Lineage Cell Therapeutics, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 19, 2016

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8-K - BIOTIME, INC 8-K 5-13-2016 - Lineage Cell Therapeutics, Inc.form8k.htm
Exhibit 99.1
 
BIOTIME, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2016
(IN THOUSANDS)

 
  
Registrant
Historical
    
Adjustments
    
Notes
    
Pro Forma
  
ASSETS
              
 
        
CURRENT ASSETS
              
 
        
Cash and cash equivalents
  
$
27,132
    
$
(7,568
)
  
(a)
    
$
19,564
  
Available for sale securities
    
829
            
 
      
829
  
Trade accounts and grants receivable, net
    
1,125
            
 
      
1,125
  
Landlord receivable
    
943
            
 
      
943
  
Prepaid expenses and other current assets
    
2,878
      
(1,157
)
  
(a)
      
1,721
  
Total current assets
    
32,907
            
 
      
24,182
  
 
                  
 
          
Equity method investment in Asterias, at fair value
    
-
      
65,678
    
(b)
      
65,678
  
Deferred tax assets
    
-
      
-
    
(c)
      
-
  
Property, plant and equipment, net and construction in progress
    
8,932
      
(5,539
)
  
(a)
      
3,393
  
Deferred license fees
    
293
            
 
      
293
  
Deposits and other long-term assets
    
1,268
      
(425
)
  
(a)
      
843
  
Equity method investment
    
4,436
            
 
      
4,436
  
Intangible assets, net
    
32,278
      
(20,145
)
  
(a)
      
12,133
  
TOTAL ASSETS
  
$
80,114
            
    
    
$
110,958
  
 
                  
 
          
LIABILITIES AND SHAREHOLDERS' EQUITY
                  
 
          
CURRENT LIABILITIES
                  
 
          
Accounts payable and accrued liabilities
    
10,674
      
(3,058
)
  
(a)
      
7,616
  
Capital lease liability, current portion
    
22
      
(7
)
  
(a)
      
15
  
Promissory notes, current portion
    
95
            
 
      
95
  
Deferred grant income
    
2,269
      
(2,269
)
  
(a)
      
-
  
Deferred license and subscription revenue, current portion
    
609
            
 
      
609
  
Total current liabilities
    
13,669
            
 
      
8,335
  
 
                  
 
          
LONG-TERM LIABILITIES
                  
 
          
Deferred revenues, net of current portion
    
538
            
 
      
538
  
Deferred rent liabilities, net of current portion
    
261
      
(203
)
  
(a)
      
58
  
Lease liability
    
5,408
      
(4,300
)
  
(a)
      
1,108
  
Related party convertible debt, net of discount
    
394
            
 
      
394
  
Promissory notes, net of current portion
    
220
            
 
      
220
  
Capital lease, net of current and other liabilities
    
32
      
(25
)
  
(a)
      
7
  
Deferred tax liability related to equity method investment retained
    
-
      
-
    
(c)
      
-
  
TOTAL LIABILITIES
    
20,522
            
 
      
10,660
  
 
                  
 
          
Commitments and contingencies
                              
                               
SHAREHOLDERS' EQUITY
                  
 
          
Preferred shares, no par value, 2,000 shares authorized; none issued and outstanding
    
-
      
-
    
 
          
Common shares, no par value, 125,000 shares authorized; 94,894 issued and 90,421 shares outstanding actual and 94,274 pro forma, as of March 31, 2016
    
275,238
      
(6,783
)
  
(a)
      
268,455
  
Accumulated other comprehensive loss
    
(60
)
          
 
      
(60
)
Accumulated deficit
    
(246,293
)
    
52,109
    
(e)
      
(194,184
)
Treasury stock at cost: 4,473 shares actual and 620 shares pro-forma as of March 31, 2016
    
(18,033
)
    
15,142
    
(d)
      
(2,891
)
BioTime, Inc. shareholders' equity
    
10,852
            
 
      
71,320
  
 
                  
 
          
Non-controlling interest
    
48,740
      
(19,762
)
  
(a)
      
28,978
  
Total shareholders' equity
    
59,592
            
 
      
100,298
  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  
$
80,114
            
    
    
$
110,958
  
 
1
BIOTIME, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2016
(IN THOUSANDS, EXCEPT PER SHARE DATA)

 
Registrant
Historical
    
Adjustments
    
Notes
    
Pro Forma
  
REVENUES:
              
 
        
Subscription and advertisement revenues
  
$
420
    
$
-
    
 
    
$
420
  
Royalties from product sales
    
123
      
(107
)
  
(f)
      
16
  
Grant income
    
1,487
      
(1,487
)
  
(f)
      
-
  
Sale of research products and services
    
43
      
-
    
 
      
43
  
Total revenues
    
2,073
      
(1,594
)
  
 
      
479
  
 
                  
 
          
Cost of sales
    
(225
)
    
53
    
(f)
      
(172
)
 
                  
 
          
Gross Profit
    
1,848
      
(1,541
)
  
 
      
307
  
 
                  
 
          
OPERATING EXPENSES:
                  
 
          
Research and development
    
13,734
      
(6,343
)
  
(g)
      
7,391
  
General and administrative
    
11,872
      
(6,218
)
  
(g)
      
5,654
  
Total operating expenses
    
25,606
      
(12,561
)
  
 
      
13,045
  
                               
Loss from operations
    
(23,758
)
    
11,020
    
 
      
(12,738
)
                               
OTHER INCOME/(EXPENSES):
                  
 
          
Total other income/(expense), net
    
(239
)
    
147
    
(h)
      
(92
)
LOSS BEFORE INCOME TAX BENEFIT
    
(23,997
)
    
11,167
    
 
      
(12,830
)
 
                  
 
          
Deferred income tax benefit
    
-
      
-
    
(i)
      
-
  
 
                  
 
          
NET LOSS
    
(23,997
)
    
11,167
    
 
      
(12,830
)
 
                  
 
          
Net loss attributable to non-controlling interest
    
6,885
      
(4,401
)
  
(j)
      
2,484
  
 
                  
 
          
NET LOSS ATTRIBUTABLE TO BIOTIME, INC.
  
$
(17,112
)
  
$
6,766
    
 
    
$
(10,346
)
 
                  
 
          
BASIC AND DILUTED NET LOSS PER COMMON SHARE
  
$
(0.19
)
          
    
    
$
(0.11
)
 
                  
 
          
WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING: BASIC AND DILUTED
    
90,421
            
 
      
90,421
  

2
BIOTIME, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2015
(IN THOUSANDS, EXCEPT PER SHARE DATA)

 
  
Registrant
Historical
    
Adjustments
    
Notes
    
Pro Forma
  
REVENUES:
              
 
        
Subscription and advertisement revenues
  
$
1,357
    
$
-
    
 
    
$
1,357
  
Royalties from product sales
    
719
      
(535
)
  
(f)
      
184
  
Grant income
    
4,502
      
(3,007
)
  
(f)
      
1,495
  
Sale of research products and services
    
458
      
-
  
 
      
458
  
Total revenues
    
7,036
      
(3,542
)
  
 
      
3,494
  
 
                  
 
          
Cost of sales
    
(1,107
)
    
228
    
(f)
      
(879
)
 
                  
 
          
Gross Profit
    
5,929
      
(3,314
)
  
 
      
2,615
  
 
                  
 
          
OPERATING EXPENSES:
                  
 
          
Research and development
    
42,604
      
(17,321
)
  
(g)
      
25,283
  
General and administrative
    
29,134
      
(7,712
)
  
(g)
      
21,422
  
Total operating expenses
    
71,738
      
(25,033
)
  
 
      
46,705
  
 
                  
 
          
Loss from operations
    
(65,809
)
    
21,719
    
 
      
(44,090
)
 
                  
 
          
OTHER INCOME/(EXPENSES):
                  
 
          
Total other income/(expense), net
    
3,159
      
347
    
(h)
      
3,506
  
LOSS BEFORE INCOME TAX BENEFIT
    
(62,650
)
    
22,066
    
 
      
(40,584
)
 
                  
 
          
Deferred income tax benefit
    
4,516
      
(4,516
)
  
(i)
      
-
  
 
                  
 
          
NET LOSS
    
(58,134
)
    
17,550
    
 
      
(40,584
)
 
                  
 
          
Net loss attributable to non-controlling interest
    
11,143
      
(5,553
)
  
(j)
      
5,590
  
 
                  
 
          
NET LOSS ATTRIBUTABLE TO BIOTIME, INC.
    
(46,991
)
    
11,997
    
 
      
(34,994
)
 
                  
 
          
Dividends on preferred shares
    
(415
)
    
-
    
 
      
(415
)
 
                  
 
          
NET LOSS ATTRIBUTABLE TO BIOTIME, INC. COMMON SHAREHOLDERS
  
$
(47,406
)
  
$
11,997
    
 
    
$
(35,409
)
 
                  
 
          
BASIC AND DILUTED NET LOSS PER COMMON SHARE
  
$
(0.59
)
          
    
    
$
(0.44
)
 
                  
 
          
WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING: BASIC AND DILUTED
    
79,711
            
 
      
79,711
  

3
Notes to Unaudited Pro Forma Condensed Combined Financial Information.

(a) This adjustment reflects the deconsolidation of the assets and liabilities attributable to Asterias, including our carrying value of noncontrolling interest in Asterias, as of March 31, 2016, due to a loss of control of Asterias that occurred on May 13, 2016. This adjustment also reflects the equity impact, as of March 31, 2016, of certain intercompany transactions and balances previously eliminated in consolidation upon deconsolidation of Asterias.

(b) This adjustment reflects the fair value of our retained noncontrolling investment in Asterias on May 13, 2016, the date of our deconsolidation of Asterias subsidiary due to a loss of control in accordance with ASC 810-10-40-4(c). This amount was determined by multiplying 21.7 million shares of Asterias common stock we hold as of May 13, 2016, by the $3.02 per share closing price of Asterias common stock on the NYSE: MKT on that date. We may account for our retained noncontrolling investment in Asterias at fair value using the equity method of accounting by electing the fair value option under ASC 825-10, in which all subsequent changes in fair value of our investment in Asterias will be recorded in our consolidated statements of operations included in other income and expenses, net.

(c) This adjustment reflects a $23.6 million deferred tax liability based on the difference in our financial reporting basis retained in Asterias, at fair value, and our tax basis in Asterias, computed based on our historical tax rate of 36%, in accordance with ASC 740, Income Taxes. This adjustment also reflects a $23.6 million release of the valuation allowance we have on our deferred tax assets to the extent of this deferred tax liability since the deferred tax liability is considered to be a source of taxable income as prescribed by ASC 740-10-30-17 that will result in the more likely than not realization of our deferred tax assets, thereby reducing the need for a valuation allowance to the extent of the deferred tax liability recorded on the retained noncontrolling investment in Asterias as of May 13, 2016.  See footnote (e).

(d) This adjustment reflects the carrying value of our treasury stock, which represents our shares held by Asterias as of March 31, 2016.  These shares will continue to be held by Asterias as outstanding BioTime common stock.

(e) This adjustment reflects the estimated gain of approximately $52.1 million arising from the deconsolidation of Asterias on May 13, 2016, due to a loss of control of Asterias on that date.  This pro forma estimated gain was computed in accordance with ASC 810-10-40-5, as the difference between (i) the aggregate fair value of our retained noncontrolling investment in Asterias on May 13, 2016 and the carrying amount of our noncontrolling interest in Asterias as of March 31, 2016, and (ii) the carrying amount of Asterias' assets and liabilities as of March 31, 2016. The actual gain on deconsolidation will be determined using the fair value of our retained noncontrolling investment in Asterias on May 13, 2016 and, based on the actual carrying amounts of Asterias' assets and liabilities, including the actual carrying amount of our noncontrolling interest in Asterias, as of May 13, 2016, the date of deconsolidation. We are not able to estimate the actual gain until we determine the actual balances of our carrying amounts, as applicable, as of May 13, 2016, which will be completed during the second quarter ended June 30, 2016. The actual gain may differ materially from the pro forma estimated gain shown herein.

This pro forma estimated gain has not been reflected in the pro forma condensed combined statements of operations because it is considered to be nonrecurring in nature.

4
The computation of the pro forma estimated gain was computed as follows (in thousands):

(i)
Retained noncontrolling investment in Asterias, at fair value, as of May 13, 2016
  
$
65,678
 
 
 
BioTime deferred tax liability for retained noncontrolling investment in Asterias
  
 
(23,644
)
 
 
BioTime deferred tax asset (release of valuation allowance)
  
 
23,644
 
 
 
Carrying amount of BioTime noncontrolling interest in Asterias at March 31, 2016
  
 
19,762
 
 
 
 
  
 
85,440
 
(i)
(ii)
Carrying amount of Asterias assets and liabilities as of March 31, 2016:
  
 
 
 
  
 
Carrying amount of Asterias assets
  
 
54,650
 
 
 
Less: Carrying amount of Asterias liabilities
  
 
21,319
 
 
 
Net assets of Asterias as of March 31, 2016
  
 
33,331
 
(ii)
 
 
  
 
 
 
    
(iii)
Pro forma estimated gain on deconsolidation of Asterias
  
$
52,109
 
(i) - (ii)
 
(f) This adjustment reflects the deconsolidation of revenues and cost of sales attributable to Asterias.

(g) This adjustment reflects the deconsolidation of operating expenses attributable to Asterias.

(h) This adjustment reflects the deconsolidation of other income and expenses, net, attributable to Asterias.

(i) This adjustment reflects the estimated income tax effect of the pro-forma adjustments. The tax effect of the pro-forma adjustments was calculated using the historical statutory rates in effect for the periods presented

(j) This adjustment reflects the deconsolidation of the net loss attributable to noncontrolling interests of Asterias.
 
 
5

Lineage Cell Therapeutics, Inc. Reports