Peabody received a Bachelor
Degree in Business Administration from the University of Michigan and is a
Certified Public Accountant.
Steven A. Seinberg, J.D., 42,
has been our Chief Financial Officer and Treasurer since August
2001. Prior to assuming these positions, Mr. Seinberg worked for over
five years as BioTime’s Director of Financial and Legal Research, a position
that involved, among other duties, contract modifications and management of our
intellectual property portfolio. Mr. Seinberg received a J.D. from
Hastings College of the Law in San Francisco in 1994.
57
Committees
of the Board
We do not
have a standing Audit Committee, Nominating Committee, or Compensation
Committee. Nominees to the Board of Directors are selected by the
entire Board.
Attendance
At Board Meetings
During
the fiscal year ended December 31, 2008, our Board of Directors met six
times. No director attended fewer than 75% of the meetings of the
Board or any committee on which they served.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires our directors and executive officers and persons who own more than ten
percent (10%) of a registered class of our equity securities to file with the
Securities and Exchange Commission (the “SEC”) initial reports of ownership and
reports of changes in ownership of common shares and other BioTime equity
securities. Officers, directors and greater than ten percent
beneficial owners are required by SEC regulations to furnish us with copies of
all reports they file under Section 16(a).
To our
knowledge, based solely on our review of the copies of such reports furnished to
us, all Section 16(a) filing requirements applicable to our officers, directors,
and greater than ten percent beneficial owners were complied with during the
fiscal year ended December 31, 2008, except that a total of thirteen Forms 4
filed on behalf of Alfred D. Kingsley (three late filings), Gary K. Duberstein
(three late filings), Greenbelt Corp. (two late filings), Greenway Partners LP
(two late filings), Broadwood Partners LP (two late filings), and Valeta Gregg
(one late filing) were filed late. There were no known failures to file
any required reports.
Code
of Ethics
We have
adopted a Code of Ethics that applies to our principal executive officer, our
principal financial officer and accounting officer, our other executive
officers, and our directors. The purpose of the Code of Ethics is to
promote (i) honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships; (ii) full, fair, accurate, timely and understandable disclosure
in reports and documents that we file with or submit to the Securities and
Exchange Commission and in our other public communications; (iii) compliance
with applicable governmental rules and regulations, (iv) prompt internal
reporting of violations of the Code to an appropriate person or persons
identified in the Code; and (v) accountability for adherence to the
Code. A copy of our Code of Ethics has been posted on our internet
website and can be found at www.biotimeinc.com.
58
During
October 2007, we entered into an employment agreement with our Chief Executive
Officer, Dr. Michael West, pursuant to which he is entitled to receive an annual
salary of $250,000, an annual bonus equal to the lesser of (A) $65,000 or (B)
the sum of 65% of Consulting Fees and 6.5% of Grant Funds we receive during each
fiscal year; provided that (x) we obtained the grant that is the source of the
Grant Funds during the term of his employment, (y) the grant that is the source
of the Grant Funds is not a renewal, extension, modification, or novation of a
grant (or a new grant to fund the continuation of a study funded by a prior
grant from the same source) obtained by us prior to his employment, and (z) the
grant that is the source of the Grant Funds was not obtained by us substantially
through the efforts of any consultant or independent contractor compensated by
us for obtaining the grant. Grant Funds means money actually paid to
us during a fiscal year as a research grant by any federal or state government
agency or any not for profit non-government organization, and expressly excludes
(1) license fees, (2) royalties, (3) Consulting Fees, (4) capital contributions
to us or any of our subsidiaries, or any joint venture of any kind (regardless
of the legal entity through which the joint venture is conducted) to which we
are a party, and (5) any other payments received by us from a business or
commercial enterprise for research and development of products or technology
pursuant to a contract or agreement for the commercial development of a product
or technology. Consulting Fees means money we receive under a
contract that entitles us to receive a cash fee for providing scientific and
technical advice to third parties concerning stem cells.
Dr. West
was granted an option to purchase 1,500,000 common shares (the AOption@) under the
2002 Plan. The Option is paired with stock appreciation rights
("SARs") with respect to 976,500 shares. The exercise price of the
Option and the SARs is $0.50. The Option and the SARs will vest (as
thereby become exercisable) at the rate of 1/60th of the number of Option shares
or SARs at the end of each full month of employment. Vesting will
depend on Dr. West=s continued
employment by us through the applicable vesting date, and will be subject to the
terms and conditions of the 2002 Plan and a Stock Option Agreement consistent
with the 2002 Plan and Dr. West’s Employment Agreement. The unvested
portion of the Option and the SARs shall not be exercisable.
The
vested portion of the Option and the SARs shall expire on the earliest of (A)
seven (7) years from the date of grant, (B) three months after Dr. West ceases
to be employed by us for any reason other than his death or disability, or (C)
one year after he ceases to be employed by us due to his death or disability;
provided that if he dies during the three month period described in clause (B),
the expiration date of the vested portion of the Option shall be one year after
the date of his death. In addition, (X) if the SAR is exercised, the
vested portion of the Option shall expire as to a number of shares for which the
SAR was exercised, and (Y) the vested and unvested portion of the SARs shall
expire when our shareholders approve an amendment to the 2002 Plan increasing
the number of common shares available under the 2002 Plan from 2,000,000 to
4,000,000 shares. The Option and the SARs, respectively, shall not be
exercisable after it has expired.
The SARs
may not be exercised, in whole or in part, until the vested portion of the
Option has been exercised in full. A vested SAR may be exercised by
delivering a writtennotice to us specifying the number of SAR shares being
exercised. Upon exercise of an SAR, Dr. West shall be entitled to
receive a payment of cash per SAR share
59
exercised
equal to the amount by which the fair market value of a BioTime common share on
the date of exercise exceeds the exercise price of the SAR. The fair
market value of a BioTime common share shall be determined by the Board of
Directors in the manner provided in the 2002 Plan. SARs may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised only by Dr. West during his lifetime.
In the
event that Dr. West’s employment is terminated for “cause,” as defined in his
Employment Agreement, or as a result of his death or disability, or his
resignation, he will be entitled to receive payment for all unpaid salary,
accrued but unpaid bonus, if any, and vacation accrued as of the date of his
termination of employment.
If we
terminate Dr. West’s employment without “cause,” he will be entitled to
additional benefits, consisting of payment of either three months base salary,
if he was employed by us for less than two years, or six months base salary if
he was employed by us for at least two years. In addition, 50% of the
then unvested shares subject to Dr. West’s Option will vest if he was employed
by us for at least two years. However, if a termination of Dr. West’s
employment without “cause” occurs within twelve months following a “Change in
Control,” Dr. West will be entitled to four months base salary if he was
employed by us for less than two years, or twelve months base salary if he was
been employed by us for at least two years; and 50% of the then unvested shares
subject to Dr. West’s Option will vest if he was been employed for less than two
years, or one 100% of the then unvested shares subject to his Option if he was
employed for at least two years.
“Change
of Control” means (A) the acquisition of our voting securities by a person or an
Affiliated Group entitling the holder to elect a majority of our directors;
provided, that an increase in the amount of voting securities held by a person
or Affiliated Group who on the date of the Employment Agreement owned
beneficially owned (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the regulations thereunder) more than 10% of our voting
securities shall not constitute a Change of Control; and provided, further, that
an acquisition of voting securities by one or more persons acting as an
underwriter in connection with a sale or distribution of voting securities shall
not constitute a Change of Control, (B) the sale of all or substantially all of
our assets; or (C) a merger or consolidation in which we merge or consolidate
into another corporation or entity in which our stockholders immediately before
the merger or consolidation do not own, in the aggregate, voting securities of
the surviving corporation or entity (or the ultimate parent of the surviving
corporation or entity) entitling them, in the aggregate (and without regard to
whether they constitute an Affiliated Group) to elect a majority of the
directors or persons holding similar powers of the surviving corporation or
entity (or the ultimate parent of the surviving corporation or
entity). A Change of Control shall not be deemed to have occurred if
all of the persons acquiring our voting securities or assets or merging or
consolidating with us are one or more of our direct or indirect subsidiary or
parent corporations. "Affiliated Group" means (A) a person and one or
more other persons in control of, controlled by, or under common control with
such person; and (B) two or more persons who, by written agreement among them,
act in concert to acquire voting securities entitling them to elect a
majority of our directors. “Person” includes both people and
entities.
60
The
following table summarizes certain information concerning the compensation paid
during the past two fiscal years to our Chief Executive Officer and our Senior
Vice-President and Chief Operating Officer, who were our only executive officers
whose compensation exceeded $100,000 during 2008:
SUMMARY
COMPENSATION TABLE
|
Name
and principal position
|
Year
|
Salary
|
Bonus
|
Stock
awards
|
Option
awards
|
Nonequity
incentive
plan compensation
|
Nonqualified
deferred compensation earnings
|
All
other compensation
|
Total
|
|||||||||||||||||||||||||
|
Michael
D. West
Chief
Executive Officer
|
2008
|
$ | 250,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 24,500 | $ | 274,500 | |||||||||||||||||
|
2007
|
$ | 62,500 | $ | — | $ | — | $ | 9,819 | $ | — | $ | — | $ | — | $ | 72,319 | ||||||||||||||||||
|
Robert
W. Peabody
Senior
Vice President and Chief Operating Officer
|
2008
|
$ | 160,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 8,000 | $ | 168,000 | |||||||||||||||||
|
2007
|
$ | 40,000 | $ | — | $ | — | $ | 3,273 | $ | — | $ | — | $ | — | $ | 43,273 | ||||||||||||||||||
See Note 6 to consolidated financial
statements for information regarding the valuation of option and SAR
awards.
Stock
Options
The
following table summarizes certain information concerning stock options held as
of December 31, 2008 by our Chief Executive Officer and our Senior
Vice-President and Chief Operating Officer, who were our only executive officers
whose compensation exceeded $100,000 during 2008:
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
Option Awards
|
||||
|
Number
of Securities
|
Number
of Securities
|
|||
|
Underlying
Unexercised
|
Underlying
Unexercised
|
Option
Exercise
|
Option
Expiration
|
|
|
Name
|
Options Exercisable
|
Options Unexercisable
|
Price
|
Date
|
| Michael West |
20,000(1)
|
$2.17
|
March
7, 2009
|
|
|
20,000(1)
|
$1.26
|
March
20, 2010
|
||
|
20,000(1)
|
$0.34
|
March
27, 2011
|
||
|
20,000(1)
|
$0.74
|
June
1, 2014
|
||
|
350,000(2)
|
1,150,000
|
$0.50
|
October
9, 2014
|
|
|
Robert
W. Peabody
|
116,662(3)
|
383,338
|
$0.50
|
October
9, 2014
|
(1) These options were granted to Dr. West during his service as a non-employee director.
(2) These
options become exercisable at the rate of 25,000 per month during the term of
Dr. West’s employment.
(3) These
options become exercisable at the rate of 8,333 per month during the term of Mr.
Peabody’s employment.
61
Compensation
of Directors
During
2007, the two directors who were not then employees each received options to
purchase 20,000 common shares exercisable at $0.74 per share, which was the
closing price of the common shares reported on the OTCBB on April 30,
2007. The options granted to these directors vested and became
exercisable in equal quarterly installments based on continued service on the
Board of Directors. Directors and members of committees of the Board of
Directors who are employees are not compensated for serving as directors or
attending meetings of the Board or committees of the Board. Directors
are entitled to reimbursements for their out-of-pocket expenses incurred in
attending meetings of the Board or committees of the Board. Directors
who are our employees are also entitled to receive compensation as
employees.
The
following table summarizes certain information concerning the compensation paid
during the past fiscal year to each of the current members of the Board of
Directors who were not our employees on the date the compensation was
awarded. Dr. West became our Chief Executive Officer during October
2007.
DIRECTOR
COMPENSATION
|
Name
|
Fees Earned or Paid In
Cash
|
Option
Awards
|
Total
|
||||||||
|
Valeta
Gregg(1)
|
-- | $ | 7,710 | $ | 7,710 | ||||||
|
Robert
N. Butler(2)
|
--
|
$ | 13,098 | $ | 13,098 | ||||||
(1) At
December 31, 2008 Valeta Gregg held options to purchase 78,332 common shares at
exercise prices ranging from $0.34 to $1.26 per share.
(2) At
December 31, 2008 Dr. Robert Butler held options to purchase 25,000 common
shares at an exercise price of $0.68 per share.
Insider
Participation in Compensation Decisions
Our Board
of Directors does not have a standing Compensation
Committee. Instead, the Board of Directors as a whole approves all
executive compensation. Executive officers who also serve on the
Board of Directors do not vote on matters pertaining to their own personal
compensation.
62
The
following table sets forth information as of March 1, 2009 concerning beneficial
ownership of common shares by each shareholder known by us to be the beneficial
owner of 5% or more of our common shares. Information concerning
certain beneficial owners of more than 5% of the common shares is based upon
information disclosed by such owners in their reports on Schedule 13D or
Schedule 13G.
Security
Ownership of Certain Beneficial Owners
|
Number
of
|
Percent
of
|
|
|
Shares
|
Total
|
|
|
Alfred
D. Kingsley(1)
|
10,128,364
|
36.0%
|
|
Gary
K. Duberstein
|
||
|
Greenbelt
Corp.
|
||
|
Greenway
Partners, L.P.
|
||
|
Greenhouse
Partners, L.P.
|
||
|
150
E. 57th
Street, Suite 24E
|
||
|
New
York, New York 10022
|
||
|
Neal
C. Bradsher(2)
|
3,216,311
|
12.1%
|
|
Broadwood
Partners, L.P.
|
||
|
Broadwood
Capital, Inc.
|
||
|
724
Fifth Avenue, 9th
Floor
|
||
|
New
York, NY 10019
|
||
___________________________
(1) Includes
2,076,698 shares presently owned by Greenbelt Corp, 334,632 shares that may be
acquired by Greenbelt Corp. upon the exercise of certain warrants, 350,265
shares owned by Greenway Partners, L.P., 304,951shares that may be acquired by
Greenway Partners, L.P. upon the exercise of certain warrants, 4,778,193 shares
owned solely by Alfred D. Kingsley, 2,270,689 shares that may be acquired by Mr.
Kingsley upon the exercise of warrants, 12,256 shares owned solely by Gary K.
Duberstein, and 680 shares that may be acquired by Mr. Duberstein upon the
exercise of certain warrants. Does not include shares that Mr.
Kingsley may acquire at $1.25 per share in exchange for certain promissory notes
in the principal amount of $250,000, plus accrued interest. Does not
include shares that Greenway may acquire at $1.25 per share in exchange for
certain promissory notes in the principal amount of $300,000, plus accrued
interest. Mr. Kingsley and Mr. Duberstein control Greenbelt Corp. and
may be deemed to beneficially own the warrants and shares that Greenbelt Corp.
beneficially owns. Greenhouse Partners, L.P. is the general partner
of Greenway Partners, L.P., and Mr. Kingsley and Mr. Duberstein are the general
partners of Greenhouse Partners, L.P. Greenhouse Partners, L.P., Mr.
Kingsley, and Mr. Duberstein may be deemed to beneficially own the shares that
Greenway Partners, L.P. owns. Mr. Duberstein disclaims beneficial
ownership of the shares and warrants owned solely by Mr. Kingsley, and Mr.
Kingsley disclaims beneficial ownership of the shares owned solely by Mr.
Duberstein.
(2) Includes
1,796,010 shares owned by Broadwood Partners, L.P.,
1,377,393 shares that may be acquired by Broadwood Partners, L.P upon
the exercise of certain warrants, 37,358 shares owned by Neal C. Bradsher, and
5,550 shares that may be acquired by Mr. Bradsher upon the exercise of certain
warrants. Broadwood Capital, Inc. is the general partner of Broadwood
Partners, L.P., and Mr. Bradsher is the President of Broadwood Capital,
Inc. Mr. Bradsher and Broadwood Capital, Inc. may be deemed to
beneficially own the shares that Broadwood Partners, L.P. owns.
63
Security
Ownership of Management
The
following table sets forth information as of March 1, 2009 concerning beneficial
ownership of common shares by each member of the Board of Directors, certain
executive officers, and all officers and directors as a group.
|
Number
of
|
Percent
of
|
|||||||
|
Shares
|
Total
|
|||||||
|
Michael D. West(1)
|
530,000 |
2.0
|
% | |||||
|
Judith Segall(2)
|
712,669 | 2.8 | % | |||||
|
Hal Sternberg(3)
|
410,201 | 1.6 | % | |||||
|
Harold D. Waitz(4)
|
338,625 | 1.3 | % | |||||
|
Valeta Gregg(5)
|
78,332 | * | ||||||
|
Robert N. Butler, M.D.(6)
|
25,000 | * | ||||||
|
Robert W. Peabody(7)
|
149,994 | * | ||||||
|
Steven A. Seinberg(8)
|
105,000 | * | ||||||
|
All
officers and directors as a group (8 persons)(9)
|
2,349,822 | 8.8 | % | |||||
___________________________
* Less
than 1%
(1) Includes
530,000 shares that may be acquired upon the exercise of certain stock options
that are presently exercisable or that may become exercisable within 60
days. Excludes 1,050,000 shares that may be acquired upon the
exercise of certain stock options that are not presently exercisable and that
will not become exercisable within 60 days.
(2) Includes
255,000 shares that may be acquired upon the exercise of certain stock options,
and 45,337 shares that may be acquired upon the exercise of certain
warrants.
(3) Includes
130,000 shares that may be acquired upon the exercise of certain options and
25,931 shares that may be acquired upon the exercise of certain
warrants.
(4) Includes
2,952 shares held for the benefit of Dr. Waitz’s children, 130,000 shares that
may be acquired by Dr. Waitz upon the exercise of certain stock options, 38,379
shares that may be acquired by Dr. Waitz upon the exercise of certain warrants
(including 720 warrants held for the benefit of Dr. Waitz’s
children).
(5) Includes
78,332 shares that may be acquired upon the exercise of certain
options.
(6) Includes
25,000 shares that may be acquired upon the exercise of certain
option.
(7) Includes
149,994 shares that may be acquired upon the exercise of certain stock options
that are presently exercisable or that may become exercisable within 60
days. Excludes 350,006 shares that may be acquired upon the exercise
of certain stock options that are not presently exercisable and that will not
become exercisable within 60 days.
(8) Includes
105,000 shares that may be acquired upon the exercise of certain
options.
(9) Includes
1,513,693 shares that may be acquired upon the exercise of certain options and
warrants. Excludes certain shares that may be acquired upon the
exercise of certain options that are not presently exercisable and will not
become exercisable within 60 days.
64
Certain
Transactions
During
April 1998, we entered into a financial advisory services agreement with
Greenbelt Corp., a corporation controlled by Alfred D. Kingsley and Gary K.
Duberstein, who are also BioTime shareholders. The agreement has been
renewed annually. We paid Greenbelt $90,000 in cash and issued
200,000 common shares for services rendered for the twelve months ending March
31, 2007. Greenbelt permitted us to defer until October 2007 paying
certain cash fees that otherwise would have been payable earlier in the
year. In return for allowing the deferral, we issued Greenbelt an
additional 60,000 common shares. For the 2008 calendar year, we
agreed to pay Greenbelt $135,000 in cash and to issue 300,000 common
shares. Greenbelt permitted us to defer paying the entire $135,000
cash fee until January 2009. In return for allowing the deferral, we
issued Greenbelt an additional 60,000 common shares during January
2009. We have agreed to file a registration statement, at our
expense, to register Greenbelt’s shares for sale under the Securities Act of
1933, as amended, upon Greenbelt’s request. We also agreed to
indemnify Greenbelt and its officers, affiliates, employees, agents, assignees,
and controlling person from any liabilities arising out of or in connection with
actions taken on our behalf under the agreement.
During
April 2006, we entered into a Revolving Line of Credit Agreement (the “Credit
Agreement”) with Alfred D. Kingsley, Cyndel & Co., Inc., and George
Karfunkel under which we could borrow up to $500,000 for working capital
purposes at an interest rate of 10% per annum. In consideration for
making the line of credit available, we issued to the lenders a total of 99,999
common shares.
In
October 2007, the Credit Agreement was amended to increase the line of credit to
$1,000,000, to increase the interest rate to 12% per annum, and to extend the
maturity date to April 30, 2008. The loan payable to Cyndel &
Co., Inc. was paid in full, and Broadwood Partners, LP joined the lender group.
In consideration for extending the maturity date of the new line of
credit, we issued to the lenders a total of 200,000 common shares.
The
Credit Agreement was amended again during March and November 2008 when
additional lenders, including Greenway Partners, L.P., joined the lender group
and the amount of the line of credit was increased and the maturity date was
extended. Additional information concerning the Credit Agreement can
be found in “Management’s Discussion and Analysis or Plan of Operation—Liquidity
and Capital Resources” and Note 3 and Note 10 to our Financial
Statements.
As of
February 27, 2009, we had received loans in the amount of $1,025,000 from
Broadwood Partners, L.P., $250,000 from Alfred D. Kingsley, and $300,000 from
Greenway Partners, L.P. We made cash payments for interest in the
amount of $44,325 to Broadwood Partners, L.P. and $11,425 to Alfred D. Kingsley
on loans made under the Credit Agreement. Interest accrued for
Broadwood Partners, L.P., Alfred D. Kingsley, Greenway Partners, L.P. as of
December 31, 2008 was $8,250, $20,000, and $19,183, respectively, which will be
payable on April 15, 2009, which is the maturity date of the loans under the
Revolving Line of Credit.
65
During
2008, we issued a warrant to purchase 100,000 of our common shares at an
exercise price of $2.00 per share, expiring July 30, 2013, to the International
Longevity Center-USA, a non-profit institution for which Robert M. Butler, M.D.,
serves as President, Chief Executive Officer, and a member of the Board of
Directors.
Director
Independence
Valeta
Gregg and Robert N. Butler, MD, are the only members of the Board of Directors
who qualify as “independent” in accordance with Section 121(A) of the American
Stock Exchange listing standards and Section 10A-3 under the Securities Exchange
Act of 1934, as amended. The other directors, Michael D. West, Judith
Segall, Hal Sternberg, and Harold Waitz do not qualify as “independent” because
they are our full time employees and executive officers.
Ms. Gregg
served on the BioTime Audit Committee, Nominating Committee and Compensation
Committee during 2007. The only compensation or remuneration that
BioTime has provided to Ms. Gregg and Dr. Butler during their tenure as
directors has been compensation as non-employee directors. Ms. Gregg,
Dr. Butler, and the members of their families have not participated in any
transaction with us that would disqualify them as “independent” directors under
the standard described above.
Rothstein,
Kass and Company (“RKCO”) audited our annual financial statements for the fiscal
years ended December 31, 2007 and December 31, 2008.
Audit Fees. RKCO
billed us $95,000 in 2007 and $102,500 in 2008 for the audit of our annual
financial statements and for the review of our financial statements included in
our quarterly reports on Form 10-QSB and Form 10-Q.
Audit-Related
Fees. BDO Seidman, our previous independent auditing firm,
billed us $20,466 for audit-related fees during the fiscal year ended December
31 2007. These fees were incurred in connection with the reissuance
of BDO’s report on our fiscal year 2005 financial statements in conjunction with
the filing of our 2006 10-KSB. There were no other audit-related fees
charged to us by RKCO during the fiscal years ended December 31, 2007 and
2008.
Tax Fees. RKCO
billed us $6,000 and $6,500, respectively, for review and preparation of U.S.
federal, state, and local tax returns during the fiscal years ended December 31,
2007 and December 31, 2008, respectively.
Other Fees. There
were no other fees charged to us by RKCO during the fiscal years ended December
31, 2007 and 2008.
The prior
approval of the Board of Directors is required for the engagement of our
auditors to perform any non-audit services for us. Other than de
minimis services incidental to audit services, non-audit services shall
generally be limited to tax services such as advice and planning and financial
due diligence services. All fees for such non-audit services must be approved by
the Board of Directors, except to the extent otherwise permitted by applicable
SEC regulations.
66
(a-1)
Financial Statements.
The
following financial statements of BioTime, Inc. are filed in the Form
10-K:
Consolidated balance
sheets
Consolidated
statements of operations
Consolidated
statements of shareholders' deficit
Consolidated
statements of cash flows
Notes to
Financial
Statements
(a-2)
Financial Statement Schedules
All
schedules are omitted because the required information is inapplicable or the
information is presented in the financial statements or the notes
thereto.
(a-3)
Exhibits.
|
Exhibit
|
|
|
Numbers
|
Description
|
|
3.1
|
Articles
of Incorporation.†
|
|
3.2
|
Amendment
of Articles of Incorporation.***
|
|
3.3
|
By-Laws,
As Amended.#
|
|
4.1
|
Specimen
of Common Share Certificate.+
|
|
4.2
|
Form
of Warrant Agreement between BioTime, Inc. and American Stock Transfer
& Trust Company++
|
|
4.3
|
Form
of Amendment to Warrant Agreement between BioTime, Inc. and American Stock
Transfer & Trust Company. +++
|
67
|
4.4
|
Form
of Warrant+++
|
|
10.1
|
Intellectual
Property Agreement between BioTime, Inc. and Hal
Sternberg.+
|
|
10.2
|
Intellectual
Property Agreement between BioTime, Inc. and Harold
Waitz.+
|
|
10.3
|
Intellectual
Property Agreement between BioTime, Inc. and Judith
Segall.+
|
|
10.4
|
Intellectual
Property Agreement between BioTime, Inc. and Steven
Seinberg.*
|
|
10.5
|
Agreement
between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive License.+
|
|
10.6
|
Agreement
for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc.
Common Shares.+
|
|
10.7
|
2002
Stock Option Plan, as amended.##
|
|
10.8
|
Exclusive
License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a
request for confidential treatment).###
|
|
10.9
|
Modification
of Exclusive License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a request for
confidential treatment).^
|
|
10.10
|
Exclusive
License Agreement between BioTime, Inc. and CJ Corp.**
|
|
10.11
|
Hextend
and PentaLyte Collaboration Agreement between BioTime, Inc. and Summit
Pharmaceuticals International
Corporation.‡
|
|
10.12
|
Lease
dated as of May 4, 2005 between BioTime, Inc. and Hollis R& D
Associates ‡‡
|
|
10.13
|
Addendum
to Hextend and PentaLyte Collaboration Agreement Between BioTime Inc. And
Summit Pharmaceuticals International Corporation‡‡‡
|
|
10.14
|
Amendment
to Exclusive License Agreement Between BioTime Inc. and Hospira,
Inc.††
|
|
10.15
|
Hextend
and PentaLyte China License Agreement Between BioTime, Inc. and Summit
Pharmaceuticals International Corporation.†††
|
|
10.16
|
Revolving
Credit Line Agreement between BioTime, Inc, Alfred D. Kingsley, Cyndel
& Co., Inc., and George Karfunkel, dated April 12,
2006.††††
|
|
10.17
|
Security
Agreement executed by BioTime, Inc., dated April 12,
2006.††††
|
68
|
10.18
|
Form
of Revolving Credit Note of BioTime, Inc. in the principal amount of
$166,666.67 dated April 12, 2006.††††
|
|
10.19
|
First
Amended and Restated Revolving Line of Credit Agreement, dated October 17,
2007. ####
|
|
10.20
|
Form
of Amended and Restated Revolving Credit Note. ####
|
|
10.21
|
Form
of Revolving Credit Note. ####
|
|
10.22
|
First
Amended and Restated Security Agreement, dated October 17, 2007.
####
|
|
10.23
|
Employment
Agreement, dated October 10, 2007, between BioTime, Inc. and Michael D.
West.++++
|
|
10.24
|
Commercial
License and Option Agreement between BioTime and Wisconsin Alumni Research
Foundation.****
|
|
10.25
|
Second
Amended and Restated Revolving Line of Credit Agreement, dated February
15, 2008.‡‡‡‡
|
|
10.26
|
Form
of Amended and Restated Revolving Credit Note.‡‡‡‡
|
|
10.27
|
Second
Amended and Restated Security Agreement, dated February 15,
2008.‡‡‡‡
|
| 10.28 | Third Amended and Restated Revolving Line of Credit Agreement, March 31, 2008. ~ |
| 10.29 | Third Amended and Restated Security Agreement, dated March 31, 2008. ~ |
| 10.30 | Sublease Agreement between BioTime, Inc. and Avigen, Inc.++++ |
| 10.31 |
License,
Product Production, and Distribution Agreement, dated June 19, 2008, among
Lifeline Cell Technology, LLC, BioTime, Inc., and Embryome Sciences, Inc.
^^
|
| 10.32 |
License
Agreement, dated July 10, 2008, between Embryome Sciences, Inc. and
Advanced Cell Technology, Inc. ^^
|
| 10.33 |
License
Agreement, dated August 15, between Embryome Sciences, Inc. and Advanced
Cell Technology, Inc. ^^^
|
| 10.34 |
Sublicense
Agreement, dated August 15, between Embryome Sciences, Inc. and Advanced
Cell Technology, Inc. ^^^
|
| 10.35 |
Fourth
Amendment of Revolving Line of Credit Agreement.^^^
|
| 10.36 |
Fourth
Amendment of Security Agreement.^^^
|
| 10.37 |
Stem
Cell Agreement, dated February 23, 2009, between Embryome Sciences, Inc.
and Reproductive Genetics Institute. ^^^^
|
| 10.38 | First Amendment of Commercial License and Option Agreement, dated March 11, 2009, between BioTime and Wisconsin Alumni Research Foundation. ^^^^ |
| 10.39 | Employment Agreement, dated October 10, 2007, between BioTime, Inc. and Robert Peabody.^^^^ |
| 21 | List of Subsidiaries of BioTime, Inc.^^^^ |
|
23.1
|
Consent
of Rothstein, Kass & Company, P.C.^^^^
|
|
31
|
Rule
13a-14(a)/15d-14(a) Certification^^^^
|
|
32
|
Section
1350
Certification^^^^
|
†Incorporated
by reference to BioTime’s Form 10-K for the fiscal year ended June 30,
1998.
+
Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992,
respectively.
69
#
Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992,
respectively.
++ Incorporated by reference
to Registration Statement on Form S-2, File Number 333-109442, filed with the
Securities and Exchange Commission on October 3, 2003, and Amendment No.1
thereto filed with the Securities and Exchange Commission on November 13,
2003.
+++Incorporated
by reference to Registration Statement on Form S-2, File Number 333-128083,
filed with the Securities and Exchange Commission on September 2,
2005.
##
Incorporated by reference to Registration Statement on Form S-8, File Number
333-101651 filed with the Securities and Exchange Commission on December 4, 2002
and Registration Statement on Form S-8, File Number 333-122844 filed with the
Securities and Exchange Commission on February 23, 2005.
###
Incorporated by reference to BioTime’s Form 8-K, filed April 24,
1997.
^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
1999.
*
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2001.
**
Incorporated by reference to BioTime’s Form 10-K/A-1 for the year ended December
31, 2002.
‡
Incorporated by reference to BioTime’s Form 8-K, filed December 30,
2004
‡‡
Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 File Number 333-109442, filed with the Securities and
Exchange Commission on May 24,
2005
‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed December 20,
2005
††
Incorporated by reference to BioTime’s Form 8-K, filed January 13,
2006
†††
Incorporated by reference to BioTime’s Form 8-K, filed March 30,
2006
††††
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2005
***
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2006.
****
Incorporated by reference to BioTime’s Form 8-K, filed January 9,
2008.
‡‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed March 10,
2008.
~
Incorporated by reference to BioTime’s Form 8-K filed April 4,
2008.
++++
Incorporated by reference to BioTime’s Form 10-KSB for the year ended December
31, 2007.
^^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2008.
^^^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended September
30, 2008.
^^^^
Filed herewith
70
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report on Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized on the 20th day of
March, 2009.
|
BIOTIME,
INC.
|
|
|
By: /s/Michael D.
West
|
|
|
Michael
D. West, Ph.D., Chief Executive
Officer
|
|
Signature
|
Title
|
Date
|
|
|
/s/Michael D. West
|
Chief
Executive Officer
|
March 20,
2009
|
|
|
Michael
D. West, Ph.D.
|
and
Director
|
||
|
/s/Judith Segall
|
Vice
President-Administration and
|
March
20, 2009
|
|
|
Judith
Segall
|
Director
|
||
|
/s/Hal Sternberg
|
Vice
President-Research and
|
March
20, 2009
|
|
|
Hal
Sternberg, Ph.D.
|
Director
|
||
|
/s/Harold D. Waitz
|
Vice
President-Regulatory Affairs/Quality Control
|
March
20, 2009
|
|
|
Harold
D. Waitz, Ph.D.
|
and
Director
|
||
|
/s/Steven A. Seinberg
|
Chief
Financial Officer
|
March
20, 2009
|
|
|
Steven
A. Seinberg
|
(Principal
Financial and Accounting
Officer)
|
||
|
|
Director | ||
|
Valeta
Gregg, Ph.D.
|
|
March
__, 2009
|
|
| Director | March __, 2009 | ||
| Robert N. Butler, M.D. |
71
|
Exhibit
|
|
|
Numbers
|
Description
|
|
3.1
|
Articles
of Incorporation.†
|
|
3.2
|
Amendment
of Articles of Incorporation.***
|
|
3.3
|
By-Laws,
As Amended.#
|
|
4.1
|
Specimen
of Common Share Certificate.+
|
|
4.2
|
Form
of Warrant Agreement between BioTime, Inc. and American Stock Transfer
& Trust Company++
|
|
4.3
|
Form
of Amendment to Warrant Agreement between BioTime, Inc. and American Stock
Transfer & Trust Company. +++
|
|
4.4
|
Form
of Warrant+++
|
|
10.1
|
Intellectual
Property Agreement between BioTime, Inc. and Hal
Sternberg.+
|
|
10.2
|
Intellectual
Property Agreement between BioTime, Inc. and Harold
Waitz.+
|
|
10.3
|
Intellectual
Property Agreement between BioTime, Inc. and Judith
Segall.+
|
|
10.4
|
Intellectual
Property Agreement between BioTime, Inc. and Steven
Seinberg.*
|
|
10.5
|
Agreement
between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive License.+
|
|
10.6
|
Agreement
for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc.
Common Shares.+
|
|
10.7
|
2002
Stock Option Plan, as amended.##
|
|
10.8
|
Exclusive
License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a
request for confidential treatment).###
|
|
10.9
|
Modification
of Exclusive License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a request for
confidential treatment).^
|
|
10.10
|
Exclusive
License Agreement between BioTime, Inc. and CJ Corp.**
|
|
10.11
|
Hextend
and PentaLyte Collaboration Agreement between BioTime, Inc. and Summit
Pharmaceuticals International
Corporation.‡
|
72
|
10.12
|
Lease
dated as of May 4, 2005 between BioTime, Inc. and Hollis R& D
Associates ‡‡
|
|
10.13
|
Addendum
to Hextend and PentaLyte Collaboration Agreement Between BioTime Inc. And
Summit Pharmaceuticals International Corporation‡‡‡
|
|
10.14
|
Amendment
to Exclusive License Agreement Between BioTime Inc. and Hospira,
Inc.††
|
|
10.15
|
Hextend
and PentaLyte China License Agreement Between BioTime, Inc. and Summit
Pharmaceuticals International Corporation.†††
|
|
10.16
|
Revolving
Credit Line Agreement between BioTime, Inc, Alfred D. Kingsley, Cyndel
& Co., Inc., and George Karfunkel, dated April 12,
2006.††††
|
|
10.17
|
Security
Agreement executed by BioTime, Inc., dated April 12,
2006.††††
|
|
10.18
|
Form
of Revolving Credit Note of BioTime, Inc. in the principal amount of
$166,666.67 dated April 12, 2006.††††
|
|
10.19
|
First
Amended and Restated Revolving Line of Credit Agreement, dated October 17,
2007. ####
|
|
10.20
|
Form
of Amended and Restated Revolving Credit Note. ####
|
|
10.21
|
Form
of Revolving Credit Note. ####
|
|
10.22
|
First
Amended and Restated Security Agreement, dated October 17, 2007.
####
|
|
10.23
|
Employment
Agreement, dated October 10, 2007, between BioTime, Inc. and Michael D.
West.++++
|
|
10.24
|
Commercial
License and Option Agreement between BioTime and Wisconsin Alumni Research
Foundation.****
|
|
10.25
|
Second
Amended and Restated Revolving Line of Credit Agreement, dated February
15, 2008.‡‡‡‡
|
|
10.26
|
Form
of Amended and Restated Revolving Credit Note.‡‡‡‡
|
|
10.27
|
Second
Amended and Restated Security Agreement, dated February 15,
2008.‡‡‡‡
|
| 10.28 | Third Amended and Restated Revolving Line of Credit Agreement, March 31, 2008. ~ |
| 10.29 | Third Amended and Restated Security Agreement, dated March 31, 2008. ~ |
| 10.30 | Sublease Agreement between BioTime, Inc. and Avigen, Inc.++++ |
| 10.31 |
License,
Product Production, and Distribution Agreement, dated June 19, 2008, among
Lifeline Cell Technology, LLC, BioTime, Inc., and Embryome Sciences, Inc.
^^
|
| 10.32 |
License
Agreement, dated July 10, 2008, between Embryome Sciences, Inc. and
Advanced Cell Technology, Inc. ^^
|
| 10.33 |
License
Agreement, dated August 15, between Embryome Sciences, Inc. and Advanced
Cell Technology, Inc. ^^^
|
| 10.34 |
Sublicense
Agreement, dated August 15, between Embryome Sciences, Inc. and Advanced
Cell Technology, Inc. ^^^
|
| 10.35 |
Fourth
Amendment of Revolving Line of Credit Agreement.^^^
|
| 10.36 |
Fourth
Amendment of Security Agreement.^^^
|
| 10.37 |
Stem
Cell Agreement, dated February 23, 2009, between Embryome Sciences, Inc.
and Reproductive Genetics Institute. ^^^^
|
| 10.38 |
First Amendment of Commercial
License and Option Agreement, dated March 11,
2009, between BioTime and Wisconsin
Alumni Research Foundation.
^^^^
|
| 10.39 | Employment Agreement, dated October 10, 2007, between BioTime, Inc. and Robert Peabody.^^^^ |
| 21 | List of Subsidiaries of BioTime, Inc.^^^^ |
|
23.1
|
Consent
of Rothstein, Kass & Company, P.C.^^^^
|
|
31
|
Rule
13a-14(a)/15d-14(a) Certification^^^^
|
|
32
|
Section
1350
Certification^^^^
|
†Incorporated
by reference to BioTime’s Form 10-K for the fiscal year ended June 30,
1998.
+
Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992,
respectively.
73
#
Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992,
respectively.
++ Incorporated by reference
to Registration Statement on Form S-2, File Number 333-109442, filed with the
Securities and Exchange Commission on October 3, 2003, and Amendment No.1
thereto filed with the Securities and Exchange Commission on November 13,
2003.
+++Incorporated
by reference to Registration Statement on Form S-2, File Number 333-128083,
filed with the Securities and Exchange Commission on September 2,
2005.
##
Incorporated by reference to Registration Statement on Form S-8, File Number
333-101651 filed with the Securities and Exchange Commission on December 4, 2002
and Registration Statement on Form S-8, File Number 333-122844 filed with the
Securities and Exchange Commission on February 23, 2005.
###
Incorporated by reference to BioTime’s Form 8-K, filed April 24,
1997.
^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
1999.
*
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2001.
**
Incorporated by reference to BioTime’s Form 10-K/A-1 for the year ended December
31, 2002.
‡
Incorporated by reference to BioTime’s Form 8-K, filed December 30,
2004
‡‡
Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 File Number 333-109442, filed with the Securities and
Exchange Commission on May 24,
2005
‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed December 20,
2005
††
Incorporated by reference to BioTime’s Form 8-K, filed January 13,
2006
†††
Incorporated by reference to BioTime’s Form 8-K, filed March 30,
2006
††††
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2005
***
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2006.
****
Incorporated by reference to BioTime’s Form 8-K, filed January 9,
2008.
‡‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed March 10,
2008.
~
Incorporated by reference to BioTime’s Form 8-K filed April 4,
2008.
++++
Incorporated by reference to BioTime’s Form 10-KSB for the year ended December
31, 2007.
^^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2008.
^^^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended September
30, 2008.
^^^^
Filed herewith
74
Exhibit
10.37
STEM CELL
AGREEMENT
This Stem Cell Agreement (“Agreement”)
is made and entered into as of the 23rd day of February, 2009 (the “Effective
Date”), by and between Reproductive
Genetics Institute, an Illinois corporation with offices located at 2825
North Halsted St., Chicago, IL 606571 (“RGI”), Embryome
Sciences, Inc., a California corporation (“ES”), with offices located at
1301 Harbor Bay Parkway, Suite 100, Alameda, California 94502. RGI and ES are
sometimes hereinafter referred to as the “Parties”.
WITNESSETH
WHEREAS, RGI owns or has licensed with
a sublicensable interest the CELLS, CELL LINES, and KNOW-HOW; and
WHEREAS, ES desires to obtain a license
from RGI to use, reproduce, market, and sell the CELLS upon the terms and
conditions set forth in this Agreement; and
WHEREAS, RGI is willing to provide the
CELLS and grant such a license to ES upon the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein, the Parties hereto agree as
follows:
ARTICLE 1 -
DEFINITIONS
For the purposes of this Agreement, the
following words and phrases shall have the following meanings:
1.1 “ACCEPTABLY
DERIVED” has the meaning defined in Section 3.2.
1.2 “AFFILIATE”
means any corporation, limited liability company, limited partnership or other
entity in control of, controlled by, or under common control with
ES.
1.3 “CELLS”
means the cells ACCEPTABLY DERIVED from the CELL LINES identified in Exhibit A attached
hereto (the “CELL LINES”), and additional cell lines derived from
preimplantation embryos during the term of this Agreement, that are covered by
(i.e., made or developed using) the KNOW-HOW and/or are provided to ES by RGI in
accordance with the provisions of Articles 2 or 3, as applicable, of this
Agreement. The CELL LINES will include, but not be limited to, those
made animal product free and those with defined HLA types and determined to
carry disease gene alleles.
1.4 “COMBINATION
PRODUCT” means a product that contains a CELLS component and at least one other
component that has independent research, diagnostic or therapeutic utility,
could reasonably be sold separately and has economic value of its
own.
1.5 “COMMERCIAL
USE” means a use of CELLS or CELL LINES for any use other than a NON-COMMERCIAL
USE.
1.6 “CONFIDENTIAL
INFORMATION” means confidential or proprietary information of RGI or ES relating
to the KNOW-HOW, CELLS and/or CELL LINES. CONFIDENTIAL INFORMATION may be in
written, graphic, oral or physical form and may include scientific knowledge,
know-how, processes, inventions, techniques, formulae, products, business
operations, customer requirements, designs, sketches, photographs, drawings,
specifications, reports, studies, findings, data, plans or other records,
biological materials, and/or software. CONFIDENTIAL INFORMATION shall
not include: (a) information which is, or later becomes, generally
available to the public through no fault of the recipient; (b) information which
is provided to the recipient by an independent third party having no obligation
to keep the information secret; (c) information which the recipient can
establish by written documentation was previously known to it; or (d)
information which the recipient can establish by written documentation was
independently developed by it without reference to the CONFIDENTIAL
INFORMATION.
1.7 “KNOW-HOW”
means all compositions of matter, techniques and data and other know-how and
technical information including inventions (whether or not patentable),
improvements and developments, practices, methods, concepts, trade secrets,
documents, computer data, computer slide illustrations, computer code,
apparatus, test data, analytical and quality control data, formulation,
manufacturing, patent data or descriptions, development information, drawings,
specifications, designs, plans, proposals and technical data and
manuals, all of which may constitute CONFIDENTIAL
INFORMATION, that is owned or controlled by RGI as of the Effective Date or that
is developed or acquired by RGI in the future, and that specifically relates
to the growth, development, reproduction, or characterization of the
CELLS acquired by ES from RGI.
1.8 “NET
SALES” means the amounts received by ES from sales or other disposition for
value of CELLS and CELL LINES or COMBINATION PRODUCTS by ES or its AFFILIATES to
any third party (excluding any disposition transaction involving a merger or
consolidation of ES or a sale of all or part of ES’s business where the
purchaser assumes ES’s rights and obligations under this Agreement), less (to
the extent applicable and appropriately documented) (i) sales, tariff and import
duties, use and other taxes directly imposed with reference to particular sales,
(ii) discounts, rebates, and similar credits and chargebacks actually allowed
and taken (regardless of whether taken or paid at the time of sale or paid or
credited to the buyer at a subsequent date), (iii) amounts allowed or credited
on returns; provided, any such allowed deductions shall be listed on the
applicable sales invoice or otherwise documented in the ordinary course of
business, and (iv) in the case of sales of CELLS for NON-COMMERCIAL USE,
royalties payable to any third party for the use of any patent or other
technology in connection with the growth, reproduction, or characterization of
CELLS.
In the
case of NET SALES of COMBINATION PRODUCTS, NET SALES means the total invoice
amount collected of COMBINATION PRODUCTS by ES or its AFFILIATES to any third
party, less, to the extent applicable, the deductions set forth above,
multiplied by a proration factor that is determined as follows:
(i) If
all components of the COMBINATION PRODUCT were sold separately during the same
or immediately preceding calendar quarter, the proration factor shall
be
2
determined
by the formula [A/(A+B)], where A is the average invoice amount earned on the
CELLS during such period when sold separately in finished form, and B is the
average invoice amount earned on all other active components of the COMBINATION
PRODUCT during such period when sold separately in finished form;
or
(ii) if
all components of the COMBINATION PRODUCT were not sold separately during the
same or immediately preceding calendar quarter, the proration factor shall be
determined by the formula [C/(C+D)], where C is the average fully absorbed cost
of the CELLS component during the prior quarter and D is the average fully
absorbed cost of all other active components of the COMBINATION PRODUCT during
the prior quarter.
1.9 “NONCOMMERCIAL
USE” means the use of CELLS as research tools, including but not limited to use
in the discovery and development of drugs and other products for the treatment
or diagnosis of disease; provided, however, that the use of CELLS directly in
the treatment or diagnosis of disease in humans shall be deemed a COMMERCIAL
USE.
1.10 “STEERING
COMMITTEE” means a committee of four people, two being appointed by ES and two
being appointed by RGI that will decide on behalf of the two companies
commercial strategies for jointly developing, marketing, and selling CELLS for
COMMERCIAL USE. The STEERING COMMITTEE shall not make decisions on
pricing of sales of CELLS by ES.
For
purposes of this Agreement, except as otherwise expressly provided herein or
unless the context otherwise requires: (a) the use herein of the
plural shall include the single and vice versa and the use of the
masculine shall include the feminine; (b) unless otherwise set forth herein, the
use of the term “including” or “includes” means “including [includes] but [is]
not limited to”; and (c) the words “herein,” “hereof,” “hereunder” and other
words of similar import refer to this Agreement as a whole and not to any
particular provision. Additional terms may be defined throughout this
Agreement.
ARTICLE 2 – LICENSE
GRANT
2.1 Grant of
Rights. RGI hereby grants to ES, and ES accepts, subject to
the terms and conditions of this Agreement, a royalty-bearing, worldwide,
non-exclusive license during the term of this Agreement only, to use the
KNOW-HOW to research, develop, make, have made, use, sell, have sold, offer for
sale, have offered for sale, import, have imported, export and have exported
CELLS and CELL LINES. The KNOW-HOW shall not be sublicensed by ES
without RGI’s written consent.
2.2 Knowledge
Transfer. Within sixty (60) days of the Effective Date, RGI
shall provide and deliver to ES, on a non-exclusive basis, copies of all
information and data relating to the KNOW-HOW as may be reasonably necessary to
allow ES to exploit the licenses granted hereunder and to reproduce the CELLS
acquired from RGI. If after the Effective Date RGI develops or
obtains any new or additional KNOW-HOW pertaining the CELLS acquired by ES from
RGI, RGI shall provide, deliver, and transfer copies of such KNOW-HOW and other
information to ES, on a non-exclusive basis, promptly after such KNOW-HOW is
developed or obtained. Such deliveries shall be made free and clear
of all liens, security interests, encumbrances, and claims of any kind by any
third party. RGI shall bear all costs of so delivering the KNOW-HOW
to ES.
3
2.3 Regulatory
Approvals. ES acknowledges and agrees that the CELLS have not
been approved by the United States Food and Drug Administration or by any
similar regulatory agency of any other country for use as drug or medical
device.
2.4 New Patents, Inventions, and
Discoveries. ES shall have the right to file and prosecute new
patent applications (and to obtain new patents) with respect to any technology,
invention, or discovery made by ES or any of its AFFILIATES using CELLS and
KNOW-HOW. RGI shall acquire no right, title or interest with respect
to such new patents, inventions, discoveries, or technology not included within
the KNOW-HOW licensed to ES by RGI, except that in the case of any product or
treatment for COMMERCIAL USE developed by ES using CELLS otherwise than in
accordance with plans approved by the STEERING COMMITTEE, RGI shall be granted a
non-exclusive, perpetual, royalty free license to make, use and sell such
products and treatments covered by such patents.
2.5 Sales of ES CELLS to
RGI. ES agrees that to the extent RGI desires to purchase
CELLS of any type from ES for NON-COMMERCIAL USE, ES will sell such CELLS to RGI
for a price per ampule equal to fifty percent (50%) of the lowest price offered
by ES to any other Customer for NON-COMMERCIAL USE during the
immediately-preceding twenty-four (24) month period.
ARTICLE 3 – MATERIAL
TRANSFER
3.1 Delivery of CELLS and CELL
LINES. In consideration of the issuance and delivery of the
License Fee Shares under Section 5.1, RGI hereby sells, transfers and assigns to
ES ten (10) of the CELLS from ten (10) CELL LINES chosen by ES listed on EXHIBIT
A. Within fifteen (15) business days after the Effective Date, RGI
shall deliver to ES a quantity of ampules containing CELLS, sufficient to enable
ES to reproduce in commercial quantities the 10 different types of
CELLS. Should ES elect to market additional types of CELLS, ES shall
give RGI written notice of the additional cell types chosen by ES from the CELL
LINES listed on Exhibit A and within fifteen (15) business days of such notice,
RGI shall sell, transfer, assign, and deliver to ES a quantity of ampules
containing such additional CELLS, sufficient to enable ES to reproduce the
additional types of CELLS in commercial quantities. Such transfer and
assignment is made free and clear of all liens, security interests,
encumbrances, and claims of any kind by any third party. RGI shall
bear all costs of delivering the CELLS to ES. All CELLS shall be
delivered to ES between the hours of 9:00 a.m. and 5:00 p.m. on a weekday (other
than a Federal or California state holiday) at the address shown in Article 10
of this Agreement, upon twenty-four hours oral or written notice to
ES. All CELLS shall be contained in cryovials and packaging suitable
for the purpose of storage and delivery. If ES elects to acquire
additional CELLS after the initial ten (10) CELLS are delivered to ES by RGI,
and RGI requires more than fifteen (15) business to deliver all of the
additional CELLS requested by ES due to the number of CELLS so requested, ES
shall allow RGI such additional time as RGI may reasonably require to complete
the delivery of all of the additional CELLS, and RGI shall use commercially
reasonably efforts and diligence to complete the delivery of such additional
CELLS, including making such deliveries in installments as sufficient CELLS of
each CELL LINE become available.
3.2 Acceptably
Derived. All human pluripotent stem cells and cell lines
comprising CELLS provided to ES under this Agreement must be ACCEPTABLY
DERIVED. RGI will provide ES with documentation verifying that all
CELLS of each CELL LINE delivered to ES were ACCEPTABLY
4
DERIVED. If
so requested by ES, RGI will take all such actions as are necessary to have the
CELLS deposited in the United Kingdom Stem Cell Bank. In order to be
ACCEPTABLY DERIVED human pluripotent stem cells must have:
(a) Been
listed on the National Institutes of Health Human Embryonic Stem Cell Registry,
or
(b) Been
deposited in the United Kingdom Stem Cell Bank, or
(c) Been
derived by, or approved for use by, a licensee of the United Kingdom Human
Fertilisation and Embryology Authority, or
(d) Been
derived in accordance with the Canadian Institutes of Health Research
Guidelines for Human Stem Cell Research under an application approved by the
National Stem Cell Oversight Committee, or
(e) Been
derived under the following conditions:
(i) Donors
of gametes, embryos, somatic cells or human tissue gave voluntary and informed
consent.
(ii) Donors
of gametes, embryos, somatic cells or human tissue did not receive valuable
consideration. This provision does not prohibit reimbursement for
permissible expenses as determined by an Institutional Review Board
(IRB).
(iii) Not
been derived from gametes, embryos, somatic cells, or human tissue knowingly
purchased or sold for valuable consideration for research
purposes. This provision does not prohibit reimbursement for
permissible expenditures as determined by an IRB or a Stem Cell Research
Oversight Committee. APermissible
expenditures@
means necessary and reasonable costs directly incurred as a result of persons,
not including human subjects or donors, providing gametes, embryos, somatic
cells, or human tissue for research purposes. Permissible
expenditures may include but are not limited to costs associated with
processing, quality control, storage, or transportation of
materials.
(iv) Donation
of gametes, embryos, somatic cells or human tissue was overseen by an IRB (or,
in the case of foreign sources, an IRB-equivalent).
(v) Individuals
who consented to donate stored gametes, embryos, somatic cells or human tissue
were not reimbursed for the cost of storage prior to the decision to
donate.
3.3 Non-Exclusive
Rights. ES acknowledges and agrees that its right to acquire
CELLS from RGI is on a non-exclusive basis, and that RGI shall be entitled to
make, use, sell, market, distribute, and transfer identical or other CELLS and
CELL LINES to third parties, or otherwise use same, for RGI’s own account, on
such terms and conditions as RGI may determine, in its sole and absolute
discretion.
5
3.4 ES
agrees that to the extent it desires to purchase CELLS which are available for
purchase from RGI, ES will purchase its requirements of such CELLS from RGI and
will not purchase such requirements for any third party unless RGI shall be
unable to timely provide same.
ARTICLE 4 –
COMMERCIALIZATION
4.1 ES
intends to use, or to cause its AFFILIATES to use, commercially reasonable
efforts to bring one or more CELL LINES developed from the CELLS acquired
hereunder to market for NON-COMMERCIAL USE during the term of this
Agreement. ES makes no representation, guaranty, or warranty that it
or its AFFILIATES will be successful in reproducing, marketing, selling, or
distributing any CELLS or CELL LINES.
ARTICLE 5 -
CONSIDERATION
5.1 License
Fee. In partial consideration of the rights and licenses
granted to ES by RGI in this Agreement, ES shall cause its parent BioTime, Inc.
to issue to RGI, as a license fee for the KNOW-HOW related to the first 10 cell
types chosen by ES from the list in Exhibit A, a number of BioTime common shares
determined by dividing Fifty Thousand Dollars ($50,000) by the closing price of
BioTime common shares on the OTC-BB market on the Effective Date of this
Agreement (or the closing price on the most recent date on which BioTime shares
traded before the Effective Date if BioTime common shares did not trade on the
OTC-BB market on the Effective Date) (the “License Fee Shares”). For each
additional cell type chosen by ES from the list in Exhibit A and as it is
updated in the future, a number of BioTime common shares determined by dividing
Five Thousand Dollars ($5,000) by the closing price of BioTime common shares on
the OTC-BB market on the date of such written notice to RGI from ES (or the
closing price on the most recent date on which BioTime shares traded before the
date of written notice if BioTime common shares did not trade on the OTC-BB
market on the date of notice) shall be issued to RGI as a license fee for the
KNOW-HOW related to CELLS derived from those additional CELL LINES (the
“Additional License Fee Shares”). The License Fee Shares and
Additional License Fee Shares are not refundable and the value of the License
Fee Shares and Additional License Fee Shares are not creditable against other
payments due to RGI under this Agreement. The License Fee Shares and
Additional License Fee Shares shall be issued to RGI within ten (10) business
days after RGI’s delivery of the KNOW-HOW and CELLS pursuant to Section 2.2 and
Section 3.1; provided, that ES shall not be in breach of this Agreement for any
delay in delivery of the License Fee Shares resulting from the time required by
the transfer agent and registrar of such shares to make a certificate of such
shares available for delivery.
(a) Investment
Representations. RGI represents and warrants to ES and BioTime
that:
(i) RGI
has received a copy of BioTime’s Annual Report on Form 10-K for the year ended
December 31, 2007 and its Quarterly Report on Form 10-Q for the three months
ended September 30, 2008 (the “Disclosure Documents”) and is relying on the
information provided therein in determining to acquire the License Fee
Shares. RGI has had a reasonable opportunity to ask questions of and
receive answers from the executive officers and directors of BioTime or one or
more of its officers, concerning BioTime and to obtain additional information,
to the extent possessed or obtainable
6
without
unreasonable effort or expense, necessary to verify the information in the
Disclosure Documents. All such questions have been answered to RGI’s
satisfaction;
(ii) RGI
understands that the License Fee Shares are being offered and sold without
registration under the Securities Act of 1933, as amended (the “Act”) or
qualification under the California Corporate Securities Law of 1968, or under
the laws of other states, in reliance upon the exemptions from such registration
and qualification requirements for non-public offerings. RGI
acknowledges and understands that the availability of the aforesaid exemptions
depends in part upon the accuracy of certain of the representations,
declarations and warranties contained herein, which RGI hereby makes with the
intent that they may be relied upon by BioTime and its officers and directors,
and by ESI and its officers and directors, in determining RGI’s suitability to
acquire the License Fee Shares. RGI understands and acknowledges that
no federal, state or other agency has reviewed or endorsed the offering of the
License Fee Shares or made any finding or determination as to the fairness of
the offering or completeness of the information in the Disclosure
Documents;
(iii) RGI
understands that the License Fee Shares may not be offered, sold, or transferred
in any manner unless subsequently registered under the Act, or unless there is
an exemption from such registration available for such offer, sale or
transfer;
(iv) RGI
has such knowledge and experience in financial and business matters to enable
RGI to utilize the information contained in the Disclosure Documents, or
otherwise made available to RGI to evaluate the merits and risks of an
investment in the License Fee Shares, and to make an informed investment
decision with respect thereto.
(v) RGI
is acquiring the License Fee Shares for RGI’s own account and for long-term
investment purposes, and not with a view to, or for sale in connection with, any
distribution of the License Fee Shares; and
(vi) RGI
is an “accredited investor,” as such term is defined in Regulation D promulgated
under the Act.
5.2 Royalties and other
Consideration. As additional consideration of the license
granted to ES from RGI in Article 2 of this Agreement, ES shall pay to RGI
royalties as follows:
(a) A
royalty equal to seven percent (7%) of the collections of Net Sales received by
ES and its AFFILIATES for each ampule of CELLS sold or otherwise disposed of for
NONCOMMERCIAL USE only. ES agrees not to sell CELLS for less than
Seven Thousand Five Hundred Dollars ($7,500) per ampule.
(b) In
the case of sales or other dispositions of CELLS by ES or any AFFILIATE for
COMMERCIAL USE, a royalty on Net Sales of an amount equal to (A) 50% of Net
Sales, minus one-half of any other royalties paid or required to be
paid by ES or its AFFILIATES to third parties on such Net Sales or (B) such
other amount as a majority of the members of the Steering Committee may approve
in writing.
7
5.3 Payment
Method. All payments due under this Agreement shall be paid to
RGI in Chicago, Illinois, U.S.A., and shall be made in United States currency
without deduction for taxes, assessments, exchanges, collection or other charges
of any kind. Conversion of foreign currency to U.S. dollars shall be
made at the conversion rate reported in The Wall Street Journal on the last
working day of the calendar quarter to which the payment relates.
5.4 Late
Fee. ES shall pay RGI interest on any overdue amounts at the
rate of one percent (1%) per month (twelve percent (12%) per annum), from the
date when such payment should have been made.
ARTICLE 6 - REPORTS AND
RECORDS
6.1 ES
shall maintain complete and accurate records of CELLS that are sold by ES or its
AFFILIATES under this Agreement. ES shall keep, and shall cause its
AFFILIATES to keep, full, true and accurate books of account containing all
particulars that may be necessary for the purpose of showing the amounts payable
to RGI hereunder and ES’s compliance with the terms and conditions of this
Agreement. Said books of account shall be kept at ES’s principal
place of business or at such other location as may be agreed upon by the
parties. Said books and the supporting data shall be open for
inspection and audit by RGI upon reasonable advance notice for three
(3) years following the end of the calendar year to which they pertain, to the
inspection of RGI or its agents for the purpose of verifying ES’s royalty
statement or compliance in other respects with this Agreement. If any
such audit determines that the reported payments to RGI were less than ninety
percent (95%) of the actual amount due to RGI for the period in question, ES
shall bear the cost of such audit (without limiting RGI’s other remedies with
respect thereto). RGI may inspect and audit such books and records no
more frequently than twice per calendar year, except that if payments reported
to RGI in any calendar year were less than 95% of the actual amount due, RGI may
inspect and audit the books and records not more than four times during that
calendar year and the following calendar year.
6.2 After
the first sale or other disposition of any CELLS for COMMERCIAL USE by ES or any
AFFILIATE, ES, within forty-five (45) days after March 31, June 30, September 30
and December 31, of each year, shall deliver to RGI a true and accurate report
of all NET SALES during the preceding three-month period under this Agreement as
shall be pertinent to a royalty accounting hereunder. Each such
report shall include at least the following:
(a) number(s)
and type(s) of CELLS sold by ES and/or its AFFILIATES;
(b) total
billings and payments received for CELLS sold by ES and itsAFFILIATES;
and
(c) deductions
applicable as provided in Section 1.8;
6.3 With
each such report submitted, ES shall pay to RGI the royalties and other payments
due and payable under this Agreement. If no royalties or other
payments shall be due, ES shall so report.
6.4 ES’s
reporting obligations hereunder shall terminate when ES’S obligation to pay
royalties to RGI has been fully satisfied.
8
ARTICLE 7 –
INDEMNIFICATION,
7.1 RGI
shall at all times during the term of this Agreement and thereafter, indemnify,
defend and hold harmless ES and its AFFILIATES, successors, assigns, agents,
officers, directors, shareholders and employees (each, an “Indemnified Party”),
at RGI’s sole cost and expense, against all liabilities of any kind whatsoever,
including legal expenses and reasonable attorneys’ fees, arising out of or
arising from a breach of any representation or warranty of RGI hereunder,
excepting only claims that result from (a) the willful misconduct or negligence
of ES or its AFFILIATES, and (b) claims alleging that the use of any of the
KNOW-HOW, or the use, reproduction, sale, transfer, or distribution of CELLS
infringes upon any patent, or trade secret of any third party. The
indemnification obligations set forth herein are subject to the following
conditions: (i) the Indemnified Party shall notify RGI in writing promptly upon
learning of any claim or suit for which indemnification is sought; (ii) RGI
shall have control of the defense or settlement, provided that the
Indemnified Party shall have the right (but not the obligation) to participate
in such defense or settlement with counsel at its selection and at its sole
expense; and (iii) the Indemnified Party shall reasonably cooperate with the
defense, at RGI’s expense.
7.2 EXCEPT
AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, RGI, ITS DIRECTORS,
OFFICERS, AGENTS, SHAREHOLDERS, EMPLOYEES, AND AFFILIATES MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EXPRESSED OR IMPLIED, AND
EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILTY
AND FITNESS
FOR A PARTICULAR PURPOSE.
7.3 ES
shall at all times during the term of this Agreement and thereafter, indemnify,
defend and hold harmless RGI and its AFFILIATES, successors, assigns, agents,
officers, directors, shareholders and employees (each, an “Indemnified Party”),
at ES’s sole cost and expense, against all liabilities of any kind whatsoever,
including legal expenses and reasonable attorneys’ fees, arising out of or
arising from a breach of any representation or warranty of ES hereunder,
excepting only claims that result from (a) the willful misconduct or negligence
of RGI or its AFFILIATES, and (b) claims for which RGI is liable pursuant to the
indemnity set forth in Section 7.1 above, , and (c) claims that the use of any
KNOW-HOW licensed by ES to RGI hereunder infringes upon any patent or trade
secret of any third party. The indemnification obligations set forth
herein are subject to the following conditions: (i) the Indemnified Party shall
notify ES in writing promptly upon learning of any claim or suit for which
indemnification is sought; (ii) ES shall have control of the defense or
settlement, provided
that the Indemnified Party shall have the right (but not the obligation)
to participate in such defense or settlement with counsel at its selection and
at its sole expense; and (iii) the Indemnified Party shall reasonably cooperate
with the defense, at ES’s expense.
ARTICLE 8 –
TERMINATION
8.1 Subject
to the other termination provisions of this Article 8, this Agreement shall be
effective on the Effective Date and shall continue in effect until December 31,
2039 (the “Original Expiration Date”). The term of this
Agreement shall be automatically extended beyond the Original Expiration Date
for a period of ten years (the “First Extension Period”), unless either party
gives the other party notice of non-extension not less than 120 days prior to
the Original Expiration Date, and thereafter shall be automatically extended
beyond the First Extension Period for an additional period
of
9
ten years
(the “Second Extension Period”), unless either party gives the other party
notice of non-extension not less than 120 days prior to the expiration of the
First Extension Period.
8.2 In
addition to any other rights that RGI may have, RGI may terminate this Agreement
and the rights, privileges and license granted hereunder by written notice upon
a breach or default of this Agreement by ES, as follows:
|
|
(i)
|
non-payment
of any amounts due which is not cured within thirty (30) days of receipt
of written notice of such non-payment;
or
|
|
|
(ii)
|
breach
of any obligation which is not cured within thirty (30) days of a written
request to remedy such breach wherein said request is delivered by
registered mail, or if the breach cannot be cured within said thirty (30)
day period, despite ES’s best efforts to do so, failure of ES within said
thirty (30) day period to proceed with reasonable promptness thereafter to
cure the breach.
|
Such
termination shall become effective upon notice from RGI thereof, unless ES shall
have cured any such material breach or default prior to the expiration of the
applicable cure period.
8.3 ES
shall have the right to terminate this Agreement at any time on thirty (30) days
prior notice to RGI provided, that ES shall discontinue sales of CELLS upon such
termination of this Agreement. Notwithstanding such termination, ES
shall pay RGI any royalties due with respect to the sale of CELLS that occurred
prior to the date of termination.
8.4 Upon
termination of this Agreement for any reason, nothing herein shall be construed
to release either party from any obligation that matured prior to the effective
date of such termination; and Sections 6.1, Article 7, Article 9, and Article
11, and any other Sections or provisions which by their nature are intended to
survive termination, shall survive any such termination.
|
|
ARTICLE 9 -
CONFIDENTIALITY
|
9.1 During
the course of this Agreement, RGI and ES may provide each other with
CONFIDENTIAL INFORMATION. CONFIDENTIAL INFORMATION may be disclosed
in oral, visual or written form, and includes such information that is
designated in writing as such by the discloser at the time of disclosure, orally
disclosed information that is designated in writing as confidential within 30
days after such oral disclosure, or information which, under all of the given
circumstances ought reasonably be treated as CONFIDENTIAL INFORMATION of the
disclosing party. RGI and ES each intend to maintain the confidential or trade
secret status of their CONFIDENTIAL INFORMATION. Each shall exercise
reasonable care to protect the CONFIDENTIAL INFORMATION of the other from
disclosure to third parties; no such disclosure shall be made without the
other’s written permission. Upon termination or expiration of this
Agreement, RGI and/or ES shall comply with the other’s written request to return
all CONFIDENTIAL INFORMATION that is in written or tangible
form. Except as expressly provided herein, neither RGI nor ES is
granted any license to use the other’s CONFIDENTIAL INFORMATION. The
obligations of RGI and ES under this Article 9 shall survive
10
any
expiration or termination of this Agreement. Notwithstanding the
preceding provisions of this Section 9.1, until such time as this Agreement is
terminated: ES shall have the right to disclose KNOW-HOW to third
parties who purchase CELLS on a need-to-know basis, provided that such third
parties sign confidentially and non-disclosure agreements recognizing the
proprietary rights of RGI thereto in form and substance satisfactory to
RGI.
ARTICLE 10 - PAYMENTS,
NOTICES, AND OTHER COMMUNICATIONS
Any payment, notice or other
communication required to be given to any party will be deemed to have been
properly given and to be effective (a) on the date of delivery if delivered by
hand, recognized national next business day delivery service, confirmed
facsimile transmission, or confirmed electronic mail, or five (5) days after
mailing by registered or certified mail, postage prepaid, return receipt
requested, to the respective addresses given below, or to another address as it
shall designate by written notice given to the other party in the manner
provided in this Section.
| In the case of RGI: | Reproductive Genetics Institute |
|
|
2825
North Halsted Street
|
|
|
Chicago,
IL 606571
|
|
|
Attention: Yury
Verlinsky
|
| With a copy to: | Jerry I. Rudman, Esq. |
|
|
Deutsch,
Levy & Engel, Chtd.
|
|
|
225
W. Washington Street, Suite
1700
|
|
|
Chicago,
IL 60606
|
| In the case of ES | Embryome Sciences, Inc. |
|
|
1301
Harbor Bay Parkway, Suite 100
|
|
|
Alameda,
California 94502
|
|
|
Attention: Michael
D. West
|
|
With
a copy to:
|
Richard
S. Soroko, Esq.
|
|
|
Lippenberger,
Thompson, Welch, Soroko & Gilbert
LLP
|
|
|
201
Tamal Vista Blvd.
|
|
|
Corte
Madera, California 94925
|
11
ARTICLE 11 - REPRESENTATIONS
AND WARRANTIES
11.1 ES
represents and warrants that it has full corporate power and authority to enter
into this Agreement, that this Agreement constitutes the binding legal
obligation of ES, enforceable in accordance with its terms, and that the
execution and performance of this Agreement by ES will not violate, contravene
or conflict with any other agreement to which ES is a party or by which it is
bound or with any law, rule or regulation applicable to ES, and that any
permits, consents or approvals necessary or appropriate for ES to enter into
this Agreement have been obtained.
11.2 ES
is an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.
11.3 RGI
represents and warrants that (a) it owns the KNOW-HOW, (b) it has the full legal
right and power to grant the licenses granted hereunder, (c) that this Agreement
constitutes the binding legal obligation of RGI, enforceable in accordance with
its terms, (d) the execution, delivery, and performance of this Agreement by RGI
will not violate, contravene or conflict with any other agreement to which RGI
is a party or by which it is bound or with any law, rule or regulation
applicable to RGI, and (e) any permits, consents or approvals necessary or
appropriate for RGI to enter into this Agreement have been
obtained.
11.4 RGI
represents and warrants that, to the best of its knowledge, the use of the KNOW-
HOW and CELLS by ES or any of ES’s AFFLIATES for any purposes contemplated or
permitted by this Agreement, will not infringe in any way any claim under any
patent held by any third party.
11.5 RGI
represents and warrant that the use of the KNOW-HOW and the CELLS by ES or any
of ES’s AFFLIATES for any purposes contemplated or permitted by this Agreement,
will not infringe in any way any claim under any patent held by RGI or under any
patent that may issue from any RGI patent application now pending, or any other
intellectual property rights of RGI.
11.6 RGI
further represents, warrants and agrees, that it shall not make any claim or
demand, or commence any lawsuit or other proceeding, alleging that use of the
KNOW-HOW or CELLS by ES or any Sublicensee during the term of this Agreement for
any purpose contemplated or permitted by this Agreement infringes in any way any
claim under any patent that RGI may in the future obtain, or any other
intellectual property rights that RGI may obtain in the future. The
provisions of this Section 11.6 shall pertain as well to all subsidiaries of RGI
and all patents and patent applications of RGI subsidiaries. RGI and its
subsidiaries shall cause the provisions of this Section 11.6, as they pertain to
refraining from asserting claims and demands or commencing lawsuits and
proceedings, to be including in all licenses and assignments of RGI’s patents
and patent applications.
11.7 RGI
represents and warrants that all CELLS and CELL LINES have been ACCEPTABLY
DERIVED.
12
ARTICLE 12 - MISCELLANEOUS
PROVISIONS
12.1 Nothing
herein shall be deemed to constitute either party as the agent or representative
of the other party.
12.2 To
the extent commercially feasible, and consistent with prevailing business
practices, all products manufactured or sold under this Agreement will be marked
with the number of each issued patent that applies to such product.
12.3 This
Agreement shall be construed, governed, interpreted and applied in accordance
with the laws of Illinois, without regard to principles of conflicts of law
thereof, except that questions affecting the construction and effect of any
patent shall be determined by the law of the country in which the patent was
granted.
12.4 The
parties hereto acknowledge that this Agreement (including the Exhibits hereto)
sets forth the entire Agreement and understanding of the parties hereto as to
the subject matter hereof, and shall not be subject to any change or
modification except by the execution of a written instrument subscribed to by
the parties hereto.
12.5 The
provisions of this Agreement are severable, and in the event that any provisions
of this Agreement shall be determined to be invalid or unenforceable under any
controlling body of the law, such invalidity or unenforceability shall not in
any way affect the validity or enforceability of the remaining provisions
hereof.
12.6 The
failure of either party to assert a right hereunder or to insist upon compliance
with any term or condition of this Agreement shall not constitute a waiver of
that right or excuse a similar subsequent failure to perform any such term or
condition by the other party.
12.7 Licenses of Intellectual
Property; Bankruptcy Code. The parties agree that the licenses
granted by the parties to the other to use KNOW-HOW constitute licenses of
“intellectual property” as defined in the United States Bankruptcy Code (the
“Bankruptcy Code”) and as used in Section 365(n) of the Bankruptcy
Code. The parties agree that the KNOW-HOW includes trade
secrets. The parties also agree that the payments of royalties on Net
Sales required to be paid by ES to RGI under this Agreement constitute
“royalties” under Section 365(n) of the Bankruptcy Code.
ARTICLE 13—WARF
SUBLICENSE
13.1 WARF
Sublicense. ES grants RGI a non-exclusive royalty-free
sublicense to use WARF Technology solely for the purpose of developing,
producing, making, and providing to ES CELLS and CELL LINES under this
Agreement. Except as required for such purpose, no other license or
sublicense of WARF Technology is granted or shall be implied by this
Agreement. RGI agrees that (a) WARF Technology may be used by RGI
only for the purpose of producing, making, and providing to ES CELLS and CELL
LINES under this Agreement; (b) RGI shall not sell, use, or transfer any CELLS
or CELL LINES produced using WARF Technology to any third party other than ES;
(c) RGI shall not use WARF Technology or CELLS or CELL LINES created, produced,
or developed using WARF Technology in any
13
manner
not permitted by the WARF license, (d) RGI shall not grant any sublicense or
assign any of its rights to use WARF Technology, and (e) RGI’s right to use WARF
Technology shall terminate upon the termination of the WARF license or this
Agreement, whichever first occurs.
13.2 Certain
Definitions. “WARF” means Wisconsin Alumni Research
Foundation. “WARF Technology” means technology under patents licensed
by BioTime from WARF and sublicensed by BioTime to ES.
[The next
page is the signature page]
14
IN WITNESS WHEREOF, the parties have
duly executed this Agreement as of the Effective Date set forth
above.
REPRODUCTIVE
GENETICS INSTITUTE
By: /s/ Yury
Verlinsky
Printed
Name: Yury Verlinsky
Title: Chief
Executive Officer
By: /s/
Oleg
Verlinsky
Printed
Name: Oleg Verlinsky
Title: COO
EMBRYOME
SCIENCES, INC.
By: /s/ Michael D.
West
Printed
Name: Michael D. West
Title:
Chief Executive Officer
By: /s/ Judith
Segall
Printed
Name: Judith Segall
Title:
Secretary
15
EXHIBIT
A
List of
ES-cell lines with cytogenetic disorders Updated 11/07/2008
|
1
|
hESC-104
|
69,XXY
|
|
2
|
hESC-145
|
47,XXY
|
|
3
|
hESC-168
|
46,XX
der(4) t(4;13)
|
|
4
|
hESC-184
|
47,XX
+13
|
|
5
|
hESC-208
|
47,XX
+14
|
|
6
|
hESC-245
|
47,XXY
|
|
7
|
hESC-252
|
47,XXX
|
|
8
|
hESC-257
|
47,XY
+12
|
|
9
|
hESC-267
|
45,XX
-22
|
|
10
|
hESC-278
|
47,XY
+der(21)t(2,21)
|
|
11
|
hESC-300
|
46,X
+MAR
|
|
12
|
hESC-310
|
46,XX
t(14;17)
|
|
13
|
hESC-321
|
47,XX
+21
|
|
14
|
hESC-339
|
46,XX
iso(17q)
|
|
15
|
hESC-359
|
47,XX
+12
|
16
List of
ES-cell lines with genetic disorders Updated 10/29/2008
|
Cell
Line ID
|
Genetic
Disorder
|
|
hESC-201
|
ADRENOLEUKODYSTROPHY;
ALD; affected (I801 del AG)
|
|
hESC-279
|
ALBINISM,
OCULAR, TYPE I; OA1, affected, male (c.25ldel C)
|
|
hESC-285
|
ALBINISM,
OCULAR, TYPE I; OA1, carrier (N / c.251del C)
|
|
hESC-414
|
BREAST
CANCER, FAMILIAL (BRCA2); affected (N/IVS7 GT
del)
|
|
hESC-413
|
BREAST
CANCER, FAMILIAL (BRCA2); affected (N/IVS7 GT del) & MULTIPLE
ENDOCRINE NEOPLASIA, TYPE I; MEN1 affected (N/3036 4bp
del)
|
|
hESC-416
|
CYSTIC
FIBROSIS; affected (AF508/1717-1 G>A)
|
|
hESC-417
|
CYSTIC
FIBROSIS; affected (AF508/ 17-17-1 G-A)
|
|
hESC-288
|
CYSTIC
FIBROSIS; affected (AF508/AFSfl8)
|
|
hESC-289
|
CYSTIC
FIBROSIS; affected (AF508/AF508)
|
|
hESC-411
|
CYSTIC FIBROSIS affected
(AF508/AF508)
|
|
hESC-412
|
CYSTIC
FIBROSIS,
affected (AF508/AF508)
|
|
hESC-410
|
CYSTIC
FIBROSIS, affected (N1303K/AF508)
|
|
hESC-257
|
CYSTIC
FIBROSIS, affected (W1282X/R117C)
|
|
hESC-148
|
DYSTROPHIA MYOTONICA
1, affected
|
|
hESC-153
|
DYSTROPHIA MYOTONICA
1, affected
|
|
hESC-246
|
EMERY-DREIFUSS
MUSCULAR DYSTROPHY, X-LINKED; EDMD, affected (XY)
|
|
hESC-357
|
EMERY-DREIFUSS
MUSCULAR DYSTROPHY, X-LINKED; EDMD, affected (XY)
|
|
hESC-358
|
EMERY-DREIFUSS
MUSCULAR DYSTROPHY, X-LINKED; EDMD, affected (XY)
|
|
hESC-245
|
EMERY-DREIFUSS
MUSCULAR DYSTROPHY, X-LINKED; EDMD, carrier (XXY)
|
|
hESC-328
|
FACIOSCAPULOHUMERAL
MUSCULAR DYSTROPHY 1A; FSHMD1A, affected
|
|
hESC-330
|
FACIOSCAPULOHUMERAL
MUSCULAR DYSTROPHY 1A; FSHMD1A, affected
|
|
hESC-333
|
FACIOSCAPULOHUMERAL
MUSCULAR DYSTROPHY 1A; FSHMD1A, affected
|
|
hESC-399
|
FACIOSCAPULOHUMERAL
MUSCULAR DYSTROPHY 1A; FSHMD1A, affected
|
|
hESC-401
|
FACIOSCAPULOHUMERAL
MUSCULAR DYSTROPHY 1A; FSHMD1A, affected
|
|
hESC-402
|
FACIOSCAPULOHUMERAL
MUSCULAR DYSTROPHY 1A; FSHMD1A,
affected
|
17
|
hESC-403
|
FACIOSCAPULOHUMERAL
MUSCULAR DYSTROPHY 1A; FSHMD1A, affected
|
|
hESC-128
|
FANCONI
ANEMIA, COMPLEMENTATION GROUP A; FANCA, carrier (N/14bp
del)
|
|
hESC-214
|
FRAGILE
SITE MENTAL RETARDATION 1, affected male
|
|
hESC-125
|
FRAGILE
SITE MENTAL RETARDATION 1, carrier
|
|
hESC-356
|
HEMOGLOBIN-ALPHA LOCUS;
HBA, affected (-- /--)
|
|
hESC-164
|
HEMOGLOBIN-BETA
LOCUS; HBB, affected (cd39 / IVS1-110)
|
|
hESC-418
|
HEMOGLOBIN-BETA
LOCUS; HBB, affected (cd8+G/619del)
|
|
hESC-233
|
HEMOGLOBIN-BETA
LOCUS; HBB, affected (HbS/HbS - sickle cell
anemia)
|
|
hESC-405
|
HEMOGLOBIN-BETA
LOCUS; HBB, affected (lVSI-5/Cd8+G)
|
|
hESC-223
|
HEMOGLOBIN-BETA
LOCUS; HBB, affected (IVSI-6/IVSI-6)
|
|
hESC-254
|
HEMOGLOBIN-BETA
LOCUS; HBB, affected (Unknown / IVSII-1)
|
|
hESC-277
|
HEMOGLOBIN-BETA
LOCUS; HBB, affected (Unknown/IVSII-1)
|
|
hESC-158
|
HEMOGLOBIN-BETA
LOCUS; HBB, carrier (N/IVS 1-1)
|
|
hESC-213
|
HEMOGLOBIN-BETA
LOCUS; HBB, carrier (N/IVSl-1l0)
|
|
hESC-186
|
HUNTINGTON
DISEASE; HD, affected
|
|
hESC-187
|
HUNTINGTON
DISEASE; HD, affected
|
|
hESC-194
|
HUNTINGTON
DISEASE; HD, affected
|
|
hESC-218
|
HUNTINGTON
DISEASE; HD, affected
|
|
hESC-396
|
HUNTINGTON
DISEASE; HD, affected
|
|
hESC-397
|
HUNTINGTON
DISEASE; HD, affected
|
|
hESC-415
|
HUNTINGTON
DISEASE; HD, affected
|
|
hESC-154
|
MARFAN
SYNDROME; MFS, affected (N/G7712A )
|
|
hESC-414
|
MULTIPLE
ENDOCRINE NEOPLASIA, TYPE I; MEN1 affected (N/3036 4bp
del)
|
|
hESC-170
|
MUSCULAR
DYSTROPHY, BECKER TYPE; BMD, affected male
|
|
hESC-283
|
MUSCULAR
DYSTROPHY, DUCHENNE TYPE; DMD, affected male
|
|
hESC-301
|
MUSCULAR
DYSTROPHY, DUCHENNE TYPE; DMD, affected male
|
|
hESC-180
|
MUSCULAR
DYSTROPHY, DUCHENNE TYPE; DMD, carrier
|
|
hESC-302
|
MUSCULAR
DYSTROPHY, DUCHENNE TYPE; DMD,
carrier
|
18
|
hESC-137
|
NEUROFIBROMATOSIS,
TYPE I; NF;laffected (EXON 29 TGG-TGA)
|
|
hESC-138
|
NEUROFIBROMATOSIS,
TYPE I; NF;laffected (EXON 29 TGG-TGA)
|
|
hESC-139
|
NEUROFIBROMATOSIS,
TYPE I; NF;laffected (EXON 29 TGG-TGA)
|
|
hESC-140
|
NEUROFIBROMATOSIS,
TYPE I; NF;laffected (EXON 29 TGG-TGA)
|
|
hESC-141
|
NEUROFIBROMATOSIS,
TYPE I; NF;laffected (EXON 29 TGG-TGA)
|
|
hESC-235
|
NEUROFIBROMATOSIS,
TYPE I; NF;laffected (N/e.750-75I insT)
|
|
hESC-315
|
NEUROFIBROMATOSIS,
TYPE I; NF;laffected (R19 47X/N)
|
|
hESC-326
|
POPLITEAL
PTERYGIUM SYNDROME; PPS; affected (R84H/N)
|
|
hESC-323
|
SANDHOFF
DISEASE; affected (II20V/5’end l6 kb DEL)
|
|
hESC-324
|
SANDHOFF
DISEASE; affected (II20V/5' end 16 kb DEL)
|
|
hESC-395
|
SANDHOFF
DISEASE; affected (II20V/5' end l6 kbDEL)
|
|
hESC-274
|
SPINAL
MUSCULAR ATROPHY, TYPE I; SMA1, affected
|
|
hESC-404
|
SPINAL
MUSCULAR ATROPHY, TYPE I; SMA1, affected
|
|
hESC-271
|
TORSION
DYSTONIA 1, AUTOSOMAL DOMINANT; DYT1, affected (N/ GAG
del)
|
|
hESC-386
|
TORSION
DYSTONIA 1, AUTOSOMAL DOMINANT; DYT1, affected (N/ GAG
del)
|
|
hESC-406
|
TORSION
DYSTONIA 1, AUTOSOMAL DOMINANT; DYT1, affected (N/ GAG
del)
|
|
hESC-407
|
TREACHER
COLLINS-FRANCESCHETTI SYNDROME; TCOF (Nt. 4374 ins.
A/N)
|
|
hESC-408
|
TREACHER
COLLINS-FRANCESCHETTI SYNDROME; TCOF (Nt. 4374 ins,
A/N)
|
|
hESC-316
|
TUBEROUS
SCLEROSIS TYPE 1, affected (N/IVS+1 G ¦^)
|
|
hESC-320
|
TUBEROUS
SCLEROSIS TYPE 1, affected (N/ IVS7+1 G¦^)
|
19
|
ID
|
Karyotype
|
Type
|
SSEA3
|
SSEA4
|
TRA80
|
TRA80
|
TRA39
|
Oct4
|
AP
|
|
FL
|
|||||||||
|
SI-15
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-17
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-18
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-21
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-24
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-27
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-28
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-31
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-33
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-53
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-60
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-62
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-63
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-73
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-79
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-80
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-8I
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-93
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-94
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-95
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
||
|
SI-96
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-97
|
46,XY
|
M
|
+
|
||||||
|
SI-98
|
pending
|
M
|
+
|
4-
|
4-
|
+
|
+
|
||
|
SI-99
|
46,XY
|
M
|
+
|
4-
|
4-
|
+
|
+
|
20
|
SI-100
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
||
|
SI-101
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-102
|
46,XX
|
M
|
+
|
+
|
|||||
|
SI-103
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-105
|
46,XX
|
M
|
+
|
+
|
|||||
|
SI-106
|
46XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-107
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-108
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-109
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-110
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-111
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-114
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-115
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-122
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-123
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-124
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-126
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-131
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-132
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-133
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-134
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-135
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-144
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-146
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-149
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-150
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
21
|
SI-151
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-155
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-156
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-157
|
46XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-159
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-160
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-161
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-162
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-163
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-165
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-167
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-169
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-171
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-172
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-174
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-175
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
||
|
SI-176
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-177
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-178
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-179
|
46XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-182
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-183
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-185
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-188
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-189
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-191
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
22
|
SI-192
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-193
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-195
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-196
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-197
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-198
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-199
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-200
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-202
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-203
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-204
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
S1-205
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-206
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-209
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-210
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-211
|
pending
|
VI
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-215
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
S1-216
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI
217
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-219
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-221
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
S1-222
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
S1-224
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
S1-226
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-227
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-228
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
23
|
SI-230
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-231
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-232
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-234
|
45X?
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-236
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-237
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-238
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-239
|
pending
|
M
|
|||||||
|
SI-240
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-241
|
pending
|
M
|
|||||||
|
SI-242
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-243
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-244
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-247
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-248
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-249
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-250
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-251
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-253
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-255
|
46XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-256
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-258
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-259
|
46XX
|
M
|
|||||||
|
SI-260
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-261
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-262
|
pending
|
M
|
24
|
SI-263
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-264
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-265
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-266
|
46XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
|
|
SI-268
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-269
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-270
|
46,XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-272
|
46XX
|
H
|
|||||||
|
SI-273
|
46XX
|
H
|
|||||||
|
SI-275
|
46XX
|
H
|
|||||||
|
SI-276
|
pending
|
H
|
|||||||
|
SI-280
|
46XX
|
H
|
|||||||
|
SI-281
|
46
XX
|
H
|
|||||||
|
SI-282
|
46XY
|
H
|
|||||||
|
SI-284
|
46XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-286
|
46XX
|
H
|
|||||||
|
SI-287
|
pending
|
H
|
|||||||
|
SI-290
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-291
|
46XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-292
|
46XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-293
|
46XY
|
free
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-294
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-295
|
46XX
|
M
|
|||||||
|
SI-296
|
pending
|
M
|
|||||||
|
SI-297
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-298
|
46XY
|
M
|
25
|
SI-299
|
46XY
|
M
|
|||||||
|
SI-303
|
46XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
S1-304
|
46XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
S1-305
|
46XY
|
H
|
|||||||
|
SI-306
|
46XY
|
H
|
|||||||
|
SI-307
|
46XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-308
|
46XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-309
|
46XY
|
H
|
|||||||
|
SI-311
|
46XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-313
|
46XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-322
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-325
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-327
|
46XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-331
|
46XY
|
M
|
|||||||
|
SI-334
|
46XX
|
M
|
|||||||
|
SI-335
|
pending
|
M
|
|||||||
|
SI-336
|
46,XX
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-337
|
46XX
|
M
|
|||||||
|
SI-338
|
46XY
|
M
|
|||||||
|
SI-340
|
46XX
|
M
|
|||||||
|
SI-341
|
46XY
|
M
|
|||||||
|
SI-342
|
pending
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-343
|
46XY
|
M
|
|||||||
|
SI-344
|
pending
|
M+H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-345
|
46XX
|
M
|
|||||||
|
S1-349
|
46,XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
26
|
SI-3
50
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-351
|
46XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-352
|
46XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-353
|
46XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-354
|
46,XY
|
M+H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-355
|
46,XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-3
56
|
46XX
|
M+H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-357
|
46XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-358
|
46XY
|
M
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-360
|
46,XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-361
|
46,XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-362
|
46,XX
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-363
|
46XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-364
|
46XY
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-3
65
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-366
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
S1-367
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-368
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-369
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-370
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
S1-371
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-372
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-373
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-3
74
|
pending
|
H
|
+
|
+
|
+
|
+
|
+
|
+
|
+
|
|
SI-375
|
pending
|
H
|
|||||||
|
SI-390
|
pending
|
M
|
27
Exhibit
10.38
Agreement
08-0155A
FIRST AMENDMENT OF
COMMERCIAL LICENSE AND OPTION AGREEMENT
This First Amendment of Commercial
License and Option Agreement is made effective the 11th day of March 2009
(“Amendment Date”), by and between the Wisconsin Alumni Research Foundation
(hereinafter called “WARF”), a nonprofit Wisconsin corporation, and BioTime,
Inc. (hereinafter called “Licensee”), a corporation organized and existing under
the laws of California.
WHEREAS, WARF and Licensee
have entered into a Commercial License and Option Agreement (“Agreement”) with
respect to certain Licensed Patents and Licensed Materials, as defined
therein.
WHEREAS, the parties desire to
amend certain license fee, maintenance fee, and patent cost payment
provisions.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth below, the
parties covenant and agree as follows:
1. Section
4A of the Agreement is amended to read as follows:
“A. License and Maintenance
Fees.
Licensee agrees to pay to WARF a
license fee of $295,000 due and payable as follows: (1) the first
installment of $10,000 shall be paid in cash within thirty (30) days after the
Effective Date of this Agreement, (2) the second installment of $70,000 shall be
paid within ten (10) days after the Amendment Date by issuing to WARF a number
of common shares, no par value, of Licensee (“Shares”) having a Market Value of
$70,000, and (3) the remaining $215,000 shall be paid in cash on the earlier of:
(i) thirty (30) days after Licensee raises $5,000,000 or more of new equity
financing or (ii) March 2, 2010. A maintenance fee of $25,000 shall
be due annually on March 2 of each year commencing March 2, 2010 and continuing
thereafter for the term of this Agreement. “Market Value” of the
Shares shall be the aggregate market value of the Shares based on the closing
price per share for such Shares as reported on the OTC Bulletin Board on the
Amendment Date.”
2. Section
4C of the Agreement is amended to read as follows:
“C. Patent Fees and
Costs.
Licensee also agrees to pay to WARF
$25,000 toward reimbursement of the costs associated with preparing, filing and
maintaining the Licensed Patents, which shall be due and payable as
follows: the first installment of $5,000 shall be due within thirty
(30) days of the Effective Date of this Agreement, and the remaining $20,000
shall be due on the earlier of (i) thirty (30) days after Licensee raises
$5,000,000 or more of new equity financing or (ii) March 2, 2010.”
3. WARF
represents and warrants to Licensee that:
(a) WARF has received from Licensee the
following reports filed by Licensee under the Securities Exchange Act of
1934, as amended: (a) a copy of Licensee’s annual report on Form
10-KSB for the fiscal year ended December 31, 2007, and quarterly report on Form
10-Q
for the fiscal quarter and nine months
ended September 30, 2008, and all Current Reports on Form 8-K filed by Licensee
since November 19, 2008 (the “Disclosure Documents”);
(b) WARF
is relying on the information provided in the Disclosure Documents or otherwise
communicated to WARF in writing by Licensee. WARF has not relied on
any statement or representations inconsistent with those contained in the
Disclosure Documents. WARF has had a reasonable opportunity to ask
questions of and receive answers from the executive officers and directors of
Licensee, or one or more of its officers, concerning Licensee and to obtain
additional information, to the extent possessed or obtainable without
unreasonable effort or expense, necessary to verify the information in the
Disclosure Documents. All such questions have been answered to WARF’s
satisfaction;
(c) WARF
understands that the Shares are being offered and sold without registration
under the Securities Act of 1933, as amended (the “Act”) or qualification under
the California Corporate Securities Law of 1968, or under the laws of Wisconsin
or any other state, in reliance upon the exemptions from such registration and
qualification requirements for non-public offerings. WARF
acknowledges and understands that the availability of the aforesaid exemptions
depends in part upon the accuracy of certain of the representations,
declarations and warranties contained herein, which WARF hereby makes with the
intent that they may be relied upon by Licensee and its officers and directors
in determining WARF’s suitability to acquire the Shares. WARF
understands and acknowledges that no federal, state or other agency has reviewed
or endorsed the offering of the Shares, or made any finding or determination as
to the fairness of the offering or completeness of the information in the
Disclosure Documents;
(d) WARF
understands that the Shares may not be offered, sold, or transferred in any
manner unless subsequently registered under the Act, or unless there is an
exemption from such registration available for such offer, sale or
transfer;
(e) WARF
has such knowledge and experience in financial and business matters to enable
WARF to utilize the information contained in the Disclosure Documents, or
otherwise made available to WARF to evaluate the merits and risks of an
investment in the Shares, and to make an informed investment decision with
respect thereto;
(f) WARF
is acquiring the Shares solely for WARF’s own account and for long-term
investment purposes, and not with a view to, or for sale in connection with, any
distribution of the Shares; and
(g) WARF
is an “accredited investor,” as such term is defined in Regulation D promulgated
under the Act.
4. The
Shares shall bear an appropriate legend, conspicuously disclosing the
restrictions on transfer under the Act. Licensee agrees that upon the
sale of the Shares and pursuant to an exemption from registration under the Act,
upon the presentation of the certificates containing such a legend to it’s
transfer agent, Licensee will remove such legend. Licensee further
agrees to remove the legend at such time as registration under the Act shall no
longer be required.
2
|
WISCONSIN
ALUMNI RESEARCH FOUNDATION
|
||
|
By:
|
/s/ Craig J. Christianson | |
|
Craig
J. Christianson, Director of Licensing
|
||
|
BIOTIME,
INC.
|
||
|
By:
|
/s/ Michael D. West | |
|
Michael
D. West,
|
||
|
Chief
Executive Officer
|
||
3
Exhibit
10.39
EMPLOYMENT
AGREEMENT
THIS
AGREEMENT is made October 10, 2007, by and between BioTime, Inc. (the
"Company"), and Robert W. Peabody ("Executive").
W I T N E S S E T
H:
WHEREAS, the Company desires to employ
Executive, and Executive 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. Engagement
(a) Position and
Duties. The Company agrees to employ Executive in the
position of Senior Vice President and Chief Operating
Officer. Executive shall report to the Chief Executive Officer of the
Company and shall perform the duties and functions as are normally carried out
by a Senior Vice President and Chief Operating Officer of a developer of
pharmaceutical or medical products of a size comparable to the Company that has
a class equity securities registered under Section 12 of the Securities Exchange
Act of 1934, as amended, and as the Board of Directors of the Company (the
"Board of Directors") shall from time to time reasonably
determine. Without limiting the generality of the immediately
preceding sentence, Executive's duties shall include, but shall not be limited
to: (i) assisting in securing research grants; (ii) administering the
non-scientific issues surrounding accomplishing the task outlined in awarded
grants; (ii) setting up policies, procedures, and controls to comply with the
financial reporting requirements of the Company, any collaborator on
any grant financed project, and each grant issuer; (iii) establishing a progress
tracking system and being responsible for insuring that projects are on budget
and on a timeline to achieve the grant requirements; (iv) make sure that all
external reporting to third parties and all internal reporting within the
Company is timely, proper, and accurate; (v) serve as chief of staff for the
Chief Executive Officer, and (vi) other administrative duties as assigned by the
Chief Executive Officer or the Board of Directors which could be altered or
changed from time to time. Executive shall devote his best efforts,
skills and abilities, on a full-time basis, exclusively 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. Executive covenants and agrees that he will faithfully
adhere to and fulfill such policies as are established from time to time by the
Board of Directors.
(b) No Conflicting
Obligations. Executive represents and warrants to the Company
that he is under no obligations or commitments, whether contractual or
otherwise, that are inconsistent with his obligations under this Agreement or
that would prohibit him, contractually or otherwise, from performing his duties
as Senior Vice President and Chief Operating Officer of the Company as provided
in this Agreement.
(c) No Unauthorized Use of Third Party
Intellectual Property. Executive represents and warrants that
he will not use or disclose, in connection with his employment by the Company,
any patents, trade secrets, confidential information, or other proprietary
information or intellectual property as to which any other person has any right,
title or interest, except to the extent that the Company holds a valid license
or other written permission for such use from the owner(s)
thereof. Executive represents and warrants to the Company that he has
returned all property and confidential information belonging to any prior
employer.
2. Compensation
(a) Salary and
Bonuses. During the term of this Agreement, the Company shall
pay to the Executive:
(i) Annual Salary. The
Company shall pay Executive an annual salary of one hundred sixty thousand
dollars ($160,000.00) the (“Annual Salary”). Executive’s salary shall
be paid in equal bi-monthly installments, consistent with the Company’s regular
salary payment practices. Executive’s salary may be adjusted from
time-to-time by the Company without affecting this Agreement.
(ii) Bonus. In
addition to his Annual Salary, Executive shall be entitled to receive an annual
bonus equal to the lesser of (A) forty-five thousand dollars ($45,000.00) or (B)
the sum of 35% of Consulting Fees and 3.5% of Grant Funds received by the
Company during each fiscal year; provided that (x) the grant that is the source
of the Grant Funds was obtained by the Company during the term of
Executive’s employment by the Company, (y) the grant that is the source of the
Grant Funds is not a renewal, extension, modification, or novation of a grant
(or a new grant to fund the continuation of a study funded by a prior grant from
the same source) obtained by the Company prior to Executive’s employment by the
Company, and (z) the grant that is the source of the Grant Funds was not
obtained by the Company substantially through the efforts of any consultant or
independent contractor compensated by the Company for obtaining the
grant. The bonus shall be paid on a monthly basis, subject to the
Company's receipt of the funds from which the bonus it to be paid.
(A) Grant
Funds means money actually paid to the Company during a fiscal year as a
research grant by any federal or state government agency or any not for profit
non-government organization, and expressly excludes (1) license fees, (2)
royalties, (3) Consulting Fees, (4) capital contributions to the Company or any
subsidiary of the Company, or any joint venture of any kind (regardless of the
legal entity through which the joint venture is conducted) to which the Company
is a party, and (5) any other payments received by the Company by a business or
commercial enterprise for research and development of products or technology
pursuant to a contract or agreement for the commercial development of a product
or technology.
2
(B) Consulting
Fees means money actually received by the Company under a contract that entitles
the Company to receive a cash fee for providing scientific and technical advice
to third parties concerning stem cells.
(b) Expense
Reimbursements. The Company shall reimburse Executive for
reasonable travel and other business expenses incurred by Executive in the
performance of his duties hereunder, subject to the Company's policies and
procedures in effect from time to time, and provided that Executive submits
supporting vouchers.
(c) Benefit
Plans. Executive shall be eligible (to the extent he
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.
(d) Stock
Options/SARs. The Company will grant Executive an option
to purchase 500,000 of the Company’s common shares (the “Option”) under the
Company’s 2002 Employee Stock Option Plan (the “Plan”). The Option
shall be paired with a stock appreciation right ("SAR") with respect to 325,530
shares that may be exercised only as provided in this Agreement.
(i) The
exercise price of the Option and the SAR will be the greater of $0.50 per share
and the Fair Market Value of the Company’s common shares on the date of grant
determined in accordance with the Plan. The Option and the SAR will
vest (as thereby become exercisable) as follows: 1/60th of the number of Option
shares will vest at the end of each full month of employment. Vesting
will depend on Executive’s continued employment with the Company through the
applicable vesting date, and will be subject to the terms and conditions of the
Plan and a Stock Option Agreement consistent with the Plan and this
paragraph. The unvested portion of the Option and the SARs shall not
be exercisable.
(ii) The
vested portion of the Option and the SAR shall expire on the earliest of (A)
seven (7) years from the date of grant, (B) three months after Executive ceases
to be an employee of the Company for any reason other than Executive’s death or
Disability (as defined below), or (C) one year after Executive ceases to be an
employee of the Company due to his death or Disability; provided that if
Executive dies during the three month period described in clause (B) of this
paragraph, the expiration date of the vested portion of the Option shall be one
year after the date of his death. In addition, (X) if the SAR is
exercised, the vested portion of the Option shall expire as to a number of
shares for which the SAR was exercised, and (Y) the vested and unvested portion
of the SAR shall expire when the shareholders of the Company approve an
amendment to the Plan described below. The Option and the SAR,
respectively, shall not be exercisable after it has expired.
3
(iii) Except
as specifically set forth in this Section, Executive’s rights under the Plan, or
any other stock option plan later adopted by the Company, shall be governed
solely by the terms of the Plan, or the later adopted stock option
plan.
(iv) The
SAR may not be exercised, in whole or in part, until the vested portion of the
Option has been exercised in full. A vested SAR may be exercised by
the Executive by delivering a written notice to the Company specifying the
number of SAR shares being exercised. Upon exercise of an SAR,
Executive shall be entitled to receive a payment of cash per SAR share exercised
equal to the amount by which the fair market value of a Company common share on
the date of exercise exceeds the exercise price of the SAR. The fair market
value of a Company common share shall be determined by the Board of Directors in
the manner provided in the Plan. The amount payable to Executive upon
exercise of an SAR shall be subject to all applicable, federal, state, and local
income tax withholdings, FICA and similar state withholdings, and any other
applicable payroll tax withholding. SARs may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Executive, only by the Executive.
(v) On
the date of this Agreement, the number of shares available for the grant of
options under the Plan, as approved by the shareholders of the Company, is less
than 1,500,000. The Board of Directors has approved an amendment to
the Plan that would increase the number of shares available for the exercise of
options; however, the amendment is subject to approval by the shareholders of
the Company. The Company will submit the Plan amendment to its
shareholders for approval at its next annual meeting of shareholders, and the
Board of Directors will recommend that the shareholders approve the
amendment. The Board of Directors has reserved 174,459 shares under
the Plan, as previously approved by the shareholders, for the Option granted to
Executive.
(e) Vacation; Sick
Leave. Executive shall be entitled to three 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 and sick leave days shall
accrue based upon days of service. Executive shall also be entitled
to leave from work, without reduction in compensation for ten days during each
calendar year, due to illness subject to the policies and procedures of the
Company, and subject to the provisions of this Agreement governing termination
due to disability, sickness or illness. The Company may, from time to
time, adopt policies governing the disposition of unused vacation days and sick
leave days remaining at the end of the Company's fiscal year; which policies may
govern whether unused vacation days or sick leave days will be paid, lost, or
carried over into subsequent fiscal years.
3. Competitive
Activities. During the term of Executive’s employment with the
Company and for three years thereafter, Executive shall not, for himself or any
third party, directly or indirectly employ, solicit for employment or recommend
for employment any person employed by the Company. During the term of
Executive’s employment, he shall not, directly or
4
indirectly
as an employee, contractor, officer, director, member, partner, agent, or equity
owner, engage in any activity or business that competes or could reasonably be
expected to compete with the business of the Company. Executive
acknowledges that there is a substantial likelihood that the activities
described in this Section would (a) involve the unauthorized use or disclosure
of the Company’s Confidential Information and that use or disclosure would be
extremely difficult to detect, and (b) result in substantial competitive harm to
the Company's business. Executive has accepted the limitations of
this Section as a reasonably practicable and unrestrictive means of
preventing such use or disclosure of Confidential Information and preventing
such competitive harm.
4. Inventions/Intellectual
Property/Proprietary Information
(a) Inventions and
Discoveries Belong to the Company. Any and all
inventions, discoveries, improvements or intellectual property which Executive
may conceive or make during the period of employment relating to or in any way
pertaining to or connected with the systems, products, apparatus, or methods
employed, manufactured, constructed or researched by the Company shall be the
sole and exclusive property of the Company. The obligations
provided for by this Agreement, except for the requirements as to disclosure in
Section, do not apply to any rights Executive may have acquired in connection
with an invention, discovery, improvement or intellectual property for which no
equipment, supplies, facility, or trade secret information of the Company was
used and which was developed entirely on the Executive’s own time and (a) which
at the time of conception or reduction to practice does not relate directly or
indirectly to the business of the Company or to the Company’s actual or
demonstrable anticipated research or development, or (b) which does not result
from any work performed by Executive for the Company. The parties understand and
agree that this limitation is intended to be consistent with California Labor
Code, Section 2870, a copy of which is attached as Exhibit A. If
Executive wishes to clarify that something created by him prior to his
employment by the Company that relates to the Company’s actual or proposed
business is not within the scope of this Agreement, he has listed it on Appendix
B in a manner that does not violate any third party rights. To
the extent allowed by law, the rights assigned by Executive to the Company
includes all rights of paternity, integrity, disclosure and withdrawal and any
other rights that may be known as or referred to as “moral rights,” “artist’s
rights,” “droit moral,” or the like (collectively “Moral Rights”). To
the extent Executive retains any such Moral Rights under applicable law, he
hereby ratifies and consents to any action that may be taken with respect to
such Moral Rights by or authorized by the Company and agrees not to assert any
Moral Rights with respect thereto. Executive shall confirm in writing
any such ratifications, consents and agreements from time to time as requested
by the Company.
(b) Disclosure of
Inventions and Discoveries. Executive agrees to disclose
promptly to the Company all improvements, discoveries, or inventions which
Executive may make solely, jointly, or commonly with others, and to assign as
appropriate such improvements, discoveries, inventions or intellectual property
to the Company, where the rights are the property of the
Company. Executive agrees to execute and sign any and all
applications, assignments, or other instruments which the Company may deem
necessary in order to enable the Company, at
5
its
expense, to apply for, prosecute, and obtain patents of the United States or
foreign countries for the improvements, discoveries, inventions or intellectual
property, or in order to assign or convey to or vest in the Company the sole and
exclusive right, title, and interest in and to said improvements, discoveries,
inventions, or patents. Executive hereby irrevocably designates and
appoints the Company as Executive's agent and attorney-in-fact, coupled with an
interest and with full power of substitution, to act for and in Executive's
behalf to execute and file any document and to do all other lawfully permitted
acts to further the purposes of this paragraph with the same legal force and
effect as if executed by Executive. This paragraph is applicable
whether or not the invention, discovery, improvement or intellectual property
was made under the circumstances described in paragraph (a) of this
Section. Executive agrees to make such disclosures understanding that
they will be received in confidence and that, among other things, they are for
the purpose of determining whether or not rights to the related invention,
discovery, improvement, or intellectual property is the property of the
Company.
(c) Confidential and
Proprietary Information. During his employment, Executive will
have access to the Company's trade secrets and confidential
information. Confidential Information means all information and
ideas, in any form, relating in any manner to matters such as: the
Company’s products; formulas; technology and know-how; inventions; clinical
trial plans and data; business plans; marketing plans; the identity, expertise
and compensation of employees and contractors; systems, procedures, and manuals;
customers; suppliers; joint venture partners; research collaborators; licensees;
and financial information. Confidential Information also shall
include any information of any kind, whether belonging to the Company or any
third party, that the Company has agreed to keep secret or confidential under
the terms of any agreement with any third party. Confidential
Information does not include: (i) information that is or becomes
publicly known through lawful means other than unauthorized disclosure by
Executive; (ii) information that was rightfully in Executive’s possession prior
to his employment with the Company and was not assigned to the Company or was
not disclosed to Executive in his capacity as a director or other fiduciary of
the Company; or (iii) information disclosed to Executive, after the termination
of his employment by the Company, without a confidential restriction by a third
party who rightfully possesses the information and did not obtain it, either
directly or indirectly, from the Company, and who is not subject to an
obligation to keep such information confidential for the benefit of the Company
or any third party with whom the Company has a contractual
relationship. Executive understands and agrees that all Confidential
Information shall be kept confidential by Executive both during and after his
employment by the Company. Executive further agrees that he will not,
without the prior written approval by the Company, disclose any Confidential
Information, or use any Confidential Information in any way, either during the
term of his employment or at any time thereafter, except as required by the
Company in the course of his employment.
5. Termination of
Employment. Executive understands and agrees that his
employment has no specific term. This Agreement, and the employment
relationship, are "at will" and may be terminated by either party with or
without cause upon written notice to the other. Executive agrees to
give the Company thirty (30) days advance written notice of his
intent
6
to
terminate his employment with the Company. Except as otherwise agreed
in writing or as otherwise provided in this Agreement, upon termination of
Executive's employment, the Company shall have no further obligation to
Executive by way of compensation or otherwise as expressly provided in this
Agreement.
(a) Separation
Benefits. Upon termination of Executive’s employment with the
Company for any reason, Executive will receive the severance benefits set forth
below, but Executive will not be entitled to any other compensation, award or
damages with respect to his employment or termination of
employment.
(i) Termination for Cause, Death,
Disability, or Resignation. In the event of Executive’s
termination for Cause, or termination as a result of his death or Disability, or
his Resignation, Executive will be entitled to receive payment for all unpaid
salary, accrued but unpaid bonus, if any, and vacation accrued as of the date of
his termination of employment. Executive will not be entitled
to any cash severance benefits or additional vesting of any Company stock
options or other equity or cash awards.
(ii) Termination Without
Cause. In the event of Executive’s termination without Cause,
he will be entitled to (A) the benefits set forth in paragraph (a)(i) of this
Section, (B) payment in an amount equal to either (1) three months base salary
if Executive has been employed by the Company for less than two years, or (2)
six months base salary if Executive has been employed by the Company for at
least two years, which in either case may be paid in a lump sum or, at the
election of the Company, in installments consistent with the payment of
Executive’s salary while employed by the Company, subject to such payroll
deductions and withholdings as are required by law, and (C) accelerated vesting
of fifty percent (50%) of the then unvested shares subject to the Option if
Executive has been employed by the Company for at least two
years. The elimination of Executive's position or a material
reduction in his assigned duties or related salary shall be considered
termination without Cause.
(iii)
Change of
Control. In the event the Company (or any successor in
interest to the Company that has assumed the Company’s obligation under this
Agreement) terminates Executive’s employment without Cause within twelve (12)
months following a Change in Control, in lieu of the benefits set forth in
paragraph (a)(ii) of this Section, Executive will be entitled to (A) the
benefits set forth in paragraph (a)(i) of this Section, (B) a lump sum payment
in an amount equal to either (1) four months base salary if Executive has been
employed by the Company for less than two years, or (2) twelve months base
salary if Executive has been employed by the Company for at least two years,
subject to such payroll deductions and withholding as are required by law; and
(C) accelerated vesting of either (1) fifty percent (50%) of the then unvested
shares subject to the Option if Executive has been employed by the Company for
less than two years, or (2) one hundred percent (100%) of the then unvested
shares subject to the Option if Executive has been employed by the Company for
at least two years.
(b) Release. Any
other provision of this Agreement notwithstanding, paragraphs (a)(ii) and
(a)(iii) of this Section shall not apply unless the Executive (i) has
executed
7
a general
release of all claims (in a form prescribed by the Company) and (ii) has
returned all property of the Company in the Executive’s possession.
(c) Continuation of
Certain Benefits. In the event of
the termination of Executive's employment for any reason other than his death,
Executive's benefits will be continued under the Company’s then existing benefit
plans and policies for so long as provided under the terms of such plans and
policies and as required by applicable law. If Executive elects
to continue his health insurance coverage under the Consolidated Omnibus Budget
Reconciliation Act (“COBRA”) following the termination of his employment, then
the Company shall pay the Executive's monthly premium under COBRA until the
earlier of (i) the expiration of the Executive’s continuation coverage under
COBRA, and (ii) the date when the Executive receives substantially equivalent
health insurance coverage in connection with new employment or
self-employment.
(d) Definitions. For purposes of
this Section, the following definitions shall apply:
(i) "Affiliated
Group" means (A) a Person and one or more other Persons in control of,
controlled by, or under common control with such Person; and (B) two or more
Persons who, by written agreement among them, act in concert to acquire Voting
Securities entitling them to elect a majority of the directors of the
Company.
(ii) "Cause" means:
(A) the failure to properly perform Executive’s job responsibilities, as
determined reasonably and in good faith by the Board of Directors; (B)
commission of any act of fraud, gross misconduct or dishonesty with respect to
the Company; (C) conviction of, or plea of guilty or “no contest” to, any
felony, or a crime involving moral turpitude; (D) breach of any provision of
this Agreement or any provision of any proprietary information and inventions
agreement with the Company; (E) failure to follow the lawful directions of the
Board of Directors; (F) chronic alcohol or drug abuse, (G) obtaining in
connection with any transaction in which the Company or any of its subsidiaries
or affiliates is a party to a material undisclosed financial benefit for himself
or for any member of his immediate family or for any corporation, partnership,
limited liability company, or trust in which he or any member of his immediate
family owns a material financial interest; or (H) harassing or discriminating
against, or participating or assisting in the harassment of or discrimination
against, any employee of the Company (or any of any of subsidiary or affiliate
of the Company) based upon gender, race, religion, ethnicity, or
nationality.
(iii) "Change
of Control" means (A) 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 on the date of this
Agreement owned beneficially owned (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the regulations thereunder)
more than 10% of the Voting Securities shall not constitute a Change of Control;
and provided, further, that an acquisition of Voting Securities
by
8
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 (A); (B) the sale of all or substantially all of the assets of the
Company; or (C) 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
(A), (B) or (C) 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.
(iv) "Disability"
shall mean Executive’s inability to perform the essential functions of his job
responsibilities for a period of one hundred eighty (180) consecutive days or
one hundred eighty (180) days in the aggregate in any twelve (12) month
period.
(v) "Person"
means any natural person or any corporation, partnership, limited liability
company, trust, unincorporated business association or other
entity.
(vi) "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. Turnover of Property and Documents on
Termination. Executive agrees that on or before termination of
his employment, he will return to the Company all equipment and other property
belonging to the Company, and all originals and copies of Confidential
Information (in any and all media and formats, and including any document or
other item containing Confidential Information) in Executive's possession or
control, and all of the following (in any and all media and formats, and whether
or not constituting or containing Confidential Information) in Executive's
possession or control: (a) lists and sources of customers; (b)
proposals or drafts of proposals for any research grant, research or development
project or program, marketing plan, licensing arrangement, or other arrangement
with any third party; (c) reports, job or laboratory notes, specifications, and
drawings pertaining to the Company's research, development, products, patents,
and technology; and (d) any and all inventions or intellectual property
developed by Executive during the course of employment.
7. Arbitration. Except
for injunctive proceedings against unauthorized disclosure of confidential
information, any and all claims or controversies between the Company and
Executive, including but not limited to (a) those involving the construction or
application of any of the terms, provisions, or conditions of this Agreement;
(b) all contract or tort claims of any
9
kind; and
(c) any claim based on any federal, state or local law, statute, regulation or
ordinance, including claims for unlawful discrimination or harassment, shall be
settled by arbitration in accordance with the then current Employment Dispute
Resolution Rules of the American Arbitration Association. Judgment on
the award rendered by the arbitrator(s) may be entered by any court having
jurisdiction thereof. The location of the arbitration shall be San
Francisco, California. Unless the parties mutually agree otherwise,
the arbitrator shall be a retired judge selected from a panel provided by the
American Arbitration Association, or the Judicial Arbitration and Mediation
Service (JAMS). The Company shall pay the arbitrators fees and
costs. Each party shall pay for its own costs and attorneys’ fees, if
any. However, if any party prevails on a statutory claim which
affords the prevailing party attorneys’ fees, the arbitrator may award
reasonable attorneys’ fees and costs to the prevailing party.
EXECUTIVE
UNDERSTANDS AND AGREES THAT THIS AGREEMENT TO ARBITRATE CONSTITUTES A WAIVER OF
HIS RIGHT TO A TRIAL BY JURY OF ANY MATTERS COVERED BY THIS AGREEMENT TO
ARBITRATE.
8. Severability. In
the event that any of the provisions of this Agreement shall be held to be
invalid or unenforceable in whole or in part, those provisions to the extent
enforceable and all other provisions shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable parts had not been included
in this Agreement. In the event that any provision relating to the
time period of restriction shall be declared by a court of competent
jurisdiction to exceed the maximum time period such court deems reasonable and
enforceable, then the time period of restriction deemed reasonable and
enforceable by the court shall become and shall thereafter be the maximum time
period.
9. Agreement Read and
Understood. Executive acknowledges that he has carefully read
the terms of this Agreement, that he has had an opportunity to consult with an
attorney or other representative of his own choosing regarding this Agreement,
that he understands the terms of this Agreement, and that he is entering this
agreement of his own free will.
10. Complete Agreement,
Modification. This Agreement is the complete agreement between
the parties on the subjects contained herein and supersedes all previous
correspondence, promises, representations, and agreements, if any, either
written or oral. No provision of this Agreement may be modified,
amended, or waived except by a written document signed both by the Company and
Executive.
11. Governing Law. This
Agreement shall be construed and enforced according to the laws of the State of
California.
12. Assignability. This
Agreement, and the rights and obligations of the parties under this Agreement,
may not be assigned by Executive. The Company may assign any of its
rights and obligations under this Agreement to any successor or surviving
corporation, limited liability company, or other entity resulting from a merger,
consolidation, sale of assets, sale of
10
stock,
sale of membership interests, or other reorganization, upon condition that the
assignee shall assume, either expressly or by operation of law, all of the
Company's obligations under this Agreement.
13. Survival. This
Section 13 and the covenants and agreements contained in Sections 4 and 6 of
this Agreement shall survive termination of this Agreement and Executive's
employment.
14. Notices. Any
notices or other communication required or permitted to be given under this
Agreement shall be in writing and shall be mailed by certified mail, return
receipt requested, or sent by next business day air courier service, or
personally delivered to the party to whom it is to be given at the address of
such party set forth on the signature page of this Agreement (or to such other
address as the party shall have furnished in writing in accordance with the
provisions of this Section 14).
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement on the day and year first above
written.
EXECUTIVE:
/s/
Robert
Peabody
Robert W.
Peabody
|
Address:
|
_______________________________
|
_______________________________
COMPANY:
BIOTIME,
INC.
By: /s/ Hal
Sternberg
Title:
VP/Office of the President
|
Address:
|
6121
Hollis Street
|
Emeryville, California
94608
11
APPENDIX A
California
Labor Code Section 2870.
Application
of provision providing that employee shall assign or offer to assign rights in
invention to employer.
(a) Any
provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or
her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer’s equipment,
supplies, facilities, or trade secret information except for those inventions
that either:
(i) Relate
at the time of conception or reduction to practice of the invention to the
employer’s business, or actual or demonstrably anticipated research or
development of the employer; or
|
|
(ii)
|
Result
from any work performed by the employee for his
employer.
|
(b) To
the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.
12
APPENDIX
B
PRIOR
MATTERS
None
13
EXHIBIT
21
BIOTIME,
INC.
SUBSIDIARIES
|
Subsidiary
|
State of Incorporation
|
||
|
Embryome
Sciences, Inc.
|
California
|
Exhibit
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby
consent to the incorporation by reference in the Registration Statements on Form
S-3 (No. 333-99205) and Form S-8 (Nos. 33-56766, 33-88968, 333-101651, and
333-122844) of BioTime, Inc. of: (i) our report dated March 17, 2009, with
respect to the audit of the consolidated balance sheets of BioTime, Inc. as of
December 31, 2008 and 2007, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the two years
then ended, which report appears in the Annual Report on Form 10-K of BioTime,
Inc. for the year ended December 31, 2008; and (ii) to the reference to our firm
under the heading “Experts” in the prospectus.
/s/
ROTHSTEIN KASS & COMPANY, P.C.
Roseland,
New Jersey
March 20,
2009
|
CERTIFICATIONS
|
Exhibit
31
|
I,
Michael D. West, certify that:
1. I
have reviewed this annual report on Form 10-K of BioTime, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the small business issuer as
of, and for, the periods presented in this report;
4. The
small business issuer’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the periodic reports are being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles
(c) Evaluated
the effectiveness of the small business issuer’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed
in this report any change in the small business issuer’s internal control over
financial reporting that occurred during the small business issuer’s most recent
(fourth) fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the small business issuer’s internal control over financial
reporting.
1
5. The
small business issuer's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
small business issuer's auditors and the audit committee of small business
issuer's board of directors (or persons performing the equivalent
functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer's ability to record, process,
summarize and report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the small business issuer's internal control over
financial reporting.
|
Date: March
20, 2009
|
|
| /s/ Michael D. West | |
|
Michael
D. West
|
|
|
Chief
Executive Officer
|
2
|
CERTIFICATIONS
|
Exhibit
31
|
I, Steven
A. Seinberg, certify that:
1. I
have reviewed this annual report on Form 10-K of BioTime, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the small business issuer as
of, and for, the periods presented in this report;
4. The
small business issuer’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the periodic reports are being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles
(c) Evaluated
the effectiveness of the small business issuer’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed
in this report any change in the small business issuer’s internal control over
financial reporting that occurred during the small business issuer’s most recent
(fourth) fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the small business issuer’s internal control over financial
reporting.
3
5. The
small business issuer's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
small business issuer's auditors and the audit committee of small business
issuer's board of directors (or persons performing the equivalent
functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer's ability to record, process,
summarize and report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the small business issuer's internal control over
financial reporting.
|
Date: March
20, 2009
|
|
| /s/ Steven A. Seinberg | |
|
Steven
A. Seinberg
|
|
|
Chief
Financial Officer
|
4
Exhibit
32
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report on Form 10-K of BioTime, Inc. (the “Company”)
for the year ended December 31, 2008 as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), we, Michael D. West, Chief
Executive Officer, and Steven A. Seinberg, Chief Financial Officer of the
Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
2. The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
|
Date: March
20, 2009
|
|
| /s/ Michael D. West | |
|
Michael
D. West
|
|
|
Chief
Executive Officer
|
|
| /s/ Steven A. Seinberg | |
|
Steven
A. Seinberg
|
|
|
Chief
Financial Officer
|