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PART I 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. Item 1. Description of BusinessOverview
BioTime, Inc. (the “Company” or “BioTime”) is a development stage company engaged in
the research and development of synthetic solutions that can be used as blood plasma volume
expanders, blood replacement solutions during hypothermic (low temperature) surgery, and organ
preservation solutions. Plasma volume expanders are used to treat blood loss in surgical or trauma
patients until blood loss becomes so severe that a transfusion of packed red blood cells or other
blood products is required. The Company is also developing a specially formulated hypothermic
blood substitute solution that would have a similar function and would be used for the replacement
of very large volumes of a patient’s blood during cardiac surgery, neurosurgery and other surgeries
that involve lowering the patient’s body temperature to hypothermic levels. 2
Because Hextend is a surgical product, sales will be determined by anesthesiologists,
surgeons practicing a variety of specialties, and hospital pharmacists. Abbott’s marketing strategy
is designed to reach this target customer base through sales calls and an advertising campaign
focused on the physiological basis of using a plasma-like substance to replace lost blood volume and
the ability of Hextend to support vital physiological processes. 3
Based upon the results of its clinical studies and laboratory research, the Company has
determined that in many emergency care and surgical applications it is not necessary for a plasma
volume expander to include special oxygen carrying molecules to replace red blood cells. Therefore,
the Company is developing formulations that do not use costly and potentially toxic oxygen carrying
molecules such as synthetic hemoglobin and perfluorocarbons. 4 Hextend® and PentaLyte® are registered trademarks, and HetaCool™ is a trademark, of BioTime, Inc. Products for Surgery, Plasma Volume Replacement and Emergency CareThe Market for Plasma Volume Expanders The Company is developing Hextend, PentaLyte, HetaCool and other synthetic plasma
expander solutions to treat acute blood loss that occurs as a result of trauma injuries and during many
kinds of surgery. These products are synthetic, can be sterilized, and can be manufactured in large
volumes. Hextend, PentaLyte, and HetaCool contain constituents that may maintain physiological
balance when used to replace lost blood volume. 5 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. Albumin produced from human plasma can be used for this purpose, 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. The Market for Products for Hypothermic Surgery Approximately 400,000 coronary bypass and other open heart surgeries are performed in the
United States annually, and approximately 18,000 aneurysm surgeries and 4,000 arterio-venous
malformation surgeries were performed in the United States during 1989. Those procedures often
require the use of cardio-pulmonary bypass equipment to do the work of the heart and lungs during
the surgery. During open heart surgery and surgical procedures for the treatment of certain
cardiovascular conditions such as large aneurysms, cardiovascular abnormalities and damaged blood
vessels in the brain, surgeons must temporarily interrupt the flow of blood through the body.
Interruption of blood flow can be maintained only for short periods of time at normal body
temperatures because many critical organs, particularly the brain, are quickly damaged by the
resultant loss of oxygen. As a result, certain surgical procedures are performed at low temperatures
because lower body temperature helps to minimize the chance of damage to the patient’s organs by
reducing the patient’s metabolic rate, thereby decreasing the patient’s needs during surgery for
oxygen and nutrients which normally flow through the blood. Hextend, PentaLyte and HetaCool The Company’s first three blood volume replacement products, Hextend, PentaLyte, and HetaCool, have been formulated to maintain the patient’s tissue and organ function by sustaining the patient’s fluid volume and physiological balance. Hextend, PentaLyte, and HetaCool, are composed of a hydroxyethyl starch, electrolytes, sugar and a buffer in an aqueous base. Hextend and HetaCool use a high molecular weight hydroxyethyl starch (hetastarch) whereas PentaLyte uses a lower molecular weight hydroxyethyl starch (pentastarch). The hetastarch is retained in the blood longer 6
than the pentastarch, which may make Hextend and HetaCool the products of choice when a larger
volume of plasma expander or blood replacement solution for low temperature surgery is needed or
where the patient’s ability to restore his own blood proteins after surgery is compromised.
PentaLyte, with pentastarch, would be eliminated from the blood faster than Hextend and HetaCool
and might be used when less plasma expander is needed or where the patient is more capable of
quickly restoring lost blood proteins. The Company has also tested HexaLyte, a new plasma volume
expander that contains a low molecular weight hydroxyethyl starch and that would be eliminated
from the body more rapidly than Hextend and HetaCool, but not as rapidly as PentaLyte. BioTime
believes that by testing and bringing these products to the market, it can increase its market share
by providing the medical community with solutions to match patients’ needs. 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. 7 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. BioTime has submitted the results of a Phase I clinical study and is waiting for the FDA to
complete its review before further clinical studies can begin. BioTime’s present plan is to seek
approval of PentaLyte as a cardio-pulmonary by-pass pump priming solution and for the treatment
of hypovolemia. Cardiac surgeons are working to develop innovative procedures to repair damaged coronary
arteries and heart valves. If optically guided surgical instruments can be inserted into the heart
through blood vessels or small incisions, there may be no need to open the patient’s chest cavity.
BioTime believes that HetaCool may be useful in these minimally invasive closed chest cardiac
procedures because the solution is transparent and if it were used to completely replace blood at low
temperatures it would permit surgeons to use their optically guided instruments inside the heart or
blood vessels without having their view obstructed by blood. The use of BioTime’s solutions may
also allow better control over stopping and starting the heart, as well as extending the time period
of such surgeries. BioTime intends to conduct a series of laboratory studies using animal subjects
to test the utility of HetaCool as a low temperature blood substitute in such procedures. 8 HetaCool has been used to completely replace the blood volume of hamsters, dogs, pigs, and
baboons at temperatures approaching freezing. Many of these animal subjects survived long term
after hypothermic blood substitution with HetaCool. In these laboratory tests, the animals’ blood
was replaced by HetaCool and they were chilled for one to more than four hours with deep body
temperatures between 1ºC and 10ºC. Organ Transplant ProductsThe Market for Organ Preservation Solutions Organ transplant surgery is a growing field. Each year in the United States, approximately
5,000 donors donate organs, and approximately 5,000 people donate skin, bone and other tissues.
As
more surgeons have gained the necessary expertise and surgical methods have been
refined, the number of transplant procedures has increased, as has the
percentage of successful transplants. Organ transplant surgeons and their
patients face two major obstacles, namely the shortage of available organs from
donors, and the limited amount of time that a transplantable organ can be kept
viable between the time it is harvested from the donor and the time it is
transplanted into the recipient. 9 BioTime is seeking to address this problem by developing a more effective organ preservation
solution that will permit surgeons to harvest all transplantable organs from a single donor. The
Company believes that preserving the viability of all transplantable organs and tissues
simultaneously, at low temperatures, would extend by several hours the time span in which the
organs can be preserved prior to transplant. Long-term Tissue and Organ Banking The development of marketable products and technologies for the preservation of tissues and
vital organs for weeks and months is a long-range goal of the Company’s research and development
plan. To permit such long-term organ banking the Company is attempting to develop products and
technologies that can protect tissues and organs from the damage that occurs when human tissues
are subjected to subfreezing temperatures. 10 In other laboratory experiments, BioTime scientists have shown that animals can be revived to consciousness after partial freezing with their blood replaced by HetaFreeze. While this technology has not developed to an extent that allows long term survival of the laboratory subjects, and their organs, a better understanding of the effects of partial freezing could allow for extended preservation times for vital organs, skin and blood vessels. Other Potential Uses of BioTime Solutions Isolated regional perfusion of anti-cancer drugs has been used to treat melanoma of the limbs,
and inoperable tumors of the liver. The Company believes that employing such a procedure while
the patient is kept in ice-cold blood-substitution may allow high doses of toxic anti-cancer drugs to
be directed at inoperable tumors within vital organs, which would selectively be warmed. Keeping
the rest of the patient in a cold, blood substituted state may reduce or eliminate the circulation of the
toxic drugs to healthy tissues. Research and Development Strategy From inception through December 31, 2000, the Company has spent $19,945,350 on research
and development. The greatest portion of BioTime’s research and development efforts have been
devoted to the development of Hextend, PentaLyte and HetaCool for conventional surgery,
emergency care, low temperature surgery, and multi-organ preservation. A lesser portion of the
Company’s research and
development efforts have been devoted to developing solutions and protocols for
storing organs and tissues at subfreezing temperatures. In the future the
Company may explore other applications of its products and technologies,
including cancer chemotherapy. As the first products achieve market entry, more
effort will be expended to bring the next tier of products to maturity. 11 Experiments intended to test the efficacy of the Company’s low temperature blood
replacement solutions and protocols for surgical applications involve replacing the animal’s blood
with the Company’s solution, maintaining the animal in a cold blood-substituted state for a period
of time, and then attempting to revive the animal. Experiments for multi-organ preservation involve
the maintenance of the animal subjects at cold temperatures for longer periods of time than would
be required for many surgical applications, followed by transplant procedures to test the viability of
one or more of the subject’s vital organs. LicensingAbbott Laboratories On April 23, 1997, the Company and Abbott entered into a License Agreement under which
the Company granted to Abbott an exclusive license to manufacture and sell Hextend in the United
States and Canada for all therapeutic uses other than those involving hypothermic surgery where the
patient’s body temperature is lower than 12ºC (“Hypothermic Use”), or replacement of substantially
all of a patient’s
circulating blood volume (“Total Body Washout”). The Company has
retained all rights to manufacture, sell or license Hextend and other products
in all other countries. 12 Abbott has agreed that the Company may convert Abbott’s exclusive license to a non-
exclusive license or may terminate the license outright if certain minimum sales and royalty
payments are not met. In order to terminate the license outright, the Company would pay a
termination fee in an amount ranging from the milestone payments made by Abbott to an amount
equal to three times prior year net sales, depending upon when termination occurs. Abbott’s
exclusive license also may terminate, without the payment of termination fees by the Company, if
Abbott fails to market Hextend. Abbott has agreed to manufacture Hextend for sale by the Company
in the event that Abbott’s exclusive license is terminated in either case. In order to preserve its rights to obtain an exclusive license for PentaLyte under its License
Agreement, Abbott notified the Company that Abbott will supply BioTime with batches of
PentaLyte, characterization and stability studies, and other regulatory support needed for BioTime
to file an IND and conduct clinical studies. 13 6% and not more than 7.5% of net sales of Hextend manufactured in countries in which patent
protection has been obtained but sold in countries in which patents have not yet been issued. Horus
will pay a royalty of not less than 2% and not more than 3.5% of net sales of Hextend for the use of
licensed proprietary technology, plus a royalty of 2% of net sales for the use of the Hextend
trademark, with respect to sales of Hextend manufactured and sold in countries in which patents are
not issued or have expired. The foregoing description of the Horus License Agreement is a summary only and is qualified
in all respects by reference to the full text of the License Agreement. 14 Manufacturing
Manufacturing Arrangements 15 according to good manufacturing practices. The Company would have to raise additional capital
to participate in the development and acquisition of the necessary production technology and
facilities. Marketing Hextend is being sold by Abbott in the United States. When regulatory approval is obtained,
Hextend will be sold by Abbott in Canada, and by Horus or other Akzo companies in other parts of
the world, except Japan where BioTime has not yet granted marketing rights. 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. As part of the marketing program, Abbott, Horus, and the Company will finance a number of limited medical studies comparing outcomes of patients receiving Hextend and patients receiving other products during surgery, and comparing the relative patient care cost of using Hextend compared to other products. The results of these studies will be published in a series of abstracts, reports and peer reviewed journal articles intended for the target Hextend customer base. It will take time to complete these studies and publish the results. The outcome of the planned medical studies and timing of the publication of the results could have an effect on the growth of demand for and sales of Hextend. 16 Government Regulation The FDA and foreign regulatory authorities will regulate the Company’s 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. 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 an other 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. 17 Patents and Trade Secrets The Company holds a number of United States patents having composition and methods of
use claims covering BioTime’s proprietary solutions, including Hextend and PentaLyte. The most
recent U.S. patents were issued during 1998. Patents covering certain of the Company’s solutions
have also been issued in Australia, Israel, Russia, South Africa, and South Korea. Additional patent
applications have been filed in the United States and numerous other countries for Hextend,
PentaLyte and other solutions. Competition The Company’s 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, the Company’s 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. Abbott and Baxter International manufacture and sell a generic equivalent of Hespan. As a result of the introduction of generic plasma expanders intended to compete with Hespan, competition in the plasma expander market has intensified and wholesale prices have declined. Abbott, which markets Hextend for BioTime in the Untied States, is also the leading seller of generic 6% hetastarch in saline solution. 18 To compete with new and existing plasma expanders, the Company is developing 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, the Company is seeking to develop
a solution that can be used to preserve all organs simultaneously and for long periods of time. EmployeesAs of December 31, 2000, the Company employed 13 persons on a full-time basis and 3 persons on a part-time basis. Three full-time employees and two part-time employees hold Ph.D. Degrees in one or more fields of science. Risk Factors Some
of the factors that could materially affect the Company’s operations are
and prospects are discussed below. There may be other factors that are not
mentioned here or of which BioTime is not presently aware that could also affect
BioTime’s operations. 19 the market, and
since the Company received FDA approval to market Hextend it has received $92,883 of royalties
on sales. As a result of the developmental nature of its business and the limited sales of its product,
since the Company’s inception in November 1990 it has incurred $27,111,413 of losses. There can
be no assurance that the Company will generate sufficient revenues from licensing its products and
technologies and from royalties on sales of its products to be profitable. Products
that compete with Hextend are being manufactured and marketed by established
pharmaceutical companies with substantial resources. B. Braun presently markets
Hespan, an artificial plasma volume expander that contains 6% hetastarch in
saline solution. Abbott and Baxter International manufacture and sell a generic
equivalent of Hespan. As a result of the introduction of generic plasma
expanders intended to compete with Hespan, competition in the plasma expander
market has intensified and wholesale prices have declined. There also is a risk
that the Company’s competitors may succeed in developing safer or more
effective products that could render the Company’s products and
technologies obsolete or noncompetitive. 20 other lenders, fees under licensing agreements, or any combination of those sources. Mandatory prepayments of principal will be due to the extent that the Company receives funds from any one or more of those sources in excess of $1,000,000 but less than $2,000,000. Although BioTime believes that its cash on hand and funds available under the Credit Agreement will be sufficient to allow it to continue its operations on a limited scale for 12 months, it will need additional funds, including the license fees expected to be received from Horus, to begin clinical trials of PentaLyte and to conduct its other product development and research programs. There can be no assurance that the Company will be able to raise additional funds on favorable terms or at all, or that such funds, if raised, will be sufficient to permit the Company to continue its operations, notwithstanding the progress of its research and development projects. The Company’s operating expenses will increase if it succeeds in bringing additional products out of the laboratory testing phase of development and into clinical trials. Additional financing may be required for the continuation or expansion of the Company’s research and product development, additional clinical trials of new products, and production and marketing of Company products that receive FDA or foreign regulatory approval. Although the Company will continue to seek licensing fees from pharmaceutical companies for licenses to manufacture and market new products such as PentaLyte and HetaCool, additional sales of equity or debt securities may be required to meet the Company’s short-term capital needs. Sales of additional equity securities could result in the dilution of the interests of present shareholders. BioTime Products Cannot Be Marketed Without FDA and Other Regulatory Approvals 21 Uncertainty as to the Successful Development of Medical Products
Patents May Not Protect BioTime Products from Competition 22 Dependence Upon Key Personnel The Price of BioTime Stock May Rise and Fall Rapidly 23 Item 2. Facilities.The Company occupies its office and laboratory facility in Berkeley, California under a lease that will expire on March 31, 2004. The Company presently occupies approximately 8,890 square feet of space and pays rent in the amount of $10,400 per month. The rent will increase annually by the greater of 3% and the increase in the local consumer price index, subject to a maximum annual increase of 7%. The Company also pays all charges for utilities and garbage collection. The Company has an option to extend the term of the lease for a period of three years, and to terminate the lease early upon six months notice. The Company uses, on a fee per use basis, facilities for surgical research on animals at an unaffiliated privately run research center located in Winters, California. Contracting for the use of research facilities has enabled the Company to initiate its research projects without the substantial capital cost, overhead costs and delay associated with the acquisition and maintenance of a modern animal surgical research facility. Item 3. Legal Proceedings.The Company is not presently involved in any material litigation or proceedings, and to the Company’s knowledge no such litigation or proceedings are contemplated. Item 4. Submission of Matters to a Vote of Security Holders.None. 24 Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.The Company’s Common Shares have been trading on the American Stock Exchange since August 31, 1999, and traded on the Nasdaq National Market from April 28, 1998 to August 30,1999, and on the Nasdaq SmallCap Market from March 5, 1992 through April 27, 1998. The closing price of the Company’s Common Shares on the AMEX on March 26, 2001 was $7.25. The following table sets forth the range of high and low bid prices for the Common Shares for the fiscal year ended June 30, 1998, the fiscal year (six months) ended December 31, 1998, and the fiscal years ended December 31, 1999 and 2000, based on transaction data as reported by Nasdaq and AMEX. All prices have been rounded to the nearest cent and have been adjusted to give effect to the Company’s payment of a stock dividend during October 1997 to effect a three-for-one stock split. |
Quarter Ended High Low - ------------- ---- --- September 30, 1997 17.08 8.67 December 31, 1997 27.00 18.50 March 31, 1998 19.75 11.00 June 30, 1998 14.37 5.81 September 30, 1998 9.88 5.50 December 31, 1998 18.13 7.00 March 31, 1999 19.38 12.88 June 30, 1999 21.50 8.63 September 30, 1999 16.69 8.13 December 31, 1999 13.25 8.19 March 31, 2000 17.13 8.63 June 30, 2000 12.25 5.50 September 30, 2000 9.13 6.38 December 31, 2000 8.31 3.81
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As of March 20, 2001, there were 307 shareholders of record of the Common Shares based
upon information from the Registrar and Transfer Agent. 25 Item 6. Selected Financial Data.The selected financial data as of December 31, 2000, 1999 and 1998, June 30, 1998 and 1997, and the period from inception (November 30, 1990) to December 31, 2000 presented below have been derived from the audited financial statements of the Company. The selected financial data should be read in conjunction with the Company’s financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein. Statement of Operations Data: |
Six Months
Year Ended Ended Year Ended Period from Inception
December 31, December 31, June 30, (November 30, 1990) to
2000 1999 1998 1998 1997 December 31, 2000
------------ ------------ ------------ ------------ ------------ ---------------------
REVENUE:
License fee $ - $ 1,037,500 $ 250,000 $ 1,150,000 $ 62,500 $ 2,500,000
Royalties from product sales 52,492 - - - - 52,492
------------ ------------ ------------ ------------ ------------ ---------------
Total revenue 52,492 - - - 62,500 2,552,492
------------ ------------ ------------ ------------ ------------ ---------------
EXPENSES:
Research and development (3,362,841) (4,900,521) (1,723,860) (3,048,775) (2,136,325) (19,945,350)
General and administrative (1,779,931) (1,896,690) (710,131) (1,849,312) (1,209,546) (11,466,385)
------------ ------------ ------------ ------------ ------------ ---------------
Total expenses (5,142,772) (6,797,211) (2,433,991) (4,898,087) (3,345,871) (31,411,735)
------------ ------------ ------------ ------------ ------------ ---------------
INTEREST AND OTHER INCOME: 165,256 279,827 89,513 294,741 189,161 1,747,830
------------ ------------ ------------ ------------ ------------ ---------------
NET LOSS $(4,925,024) $(5,479,884) $(2,094,478) $(3,453,346) $(3,094,210) $(27,111,413)
============ ============ ============ ============ ============ ===============
BASIC AND DILUTED LOSS PER SHARE $ (0.44) $ (0.51) $ (0.21) $ (0.35) $ (0.35)
============ ============ ============ ============ ============
COMMON AND EQUIVALENT SHARES
USED IN COMPUTING PER SHARE
AMOUNTS: BASIC AND DILUTED 11,042,087 10,688,100 10,008,468 9,833,156 8,877,024
============ ============ ============ ============ ============
Balance Sheet Data:
December 31, 2000 December 31,1999 December 31, 1998
---------------------- -------------------- ---------------------
Cash, cash equivalents and
short term investments $ 1,318,338 $ 5,292,806 $ 2,429,014
Working Capital 1,081,237 4,804,579 2,157,578
Total assets 1,677,484 5,678,644 2,809,455
Shareholders' equity 1,317,735 5,083,132 2,384,752
26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.Overview Since its inception in November 1990, the Company has been engaged primarily in research
and development activities. The Company’s operating revenues have been generated primarily from
licensing fees, including $2,500,000 received from Abbott for the right to manufacture and market
Hextend in the United States and Canada. BioTime recently entered into a license agreement with
Horus under which BioTime expects to receive up to $9,500,000 of license fees for the right to
manufacture and market Hextend overseas. Only one of the Company’s products is presently on the
market, and since the Company received FDA approval to market Hextend it has received $92,883
of royalties on sales. As a result of the developmental nature of its business and the limited sales
of its product, since the Company’s inception in November 1990 it has incurred $27,111,413 of
losses. The Company’s ability to generate substantial operating revenue depends upon its success
in developing and marketing or licensing its plasma volume expanders and organ preservation
solutions and technology for medical use. 27 The following graph illustrates quarterly amounts derived from the quarterly sales reports provided to BioTime by Abbott with its royalty payments. Royalties on sales that occurred during the fourth quarter of 1999 through the third quarter of 2000 are reflected in the Company’s financial statements for the year ended December 31, 2000, while royalties on sales that occurred during the fourth quarter of 2000 will be reflected in the Company’s financial statements for the first quarter of 2001. |
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As shown above, quarterly sales of Hextend have increased approximately 600% from the last quarter in 1999, when the product was formally launched, through the last quarter of 2000. Sales during the fourth quarter of 2000 may reflect the purchasing practices of certain wholesale distributors who increase their purchases of inventory during the last month of the year. BioTime attributes these percentage gains in quarterly sales to Abbott’s escalating marketing efforts and the accelerating demand for Hextend by physicians and hospitals due to its outstanding performance in many hundreds of operating rooms around the country. 28 Because Hextend is a surgical product, sales will be determined by anesthesiologists,
surgeons practicing a variety of specialties, and hospital pharmacists. Abbott’s marketing strategy
is designed to reach this target customer base through sales calls and an advertising campaign
focused on the physiological basis of using a plasma-like substance to replace lost blood volume and
the ability of Hextend to support vital physiological processes. The Company has completed a Phase I clinical trial of PentaLyte and has submitted the test data to the FDA, along with a proposed clinical trial protocol. BioTime plans to test PentaLyte for the treatment of hypovolemia in surgery. 29 The Company is also continuing to develop solutions for low temperature surgery. Once a
sufficient amount of data from successful low temperature surgery has been compiled, the Company
plans to seek permission to use Hextend as a complete replacement for blood under near-freezing
conditions. BioTime currently plans to market Hextend for complete blood volume replacement at
very low temperatures under the registered trade mark “HetaCool®” after FDA approval is obtained. Change of Fiscal YearIn November 1998, the Board of Directors approved a change to the Company’s operating fiscal year from a fiscal year ending June 30 to a fiscal year ending December 31, beginning January 1, 1999. See Note 1 of Notes to Financial Statements. Accordingly, the accompanying financial statements are for the twelve months ended December 31, 2000 and 1999 (“Fiscal 2000” and “Fiscal 1999” respectively), the six months ended December 31, 1998, and the twelve months ended June 30, 1998 (“Fiscal 1998”). 30 Results of OperationsYear Ended December 31, 2000 and Year Ended December 31, 1999 31
Years Ended December 31, 1999 and Six Month Period Ended December 31, 1998 Taxes At December 31, 2000 the Company had a cumulative net operating loss carryforward of approximately $32,500,000 for federal income tax purposes. Liquidity and Capital ResourcesSince inception, the Company has primarily financed its operations through the sale of equity securities and licensing fees, and at December 31, 2000 the Company had cash and cash equivalents of approximately $1,318,000. The Company expects to receive a $4,000,000 license fee from Horus when Horus confirms certain manufacturing and hydroxyethyl starch supply arrangements needed to manufacture Hextend. Horus is working to put those arrangements in place, but there can be no assurance that those arrangements will be completed. In the meantime, BioTime may borrow up to $1,000,000 for working capital purposes under its Credit Agreement with Alfred D. Kingsley, an investor and consultant to the Company. 32
Amounts borrowed under the Credit Agreement will bear interest at 10% per annum and will
be due in one year or when BioTime receives at least $2,000,000 through the sale of capital stock,
loans from other lenders, fees under licensing agreements, or any combination of those sources.
Mandatory prepayments of principal will be due to the extent that the Company receives funds from
any one or more of those sources in excess of $1,000,000 but less than $2,000,000, and the amount
of any such mandatory prepayments of principal will reduce the maximum amount available under
the Credit Agreement and will not be available for future borrowings. The Company will have the
right to make voluntary prepayments of principal, that would otherwise not be due, without penalty
or premium but with accrued interest, at any time, and any amounts voluntary prepaid will be
available for future borrowings, so long as the Company is not in default under the Credit Agreement
and the outstanding principal balance loaned under the Credit does not exceed $1,000,000. Item 7A. Quantitative and Qualitative Disclosures About Market Risk.The Company did not hold any market risk sensitive instruments as of December 31, 2000, December 31, 1999, December 31, 1998 or June 30, 1998. 33 Item 8. Financial Statements and Supplementary DataINDEX TO FINANCIAL STATEMENTS |
Pages
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Independent Auditors' Report 35
Balance Sheets As of December 31, 2000 and
December 31, 1999 36
Statements of Operations For the Year Ended
December 31, 2000, the Year Ended December 31, 1999,
the Six Months Ended December 31, 1998, the Year Ended
June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 2000 37
Statements of Shareholders' Equity For the Year Ended
December 31, 2000, the Year Ended December 31, 1999,
the Six Months Ended December 31, 1998, the Year Ended
June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 2000 38-40
Statements of Cash Flows For the Year Ended
December 31, 2000, the Year Ended December 31, 1999,
the Six Months Ended December 31, 1998, the Year Ended
June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 2000 41-42
Notes to Financial Statements 43-54
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34 INDEPENDENT AUDITORS’ REPORTTo the Board of Directors and Shareholders We have audited the accompanying balance sheets of BioTime, Inc. (a development stage company) as of December 31, 2000 and 1999, and the related statements of operations, shareholders’ equity and cash flows for the years ended December 31, 2000 and 1999, the six months ended December 31, 1998, the year ended June 30, 1998, and the period from November 30, 1990 (inception) to December 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of BioTime, Inc. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years ended December 31, 2000, and 1999, the six months ended December 31, 1998, the year ended June 30, 1998 and the period from November 30, 1990 (inception) to December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. The Company is in the development stage as of December 31, 2000. As discussed in Note 1 to the financial statements, successful completion of the Company’s product development program and, ultimately, the attainment of profitable operations is dependent upon future events, including maintaining adequate financing to fulfill its development activities, obtaining regulatory approval for products ultimately developed, and achieving a level of revenues adequate to support the Company’s cost structure. /s/ DELOITTE & TOUCHE LLP 35 BIOTIME, INC. BALANCE SHEETS
|
ASSETS
December 31, December 31,
2000 1999
----------------- ----------------
CURRENT ASSETS
Cash and cash equivalents $ 1,318,338 $ 5,292,806
Prepaid expenses and other current assets 122,648 107,285
----------------- ----------------
Total current assets 1,440,986 5,400,091
----------------- ----------------
EQUIPMENT, Net of accumulated depreciation of $352,104 and $276,647 226,598 268,653
DEPOSITS AND OTHER ASSETS 9,900 9,900
----------------- ----------------
TOTAL ASSETS $ 1,677,484 $ 5,678,644
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 359,749 $ 595,512
COMMITMENTS (Note 6)
SHAREHOLDERS' EQUITY:
Preferred Shares, no par value, undesignated as to Series,
authorized 1,000,000 shares; none outstanding in 2000 and 1999 (Note 4)
Common Shares, no par value, authorized 40,000,000 shares; issued and
outstanding shares; 11,426,604 in 2000 and 10,891,031 in 1999 (Note 4) 28,360,007 27,200,380
Contributed Capital 93,972 93,972
Deficit accumulated during development stage (27,136,244) (22,211,220)
----------------- ----------------
Total shareholders' equity 1,317,735 5,083,132
----------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,677,484 $ 5,678,644
================= ================
See notes to financial statements.
|
36 BIOTIME, INC. |
Six Months
Year Ended Ended Year Ended Period from Inception
December 31, December 31, June 30, (November 30, 1990) to
2000 1999 1998 1998 December 31, 2000
------------ ------------ ------------ ------------ ---------------------
REVENUE:
License fee $ - $ 1,037,500 $ 250,000 $ 1,150,000 $ 2,500,000
Royalty from product sales 52,492 - - - 52,492
------------ ------------ ------------ ------------ --------------
Total revenue 52,492 - - - 2, 552,492
------------ ------------ ------------ ------------ --------------
EXPENSES:
Research and development (3,362,841) (4,900,521) (1,723,860) (3,048,775) (19,945,350)
General and administrative (1,779,931) (1,896,690) (710,131) (1,849,312) (11,466,385)
------------ ------------ ------------ ------------ --------------
Total expenses (5,142,772) (6,797,211) (2,433,991) (4,898,087) (31,411,735)
------------ ------------ ------------ ------------ --------------
INTEREST AND OTHER INCOME: 165,256 279,827 89,513 294,741 1,747,830
------------ ------------ ------------ ------------ --------------
NET LOSS $(4,925,024) $(5,479,884) $(2,094,478) $(3,453,346) $ (27,111,413)
============ ============ ============ ============ ==============
BASIC AND DILUTED LOSS PER SHARE $ (0.44) $ (0.51) $ (0.21) $ (0.35)
============ ============ ============ ============
COMMON AND EQUIVALENT SHARES
USED IN COMPUTING PER SHARE
AMOUNTS:
BASIC AND DILUTED 11,042,087 10,688,100 10,008,468 9,833,156
============ =========== ============ ============
See notes to financial statements.
|
37 BIOTIME, INC. |
Series A Convertible
Preferred Shares Common Shares
--------------------- ---------------------- Deficit Accumulated
Number of Number Contributed During Development
Shares Amount of Shares Amount Capital Stage
--------- --------- --------- ----------- ----------- -------------------
BALANCE, November 30, 1990
(date of inception) -- -- -- -- -- --
NOVEMBER 1990:
Common shares issued for cash 1,312,758 $ 263
DECEMBER 1990:
Common shares issued for
stock of a separate entity at fair value 1,050,210 137,400
Contributed equipment at appraised
value $ 16,425
Contributed cash 77,547
MAY 1991:
Common shares issued for cash
less offering costs 101,175 54,463
Common shares issued for stock
of a separate entity at fair value 100,020 60,000
JULY 1991:
Common shares issued for
services performed 30,000 18,000
AUGUST-DECEMBER 1991:
Preferred shares issued for
cash less offering costs of $125,700 360,000 $474,300
MARCH 1992:
Common shares issued for
cash less offering costs of $1,015,873 2,173,500 4,780,127
Preferred shares converted
into common shares (360,000) (474,300) 360,000 474,300
Dividends declared and paid
on preferred shares $(24,831)
MARCH 1994:
Common shares issued for cash less
offering costs of $865,826 2,805,600 3,927,074
JANUARY-JUNE 1995:
Common shares repurchased
with cash (253,800) (190,029)
JULY 1995-JUNE 1996:
Common shares issued for cash 608,697 1,229,670
Common shares repurchased with cash (18,600) (12,693)
Common shares warrants and options
granted for services 356,000
NET LOSS (8,064,471)
--------- --------- --------- ----------- ---------- ------------------
BALANCE AT JUNE 30, 1996 -- $ -- 8,269,560 $10,834,575 $ 93,972 $ (8,089,302)
See notes to financial statements. (Continued)
|
38 BIOTIME, INC. |
Series A Convertible
(Continued) Preferred Shares Common Shares
--------------------- ---------------------- Deficit Accumulated
Number of Number Contributed During Development
Shares Amount of Shares Amount Capital Stage
--------- --------- --------- ----------- ----------- -------------------
JULY 1996 - JUNE 1997:
Common shares issued for cash less
offering costs of $170,597 849,327 5,491,583
Common shares issued for cash
(exercise of options and warrants) 490,689 1,194,488
Common shares warrants and options
granted for service 105,000
JULY 1997 - JUNE 1998:
Common shares issued for cash
(exercise of options) 337,500 887,690
Common shares warrants and options
granted for service 38,050
Common shares issued for services 500 6,250
JULY 1998 - DECEMBER 1998:
Common shares issued for cash
(exercise of options and warrants) 84,000 395,730
Common shares options granted for services 50,000
Common shares issued for
services 1,500 18,750
NET LOSS (8,642,034)
--------- --------- ---------- ---------- --------- -------------------
BALANCE AT DECEMBER 31, 1998 -- -- 10,033,076 19,022,116 93,972 (16,731,336)
Common shares issued for cash (less offering
costs of $128,024) 751,654 7,200,602
Common shares issued for cash and
exchange for 2,491 common shares whicH
were canceled (exercise of options) 65,509 199,810
Common shares issued for services 792 9,900
Common shares warrant donated 552,000
Common shares issued for cash (exercise of
warrant) 40,000 20,000
Options granted for services 195,952
NET LOSS (5,479,884)
--------- --------- ---------- ---------- --------- -------------------
BALANCE AT DECEMBER 31, 1999 -- -- 10,891,031 27,200,380 93,972 (22,211,220)
See notes to financial statements. (Continued)
|
39 BIOTIME, INC. |
Series A Convertible
(Continued) Preferred Shares Common Shares
--------------------- ---------------------- Deficit Accumulated
Number of Number Contributed During Development
Shares Amount of Shares Amount Capital Stage
--------- --------- --------- ----------- ----------- -------------------
Common Shares issued for services 17,661 131,525
Exercise of Options 51,000 51,000
Exercise of Warrants (less issuance cost of
$36,176) 466,912 864,964
Options granted for services 112,138
NET LOSS (4,925,024)
--------- --------- ---------- ----------- ---------- -------------------
BALANCE AT DECEMBER 31, 2000 -- $ -- 11,426,604 $28,360,007 $ 93,972 $ (27,136,244)
========= ========= ========== =========== ========== ===================
See notes to financial statements. (Concluded)
|
40 BIOTIME, INC. |
Six Months
Year Ended Ended Year Ended Period from Inception
December 31, December 31, June 30, (November 30, 1990) to
2000 1999 1998 1998 December 31, 2000
------------ ------------ -------------- ------------- ----------------------
OPERATING ACTIVITIES:
Net loss $ (4,925,024) $ (5,479,884) $ (2,094,478) $(3,453,346) $ (27,111,413)
Adjustments to reconcile net loss to net cash
used in operating activities:
Deferred revenue (187,500) (250,000) (500,000) (1,000,000)
Depreciation 75,458 59,540 28,582 49,284 352,105
Cost of Donation - warrants 552,000 552,000
Cost of services - shares, options and warrants 243,663 220,574 78,750 44,300 1,041,565
Supply reserves 100,000 200,000
Changes in operating assets and liabilities:
Research and development supplies on hand (200,000)
Prepaid expenses and other current
assets (15,364) 31,260 87,367 13,197 (122,649)
Deposits and other assets 50,800 34,000 (65,000) (9,900)
Accounts payable (235,763) 358,309 47,673() 59,638 359,749
Accrued compensation (175,000) --
Deferred revenue (400,000) 1,000,000
-------------- ------------- -------------- ------------- ----------------
Net cash used in operating activities (4,857,030) (4,394,901) (2,068,106) (4,446,203) (24,938,543)
-------------- ------------- -------------- ------------- ----------------
INVESTING ACTIVITIES:
Sale of investments 197,400
Purchase of short-term investments (9,946,203)
Redemption of short-term investments 9,946,203
Purchase of equipment and furniture (33,402) (161,719) (4,391) (147,340) (562,277)
-------------- ------------- -------------- ------------- ----------------
Net cash used in investing activities (33,402) (161,719) (4,391) (147,340) (364,877)
-------------- ------------- -------------- ------------- ----------------
FINANCING ACTIVITIES:
Issuance of preferred shares for cash 600,000
Preferred shares placement costs (125,700)
Issuance of common shares for cash 7,328,626 23,701,732
Common shares placement costs (36,177) (128,024) (2,216,497)
Net proceeds from exercise of common share
options and warrants 952,141 219,810 395,730 887,690 4,812,229
Contributed capital - cash 77,547
Dividends paid on preferred shares (24,831)
Repurchase of common shares (202,722)
-------------- ------------- -------------- ------------- ----------------
Net cash provided by financing activities 915,964 7,420,412 395,730 887,690 26,621,758
-------------- ------------- -------------- ------------- ----------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (3,974,466) 2,863,792 (1,676,767) (3,705,853) 1,318,338
CASH AND CASH EQUIVALENTS:
At beginning of period 5,292,806 2,429,014 4,105,781 7,811,634 --
-------------- ------------- -------------- ------------- ----------------
At end of period $ 1,318,338 $ 5,292,806 $ 2,429,014 $ 4,105,781 $ 1,318,338
============== ============= ============== ============= ================
See notes to financial statements. (Continued)
|
41 BIOTIME, INC. |
Six Months
Year Ended Ended Year Ended Period from Inception
December 31, December 31, June 30, (November 30, 1990) to
2000 1999 1998 1998 December 31, 2000
------------ ------------ -------------- ------------- ----------------------
NONCASH FINANCING AND
INVESTING ACTIVITIES:
Receipt of contributed equipment $ 16,425
Issuance of common shares
in exchange for shares of
common stock of Cryomedical
Sciences, Inc. in a stock-for-stock
transaction $ 197,400
Granting of options and warrants for
services $ 112,138 $ 195,952 $ 50,000 $ 38,050 $ 875,140
Issuance of common shares in exchange for
services $ 131,525 $ 9,900 $ 18,750 $ 6,250 $ 166,425
See notes to financial statements. (Concluded)
|
42 BIOTIME, INC. 1. GENERAL AND DEVELOPMENT STAGE ENTERPRISE General
– BioTime, Inc. (the Company) was organized November 30, 1990 as a California
corporation. The Company is a biomedical organization, currently in the
development stage, which is engaged in the research and development of synthetic
plasma expanders, blood volume substitute solutions, and organ preservation
solutions, for use in surgery, trauma care, organ transplant procedures, and
other areas of medicine. 43 Change
in fiscal year – On November 12, 1998, the Board of Directors of BioTime
determined that it would be in the best interests of the Company and its
shareholders to change the Company’s fiscal year from one ending on June 30
to one ending on December 31 and, accordingly, the Company adopted a December 31
or calendar year-end beginning on January 1, 1999. Accordingly, the accompanying
statements of operations, shareholders’ equity and cash flows include the
transition fiscal period for the six months from July 1, 1998 to December 31,
1998. 44
share
for the years ended December 31, 2000, 1999, the six months ended December 31,
1998 and the year ended June 30, 1998 exclude any effect from such securities as
their inclusion would be antidilutive. As a result, there is no difference
between basic and diluted calculations of loss per share for all periods
presented. 45 Under
the License Agreement, Abbott has paid the Company $2,500,000 of license fees
based upon achievement of specified milestones. Up to $37,500,000 of additional
license fees will be payable based upon annual net sales of Hextend at the rate
of 10% of annual net sales if annual net sales exceed $30,000,000 or 5% if
annual net sales are between $15,000,000 and $30,000,000. Abbott’s
obligation to pay license fees on sales of Hextend will expire on the earlier of
January 1, 2007 or, on a country by country basis, when all patents protecting
Hextend in the applicable country expire or any third party obtains certain
regulatory approvals to market a generic equivalent product in that country. 46 warrants were issued in equal quarterly
installments over a two year period, beginning October 15, 1995. The exercise
price and number of Common Shares for which the warrants may be exercised are
subject to adjustment to prevent dilution in the event of a stock split,
combination, stock dividend, reclassification of shares, sale of assets, merger
or similar transaction. As of December 31, 2000, 466,912 warrants have been
exercised at $1.93 per share and 466,908 warrants remain outstanding at prices
ranging from $2.35 - $15.74 and expire through July 15, 2002. 47 On
March 9, 1999, the Company completed a subscription rights offering raising
$7,328,626, through the sale of 751,654 common shares. 48 Option activity under the Plan is as follows: |
Weighted
Number of Average Exercise
Shares Price
---------------------- -----------------------
Outstanding, June 30, 1997 (678,000 exercisable at a
weighted average price of $4.22) 840,000 3.78
Granted (weighted average fair value of $11.44 per
share) 32,000 16.56
Exercised 337,500 2.63
Canceled -- --
---------------------- -----------------------
Outstanding, June 30, 1998 (411,500 exercisable at a
weighted average price of $6.52) 534,500 5.28
Granted (weighted average fair value of $2.50 per
share) 20,000 7.25
Exercised 84,000 4.71
Canceled -- --
---------------------- -----------------------
Outstanding, December 31, 1998 (440,500
exercisable at a weighted average price of $5.76) 470,500 $ 5.46
Granted (weighted average fair value of $9.52 per
share) 96,000 11.81
Exercised 68,000 12.65
Canceled -- --
---------------------- -----------------------
Outstanding, December 31, 1999 (438,500
exercisable at a weighted average price of $6.33) 498,500 6.98
Granted (weighted average fair value of $7.03 per
share) 52,500 9.95
Exercised 51,000 1.00
Canceled 30,000 1.10
---------------------- -----------------------
Outstanding, December 31, 2000 (470,000 470,000 8.34
exercisable at a weighted average price of $8.34)
|
49 Additional information regarding options outstanding as of December 31, 2000 is as follows: |
Options Outstanding Options Exercisable
------------------------------ ----------------------------------------
Weighted Avg.
Remaining
Range of Number Contractual Life Weighted Avg. Number Weighted Avg.
Exercise Prices Outstanding (yrs) Exercise Price Exercisable Exercise Price
- -------------------- ----------------- -------------------- -------------------- --------------- ------------------
$1.00-1.13 99,000 2.91 $1.13 99,000 $ 1.13
6.00-8.82 86,500 2.15 6.23 86,500 6.23
9.00-13.00 262,500 3.74 10.93 262,500 10.93
18.25 22,000 1.90 18.25 22,000 18.25
----------------- ---------------
$1.00-$18.25 470,000 3.19 $8.34 470,000 $ 8.34
----------------- ---------------
|
As
discussed in Note 1, the Company continues to account for its employee
stock-based awards using the intrinsic value method in accordance with
Accounting Principles Board No. 25, Accounting for Stock Issued to Employees and
its related interpretations. Accordingly, no compensation expense has been
recognized in the financial statements for employee stock arrangements. Options
to purchase 181,500 shares were outstanding to employees at December 31, 2000.
Options granted to non-employees have been recognized in the financial
statements at the estimated fair value of the services or benefit provided.
Options to purchase 288,500 shares were outstanding to non-employees at December
31, 2000. 50
Therefore, pro forma net loss
is the same as recorded net loss for the six months ended December 31, 1998. The
impact of outstanding non-vested stock options granted prior to 1996 has been
excluded from the pro forma calculation; accordingly, the year ended December
31,1999, the six months ending December 31, 1998, and the year ended June 30,
1998 pro forma adjustments are not indicative of future period pro forma
adjustments, when the calculation will apply to all applicable stock options. 51 7. INCOME TAXES |
Year Ended Year Ended
December 31, December 31,
2000 1999
--------------------- --------------------
Deferred Tax Asset:
NOL Carryforwards $ 11,938,185 $ 9,246,868
Research and Development Credits 873,269 788,920
Other, net (100,841) 514,618
--------------------- --------------------
Total 12,710,613 10,550,406
Valuation allowance (12,710,613) (10,550,406)
--------------------- --------------------
Net deferred tax asset $ -0- $ -0-
===================== ====================
|
No
tax benefit has been recorded through December 31, 2000 because of the net
operating losses incurred and a full valuation allowance provided. A valuation
allowance is provided when it is more likely than not that some portion of the
deferred tax asset will not be realized. The Company established a 100%
valuation allowance at December 31, 2000 and 1999 due to the uncertainty of
realizing future tax benefits from its net operating loss carryforwards and
other deferred tax assets. 52 9. SUBSEQUENT EVENTS |
Fourth Total
First Quarter Second Quarter Third Quarter Quarter Year
----------------------------------------------------------------------------------------------
Fiscal Year Ended
December 31, 2000
- ---------------------------
Revenue $5,732 $7,387 $19,592 $19,781 $52,492
Net Loss $1,319,947 $1,329,761 $1,224,955 $1,050,361 $4,925,024
Net Loss per share $.12 $.12 $.11 $.10 $.44
|
53 |
Fourth Total
First Quarter Second Quarter Third Quarter Quarter Year
----------------------------------------------------------------------------------------------
Fiscal Year Ended
December 31, 1999
- ---------------------------
Revenue $437,500 $600,000 -- -- $1,037,500
Net Loss $786,939 $990,594 $2,254,588 $1,447,763 $5,479,884
Net Loss per share $.08 $.09 $.21 $.14 $.51
|
54 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure PART III
Item 10. Directors and Executive Officers of the Registrant. 55 consulting business, Dr. Nickel served in a number of management positions for Syntex Corporation
and Merck & Company. Dr. Nickel received his Ph.D. in Organic Chemistry from Rutgers
University in 1970. 56 Executive Compensation 57 SUMMARY COMPENSATION TABLE |
Annual Compensation Long-Term Compensation
------------------- ----------------------
Name and Principal Position Year Ended Salary($) Bonus Stock Options (Shares)
- --------------------------- ---------- -------- ----- ----------------------
Paul Segall December 31, 2000 $163,000
Chairman and Chief Executive Officer December 31, 1999 $156,000
December 31, 1998* $ 49,500
June 30, 1998 $ 95,500 $50,000 __
Hal Sternberg
Vice President of Research December 31, 2000 $163,000
December 31, 1999 $156,000
December 31, 1998* $ 49,500
June 30, 1998 $ 95,500 $25,000 __
Harold Waitz December 31, 2000 $163,000
Vice President of Engineering December 31, 1999 $156,000
December 31, 1998* $ 49,500
June 30, 1998 $ 95,500 __ __
Victoria Bellport December 31, 2000 $163,000
Vice President and December 31, 1999 $156,000
Chief Financial Officer December 31, 1998* $ 49,500
June 30, 1998 $ 95,500 $25,000 __
Judith Segall December 31, 2000 $163,000
Vice President and Corporate Secretary December 31, 1999 $156,000
December 31, 1998* $ 49,500
June 30, 1998 $ 95,500 $25,000 __
|
*During 1998, the Company changed its fiscal year end from June 30 to December 31. The amounts of base salary shown in the table for the year ended December 31, 1998 reflect a short (six month) fiscal year. Insider Participation in Compensation Decisions 58 Stock Options |
Number of Warrant Shares Exercise Price Per Share Expiration Date
------------------------ ------------------------ ---------------
389,094 $ 1.93 October 15, 2000
77,818 $ 1.93 January15, 2001
77,818 $ 2.35 April 15, 2001
77,818 $ 9.65 July 15, 2001
77,818 $9.42 October 15, 2001
77,818 $10.49 January 15, 2002
77,818 $15.74 April 15, 2002
77,818 $13.75 July 15, 2002
|
The number of shares and exercise prices shown have been adjusted for the Company’s subscription rights distributions during January 1997 and February 1999 and the payment of a stock dividend during October 1997. Greenbelt has purchased 466,912 Common Shares by exercising some of those warrants and continues to hold warrants to purchase an aggregate of 466,908 Common Shares. Under the agreement, the Company has filed a registration statement on Form S-3 to register 622,548 warrants and underlying Common Shares for sale under the Securities Act of 1933, as amended (the “Act”). The Company has the obligation to file, at Greenbelt’s request, one or more additional registration statements to cover the 311,272 warrants and Common Shares not covered by the first registration statement. The Company will bear the expenses of registration, other than any underwriting 59 discounts that may be incurred by Greenbelt Corp. in connection with a sale of the warrants or common
shares. The Company shall not be obligated to file more than two such registration statements, other
than registration statements on Form S-3. Greenbelt Corp. also is entitled to include warrants and
common shares in any registration statement filed by the Company to register other securities for sale
under the Act. 60 Item 12. Security Ownership of Certain Beneficial Owners and Management. |
Number of Percent of
Shares Total
------ -----
Alfred D. Kingsley (1)
Gary K. Duberstein
Greenbelt Corp.
Greenway Partners, L.P.
Greenhouse Partners, L.P.
277 Park Avenue, 27th Floor
New York, New York 10017 1,828,337 15.2
Paul and Judith Segall (2) 645,408 5.6
Harold D. Waitz (3) 424,166 3.7
Hal Sternberg 402,043 3.5
Victoria Bellport 205,978 1.8
Ronald S. Barkin (4) 192,861 1.7
Jeffrey B. Nickel (5) 35,000 *
Milton H. Dresner (6) 41,598 *
All officers and directors
as a group (8 persons)(4)(5)(6) 1,947,054 16.8%
- ---------------------------
* Less than 1%
(1) Includes 466,908 Common Shares issuable upon the exercise of certain warrants owned
beneficially by Greenbelt Corp and 549,142 Common Shares owned by Greenbelt Corp. Mr.
Kingsley and Mr. Duberstein may be deemed to beneficially own the warrant shares that
Greenbelt Corp. beneficially owns. Includes 90,750 Common Shares owned by Greenway
|
61 |
Partners, L.P. 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 Common Shares that Greenway Partners, L.P. beneficially owns. Includes 653,142 Common
Shares owned solely by Mr. Kingsley and 50,000 Common Shares issuable upon the exercise of
certain warrants owned by Mr. Kingsley, as to which Mr. Duberstein disclaims beneficial
ownership. Includes 10,895 Common Shares owned solely by Mr. Duberstein, as to which Mr.
Kingsley disclaims beneficial ownership.
(2) Includes 443,245 shares held of record by Paul Segall and 202,163 shares held of record by Judith
Segall.
(3) Includes 2,100 shares held for the benefit of Dr. Waitz’s minor children.
(4) Includes 90,000 Common Shares issuable upon the exercise of certain options.
(5) Includes 35,000 Common Shares issuable upon the exercise of certain options.
(6) Includes 20,000 Common Shares issuable upon the exercise of certain stock options. Does not
include Common Shares that Mr. Dresner may acquire in lieu of cash payment of his director’s
fees.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s directors and executive officers and persons who own more than ten percent (10%) of a registered class of the Company’s 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 equity securities of the Company. Officers, directors and greater than ten percent beneficial owners are required by SEC regulation to furnish the Company with copies of all reports they file under Section 16(a). To the Company’s knowledge, based solely on its review of the copies of such reports furnished to the Company and written representations that no other reports were required, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with during the fiscal year ended December 31, 1999. 62 PART IVItem 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K |
Page
----
Independent Auditors' Report 35
Balance Sheets As of December 31, 2000
and December 31, 1999 36
Statements of Operations For the
Years Ended December 31, 2000 and
December 31, 1999, the Six Months Ended
December 31, 1998, the Two Years in the Period
Ended June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 2000 37
Statements of Shareholders' Equity For the
Years Ended December 31, 2000 and
December 31, 1999, the Six Months
Ended December 31, 1998, the Two Years in the Period
Ended June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 2000 38-40
Statements of Cash Flows For the
Years Ended December 31, 2000 and
December 31, 1999, the Six Months Ended
December 31, 1998, the Two Years in the Period
Ended June 30, 1998 and the Period From Inception
(November 30, 1990) to December 31, 2000 41-42
Notes to Financial Statements 43-54
|
63 |
(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, as Amended.†
3.3 By-Laws, As Amended.#
4.1 Specimen of Common Share Certificate.+
10.1 Lease Agreement dated July 1, 1994 between the Registrant and Robert and Norah Brower,
relating to principal executive offices of the Registrant.*
10.2 Employment Agreement dated June 1, 1996 between the Company and Paul Segall.++
10.3 Employment Agreement dated June 1, 1996 between the Company and Hal Sternberg.++
10.4 Employment Agreement dated June 1, 1996 between the Company and Harold Waitz.++
10.5 Employment Agreement dated June 1, 1996 between the Company and Judith Segall.++
10.6 Employment Agreement dated June 1, 1996 between the Company and Victoria Bellport.++
10.7 Intellectual Property Agreement between the Company and Paul Segall.+
10.8 Intellectual Property Agreement between the Company and Hal Sternberg.+
10.9 Intellectual Property Agreement between the Company and Harold Waitz.+
10.10 Intellectual Property Agreement between the Company and Judith Segall.+
10.11 Intellectual Property Agreement between the Company and Victoria Bellport.+
10.12 Agreement between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive License.+
10.13 Agreement for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc. Common
Shares.+
10.14 1992 Stock Option Plan, as amended.##
10.15 Employment Agreement dated April 1, 1997 between the Company and Ronald S. Barkin.^
|
64 |
10.16 Intellectual Property Agreement between the Company and Ronald S. Barkin.^
10.17 Addenda to Lease Agreement between the Company and Donn Logan.‡
10.18 Amendment to Employment Agreement between the Company and Paul Segall.^^
10.19 Amendment to Employment Agreement between the Company and Hal Sternberg.^^
10.20 Amendment to Employment Agreement between the Company and Harold Waitz.^^
10.21 Amendment to Employment Agreement between the Company and Judith Segall.^^
10.22 Amendment to Employment Agreement between the Company and Victoria Bellport.^^
10.23 Amendment to Employment Agreement between the Company and Ronald S. Barkin.^^
10.24 Exclusive License Agreement between Abbott Laboratories and BioTime, Inc. (Portions of this
exhibit have been omitted pursuant to a request for confidential treatment).###
10.25 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).^^^
10.26 Exclusive License Agreement between Hours, B.V. and BioTime, Inc.
(Portions of this exhibit have been omitted pursuant to a request for confidential treatment).††
10.27 Guaranty of Akzo Nobel, N.V.††
10.28 Revolving Line of Credit Agreement between BioTime, Inc. and Alfred D. Kingsley**
10.29 Warrant Agreement between BioTime, Inc. and Alfred D. Kingsley**
23.1 Consent of Deloitte & Touche LLP**
|
†Incorporated by reference to the Company’s Form 10-K for the fiscal year ended June 30, 1998. + Incorporated by reference to Registration Statement on Form S-1, File Number 33-44549 filed with the Securities and Exchange Commission on December 18, 1991, and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and Exchange Commission on February 6, 1992 and March 7, 1992, respectively. # Incorporated by reference to Registration Statement on Form S-1, File Number 33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities and Exchange Commission on June 22, 1992, and August 27, 1992, respectively. * Incorporated by reference to the Company’s Form 10-K for the fiscal year ended June 30, 1994. ++ Incorporated by reference to the Company’s Form 10-K for the fiscal year ended June 30, 1996. 65 ^ Incorporated by reference to the Company’s Form 10-Q for the quarter ended March 31, 1997. ## Incorporated by reference to Registration Statement on Form S-8, File Number 333-30603 filed with the Securities and Exchange Commission on July 2, 1997. ^ ^ Incorporated by reference to the Company’s Form 10-Q for the quarter ended March 31, 1999. ### Incorporated by reference to the Company’s Form 8-K, filed April 24, 1997. ^^^ Incorporated by reference to the Company’s Form 10-Q for the quarter ended June 30, 1999. ‡ Incorporated by reference to the Company’s Form 10-K for the year ended December 31, 1999. ††Incorporated by reference to the Company’s Form 8-K filed February 16, 2001 (b) Reports on Form 8-K 66 SIGNATURESPursuant 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 28th day of March 2001. BIOTIME, INC. |
Signature Title Date
--------- ----- ----
/s/Paul E. Segall
- ----------------------
Paul E. Segall, Ph.D. Chairman, Chief Executive Officer and March 28, 2001
Director (Principal Executive Officer)
/s/Ronald S. Barkin
- ----------------------
Ronald S. Barkin President and Director March 28, 2001
/s/Harold D. Waitz
- ----------------------
Harold D. Waitz, Ph.D. Vice President and Director March 28, 2001
/s/Hal Sternberg
- ----------------------
Hal Sternberg, Ph.D. Vice President and Director March 28, 2001
/s/Victoria Bellport
- ----------------------
Victoria Bellport Chief Financial Officer and March 28, 2001
Director (Principal Financial and
Accounting Officer)
/s/Judith Segall
- ----------------------
Judith Segall Vice President, Corporate Secretary March 28, 2001
and Director
- ----------------------
Jeffrey B. Nickel Director March __, 2001
- ----------------------
Milton H. Dresner Director March __, 2001
|
67 |
Exhibit Index
Exhibit
Numbers Description
- ------- -----------
3.1 Articles of Incorporation, as Amended.†
3.3 By-Laws, As Amended.#
4.1 Specimen of Common Share Certificate.+
10.1 Lease Agreement dated July 1, 1994 between the Registrant and Robert and Norah Brower,
relating to principal executive offices of the Registrant.*
10.2 Employment Agreement dated June 1, 1996 between the Company and Paul Segall.++
10.3 Employment Agreement dated June 1, 1996 between the Company and Hal Sternberg.++
10.4 Employment Agreement dated June 1, 1996 between the Company and Harold Waitz.++
10.5 Employment Agreement dated June 1, 1996 between the Company and Judith Segall.++
10.6 Employment Agreement dated June 1, 1996 between the Company and Victoria Bellport.++
10.7 Intellectual Property Agreement between the Company and Paul Segall.+
10.8 Intellectual Property Agreement between the Company and Hal Sternberg.+
10.9 Intellectual Property Agreement between the Company and Harold Waitz.+
10.10 Intellectual Property Agreement between the Company and Judith Segall.+
10.11 Intellectual Property Agreement between the Company and Victoria Bellport.+
10.12 Agreement between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive License.+
10.13 Agreement for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc. Common
Shares.+
10.14 1992 Stock Option Plan, as amended.##
10.15 Employment Agreement dated April 1, 1997 between the Company and Ronald S. Barkin.^
10.16 Intellectual Property Agreement between the Company and Ronald S. Barkin.^
10.17 Addenda to Lease Agreement between the Company and Donn Logan.‡
10.18 Amendment to Employment Agreement between the Company and Paul Segall.^^
10.19 Amendment to Employment Agreement between the Company and Hal Sternberg.^^
10.20 Amendment to Employment Agreement between the Company and Harold Waitz.^^
|
68 |
10.21 Amendment to Employment Agreement between the Company and Judith Segall.^^
10.22 Amendment to Employment Agreement between the Company and Victoria Bellport.^^
10.23 Amendment to Employment Agreement between the Company and Ronald S. Barkin.^^
10.24 Exclusive License Agreement between Abbott Laboratories and BioTime, Inc. (Portions of this
exhibit have been omitted pursuant to a request for confidential treatment).###
10.25 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).^^^
10.26 Exclusive License Agreement between Hours, B.V. and BioTime, Inc.
(Portions of this exhibit have been omitted pursuant to a request for confidential treatment).††
10.27 Guaranty of Akzo Nobel, N.V.††
10.28 Revolving Line of Credit Agreement between BioTime, Inc. and Alfred D. Kingsley**
10.29 Warrant Agreement between BioTime, Inc. and Alfred D. Kingsley**
23.1 Consent of Deloitte & Touche LLP**
|
†Incorporated by reference to the Company’s Form 10-K for the fiscal year ended June 30, 1998. + Incorporated by reference to Registration Statement on Form S-1, File Number 33-44549 filed with the Securities and Exchange Commission on December 18, 1991, and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and Exchange Commission on February 6, 1992 and March 7, 1992, respectively. # Incorporated by reference to Registration Statement on Form S-1, File Number 33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities and Exchange Commission on June 22, 1992, and August 27, 1992, respectively. * Incorporated by reference to the Company’s Form 10-K for the fiscal year ended June 30, 1994. ++ Incorporated by reference to the Company’s Form 10-K for the fiscal year ended June 30, 1996. ^ Incorporated by reference to the Company’s Form 10-Q for the quarter ended March 31, 1997. ## Incorporated by reference to Registration Statement on Form S-8, File Number 333-30603 filed with the Securities and Exchange Commission on July 2, 1997. ^ ^ Incorporated by reference to the Company’s Form 10-Q for the quarter ended March 31, 1999. ### Incorporated by reference to the Company’s Form 8-K, filed April 24, 1997. ^^^ Incorporated by reference to the Company’s Form 10-Q for the quarter ended June 30, 1999. ‡ Incorporated by reference to the Company’s Form 10-K for the year ended December 31, 1999. ††Incorporated by reference to the Company’s Form 8-K filed February 16, 2001 69 |