As filed with the Securities and Exchange Commission on May 15, 1996
Registration No. 33-73256
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
The Securities Act of 1933
----------------------------------
BIOTIME, INC.
(Exact name of Registrant as specified in charter)
----------------------------------------------------
California 8099 94-3127919
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification Number)
Classification Code Number)
---------------------------
Paul E. Segall, President
935 Pardee Street BioTime, Inc.
Berkeley, California 94710 935 Pardee Street
(510) 845-9535 Berkeley, California 94710
(Address, including zip code, (510) 845-9535
and telephone number, (Name, address, including zip
including area code, code, and telephone number,
of Registrant's principal including area code,
executive offices) of agent for service)
-------------------------
Copies of all communications, including all communications sent to the agent
for service, should be sent to:
RICHARD S. SOROKO, ESQ.
Lippenberger, Thompson, Welch & Soroko LLP
250 Montgomery Street, Suite 500
San Francisco, California 94104
Tel. (415) 421-5300
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================================================================================
<PAGE>
<TABLE>
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K Under the
Securities Act of 1933, as amended
<CAPTION>
Item in Part I of Form S-1 Caption and Subcaption in Prospectus
- -------------------------- ------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus........................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................................... Inside Front and Outside Back Cover Pages
3. Summary Information; Risk Factors and Ratio of
Earnings to Fixed Charges........................................ Prospectus Summary; Risk Factors
4. Use of Proceeds.................................................. Inapplicable
5. Determination of Offering Price.................................. Cover Page; Plan of Distribution
6. Dilution......................................................... Inapplicable
7. Selling Securityholders.......................................... Plan of Distribution
8. Plan of Distribution............................................. Cover Page; Plan of Distribution
9. Description of Securities to be Registered....................... Description of Securities
10. Interests of Named Experts and Counsel........................... Inapplicable
11. Information With Respect to the Registrant....................... Prospectus Summary; Selected Financial Information;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Certain Transactions; Principal
Shareholders; Description of Securities; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities................... Inapplicable
</TABLE>
<PAGE>
PROSPECTUS
BIOTIME, INC.
90,000 COMMON SHARES
--------------------
This Prospectus relates to 90,000 common shares, no par value ("Common
Shares") of BioTime, Inc. (the "Company" or "BioTime") issuable upon the
exercise of certain warrants sold to H.J. Meyers & Co. Inc. in connection with
the underwriting of a public offering of Common Shares during February 1994 (the
"Underwriter's Warrants"). Holders of the Underwriter's Warrants may rely upon
this Prospectus in connection with the purchase of Common Shares from the
Company through the exercise of their Underwriter's Warrants. The Underwriter's
Warrants will expire unless exercised by 5:00 p.m. Eastern Standard Time on
February 23, 1999.
The Common Shares are authorized for trading on the National Association of
Securities Dealers, Inc. Automated Quotations system ("NASDAQ") Small-Cap Market
under the symbol BTIM and are listed for trading on the Boston Stock Exchange
under the symbol BTM.
-----------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED ONLY BY
PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS".
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 15, 1996
<PAGE>
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Securities and Exchange Commission. Reports, proxy
and information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C., at its New York Regional
Office at 7 World Trade Center, Suite 1300, New York, New York, 10048, and at
its Chicago Regional Office at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621-2511. Copies of such material can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Except as otherwise noted, all information in this Prospectus, (i) has been
adjusted to give effect to a 1-for-6 reverse stock split effective July 17,
1991, (ii) reflects the conversion of all outstanding Series A Preferred Shares
into 120,000 Common Shares on March 12, 1992, (iii) assumes that outstanding
warrants and options to purchase Common Shares are not exercised.
The Company
BioTime Inc. ("BioTime" or the "Company") is a development stage company
engaged in the research and development of aqueous based synthetic solutions
that can be used as plasma expanders, blood substitutes during hypothermic (low
temperature) surgery, and organ preservation solutions. These products are
intended for several important medical applications, including: the emergency
treatment of blood loss due to traumatic injury or during surgery;
cardio-pulmonary bypass surgery; the replacement of very large volumes of a
patient's blood during cardiac surgery and neurosurgery that involve lowering
the patient's body temperature to hypothermic levels; the preservation of body
organs and tissues awaiting transplant; cancer treatment; and other biomedical
applications. Because the Company's solutions are synthetic, rather than human
blood by-products, use of the solutions would not pose the risk of transmitting
AIDS, hepatitis or other blood borne infectious diseases, and would not have to
be matched to a patient's blood type.
The Company's first two blood replacement products are Hextend(TM) and
PentaLyte(TM), which are composed of different hydroxyethyl starches,
electrolytes, sugar and a buffer. The Company believes that a solution that
sustains the patient's fluid volume and physiological balance, thereby
maintaining tissue and organ function, can reduce or eliminate the need for
supplemental whole blood and blood plasma. Based upon the results of its
laboratory research, the Company has determined that in many emergency care and
surgical applications, it is not necessary for the solution to include special
oxygen carrying molecules to replace red blood cells. Therefore, the Company has
devoted its efforts to the development of formulations that do not rely upon the
use of recombinant DNA or other complex technologies to synthesize and
assimilate into solution costly and potentially toxic oxygen carrying molecules
such as hemoglobin and perfluorocarbons.
The Company has filed an Investigational New Drug Application ("IND") with
the United States Food and Drug Administration (the "FDA") for permission to
commence clinical
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<PAGE>
trials of Hextend(TM) in human patients. Because of the proven safety of the
components of Hextend(TM) in other pharmaceutical products, the Company plans to
conduct its first clinical trial as a Phase III trial involving fewer than 100
patients. Clinical trials may begin during the late summer or early fall of
1996. Although BioTime has conducted pharmacology and toxicology testing of
Hextend(TM), and has compiled a significant amount of data demonstrating the
safety and efficacy of Hextend(TM) in laboratory testing using animal subjects,
the outcome of human trials cannot be predicted with certainty.
The proposed clinical trials have been designed to test Hextend(TM) as a
blood plasma volume expander in surgical procedures that often involve a large
amount of blood loss. A sufficient quantity of Hextend(TM) for the first
clinical trials has been obtained, but before clinical trials can begin at any
hospital or medical center, the trials must be approved by the institutional
review board ("IRB") of that institution. See "BUSINESS - Government
Regulation."
The time frame in which the Company will be able to proceed with the
clinical testing necessary to file an New Drug Application ("NDA") for FDA
approval depends in part upon the ability of the Company to obtain sufficient
financing for that purpose, as well as a manufacturer willing to produce the
solution in compliance with FDA "good manufacturing practices." The Company is
seeking to obtain the necessary financing from one or more pharmaceutical
companies that would be capable of manufacturing Hextend(TM) for commercial
distribution when FDA approval is obtained. See "BUSINESS - Manufacturing;" and
"Government Regulation."
To reduce the capital costs and delays inherent in acquiring or
establishing a pharmaceutical manufacturing facility and establishing a
marketing organization, the Company will seek contract, licensing or joint
venture arrangements with one or more pharmaceutical companies for the
production and marketing of the Company's products. If such arrangements cannot
be made on acceptable terms, the Company would be required to obtain additional
capital to construct or acquire its own manufacturing facilities and establish
its own marketing organization. There is no assurance that the Company would be
able to raise sufficient capital for those purposes.
The Company was incorporated under the laws of the State of California on
November 30, 1990. The Company's principal office is located at 935 Pardee
Street, Berkeley, California 94710. It telephone number at such office is (510)
845-9535.
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<PAGE>
<TABLE>
The Offering
<S> <C>
Securities Offered...................................... 90,000 Common Shares that may be acquired upon the
exercise of the Underwriter's Warrants.
Risk Factors............................................ An investment in the Common Shares involves a high
degree of risk. The Common Shares should be purchased
only by investors who can afford the loss of their entire
investment. See "Risk Factors."
NASDAQ Symbol........................................... BTIM
Boston Stock Exchange
Symbol.................................................. BTM
Plan of Distribution.................................... Common Shares issued upon the exercise of the
Underwriter's Warrants may be sold by the holders thereof
from time to time at prices and on terms then prevailing,
or at prices related to the then current market price,
or in negotiated transactions.
</TABLE>
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<PAGE>
<TABLE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth certain summary financial information of the
Company for the periods indicated. This information should be read in
conjunction with the Company's financial statements (including notes thereto)
appearing elsewhere in this Prospectus.
<CAPTION>
Period from
Inception
(November 30,
Year Ended June 30, Nine Months Ended March 31, 1990) to
Statement of ------------------------------------------------------------- --------------------------- March 31,
Operations Data: 1991(1) 1992 1993 1994 1995 1995 1996 1996
------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EXPENSES:
Research and
development $(115,043) $ (383,705) $ (562,746) $ (777,668) $(1,791,698) $(1,196,340) $ (793,769) $(4,424,629)
General and
administrative (146,624) (406,130) (774,101) (931,439) (808,432) (631,390) (528,519) (3,595,245)
--------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses (261,667) (789,835) (1,336,847) (1,709,107) (2,600,130) (1,827,730) (1,322,288) (8,019,874)
--------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
INCOME:
Interest 3,472 57,568 119,592 152,438 218,416 156,877 105,296 656,782
Other 2,586 22,608 8,087 9,716 3,967 2,307 2,960 49,924
--------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Total Income 6,058 80,176 127,679 162,154 222,383 159,184 108,256 706,706
--------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss $(255,609) $ (709,659) $(1,209,168) $(1,546,953) $(2,377,747) $(1,668,546) $(1,214,032) $(7,313,168)
========= ========== =========== =========== =========== =========== =========== ===========
Net loss per
share $ (.24) $ (.55) $ (.69) $ (.76) $ (.90) $ (.63) $ (.47) $ (3.82)
========= ========== =========== =========== =========== =========== =========== ===========
Shares used in
calculating per
share data 1,082,114 1,301,581 1,746,614 2,046,445 2,633,464 2,644,042 2,591,581 1,914,056
========= ========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
June 30,
------------------------------------------------------------------------------ March 31,
Balance Sheet Data: 1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash, cash
equivalents and
short term
investments $ 87,085 $4,756,734 $3,404,927 $5,719,046 $3,440,896 $1,777,887
Working Capital 116,129 4,668,393 3,424,951 5,780,949 3,180,200 1,975,432
Total assets 167,250 4,849,786 3,519,268 5,909,050 3,610,330 2,166,169
Shareholders'
equity 90,489 4,628,426 3,419,258 5,799,379 3,231,603 2,004,878
<FN>
(1) Represents the period from inception (November 30, 1990) to June 30, 1991
</FN>
</TABLE>
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<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. THE
COMMON SHARES SHOULD BE PURCHASED ONLY BY INVESTORS WHO CAN AFFORD TO LOSE THEIR
ENTIRE INVESTMENT. BEFORE DECIDING TO PURCHASE ANY OF THE COMMON SHARES OFFERED
HEREBY, PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS, AMONG
OTHERS SET FORTH HEREIN, WHICH COULD MATERIALLY ADVERSELY AFFECT THE PROPOSED
OPERATIONS AND PROSPECTS OF THE COMPANY AND THE VALUE OF AN INVESTMENT IN THE
COMPANY.
Development Stage Company
The Company is in the development stage, and, to date, has been principally
engaged in research and development activities. The Company has not generated a
significant amount of operating revenue and, as reflected in the financial
statements, at March 31, 1996, the Company had incurred operating losses since
inception of $7,313,168. The Company has incurred additional losses since that
date, and as a result of the developmental nature of its business can be
expected to sustain substantial additional operating losses. The likelihood of
the success of the Company must be considered in light of the expenses,
difficulties and delays frequently encountered in starting a new business,
particularly since the Company will be engaged in the research, development,
production and marketing of new products and technologies which will utilize new
and unproven methods and which may require many years and substantial
expenditures to complete. There can be no assurance that the Company will be
successful in developing, manufacturing or marketing (directly or through third
parties) any products or technology. Even if the Company is able to successfully
develop new products or technologies, there can be no assurance that the Company
will generate sufficient revenues from the sale or licensing of such products
and technologies to be profitable. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and "BUSINESS" and the financial
statements included in this Prospectus.
Additional Financing Required
The Company believes that its cash on hand will be sufficient to permit it
to continue in operation for approximately 12 months. In addition to raising
funds for research and working capital purposes, the Company needs to raise
substantial additional financing to conduct clinical testing of its first
product, Hextend(TM). Additional financing may also be required for production
and marketing of Hextend(TM) and any other Company products that may be approved
by the FDA or foreign regulatory authorities. Because of the developmental
nature of the Company's business, it is highly unlikely that in the foreseeable
future the Company will be able to generate internally the funds necessary to
carry on its planned operations. 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 develop and market
its products. Unless the Company is able to raise additional funds when needed,
it is likely that it will be
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<PAGE>
unable to continue its planned activities, notwithstanding the progress of its
research and development projects. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
No Assurance of Proceeds to the Company
Although the Company would receive $7.18 per Common Share issued upon the
exercise of the Underwriter's Warrants, it will be economical for the holders of
Underwriter's Warrants to exercise the Underwriter's Warrants only if the Common
Shares are trading in the public market at a price greater than the sum of the
relevant exercise price plus any broker/dealer fees, commissions and discounts
and other transaction costs that would be incurred by such holders in connection
with the sale of Common Shares issued upon such exercise. There can be no
assurance that the Common Shares will be trade at such prices. The Underwriter's
Warrants will expire on February 23, 1999, and may not be exercised after the
expiration date.
Uncertainty as to Results of Research and Development; Unproven Products
The Company's business involves the attempt to develop new medical products
and technologies. Such experimentation is inherently costly, time consuming and
uncertain as to its results. If the Company is successful in developing a new
technology or product, refinement of the new technology or product and
definition of the practical applications and limitations of the technology or
product may take years and require the expenditure of large sums of money.
Hextend(TM) must be clinically tested and receive governmental approval prior to
commercialization, and the Company's other proposed blood substitute and organ
preservation solutions will require significant laboratory testing and
development before applications for permission to commence clinical testing can
be filed with the FDA. The Company does not expect its products to be available
for commercial use or sale for at least two years. There can be no assurance
that the Company's products will prove to be safe and efficacious in clinical
trials, be produced in commercial quantities at reasonable prices, or be
successfully marketed. See "BUSINESS--Government Regulation."
Uncertainty as to Human Application of Products
Hextend(TM) and the Company's other experimental products and technologies
have not been applied in human medicine and have only been used in laboratory
studies on animals. Because human physiology differs substantially from that of
laboratory animals, the products and application protocols presently being used
by the Company may have to be reformulated or modified for use in human medical
procedures. There is no assurance that the Company will be successful in
developing products and technologies for human medical procedures. Due to the
high degree of risk associated with the application of new technologies and
products in the field of human medicine, the technologies or products developed
by the Company for human application will have to undergo extensive successful
trials, even after government approvals for use are obtained, before such
technologies and products receive acceptance in the medical profession. See
"BUSINESS--Research and Development Strategy."
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<PAGE>
FDA and Other Regulatory Approvals Required
Preclinical and clinical trials and manufacturing and marketing of
BioTime's medical products will be subject to the rigorous testing and approval
processes of the FDA and corresponding foreign regulatory authorities. The
regulatory process, which includes preclinical, clinical and post-clinical
testing of each product to establish its safety and efficacy, can take several
years to complete and require the expenditure of substantial time and funds.
Data obtained from preclinical and clinical activities are susceptible to
varying interpretations which could delay, limit or prevent FDA regulatory
approval. In addition, delays or rejections may be encountered as a result of
changes in FDA policy during the period of product development and FDA
regulatory review of each submitted new product application. Similar delays may
also be encountered in foreign countries. There can be no assurance that, even
after substantial expenditures of time and money, regulatory approval will be
obtained for any products developed by the Company. Moreover, even if regulatory
approval of a product is granted, such approval may entail limitations on the
indicated uses for which the product may be marketed. After regulatory approval
is obtained, the approved product, the manufacturer and the manufacturing
facilities are subject to continual review and periodic inspections, and a later
discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on such product or manufacturer, including
withdrawal of the product from the market. Failure to comply with the applicable
regulatory requirements can, among other things, result in fines, suspensions of
regulatory approvals, product recalls, operating restrictions and criminal
prosecution. Additional government regulation may be established which could
prevent or delay regulatory approval of the Company's products. See
"BUSINESS--Government Regulation."
Availability of Raw Materials
Most of the blood substitute and organ preservation solutions being
developed by the Company contain ingredients that are readily obtainable from
multiple sources. However, Hextend,(TM) PentaLyte(TM) and other products being
developed by the Company contain hydroxyethyl starch supplied to the Company by
a pharmaceutical manufacturer that produces the same component under a contract
with a third party for use in a plasma extender with which Hextend(TM) or one of
the Company's other products might compete. BioTime is pursuing discussions with
that pharmaceutical company and other manufacturers for the purpose of obtaining
a source of supply. If such discussions are not fruitful, the Company may have
to find a new source of the ingredient, and the new supplier would have to be
approved by the FDA in order for the ingredient to be used in the commercial
manufacture of blood substitute products in the United States. There is no
assurance that any such alternate supply sources will be available on
commercially reasonable terms, if at all. If commercially reasonable alternate
supply sources are not available, the Company might decide to pursue development
of other versions of its solution that contain a chemically similar component
that is more readily available from FDA approved sources, or the Company might
decide to manufacture the ingredient. There is no assurance that the Company
would have the financial or technical resources to establish a facility to
manufacture the ingredient. See "BUSINESS--Manufacturing--Raw Materials."
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<PAGE>
Absence of Manufacturing and Marketing Capabilities
In order to obtain FDA approval for the sale of Hextend(TM) and other
products, the Company will be required to conduct a portion of its clinical
trials using solutions manufactured under "good manufacturing practices"
required by the FDA. Accordingly, the Company will need to enter into product
manufacturing arrangements with an established pharmaceutical company or will
have to acquire or establish its own pharmaceutical manufacturing facilities
before seeking FDA approval for the sale of its products. If any of the
Company's products receive FDA approval, such products will then have to be
manufactured in compliance with applicable federal and state regulatory
requirements, in commercial quantities and at an acceptable cost and with
sufficient stability to withstand the distribution process. The Company
presently does not have adequate facilities or resources to manufacture its
products in commercial quantities or in compliance with FDA standards. In order
to reduce the capital costs and delays inherent in acquiring or establishing new
pharmaceutical manufacturing facilities and establishing a marketing
organization, the Company intends to seek contract, licensing or joint venture
arrangements with one or more pharmaceutical companies for the production and
marketing of the Company's products. If such arrangements cannot be made on
acceptable terms, the Company would then be required to construct or acquire its
own manufacturing facilities and establish its own marketing organization, which
would entail significant expenditures of time and money. No assurance can be
given that the Company will be successful in the establishment of contractual
relationships with pharmaceutical companies for the manufacture and marketing of
the Company's products, or, alternatively, in obtaining sufficient capital for
the establishment of its own manufacturing and marketing capabilities. See
"BUSINESS--Manufacturing;--Marketing."
Competition
There are other companies and academic institutions that are seeking, or
may seek, to develop products that may be competitive with the Company's
proposed products. Many of these competitors have substantially greater
financial, technical, research, clinical, production and marketing resources
than the Company. The Company's competitors may succeed in developing products
that are safer or more effective than those of the Company or that obtain FDA
approval in less time than the Company's products. Developments by others could
render the Company's products and technologies obsolete or noncompetitive. See
"BUSINESS--Competition."
Uncertainty of Patent Protection
The Company has obtained patents in the United States, and has filed patent
applications in certain foreign countries, for certain products, including its
blood substitute and organ preservation solutions. No assurance can be given
that any foreign patents will be issued to the Company, or that, if issued,
those patents and the Company's United States patents will provide the Company
with meaningful patent protection, or that others will not successfully
challenge the validity or enforceability of any patent issued to the Company.
The costs required to uphold the validity and prevent infringement of any patent
issued to the Company could be substantial, and the Company might not have the
resources available to defend its patent rights. See "BUSINESS--Patents and
Trade Secrets."
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<PAGE>
Uncertainty of Health Care Reimbursement and Reform
The Company's ability to successfully commercialize its products may depend
in part on the extent to which reimbursement for the cost of such products and
related treatment will be available from government health administration
authorities, private health coverage insurers and other organizations.
Significant uncertainty exists as to the pricing, availability of distribution
channels and reimbursement status of newly approved health care products and
there can be no assurance that adequate third party coverage will be available
to enable the Company to maintain price levels sufficient for realization of an
appropriate return on its investment in product development. In certain foreign
markets, pricing or profitability of health care products is subject to
government control. In the United States, there have been a number of federal
and state proposals to implement similar government controls, and new proposals
are likely to be made in the future.
Potential Disputes Over Ownership of Technology
Because certain officers and directors of the Company were employees of
Cryomedical Sciences, Inc. ("CMSI") prior to founding the Company, it is
possible that CMSI might claim an ownership interest in products and
technologies developed by the Company based upon the scope of research conducted
by such persons while they were employed by CMSI, or based upon the terms of
certain agreements between such scientists and CMSI with respect to the
ownership of technology and products. To date, no such claims have been asserted
against the Company by CMSI. CMSI holds patents with respect to certain low
temperature blood substitute solutions. No assurance can be given that CMSI will
not claim that the Company's products infringe upon CMSI's patents. The Company
has obtained a non-exclusive license to use certain experimental low temperature
blood substitute solutions developed by CMSI. The license is not assignable or
transferable and is subject to termination under certain circumstances,
including a sale of control of the Company. However, the Company is no longer
using, and does not intend to pursue the commercialization of, the CMSI
solutions. See "BUSINESS--Licensed Products and Technology," "MANAGEMENT" and
"CERTAIN TRANSACTIONS."
Dependence Upon Key Personnel
The Company depends to a considerable degree on the continued services of
Paul Segall, Hal Sternberg and Harold Waitz. Although the Company maintains key
man life insurance in the amount of $1,000,000 on the life of Dr. Segall, the
loss of the services of any of these individuals could have a material adverse
effect on the Company. In addition, the success of the Company will depend,
among other factors, upon successful recruitment and retention of additional
highly skilled and experienced management and technical personnel. See
"BUSINESS--Employees" and "MANAGEMENT."
No Dividends
The Company has not paid any dividends on its Common Shares. For the
foreseeable future it is anticipated that earnings, if any, which may be
generated from the Company's proposed operations will be used to finance the
growth of the Company and that cash dividends will not be paid to holders of
Common Shares. See "DIVIDEND POLICY."
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<PAGE>
Possible Volatility of Market for Common Shares
The Common Shares are traded on the NASDAQ Small Cap Market System and on
the Boston Stock Exchange. The market price of the Common Shares, like that of
the common stock of many biotechnology companies, has been highly volatile. The
price of such securities may rise rapidly in response to certain events, such as
the commencement of clinical trials of an experimental new drug, even though the
outcome of those trials and the likelihood of ultimate FDA approval remains
uncertain. Similarly, prices of such securities may fall rapidly if unfavorable
results are encountered in clinical trials or if FDA approval is not obtained or
is delayed. In the event that the Company achieves earnings from the sale of
products, securities analysts may begin predicting quarterly earnings. The
failure of the Company's earnings to meet analysts' expectations could result in
a significant rapid decline in the market price of the Company's Common Shares.
In addition, the stock market has experienced and continues to experience
extreme price and volume fluctuations which have affected the market price of
the equity securities of many biotechnology companies and which have often been
unrelated to the operating performance of these companies. Such broad market
fluctuations, as well as general economic and political conditions, may
adversely affect the market price of the Common Shares.
Requirements for Continued Listing of Securities on the NASDAQ System
The Company's Common Shares are traded on the NASDAQ Small Cap Market
System and on the Boston Stock Exchange. Both the Automated Quotation System of
the National Association of Securities Dealers, Inc. ("NASDAQ") and the Boston
Stock Exchange have adopted rules that establish criteria for initial and
continued listing of securities. Under the NASDAQ rules for continued listing, a
company must maintain at least $2,000,000 in total assets, at least $1,000,000
in net worth and a minimum bid price of $1.00 per share. There is no assurance
that future losses from operations will not cause the Company's total assets or
net worth to decline below those criteria in the future. If the Common Shares
are delisted by NASDAQ, trading in the Common Shares would thereafter be
conducted on the Boston Stock Exchange and in the over-the-counter market on an
electronic bulletin board established for securities that do not meet the NASDAQ
listing requirements. The Common Shares could also be delisted on the Boston
Stock Exchange if the Company fails to maintain $1,000,000 in total assets and
$500,000 in shareholders' equity. As a result, an investor could find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
the Common Shares.
In addition, if the Common Shares were delisted from NASDAQ, they would be
subject to the so-called penny stock rule that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally defined as an investor
with a net worth in excess of $1,000,000 or individual annual income exceeding
$200,000, or joint annual income with a spouse exceeding $300,000). For
transactions covered by this rule, the broker-dealer must make a special
suitability determination for the purchaser and must have received the
purchaser's written consent to the transaction prior to sale. Consequently,
delisting, if it occurred, could affect the ability of shareholders to sell
their Common Shares in the secondary market. See "DESCRIPTION OF SECURITIES."
The Securities and Exchange Commission (the "Commission") has adopted
regulations that
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<PAGE>
define a "penny stock" to be any equity security that has a market price (as
defined) of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the transaction,
of a disclosure schedule relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Boston Stock Exchange and NASDAQ listed securities are exempt from the
definition of "penny stock" for most purposes, except that transactions in a
NASDAQ-listed security having a market price of less than $5.00 per share are
exempt from all but the sole market-maker provision only for (i) issuers who
have $2,000,000 in tangible assets ($5,000,000 if the issuer has not been in
continuous operation for three years), (ii) transactions in which the customer
is an institutional accredited investor, and (iii) transactions that are not
recommended by the broker-dealer. In addition, transactions in a NASDAQ listed
security directly with a NASDAQ market-maker for such securities would be
subject only to the sole market-maker disclosure, and the disclosure with
respect to commissions to be paid to the broker-dealer and the registered
representative.
Finally, all NASDAQ-listed securities would be exempt if NASDAQ raised its
requirements for continued listing so that any issuer with less than $2,000,000
in net tangible assets or shareholders' equity would be subject to delisting.
These criteria are more stringent than the current NASDAQ maintenance
requirements.
Shares Eligible for Future Sale
Sale of substantial additional amounts of Common Shares in the public
market could have an adverse effect on the price of the Common Shares. The
Company had 2,591,014 Common Shares issued and outstanding on March 25, 1996, of
which 1,983,261 shares are presently freely transferable without restriction
under the Securities Act of 1933, as amended (the "Act"). In addition, the
Common Shares issuable upon the exercise of the Underwriter's Warrants will also
be freely transferable without restriction under the Act. The remaining 607,753
Common Shares outstanding at such date are eligible for sale under Rule 144
under the Act. See "SHARES ELIGIBLE FOR FUTURE SALE."
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<PAGE>
MARKET PRICE OF COMMON SHARES
The Company's Common Shares are traded in the over-the-counter market on
the NASDAQ Small Cap Market System under the symbol BTIM, and on the Boston
Stock Exchange under the symbol BTM. The closing price of the Company's Common
Shares on the NASDAQ Small Cap Marker System on April 30, 1996 was $16.50.
The following table sets forth the range of high and low bid prices for the
Common Shares for the fiscal years ended June 30, 1994 and 1995, and for the
subsequent quarters through March 31, 1996, based on transaction data as
reported on the NASDAQ Small Cap Market System.
Quarter Ended High Low
- -------------------------- -------- -----
September 30, 1993 9 7/8 8 1/8
December 31, 1993 9 3/4 7 3/8
March 31, 1994 7 3/8 4 3/8
June 30, 1994 5 2 3/4
September 30, 1994 3 1/8 2
December 31, 1994 2 3/8 1 3/4
March 31, 1995 1 15/16 1 3/8
June 30, 1995 1 7/8 1 3/8
September 30, 1995 5 3/8 1 1/4
December 31, 1995 4 3/8 2 3/8
March 31, 1996 10 1/8 2 5/8
As of March 25, 1996, there were 140 shareholders of the Common Shares based
upon information from the Registrar and Transfer Agent.
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<PAGE>
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Shares, and it is
unlikely that any cash dividends will be declared or paid on the Common Shares
in the foreseeable future. Instead, the Company plans to retain its cash for use
in financing its future operations and growth.
<TABLE>
CAPITALIZATION
The following table summarizes the capitalization of the Company as of
March 31, 1996.
<CAPTION>
March 31, 1996
--------------
<S> <C>
Common Shares, subject to rescission, no par value; issued and
outstanding 37,392 shares $ 67,300
Shareholders' Equity:
Preferred Shares, no par value; undesignated as to series; 1,000,000
shares authorized; no shares issued or outstanding --
Common Shares, no par value; 5,000,000 shares authorized;
2,553,622 shares issued and outstanding(1) 9,248,905
Contributed capital 93,972
Deficit accumulated during development stage (7,337,999)
----------
Total shareholders' equity 2,004,878
----------
Total capitalization $2,072,178
==========
<FN>
- -----------------------------
(1) Does not give effect to the potential issuance of an aggregate of 663,073
Common Shares consisting of (a) 90,000 shares issuable upon the exercise
of the Underwriter's Warrants, (c) 286,073 shares issuable upon the
exercise of other outstanding warrants, and (d) 287,000 shares issuable
upon the exercise of options granted under the Company's 1992 Stock Option
Plan.
</FN>
</TABLE>
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<PAGE>
<TABLE>
SELECTED FINANCIAL INFORMATION
The selected financial information as of June 30, 1994 and 1995 and for
three years ended June 30, 1995 presented below have been derived from the
audited financial statements of the Company which have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report appearing
elsewhere herein (which expresses an unqualified opinion and includes an
explanatory paragraph related to the development stage of the Company's
operations). The selected financial information as of June 30, 1991, 1992 and
1993 and for the years ended June 30, 1991 and 1992 has been derived from
audited financial statements of the Company not included herein. The selected
financial information as of March 31, 1996 and for the nine months ended March
31, 1995 and 1996, and the period from inception (November 30, 1990) to March
31, 1996 have been derived from the unaudited financial statements of the
Company which, in the opinion of management, reflect all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the financial
information for such periods. The selected financial information 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 in this Prospectus.
<CAPTION>
Period from
Inception
(November 30,
Year Ended June 30, Nine Months Ended March 31, 1990) to
Statement of --------------------------------------------------------------- --------------------------- March 31,
Operations Data: 1991(1) 1992 1993 1994 1995 1995 1996 1996
------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EXPENSES:
Research and
development $ (115,043) $ (383,705) $ (562,746) $ (777,668) $(1,791,698) $(1,196,340) $ (793,769) $(4,424,629)
General and
administrative (146,624) (406,130) (774,101) (931,439) (808,432) (631,390) (528,519) (3,595,245)
---------- ---------- ----------- ------------ ----------- ----------- ----------- -----------
Total expenses (261,667) (789,835) (1,336,847) (1,709,107) (2,600,130) (1,827,730) (1,322,288) (8,019,874)
---------- ---------- ----------- ------------ ----------- ----------- ----------- -----------
INCOME:
Interest 3,472 57,568 119,592 152,438 218,416 156,877 105,296 656,782
Other 2,586 22,608 8,087 9,716 3,967 2,307 2,960 49,924
---------- ---------- ----------- ------------ ----------- ----------- ----------- -----------
Total Income 6,058 80,176 127,679 162,154 222,383 159,184 108,256 706,706
---------- ---------- ----------- ------------ ----------- ----------- ----------- -----------
Net loss $ (255,609) $ (709,659) $(1,209,168) $ (1,546,953) $(2,377,747) $(1,668,546) $(1,214,032) $(7,313,168)
========== ========== =========== ============ =========== =========== =========== ===========
Net loss
per share $ (.24) $ (.55) $ (.69) $ (.76) $ (.90) $ (.63) $ (.47) $ (3.82)
========== ========== =========== ============ =========== =========== =========== ===========
Shares used
in calculating
per share data 1,082,114 1,301,581 1,746,614 2,046,445 2,633,464 2,644,042 2,591,581 1,914,056
========== ========== =========== ============ =========== =========== =========== ===========
</TABLE>
<TABLE>
June 30,
--------------------------------------------------------------------------- March 31,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and
short term investments $ 87,085 $4,756,734 $3,404,927 $5,719,046 $3,440,896 $1,777,887
Working Capital 116,129 4,668,393 3,424,951 5,780,949 3,180,200 1,975,432
Total assets 167,250 4,849,786 3,519,268 5,909,050 3,610,330 2,166,169
Shareholders' equity 90,489 4,628,426 3,419,258 5,799,379 3,231,603 2,004,878
<FN>
(1) Represents the period from inception (November 30, 1990) to June 30, 1991
</FN>
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since its inception in November 1990, the Company has been engaged
primarily in research and development activities. The Company has not yet
generated significant operating revenues, and as of March 31, 1996 the Company
had incurred a cumulative net loss of $7,313,168.
Most of the Company's research and development efforts have been
devoted to the development of Hextend(TM) and PentaLyte(TM). Clinical trials of
Hextend(TM) in human patients are now being planned. The costs of such clinical
trials will be substantial, and it will be necessary for the Company to obtain
additional financing in order to complete clinical trials.
The Company plans to continue to provide funding for its laboratory
testing programs at selected medical schools and hospitals for the purpose of
developing additional uses of Hextend(TM), PentaLyte(TM) and other new products,
but the amount of research that will be conducted at those institutions will
depend upon the extent to which the Company can raise sufficient capital for
research in addition to the funding required for the Hextend(TM) clinical
testing program. If funding for collaborative research at medical schools and
hospitals is curtailed, the Company will have to rely on in-house research,
using small laboratory animals and less sophisticated surgical procedures.
To address its anticipated need for manufacturing and marketing
resources, the Company is continuing to identify domestic and international
pharmaceutical companies that, based upon their current product lines and
resources, might be able to manufacture and market the Company's products if and
when the necessary regulatory approvals are obtained.
Because the Company's research and development expenses, clinical trial
expenses, and production and marketing expenses will be charged against earnings
for financial reporting purposes, management expects that losses from operations
will continue to be incurred for the foreseeable future.
Results of Operations
Nine Months Ended March 31, 1996 and March 31, 1995
From inception (November 30, 1990) through March 31, 1996, the Company
generated $706,706 of revenues, comprised of $49,924 from the sale of products
and services, and $656,782 in interest. For the nine months ended March 31,
1996, the Company generated $108,256 of revenues, including $2,960 from the sale
of products and services, and $105,296 in interest. For the nine months ended
March 31, 1995, the Company generated $159,184 of revenues, including $2,307
from the sale of products and services, and $156,877 in interest. The
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<PAGE>
decrease in interest income is attributable to the decrease in cash and cash
equivalents from 1995 to 1996. Limited test marketing of the Company's
laboratory research equipment, through advertisements in trade publications, has
resulted in sales of a small number of microcannulas. Although the Company may
continue to test market its laboratory research equipment, and to promote its
ability to perform research services, the Company's ability to generate
substantial operating revenue depends upon its success in developing and
marketing its blood substitute and organ preservation solutions and technology
for medical use.
From inception (November 30, 1990) through March 31, 1996, the Company
incurred $4,424,629 of research and development expenses, including salaries,
supplies and other expense items. Research and development expenses decreased to
$793,769 for the nine months ended March 31, 1996, from $1,196,340 for the nine
months ended March 31, 1995. The decrease in research and development expenses
is attributable to a decrease in the number and scope of research collaborations
the Company is sponsoring, since there has been a shift in the focus of the
Company from research to clinical studies. It is expected that research and
development expenses will increase as the Company commences clinical testing of
Hextend(TM).
From inception (November 30, 1990) through March 31, 1996, the Company
incurred $3,595,245 of general and administrative expenses. General and
administrative expenses decreased to $528,519 for the nine months ended March
31, 1996, from $631,390 for the nine months ended March 31, 1995. This decrease
is attributable to a general focus of resources and personnel on development and
testing of the Company's products. From inception through March 31, 1996, the
Company has incurred approximately $146,613 in fees payable to a local firm of
certified public accountants for advice and assistance in accounting and
financial reporting matters, and the preparation of tax returns. The Company
believes that, for the near future, obtaining such accounting services on an as
needed basis will be a more economical use of corporate resources than the
hiring of permanent accounting personnel.
Years Ended June 30, 1995 and June 30, 1994
For the year ended June 30, 1995, the Company generated total revenues
of $222,383, comprised of $3,967 from the sale of microcannulas and solutions
for research purposes, and $218,416 in interest. For the year ended June 30,
1994, the Company had total revenues of $162,154, comprised of $9,716 from the
sale of products and services, and $152,438 in interest. During March 1994, the
Company completed a second public offering of its common shares. The increase in
interest income in fiscal year 1995 over fiscal year 1994 is attributable to the
increase in cash from the public offering and investment of the offering
proceeds.
Research and development expenses increased to $1,791,698 for the year
ended June 30, 1995, from $777,668 for the year ended June 30, 1994. The
increase in research and development expenses is attributable to an increase in
the scope of Company sponsored research collaborations, the manufacturing of two
lots of Hextend(TM) solution under "good manufacturing practices" (GMP), and the
initiation of stability, toxicology and pharmacology studies needed for filing
of the Company's first Investigational New Drug application (IND).
General and administrative expenses decreased to $808,432 for the year
ended June 30,
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<PAGE>
1995 from $931,439 for the year ended June 30, 1994. The decrease in general and
administrative expenses is due largely to a focus of resources and personnel to
development and testing of the Company's products.
Year Ended June 30, 1994 and June 30, 1993
For the year ended June 30, 1994, the Company had total revenues of
$162,154, comprised of $9,716 from the sale of products and services, and
$152,438 in interest. For the year ended June 30, 1993, the Company had total
revenues of $127,679, comprised of $8,087 from the sale of products and
services, and $119,592 in interest. The increase in interest income during
fiscal 1994 is a result of the increase in cash from the public offering and
investment of the offering proceeds. The increase in sales revenue from 1993 to
1994 is attributable to a continuation of advertising of the Company's
laboratory research products.
For the years ended June 30, 1994 and 1993, the Company incurred
$777,668 and $562,746, respectively, of research and development expenses,
including salaries, supplies and costs incurred in conducting animal experiments
at a privately owned veterinary surgical research facility and at certain
hospital research laboratories. The increase in research and development
expenses during fiscal 1994 is attributable to the increases in the salaries of
certain employees, payments to consultants and an increase in the number of
research collaborations sponsored by the Company.
General and administrative expenses were $931,439 for the year ended
June 30, 1994 and were $774,101 for the year ended June 30, 1993. The increase
in general and administrative expenses is due largely to increases in the
general operations of the Company.
Taxes
At June 30, 1995, the Company had a cumulative net operating loss
carryforward of $6,069,000 for federal income tax purposes.
Liquidity and Capital Resources
Because of the developmental nature of the Company's business, it is
unlikely that in the near future the Company will be able to generate internally
the funds necessary to carry on its planned operations. Since inception, the
Company has financed its operations through the sale of equity securities.
Presently, the Company is seeking financing from pharmaceutical and medical
device companies that may be interested in licensing or otherwise acquiring
marketing rights to Hextend(TM) and other BioTime products. Financing may also
be obtained through additional public or private offerings of equity and debt
securities. The Company expects the money remaining from the net proceeds from
the second public offering will be sufficient to finance the Company's
operations for the next 12 months. Additional capital will be needed at an
earlier date if the Hextend(TM) clinical testing program begins.
The future availability and terms of equity and debt financings and
collaborative
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<PAGE>
arrangements with industry partners cannot be predicted. The unavailability or
inadequacy of financing to meet future capital needs could force the Company to
modify, curtail, delay or suspend some or all aspects of its planned operations.
-20-
<PAGE>
BUSINESS
Overview
BioTime Inc. is a development stage company engaged in the research and
development of aqueous based synthetic solutions that can be used as plasma
expanders, blood substitutes during hypothermic (low temperature) surgery, and
organ preservation solutions. These products are intended for several important
medical applications, including: the emergency treatment of blood loss due to
traumatic injury or during surgery; cardio-pulmonary bypass surgery; the
replacement of very large volumes of a patient's blood during cardiac surgery
and neurosurgery that involve lowering the patient's body temperature to
hypothermic levels; the preservation of body organs and tissues awaiting
transplant; cancer treatment; and other biomedical applications. Because the
Company's solutions are synthetic, rather than human blood by-products, use of
the solutions would not pose the risk of transmitting AIDS, hepatitis or other
blood borne infectious diseases, and would not have to be matched to a patient's
blood type.
The Company's first two blood replacement products are Hextend(TM) and
PentaLyte(TM), which are composed of different hydroxyethyl starches,
electrolytes, sugar and a buffer. The Company believes that a solution that
sustains the patient's fluid volume and physiological balance, thereby
maintaining tissue and organ function, can reduce or eliminate the need for
supplemental whole blood and blood plasma. Based upon the results of its
laboratory research, the Company has determined that in many emergency care and
surgical applications, it is not necessary for the solution to include special
oxygen carrying molecules to replace red blood cells. Therefore, the Company has
devoted its efforts to the development of formulations that do not rely upon the
use of recombinant DNA or other complex technologies to synthesize and
assimilate into solution costly and potentially toxic oxygen carrying molecules
such as hemoglobin and perfluorocarbons.
The Company has filed an Investigational New Drug Application ("IND")
with the FDA for permission to commence clinical trials of Hextend(TM) in human
patients. Because of the proven safety of the components of Hextend(TM) in other
pharmaceutical products, the Company plans to conduct its first clinical trial
as a Phase III trial involving fewer than 100 patients. Clinical trials may
begin during the late summer or early fall of 1996. Although BioTime has
conducted pharmacology and toxicology testing of Hextend(TM), and has compiled a
significant amount of data demonstrating the safety and efficacy of Hextend(TM)
in laboratory testing using animal subjects, the outcome of human trials cannot
be predicted with certainty.
The proposed clinical trials have been designed to test Hextend(TM) as
a blood plasma volume expander in surgical procedures that often involve a large
amount of blood loss. A sufficient quantity of Hextend(TM) for the first
clinical trials has been obtained, but before clinical trials can begin at any
hospital or medical center, the trials must be approved by the institutional
review board ("IRB") of that institution. See "Government Regulation."
The time frame in which the Company will be able to proceed with the
clinical testing necessary to file an New Drug Application ("NDA") for FDA
approval depends in part upon the ability of the Company to obtain sufficient
financing for that purpose, as well as a
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<PAGE>
manufacturer willing to produce the solution in compliance with FDA "good
manufacturing practices." The Company is seeking to obtain the necessary
financing from one or more pharmaceutical companies that would be capable of
manufacturing Hextend(TM) for commercial distribution when FDA approval is
obtained. See "Manufacturing" and "Government Regulation."
To reduce the capital costs and delays inherent in acquiring or
establishing a pharmaceutical manufacturing facility and establishing a
marketing organization, the Company will seek contract, licensing or joint
venture arrangements with one or more pharmaceutical companies for the
production and marketing of the Company's products. If such arrangements cannot
be made on acceptable terms, the Company would be required to obtain additional
capital to construct or acquire its own manufacturing facilities and establish
its own marketing organization. There is no assurance that the Company would be
able to raise sufficient capital for those purposes.
The Company was incorporated under the laws of the State of California
on November 30, 1990. The Company's principal office is located at 935 Pardee
Street, Berkeley, California 94710. It telephone number at such office is (510)
845-9535.
The Market for Plasma Expanders, Blood Substitutes and Organ Preservation
Solutions
The transfusion of human blood is presently the traditional and only
commercially available means for treating patients suffering from severe blood
loss requiring the replacement of more than 30% of their blood volume. The
transfusion market in the United States consists of two principal segments. The
acute blood loss segment, which comprises approximately 60 percent of the
transfusion market, includes transfusions required in connection with trauma,
surgery and unexpected blood loss. The chronic blood loss segment represents
approximately 40 percent of the transfusion market includes transfusions in
connection with general medical applications and chronic anemias. Approximately
14 million units of blood were transfused in the United States in 1992, of which
approximately 8.5 million units were administered to patients suffering the
effects of acute blood loss. Patient charges for the units of blood used in the
United States in 1992 for the treatment of acute blood loss were approximately
$2.5 billion.
The use of whole blood or human blood products presents a number of
medical risks and logistical problems that could be reduced or eliminated if a
safe and effective synthetic plasma expander or blood substitute were available.
Transfused blood can only be used in recipients having a blood type compatible
with that of the donor. Delays in treatment resulting from the necessity of
blood typing prior to transfusion, together with the limited shelf life of blood
and the limited availability of certain blood types, impose constraints on the
rapid availability of compatible blood for transfusion. Accident victims,
wounded soldiers and persons with rare blood types may die while awaiting
compatible blood. In addition, clerical error continues to result in transfusion
related deaths. The problem of blood type compatibility and availability could
be eliminated by the use of a universally compatible synthetic blood plasma. A
synthetic product with a long shelf life that could be stored at room
temperature would also resolve problems of perishability of whole blood
products.
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<PAGE>
The past decade has seen an increase in the incidence of blood-borne
infectious diseases, such as AIDS and hepatitis B, C, D, E, and F which has
heightened the awareness of both health professionals and patients to the
inherent risk from blood transfusions. Although new tests have been developed,
such tests have not entirely eliminated the risk of infectious blood-borne
disease transmission. In addition, despite improved testing standards, human
error still results in the release of contaminated units of blood. Furthermore,
some infectious diseases are known to contaminate the blood supply but cannot be
avoided because no reliable or cost effective diagnostic tests exist. New
infectious agents can suddenly appear in the blood supply, and it can take years
to develop a reliable test for such agents. Several years elapsed between the
appearance of AIDS and the development of a reliable test, and numerous patients
contracted AIDS from transfusions during that time. A synthetic blood plasma or
blood substitute not derived from human blood products would be advantageous
because it could be used without exposing the patient to the risk of infection
by a blood-borne disease.
The current blood supply is dependent upon volunteer donors.
Increasingly stringent donor-screening criteria have caused the donor pool, and
therefore the potential supply of blood, to contract. As a consequence, the cost
and intricacy of collecting, testing and storing blood has greatly increased in
recent years, and many blood banks have experienced inventory shortages. An
improved synthetic blood plasma volume expander that can be manufactured at an
economical price would help alleviate the blood shortage problems that arise
from dependence upon donated blood.
Organ transplant surgery is a growing field. Approximately 5,000 donors
donate organs, and approximately an additional 5,000 donors donate skin, bone
and other tissues in the United States each year. 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.
The scarcity of transplantable organs makes them too precious to lose
and increases the importance of effective preservation technology and products.
Current organ removal and preservation technology generally requires multiple
preservation solutions to remove and preserve effectively different groups of
organs, and limits preservation times of those organs for transplant use.
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.
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<PAGE>
The Products
Products for Surgery, Plasma Replacement and Emergency Care
Background. Severe blood loss during surgery or from trauma injuries
caused by blunt or penetrating force can cause fatal shock. Whole blood or
packed red cells generally cannot be administered to a patient until the
patient's blood serum has been typed and sufficient units of compatible blood or
red cells can be located. The use of human blood products also poses the risk of
exposing the patient to blood borne diseases such as AIDS and hepatitis. While
some fluid needs can be temporarily met by various colloid and crystalloid
plasma extenders, those solutions are generally not used to replace more than
30% of a patient's blood. The solutions being developed by the Company are
intended to be more complete synthetic plasma volume expanders that can replace
more than 30% of a patient's blood volume and can provide more of the components
necessary to prevent physiological shock during emergency care and surgical
procedures.
Synthetic Blood Plasma Expander. The Company is developing Hextend,(TM)
PentaLyte(TM) and other synthetic plasma expander solutions to treat acute blood
loss that occurs during many kinds of surgery, particularly cardiac, orthopedic
and gastro-intestinal operations. The solutions could also be used by emergency
room physicians or by paramedics while the patient is being transported to the
hospital to treat acute blood loss in trauma victims. Because BioTime's
solutions are synthetic, they could be used without matching the patient's blood
type and would not pose the risk of transmitting AIDS, hepatitis or other blood
borne infectious diseases.
Hextend,(TM) PentaLyte(TM) and BioTime's other solutions contain
constituents that may prevent or reduce the physiological imbalances that can
impair or inhibit blood clotting and cardiac function in acute blood loss
patients. Hextend(TM) and PentaLyte(TM) are similar formulations, except that
Hextend(TM) uses a high molecular weight hydroxyethyl starch (hetastarch)
whereas PentaLyte(TM) uses a low molecular weight hydroxyethyl starch
(pentastarch). The higher molecular hetastarch is retained in the blood longer
than the lower molecular weight pentastarch, which may make Hextend(TM) the
product of choice when a larger volume of plasma expander or blood substitute
for low temperature surgery is needed or where the patient's ability to
regenerate his own blood after surgery is compromised. PentaLyte,(TM) with its
lower molecular weight pentastarch, would be eliminated from the blood faster
than Hextend(TM) and might be used when less plasma expander is needed or where
the patient is more capable of quickly regenerating lost blood.
BioTime has 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, so the lack of oxygen carrying molecules in the Company's
solutions should not pose a significant contraindication to use.
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<PAGE>
Experiments by BioTime scientists have demonstrated that laboratory
animals are able to survive at normal temperatures and without supplemental
oxygen when more than two-thirds of their circulating blood volume is replaced
by BioTime's artificial plasma solution, Hextend(TM) and PentaLyte(TM). When
animals are placed in an oxygen rich environment, they are able to survive at
normal temperatures when even more of their circulating blood volume is replaced
by Hextend(TM).
BioTime has a cooperative research program with the Department of
Surgery at the Metropolitan Hospital Center in New York City to test the
potential usefulness of one of Hextend(TM) and PentaLyte(TM) as trauma care
products. In a series of laboratory animal experiments, researchers at
Metropolitan Hospital have shown the ability of Hextend(TM) and PentaLyte(TM) to
replace blood lost due to severe bleeding. Results from certain of these tests
indicate that Hextend(TM) and PentaLyte(TM) may prove more effective at
maintaining blood calcium levels than a leading commercially available plasma
extender when used to replace large volumes of blood. Calcium can be a
significant factor in regulating blood clotting and cardiac function. Results
from other in vitro tests of Hextend(TM) indicate that Hextend(TM) does not
alter the activity of a number of specific blood clotting factors, other than by
simple hemodilution.
Products for Hypothermic Surgery
Background. 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.
Current technology limits the degree to which surgeons can lower a
patient's temperature and the amount of time the patient can be maintained at a
low body temperature because blood, even when diluted, cannot be circulated
through the body at near-freezing temperatures. As a result, surgeons face
severe time constraints in performing surgical procedures requiring blood flow
interruption, and those time limitations prevent surgeons from correcting
certain cardiovascular abnormalities.
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Cardio-Pulmonary Bypass Solution. BioTime plans to test the use of
Hextend(TM) as cardio-pulmonary bypass circuit priming solutions. In order to
perform heart surgery, the patient's heart must be stopped and mechanical
apparatus is used to oxygenate and circulate the blood. The cardio-pulmonary
bypass apparatus requires a blood compatible fluid such as Hextend(TM) to
commence and maintain the process of diverting the patient's blood from the
heart and lungs to the mechanical oxygenator and pump.
BioTime believes that Hextend(TM) will maintain blood pressure and
physiological balance better than the solutions presently used as bypass priming
solutions. Approximately 1.5 to 2 liters of Hextend(TM) would be used for each
bypass operation. Based upon the number of coronary bypass operations performed,
the potential market for Hextend(TM) as bypass circuit priming solutions in the
United States would be 600,000 to 800,000 liters annually.
Low Temperature Blood Substitute Solution. The Company is also
developing Hextend(TM) as a low temperature blood substitute that will be used
to replace all of a patient's circulating blood volume to permit the rapid and
profound cooling of patients in the performance of surgery in hypothermic
bloodless conditions. Although surgeons are already using other solutions to
supplement the blood during the performance of certain limited surgical
procedures, the Company is not aware of any complete blood-substitution
procedures in current surgical practice.
Hextend(TM) would be introduced into the patient's body during the
cooling process. Once the patient's body temperature is near ice cold levels,
and the heart and brain are temporarily arrested, the surgeon would perform the
operation. During the surgery, the solutions may be circulated throughout the
body in place of blood, or the patient's circulation may be arrested for a
period of time if an interruption of fluid circulation is required in order to
perform the surgical procedure. Upon completion of the surgery, the patient
would be slowly warmed, the patient's blood would be reintroduced into the
patient's vascular system and then warmed further.
The Company believes that low temperature bloodless surgery would be
primarily suitable for open heart operations, operations to repair major
vascular disorders such as aneurysms, and removal of tumors from the brain,
head, neck or heart. Based upon laboratory studies using baboons and dogs,
BioTime has developed protocols for using Hextend(TM) to replace all of the
subject's blood for one to four hours at temperatures ranging from 10oC to 1oC.
BioTime has begun a series of laboratory studies testing the use of the solution
in low temperature open chest cardiac surgery in dogs. The purpose of these
studies is to develop protocols for aortic surgery and other cardio-vascular
procedures in human patients.
Minimally Invasive Cardiac Surgery. Cardiac surgeons are working to
develop procedures to repair damaged coronary arteries and heart valves using
optically guided instruments that can be inserted into the heart through blood
vessels or small incisions, without the need to open the patient's chest cavity.
BioTime believes that Hextend(TM) 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
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obstructed by red blood. BioTime intends to conduct a series of laboratory
studies using animal subjects to test the utility of Hextend(TM) as a low
temperature blood substitute in such procedures.
Organ Transplant Products
Background. Organ transplant surgery is a growing field. Approximately
5,000 donors donate organs, and approximately an additional 5,000 donors donate
skin, bone and other tissues in the United States each year. 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.
A significant problem that arises frequently in the field of organ
transplant surgery is the inability to recover more than a few viable organs
from a donor. Currently, surgeons use different preservation solutions for
different organs or different groups of organs. As a result, a separate
procedure using a different preservation solution is required to preserve and
remove each organ, or system of related organs. The removal of one organ can
impair the viability of other organs. Available technology does not permit
surgeons to keep the remaining organs viable within the donor's body for a
significant time after the first organ is removed.
Another problem in the field of organ transplant surgery is the timely
matching and delivery of compatible organs from donors to recipients. Currently,
an organ available for transplant is flushed with an ice cold solution during
the removal process to deactivate the organ and preserve its tissues, and then
the organ is transported on ice to the donee. The ice cold solutions currently
used, together with transportation on ice, keep the organ healthy for only a
short period of time. For example, the storage time for hearts is limited to
approximately six hours. Because of the short time span available for removal
and transplant of an organ, potential organ donees often fail to receive the
needed organs.
Multi-Organ Preservation. The Company is seeking to develop Hextend(TM)
for use as a single solution that can simultaneously preserve all of a single
donor's organs. When used as an organ preservation solution, Hextend(TM) would
be perfused into the donor's body while the body is chilled, thereby eliminating
an undesirable condition called "warm ischemia," caused when an organ is warm
while its blood supply is interrupted. The use of Hextend(TM) in conjunction
with the chilling of the body should help to slow down the process of organ
deterioration by a number of hours so that a surgeon can remove all organs for
donation and transplant. The Company's current estimates are that each such
preservation procedure could require as much as 50 to 100 liters of Hextend(TM).
The Company believes that the ability to replace an animal's blood with
the Company's solution, to maintain the animal at near freezing temperatures for
several hours, and then revive the animal, would demonstrate that the solution
could be used for multi-organ preservation. Company scientists have revived
animals after more than six hours of cold blood-substitution, and have observed
heart function in animals maintained cold and blood-substituted for more than
eight hours. An objective of the Company's research and development program is
to extend the
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time span in which animal subjects can be maintained in a cold,
blood-substituted state before revival or removal of organs for transplant
purposes. Organ transplant procedures using animal subjects could then be
conducted to test the effectiveness of Hextend(TM) as an organ preservative.
Other Potential Uses of BioTime Solutions
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 may attempt to develop
products and technologies that can protect tissues and organs from the damage
that occurs when human tissues are subjected to subfreezing temperatures.
Proprietary solutions and protocols have already been developed by the Company
which allow liquid nitrogen storage of full thickness rat and hamster skin
grafts with subsequent survival following transplantation to host animals.
Cold-Protected Chemotherapy. 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 disseminated, inoperable tumors within vital organs.
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.
BioTime considers such surgical techniques to be a longer range goal of
its research and development program for hypothermic surgery products. Use of
this complex technology in the practice of oncology can occur only after
ice-cold blood-substitution has advanced to an appropriate level of safety and
effectiveness.
Research and Development Strategy
From inception through March 31, 1996, the Company has spent $4,424,629
on research and development. The greatest portion of BioTime's research and
development efforts have been devoted to the development of Hextend(TM) and
other solutions for multi-organ preservation, low temperature surgery,
conventional surgery and emergency care. 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.
One major focus of the Company's research and development effort has
been on products and technology to extend the time animals can be kept cold and
blood-substituted, and then revived without physical impairment. An integral
part of that effort has been the development
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of techniques and procedures or "protocols" for use of the Company's products. A
substantial amount of data has been accumulated through animal tests, including
the proper drugs and anesthetics, the temperatures at which blood should be
removed and restored, solution volume, the temperature range for maintaining
circulatory arrest, and the rate at which the subject should be rewarmed.
Experiments intended to test the efficacy of the Company's blood
substitute solutions and protocols for surgical applications involve replacing
the animal's blood with low temperature blood substitute 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.
The Company is now conducting experiments, using both small and large
animals, at hospital and medical school research facilities. These collaborative
research programs are testing solutions and protocols developed in the Company's
laboratories and, in some cases, comparing the efficacy of the Company's blood
substitute solutions with commercially available FDA approved products
manufactured by other companies. The Company intends to continue to foster
relations with research hospitals and medical schools for the purpose of
conducting collaborative research projects because it believes that such
projects will introduce the Company's potential products to members of the
medical profession and provide the Company with objective product evaluations
from independent research physicians and surgeons.
It is the Company's policy to retain all patent and intellectual
property rights to its products, including any improvements that may be derived
or refined from Company financed research programs. However, to obtain funding
for additional research and development for pre-clinical and clinical studies,
the Company may seek to enter into joint venture, licensing, or other
collaborative arrangements with pharmaceutical companies. There is no assurance
that any such arrangements can be made.
Manufacturing
Facilities Required
The Company has sufficient equipment, space and personnel needed to
synthesize the quantities of Hextend(TM) used in its research activity, but the
Company does not have facilities to manufacture the solution in commercial
quantities, or under "good manufacturing practice" required by the FDA. Any
products that are approved by the FDA will have to be manufactured according to
"good manufacturing practices" in commercial quantities, and with sufficient
stability to withstand the distribution process, and in compliance with such
federal and state regulatory requirements as may be applicable. The active
ingredients and component parts of the products must be either USP or themselves
manufactured according to "good manufacturing practices". In order to obtain FDA
approval for the sale of its synthetic blood plasma volume
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expander, blood substitute and organ preservation solutions, the Company will be
required to conduct clinical trials using products manufactured according to
good manufacturing practices, at a facility that has passed FDA inspection.
Accordingly, the Company will need to enter into product manufacturing
arrangements with an established pharmaceutical company.
Through an agreement with McGaw, Inc., a subsidiary of IVAX
Corporation, BioTime has obtained approximately 6,000 liters of Hextend(TM) for
use in human clinical trials and in stability, pharmacology and toxicology
testing. The Company plans to purchase additional quantities of Hextend(TM) from
McGaw for clinical testing purposes. Discussions are continuing with McGaw
regarding the commercial manufacture and marketing of Hextend(TM), PentaLyte(TM)
and other BioTime blood plasma volume expander and blood replacement products.
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. To avoid the incurrence
of those expenses and delays, the Company is seeking contract, licensing or
joint venture arrangements with established pharmaceutical companies for the
production of the Company's products. In joint ventures or licensing
arrangements that include marketing rights, the participating pharmaceutical
company would be entitled to a large portion of the profits from sales to end
users or would pay the Company a royalty on net sales.
If contractual arrangements for the manufacture of the Company's
products cannot be made on terms acceptable to the Company, the Company would be
required to establish its own production facilities. Although the Company has
not determined the cost of constructing production facilities that meet FDA
requirements, it expects that the cost would be substantial, and that the
Company would need to raise additional capital in the future for that purpose.
There can be no assurance that the Company will be able to obtain the capital
required for the acquisition of production facilities, or that satisfactory
arrangements will be made with third parties to manufacture and distribute any
products.
Raw Materials
Most ingredients in the products being developed by the Company are
readily obtainable from multiple sources. However, most of laboratory data
collected by the Company has come from tests of Hextend(TM) and PentaLyte(TM)
containing hydroxyethyl starch supplied to the Company by McGaw, Inc., a
pharmaceutical manufacturer that produces the same hydroxyethyl starch under a
contract with a third party for use in a plasma expander with which one or more
of the Company's solutions might compete. BioTime currently has a production
agreement with McGaw, Inc. for limited quantities of Hextend(TM) for clinical
trials only, but the Company is pursuing discussions for a supply and/or
production agreement. If such discussions are not fruitful, the Company may have
to find a new source of the hydroxyethyl starch, and that starch would have to
be shown to be manufactured according to "good manufacturing practices", in
order for the starch to be used in clinical trials and in the commercial
manufacture of Hextend(TM) and PentaLyte(TM) in the United States. The Company
knows of only a few potential sources that
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currently manufacture hydroxyethyl starch. If the Company is unable to secure a
supply agreement with one of those manufacturers, the Company would have to
reformulate its solution to use a chemically similar component that is more
readily available. However, the Company would have to perform new laboratory
testing to determine whether one or more alternative ingredients could be used
in a safe and effective synthetic plasma, blood substitute or organ preservation
solution. If needed, such testing would be costly to conduct and would delay the
Company's product development program, and there is no certainty that any such
testing would demonstrate that an alternative ingredient, even if chemically
similar to the one currently used by BioTime, would be as safe or effective in
BioTime's solutions.
Marketing
The Company has not established a marketing and sales organization, but
it may need to do so if it obtains FDA approval for commercial production of its
products. The Company's proposed products and services are intended for sale to
hospitals, medical centers and scientists engaged in the practice of specific
areas of medicine or medical research, including transplantation, neurosurgery,
cardiovascular surgery, anesthesiology, oncology, emergency room and trauma
care, critical care, and biomedical research.
The Company intends to seek contract, licensing or joint venture
arrangements with established pharmaceutical companies for marketing the
Company's products. Although such arrangements could permit the Company to
receive revenues from the sale of its products expeditiously and with lower
costs, the Company would have to share those revenues with the participating
pharmaceutical companies. There can be no assurance that any pharmaceutical
companies will be willing to enter into marketing arrangements on terms
acceptable to the Company.
If the Company does not enter into licensing or other arrangements for
the sale of its products by one or more pharmaceutical companies, the Company
would have to establish its own marketing organization. Due to the complexity of
the technologies being developed by the Company, prospective end-users will have
to be trained in the proper use of products that the Company may develop.
In order to market any new products it may develop, the Company also
plans to publish studies in scientific journals, and to present studies and the
results of its work at meetings of medical and scientific professional
organizations. BioTime also will continue to seek opportunities to conduct
research in collaboration with well-known institutions and to demonstrate its
work at scientific conventions.
Government Regulation
The FDA 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
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chemical composition and the interaction of the product on the human body.
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 but will also be reviewed by the FDA staff responsible for
evaluating biologicals.
The Company's human drug products will be subject to rigorous FDA
review and approval procedures. After testing in animals, an Investigational New
Drug (IND) application 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 to demonstrate optimal use, safety and efficacy
of each product in humans. Each clinical study is 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 also regulates the manufacturing process of pharmaceutical
products and requires that a portion of the clinical trials for new products be
conducted using products produced in compliance with "good manufacturing
practices." See "Manufacturing."
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 FDA approval process is costly and time consuming and may
substantially delay, or even preclude, the commercial manufacture and sale of
the Company's products. The Company may not have sufficient funds to finance the
laboratory and clinical trials and other costs associated with the FDA
application and approval process for Hextend(TM) or any other products that the
Company may develop. Therefore, the future ability of the Company to market its
products may depend in part upon its ability to obtain additional financing or
to enter into licensing or joint venture arrangements with other companies to
finance the FDA application and approval process.
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Patents and Trade Secrets
On April 18, 1995, the Company was granted a United States Patent which
protects methods for using BioTime's proprietary solutions, including the use of
Hextend(TM) and PentaLyte(TM) to replace blood. Claims include the use of the
solutions at normal and hypothermic (below normal) body temperatures as plasma
expanders, and for increasing circulation of a hypovolemic (acute blood loss)
patient. Additional patent applications have been filed in the United States and
certain other countries for Hextend(TM) and other solutions. These patent
applications include claims for patent protection of the composition of the
Company's solutions and patent protection of methods of using the solutions. The
Company also holds a United States Patent on its microcannula.
There is no assurance that any additional patents will be issued, or
that any patents now held or later obtained by the Company will not be
successfully challenged by third parties and declared invalid or infringing of
third party claims. Further, the enforcement of patent rights often requires the
prosecution of litigation against third party infringers, and such litigation
can be costly to pursue.
While the Company believes that the protection of patents and licenses
is important to its business, the Company also will rely on trade secrets,
know-how and continuing technological advancement to maintain its competitive
position. The Company has entered into intellectual property, invention and
non-disclosure agreements with its employees and it is the Company's practice to
enter into confidentiality agreements with its consultants. There can be no
assurance, however, that these measures will prevent the unauthorized disclosure
or use of the Company's trade secrets and know-how or that others may not
independently develop similar trade secrets and know-how or obtain access to the
Company's trade secrets, know-how or proprietary technology. If, in the future,
the techniques for use of the Company's products become widely known through
academic instruction or publication, patent protection would become more
important as a means of protecting the Company's market share for its products.
Licensed Products and Technology
The Company has obtained from Cryomedical Sciences, Inc. ("CMSI") a
royalty free, non-exclusive license to make, have made, use and sell certain
experimental hypothermic blood substitute solutions for cryonics, cancer and
AIDS research and treatment. The licensed solutions were developed by three of
BioTime's scientists while they were employed by CMSI before BioTime was
founded. The license granted by CMSI will terminate if Paul Segall, Harold
Waitz, Hal Sternberg, Judith Segall, Lawrence Cohen, Donna Cohen, Victoria
Bellport, Alan Gelband, Trans Time, Inc. (a corporation in which certain
officers and directors of BioTime own an interest) and Ronald Barkin in the
aggregate do not own at least 33-1/3% of the Company's Common Shares which are
not sold to the public or otherwise owned by public shareholders (the "Insiders'
Shares"). As of March 31, 1996, such persons owned an aggregate of 596,165
shares, representing 98% of the Insiders' Shares. The license is not assignable
or transferable.
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The technology and solutions licensed from CMSI were used by the
Company's scientists in its initial experiments. However, the Company has
developed its own patented blood substitute and organ preservation solutions,
and is no longer using CMSI's solutions in its research and development program
and does not intend to pursue the commercial exploitation of those licensed
solutions.
Competition
If successfully developed, the Company's solutions will compete with
the plasma volume expanders and organ preservation solutions presently
manufactured by established pharmaceutical companies, and with human blood
products. For example, DuPont Pharmaceuticals presently markets Hespan(TM), an
artificial plasma volume expander, and Viaspan(TM), a solution for use in the
preservation of kidneys, livers and pancreases for surgical transplant. Other
blood plasma replacement products are being developed, and clinical trials have
either begun or are expected to begin in the near future for some of these
products, including Pentaspan(TM) (a solution used for the collection of red
blood cells from patients) and a genetically engineered human albumin. To
compete with new and existing plasma expanders, the Company is developing
products that contain constituents that may prevent or reduce the physiological
imbalances that can affect the patient's tissue and organ function. 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.
CMSI, which was founded by four of the Company's executive officers and
directors, is attempting to develop blood substitution and cold protecting
solutions for low temperature surgery, for organ preservation and for the
treatment of trauma victims. Somatogen, Inc. is developing a synthetic
hemoglobin blood substitute that may also have application in bloodless surgery,
in treatment of trauma victims, and in organ preservation. A number of other
companies are known to be developing artificial hemoglobin and other synthetic
red blood cell substitutes and technologies that may compete directly with the
products and technologies that the Company is developing. In general, red cell
substitutes are more expensive to produce and potentially more toxic than
HextendTM and PentaLyteTM. Some of these competing companies have substantially
larger research facilities and technical staffs and greater financial and
marketing resources than BioTime.
Generic plasma expanders intended to compete with HespanTM have
recently been introduced in the United States market. As a result, competition
in the plasma expander market has intensified and wholesale prices have
declined. Competition in the areas of business targeted by the Company is likely
to intensify 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 which
could be used to strengthen their research and development,
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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.
Employees
As of March 31, 1996, the Company employed nine persons on a full-time basis and
two persons on a part-time basis. Three of the full-time employees hold Ph.D. or
Masters Degrees in one or more fields of science.
Facilities
The Company presently occupies an approximately 5,200 square foot
office and laboratory facility in Berkeley, California under a lease that will
expire on May 31, 1997, subject to the Company's option to renew the lease for
an additional 24 month period. The current rent is $4,900 per month. The rent
will increase to $5,000 on June 1, 1996. If the Company exercises its renewal
option, rent during the option period will be $5,300 per month, plus the cost of
utilities. This facility serves as the Company's principal executive office and
laboratory for small animal experiments.
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.
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.
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<TABLE>
MANAGEMENT
Directors and Executive Officers
The names and ages of the directors and executive officers of the
Company are as follows:
<CAPTION>
Name Age Position
---- --- ---------
<S> <C> <C>
Paul Segall, Ph.D. 53 President, Chief Executive Officer and
Director
Lawrence Cohen 51 Chairman of the Board and Director
Judith Segall 42 Secretary, Vice President of Technology
and Director
Victoria Bellport 30 Chief Operating and Financial Officer,
Vice President of Operations, Treasurer
and Director
Hal Sternberg, Ph.D. 42 Vice President of Research and Director
Harold Waitz, Ph.D. 54 Vice President of Engineering and
Director
Ronald S. Barkin 50 Director
</TABLE>
Paul Segall, Ph.D., 53, is President and Chief Executive Officer of
BioTime and has served as a director of the Company since 1990. He was a
research scientist for Cryomedical Sciences, Inc. ("CMSI") and a member of its
Board of Directors from 1987 to December 1990, serving as Director of Research
and Vice President of Research for CMSI, from April 1988 until 1989. Dr. Segall
received a Ph.D. in Physiology from the University of California at Berkeley in
1977.
Lawrence Cohen, 51, became Chairman of the Board of BioTime during July
1991 and has been a director of the Company since 1990. Mr. Cohen served as
Chairman of the Board of Directors of Cars Buy Computer, Inc., a discount new
automobile dealer, from August 1991 until April 1992. From September 1988 until
November 1990, he served as President and Chief Executive Officer of Hawk Marine
Power, Inc., a manufacturer of high performance marine engines. Mr. Cohen
founded CMSI in 1987 and served as its President until June 1988.
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Victoria Bellport, 30, is Chief Financial Officer and Executive Vice
President of BioTime and has been a director of the Company since 1990. Ms. Ms.
Bellport received a B.A. in Biochemistry from the University of California at
Berkeley in 1988.
Hal Sternberg, Ph.D., 42, is Vice President of Research of BioTime and
has been a director of the Company since 1990. He was a research scientist for
CMSI from 1987 to December 1990, serving as Vice President of Biochemistry for
CMSI from November 1987 to 1989. 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., 54, is Vice President of Engineering of BioTime and
has been a director of the Company since 1990. He was a research scientist for
CMSI from 1987 to December 1990, serving as Vice President of Technology for
CMSI from November 1987 to 1989. From 1986-1988, Dr. Waitz served as Vice
President of Research at the Winters Institute, a non-profit biomedical research
institution, at which Dr. Waitz studied arteriosclerosis in primates. He
received his Ph.D. in Biophysics and Medical Physics from the University of
California at Berkeley in 1983.
Ronald S. Barkin, 50, has been a director of the Company since 1990.
Mr. Barkin is an attorney with a background in civil and corporate law. He is an
active member of the California Bar, and has practiced in that state since 1971.
Judith Segall, 42, has been Vice President of Technology and Secretary
of BioTime since 1990 and has been a director since 1996. Ms. Segall previously
served as a director of the Company from 1990 through 1994. Ms. Segall received
a B.S. in Nutrition and Clinical Dietetics from the University of California at
Berkeley in 1989.
There are no family relationships among the directors or officers of the
Company, except that Paul Segall and Judith Segall are husband and wife.
Directors' Meetings, Compensation and Committees of the Board
The Board of Directors does not have a standing Audit Committee,
Compensation Committee, or Nominating Committee. Nominees to the Board of
Directors are selected by the entire Board.
The Board of Directors has a Stock Option Committee that administers the
Company's 1992 Stock Option Plan and makes grants of options to key employees,
consultants, scientific advisory board members and independent contractors of
the Company. The members of the Stock Option Committee are Lawrence Cohen,
Victoria Bellport and Paul Segall. The Stock Option Committee was formed during
September 1992.
-37-
<PAGE>
During the fiscal year ended June 30, 1995, the Board of Directors met
nine times. No director attended fewer than 75% of the meetings of the Board or
any committee on which they served.
Directors of the Company and members of committees of the Board of
Directors who are employees of the Company 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 employees of the Company are also entitled to receive
compensation in such capacity. Ronald S. Barkin, the only director who is not an
employee of the Company, received a fee of $200 per hour for attending meetings
of the Board and for performing other duties as a director and consultant to the
Company.
Executive Compensation
None of the Company's executive officers received compensation from the
Company in excess of $100,000 during the fiscal year ended June 30, 1995. The
Board of Directors of the Company has approved a new five-year employment
agreement (the "Employment Agreement") for Paul Segall, the President and Chief
Executive Officer of the Company. The Employment Agreement will expire on
December 31, 2000 but may terminate prior to the end of the term if Dr. Segall
(1) dies, (2) leaves the Company, (3) becomes disabled for a period of 90 days
in any 150 day period, or (4) is discharged by the Board of Directors for
failure to carry out the reasonable policies of the Board, persistent
absenteeism, or a material breach of a covenant. Under his Employment Agreement,
Dr. Segall is presently receiving an annual salary of $85,000. Dr. Segall will
receive a one-time cash bonus of $25,000 if the Company receives at least
$1,000,000 of equity financing from a pharmaceutical company. Dr. Segall will be
entitled to seek a modification of his Employment Agreement before the
expiration of the five year term if the market value of the Company's
outstanding capital stock exceeds $50,000,000.
In the event of Dr. Segall's death during the term of his Employment
Agreement, the Company will pay his estate his salary for a period of six month
or until December 31, 2000, whichever first occurs. In the event that Dr.
Segall's employment terminates, voluntarily or involuntarily, after a change in
control of the Company through an acquisition of voting stock, an acquisition of
the Company's assets, or a merger or consolidation of the Company with another
corporation or entity, Dr. Segall will be entitled to severance compensation
equal to the greater of (a) 2.99 times his average annual compensation for the
preceding five years and (b) the balance of his base salary for the unexpired
portion of the term of his Employment Agreement.
The Board of Directors has also approved employment agreements that
contain the same or similar change of control severance benefits for the other
executive officers of the Company.
Dr. Segall has also executed an Intellectual Property Agreement which
provides that the Company is the owner of all inventions developed by Dr. Segall
during the course of his employment.
-38-
<PAGE>
<TABLE>
The following table summarizes certain information concerning the
compensation paid to Dr. Segall during the last three fiscal years.
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term
------------------- Compensation
Name -------------
and Stock
Principal Options
Position Year Salary($) Bonus (Shares)
- -------- ---- --------- ----- --------
<S> <C> <C> <C> <C>
Paul Segall 1995 $67,500
Chief Executive 1994 $63,796 $25,000
Officer 1993 $58,170 - 21,000 Shares
</TABLE>
Stock Option Plan
During 1992, the Company adopted the 1992 Stock Option Plan and granted
to Paul Segall options to purchase 21,000 Common Shares at $9.22 per share. The
options granted to Dr. Segall will expire five years after the date of grant,
and will become exercisable in three equal annual installments. No options were
granted to any of the Company's executive officers during the last fiscal year.
<TABLE>
The following table provides information with respect to Dr. Segall
concerning the exercise of options during the last fiscal year and unexercised
options held as of June 30, 1995.
Aggregated Options Exercised in Last Fiscal Year,
and Fiscal Year-End Option Values
<CAPTION>
Number of Number of Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired Value June 30, 1995 June 30, 1995(1)
on Realized --------------------------- ---------------------------
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- ----- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul Segall 0 -- 14,000 7,000 -- --
<FN>
(1) Based on the average of the high and low bid prices of a Common Share
($1.69) as reported on the NASDAQ Small Cap Market System on such date.
</FN>
</TABLE>
-39-
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of April 30, 1996
concerning beneficial ownership of Common Shares by each shareholder known by
the Company to be the beneficial owner of 5% or more of the Company's Common
Shares, and the Company's executive officers and directors:
Number of Percent of
Shares (1) Total (1)
---------- ---------
Paul and Judith Segall (2) 217,235 8.3%
Spinnaker Technology Fund, L.P.
SoundView Asset Management, Inc.(3)
22 Gatehouse Road
Stamford, Connecticut 06902 192,300 7.4
Harold D. Waitz (4) 153,790 5.9
Hal Sternberg (5) 145,890 5.6
Lawrence and Donna Cohen (6) 76,695 3.0
Victoria Bellport 59,445 2.3
Ronald S. Barkin(7) 31,670 1.2
All officers and directors
as a group (7 persons)(8) 684,725 25.4%
- ---------------------------
(1) Assumes that outstanding options and warrants are not exercised.
(2) Includes 128,690 shares held of record by Paul Segall and 58,345 shares
held of record by Judith Segall. Includes 9,000 Common Shares issuable
upon the exercise of certain warrants and 21,000 Common Shares issuable
upon the exercise of certain options.
(3) SoundView Asset Management, Inc. is the general partner of Spinnaker
Technology Fund, L.P. and has disclaimed beneficial ownership of such
shares.
(4) Includes 8,400 Common Shares issuable upon the exercise of certain
warrants and 21,000 Common Shares issuable upon the exercise of certain
options.
(5) Includes 6,000 Common Shares issuable upon the exercise of certain
warrants and 21,000 Common Shares issuable upon the exercise of certain
options.
(6) Includes 67,695 shares held of record by Donna Cohen, and 4,000 shares
held of record by Donna Cohen as custodian for the minor children of
Lawrence and Donna Cohen.
(7) Includes 15,000 shares issuable upon the exercise of certain options.
(8) Includes 23,400 Common Shares issuable upon the exercise of certain
warrants and 78,000 Common Shares issuable upon the exercise of certain
options.
-40-
<PAGE>
CERTAIN TRANSACTIONS
During the twelve months ended June 30, 1995, $81,043 in fees for legal
and consulting services was paid to Ronald S. Barkin, a member of the Board of
Directors.
DESCRIPTION OF SECURITIES
Common Shares
The Company is authorized to issue 5,000,000 Common Shares, no par
value, of which 2,591,014 shares were outstanding at March 25, 1996 and held by
140 persons based upon the share position listings for the Common Shares. Each
holder of record is entitled to one vote for each outstanding Common Share owned
by him on every matter properly submitted to the shareholders for their vote.
Subject to the dividend rights of holders of any of the preferred
shares that may be issued from time to time, holders of Common Shares are
entitled to any dividend declared by the Board of Directors out of funds legally
available for such purpose. The Company has not paid any cash dividends on its
Common Shares, and it is unlikely that any cash dividends will be declared or
paid on any Common Shares in the foreseeable future. Instead, the Company plans
to retain its cash for use in financing its future operations and growth.
Subject to the prior payment of the liquidation preference to holders
of any preferred shares that may be issued, holders of Common Shares are
entitled to receive on a pro rata basis all remaining assets of the Company
available for distribution to the holders of Common Shares in the event of the
liquidation, dissolution, or winding up of the Company. Holders of Common Shares
do not have any preemptive rights to become subscribers or purchasers of
additional shares of any class of the Company's capital stock.
Preferred Shares
The Company's Articles of Incorporation currently authorize the
issuance of up to 1,000,000 preferred shares, no par value. Preferred shares may
be issued by the Company in one or more series, at any time, with such rights,
preferences, privileges and restrictions as the Board of Directors may
determine, all without further action of the shareholders of the Company. Any
series of preferred shares which may be authorized by the Board of Directors in
the future may be senior to and have greater rights and preferences than the
Common Shares. There are no preferred shares presently outstanding and the
Company has no present plan, arrangement or commitment to issue any preferred
shares.
Underwriter's Warrants
The Company issued the Underwriter's Warrants to H.J. Meyers & Co.,
Inc. (formerly Thomas James and Associates) at the closing of the Company's
public offering of Common Shares during February 1994. The Underwriter's
Warrants entitle the holders to purchase up to 90,000 Common
-41-
<PAGE>
Shares at an exercise price of $7.18 per share. The Underwriter's Warrants
became exercisable on February 24, 1995 and will expire if not exercised by 5:00
p.m. Eastern Standard Time on February 23, 1999. The number of Common Shares
issuable upon the exercise of the Underwriter's Warrants, and the exercise price
per share, are subject to pro rata adjustment to prevent dilution in the event
of a split-up, stock dividend, combination, or other recapitalization of the
Company.
The foregoing description of the Underwriter's Warrants is only a
summary and is qualified in all respects to the full text of the form of
Underwriter's Warrant, a copy of which is on file with the Company and the
Securities and Exchange Commission.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Shares is American
Stock Transfer and Trust Company, 40 Wall Street, New York, New York 10005.
SHARES ELIGIBLE FOR FUTURE SALE
At March 25, 1996, the Company had 2,591,014 Common Shares outstanding.
Of those shares, 1,983,261 Common Shares are presently freely transferable
without restriction under the Act, unless they are held by "affiliates" of the
Company as that term is used under the Act and the regulations promulgated
thereunder. In addition, when offered and sold as provided in this Prospectus,
the 90,000 Common Shares issuable upon exercise of the Underwriter's Warrants,
will be freely transferrable without restriction under the Act.
The remaining 607,753 Common Shares held by approximately 63
shareholders of the Company were sold by the Company in reliance on exemptions
from the registration requirements of the Act and are "restricted" securities
within the meaning of Rule 144 under the Act and are eligible for sale under
Rule 144. In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated), including an affiliate, who has
beneficially owned shares for at least two years (including, in certain cases,
the holding period of any prior owner other than an affiliate) is entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of (i) 1% of the then outstanding Common Shares (25,910 shares at March
25, 1996) or (ii) the average weekly trading volume in the Common Shares during
the four calendar weeks preceding such sale, subject to the filing of a Form 144
with respect to such sale and certain other limitations and restrictions. In
addition, a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least three years, would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described
above.
-42-
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus relates to 90,000 Common Shares that may be issued by
the Company upon exercise of the Underwriter's Warrants. See "DESCRIPTION OF
SECURITIES -- Underwriter's Warrants." In connection with the sale of the
Underwriter's Warrants, the Company agreed to register for sale under the Act
the Common Shares issuable upon the exercise of the Underwriter's Warrants. The
Company is bearing all expenses of registering the Common Shares for sale under
the Act and under applicable state securities laws, but the holders of the
Underwriter's Warrants will bear any and all commissions, fees, and discounts of
brokers and dealers, and all transfer taxes and fees is connection with any
sales of Common Shares. The Company has agreed to use its best efforts to keep
the registration statement, of which this Prospectus is a part, effective for a
period of up to 120 days.
The following table presents certain information pertaining to the
holders of the Underwriter's Warrants and is derived from the Company's stock
transfer records and from information furnished to the Company by such holders.
Common Common
Shares Shares Offered Shares Owned
Name Owned(1) For Sale(1)(2) After Sale(1)
---- -------- -------------- -------------
James Villa(3) 64,800 64,800 0
Jerome Feldman(3) 16,200 16,200 0
Gaines, Berland Inc. 9,000 9,000 0
- ------------------------------------
(1) Includes Common Shares issuable upon the exercise of the Underwriter's
Warrants.
(2) The shares offered for sale are issuable upon the exercise of
Underwriter's Warrants.
(3) Excludes Common Shares owned by H.J. Meyers & Co., Inc. Mr. Villa is
the President and principal shareholder of H.J. Meyers & Co., Inc., and
Mr. Feldman is a Vice President of H.J. Meyers, & Co., Inc. Mr. Feldman
owns other warrants to purchase 17,552 Common Shares.
Holders of the Underwriter's Warrants who purchase Common Shares through the
exercise of the Underwriter's Warrants may sell some or all of their Common
Shares through NASDAQ or otherwise at prices and on terms then prevailing, or at
prices related to the then current market price, or in negotiated transactions.
The holders of Underwriter's Warrants may sell some or all of their Common
Shares in transactions involving broker-dealers who may act as agent or who may
acquire Common Shares as principal. During such time as the Underwriter's
Warrants are exercisable, broker-dealers also may acquire Underwriter's Warrants
from the holders at prices based upon the difference between the then current
market price of the Common Shares (or prices related to the then current market
price of the Common Shares) and the exercise price of the Underwriter's
Warrants, but subject to discounts or selling concessions. Such broker-dealers
may then exercise the Underwriter's Warrants for their own accounts and sell the
Common Shares as principals. Alternatively, broker-dealers may, subject to
applicable laws and regulations pertaining to margin transactions, finance the
exercise of the
-43-
<PAGE>
Underwriter's Warrants by the holders and then purchase and sell as principals,
or sell as agents, the Common Shares. Any broker-dealers participating in such
transactions as agents may receive commissions from the holders of the
Underwriter's Warrants (and, if they act as agents for the purchasers of such
Common Shares, from such purchasers). Usual and customary brokerage fees will be
paid by the holders of Underwriter's Warrants who are not broker-dealers.
Broker-dealers may agree to sell a specified number of Common Shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable to
do so acting as agent for the holders of Underwriter's Warrants, to purchase as
principal any unsold shares at the price required to fulfill the broker-dealer
commitment to the holder of the Underwriter's Warrants. Broker-dealers who
acquire Common Shares as principals may thereafter resell such Common Shares
from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above) through NASDAQ or on the
Boston Stock Exchange, in negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive from the purchasers of such Common Shares
usual and customary commissions.
Each holder of Underwriter's Warrants has advised the Company that during
such time as such he may be engaged in a distribution of the Common Shares, such
person will: (a) not engage in any stabilization activity in connection with the
Company's securities; (b) cause to be furnished to each broker through whom
Common Shares included herein may be offered such copies of this Prospectus as
may be required by such broker; and (c) not bid for or purchase any securities
of the Company or any rights to acquire the Company's securities, or attempt to
induce any person to purchase any of the Company's securities or rights other
than as permitted under the Securities Exchange Act of 1934. The holders of
Underwriter's Warrants, and any broker-dealers who participate in the sale of
Common Shares, may be deemed to be "underwriters" as defined in the Act. Any
commissions paid or any discounts or concessions allowed to any such
broker-dealers and, if any such broker-dealers purchase Common Shares as
principals, any profits received on the resale of such Common Shares may be
deemed to be underwriting discounts and commissions under the Act.
-44-
<PAGE>
LEGAL MATTERS
The validity of the Common Shares will be passed upon for the Company by
Lippenberger, Thompson, Welch & Soroko LLP, San Francisco, California. A member
of Lippenberger, Thompson, Welch & Soroko LLP owns options to purchase 10,000
Common Shares.
EXPERTS
The financial statements of BioTime, Inc. as of June 30, 1994 and 1995 and
for each of the three fiscal years in the period ended June 30, 1995 included in
this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report (which express an unqualified opinion and
includes an explanatory paragraph related to the development stage of the
Company's operations) included herein and has been so included in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. a Registration Statement on Form S-1 under the
Securities Act of 1933, as amended, for the registration of the securities
offered hereby. This Prospectus, which is part of the Registration Statement,
does not contain all of the information contained in the Registration Statement.
For further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto, which may be inspected, without charge, at the Office of the Securities
and Exchange Commission, or copies of which may be obtained from the Commission
in Washington, D.C. upon payment of the requisite fees. Statements contained in
this Prospectus as to the content of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
-45-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Pages
Independent Auditors' Report F1
Balance Sheets F2
Statements of Operations F3
Statements of Shareholders' Equity F4
Statements of Cash Flows F8 - F9
Notes to Financial Statements F10 - F14
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
BioTime, Inc.
Berkeley, California
We have audited the accompanying balance sheets of BioTime, Inc. (a development
stage company) as of June 30, 1995 and 1994, and the related statements of
operations and cash flows for each of the three years in the period ended June
30, 1995, and the statements of shareholders' equity for the period from
November 30, 1990 (inception) to June 30, 1995. 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 generally accepted auditing
standards. 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 June 30, 1995 and 1994,
and the results of its operations and its cash flows for each of the three years
in the period ended June 30, 1995 in conformity with generally accepted
accounting principles.
The Company is in the development stage as of June 30, 1995. 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 sales adequate to
support the Company's cost structure.
DELOITTE & TOUCHE LLP
Oakland, California
August 25, 1995
F-1
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
BALANCE SHEETS
<CAPTION>
June 30, June 30, March 31,
1994 1995 1996
---- ---- ----
ASSETS (unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 2).......................... $ 719,046 $ 3,440,896 $ 1,777,887
Short term investments (Note 2) ............................ 5,000,000
Research and development supplies .......................... 200,000
Prepaid expenses and other current
assets .................................................... 104,274 50,731 91,536
----------- ----------- -----------
Total Current Assets ....................................... 5,823,320 3,491,627 2,069,423
EQUIPMENT, Net of accumulated
depreciation of $31,470,
$62,681 and $89,219 (Notes 2 and 3) ....................... 80,242 108,655 87,046
ORGANIZATION COSTS, Net
of accumulated amortization
of $3,008, $3,848 and $4,196
(Note 2) .................................................. 1,188 348
DEPOSITS ................................................... 4,300 9,700 9,700
----------- ----------- -----------
TOTAL ASSETS ............................................... $ 5,909,050 $ 3,610,330 $ 2,166,169
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES --
Accounts payable .......................................... $ 42,371 $ 311,427 $ 93,991
----------- ----------- -----------
COMMON SHARES, subject to
rescission, no par value,
issued and outstanding
37,392 shares (Note 5) .................................... 67,300 67,300 67,300
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 3 and 4)
SHAREHOLDERS' EQUITY:
Preferred Shares, no par value,
undesignated as to series,
authorized 1,000,000
shares; none outstanding
(Note 5)
Common Shares,
no par value, authorized
5,000,000 shares; issued and
outstanding 2,644,422, 2,559,822
and 2,553,622 shares (Note 2) ............................. 9,451,627 9,261,598 9,248,905
Contributed Capital ........................................ 93,972 93,972 93,972
Deficit accumulated
during development stage .................................. (3,746,220) (6,123,967) (7,337,999)
----------- ----------- -----------
Total shareholders' equity ................................. 5,799,379 3,231,603 2,004,878
----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY ...................................... $ 5,909,050 $ 3,610,330 $ 2,166,169
=========== =========== ===========
<FN>
See notes to financial statements
</FN>
</TABLE>
F-2
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<CAPTION>
Period From
Inception
Nine Months Ended (November 30,
Year Ended June 30, March 31, 1990) to
------------------------------------------ ---------------------------- March 31,
1993 1994 1995 1995 1996 1996
---- ---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
EXPENSES:
Research and development
(Note 2,3 and 4) ............... $ (562,746) $ (777,668) $(1,791,698) $(1,196,340) $ (793,769) $(4,424,629)
General and administrative
(Notes 2,3,4 and 6) ............ (774,101) (931,439) (808,432) (631,390) (528,519) (3,595,245)
----------- ----------- ----------- ----------- ----------- -----------
Total Expenses ................. (1,336,847) (1,709,107) (2,600,130) (1,827,730) (1,322,288) (8,019,874)
----------- ----------- ----------- ----------- ----------- -----------
INCOME:
Interest ....................... 119,592 152,438 218,416 156,877 105,296 656,782
Other .......................... 8,087 9,716 3,967 2,307 2,960 49,924
----------- ----------- ----------- ----------- ----------- -----------
Total Income ................... 127,679 162,154 222,383 159,184 108,256 706,706
----------- ----------- ----------- ----------- ----------- -----------
NET LOSS ....................... $(1,209,168) $(1,546,953) $(2,377,747) $(1,668,546) $(1,214,032) $(7,313,168)
=========== =========== =========== =========== =========== ===========
NET LOSS PER
SHARE (Note 2) ................ $ (.69) $ (.76) $ (.90) $ (.63) $ (.47) $ (3.82)
=========== =========== =========== =========== =========== ===========
NUMBER OF SHARES USED
FOR CALCULATION OF
NET LOSS PER SHARE
(Note 2) ...................... 1,746,614 2,046,445 2,633,464 2,644,042 2,591,581 1,914,056
=========== =========== =========== =========== =========== ===========
<FN>
See notes to financial statements
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Series A Convertible Deficit
Preferred Shares Common Shares Accumulated
--------------------- ---------------------- During
Number of Number of Contributed Development
Shares Amount Shares Amount Capital Stage
---------- -------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, November 30, 1990
(date of inception).....................
NOVEMBER 1990 - 437,587 common
shares issued for cash
($0.0006 per share) .................... 437,587 $ 263
DECEMBER 1990:
350,070 common shares issued for
stock of a separate entity at
fair value of $.39 per share ........... 350,070 137,400
Contributed equipment at
appraised value ........................ $16,425
Contributed cash (Note 3) .............. 77,547
MAY 1991:
33,725 common shares issued for
cash ($1.80 per share), less
offering costs of $6,237 (Note 5) ...... 33,725 54,463
33,340 common shares issued or
stock of a separate entity at fair
value of $1.80 per share (Note 6) ...... 33,340 60,000
NET LOSS (255,609)
-------- ------- ------ ---------
BALANCE AT JUNE 30, 1991 ................ 854,722 252,126 93,972 (255,609)
JULY 1991:
10,000 common shares issued for
services performed ($1.80 per share)
(Note 6) ............................... 10,000 18,000
AUGUST 1991:
36,000 preferred shares
issued for cash ($5.00 per share)
less offering costs of $39,851 ......... 36,000 $140,149
SEPTEMBER 1991:
8,000 preferred shares
issued for cash ($5.00 per share)
less offering costs of $4,856 .......... 8,000 35,144
OCTOBER 1991:
26,400 preferred shares issued
for cash ($5.00 per share) less
offering costs of $28,134 .............. 26,400 103,866
<FN>
See notes to financial statements. (Continued)
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Series A Convertible Deficit
Preferred Shares Common Shares Accumulated
-------------------- ------------------------- During
Number Number of Contributed Development
of Shares Amount Shares Amount Capital Stage
--------- --------- ------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
NOVEMBER 1991:
42,300 preferred shares issued for
cash ($5.00 per share), less offering
costs of $45,079 ...................... 42,300 166,421
DECEMBER 1991:
7,300 preferred shares issued for cash
($5.00 per share), less offering costs
of $7,780 ............................. 7,300 28,720
MARCH 1992:
724,500 common shares issued for
cash ($8.00 per share), less offering
costs of $1,015,873 ................... 724,500 4,780,127
120,000 preferred shares converted
into 120,000 common shares ........... (120,000) (474,300) 120,000 474,300
Dividends declared and paid
on preferred shares .................. (24,831)
NET LOSS ............................... (709,659)
--------- --------- ---------- ---------- ------ ----------
BALANCE AT JUNE 30, 1992 ............... 1,709,222 5,524,553 93,972 (990,099)
NET LOSS ............................... (1,209,168)
--------- --------- ---------- ---------- ------ ----------
BALANCE AT JUNE 30, 1993 ............... 1,709,222 5,524,553 93,972 (2,199,267)
MARCH 1994:
935,200 common shares issued for cash
($5.125 per share), less offering costs
of $865,826 ........................... 935,200 3,927,074
NET LOSS (1,546,953)
--------- --------- ---------- ---------- ------ ----------
BALANCE AT JUNE 30, 1994 ............... 2,644,422 9,451,627 93,972 (3,746,220)
AUGUST 1994:
7,000 common shares repurchased
with cash ............................. (7,000) (20,613)
SEPTEMBER 1994:
4,400 common shares repurchased
with cash ............................. (4,400) (10,438)
OCTOBER 1994:
23,500 common shares repurchased
with cash ............................. (23,500) (55,926)
<FN>
(Continued)
</FN>
</TABLE>
F-5
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Series A Convertible Deficit
Preferred Shares Common Shares Accumulated
-------------------- ------------------------- During
Number Number of Contributed Development
of Shares Amount Shares Amount Capital Stage
--------- --------- ------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 1994:
18,000 common shares repurchased
with cash .......................... (18,000) (43,812)
JANUARY 1995:
21,000 common shares repurchased
with cash ......................... (21,000) (38,145)
FEBRUARY 1995:
6,000 common shares repurchased
with cash ......................... (6,000) (12,932)
JUNE 1995:
4,700 common shares repurchased
with cash ......................... (4,700) (8,163)
NET LOSS ............................ (2,377,747)
--------- --------- ------------ ---------- ------- -----------
BALANCE AT JUNE 30, 1995 ............ 2,559,822 9,261,598 93,972 (6,123,967)
JULY 1995:
4,200 common shares repurchased
with cash (unaudited) ............. (4,200) (8,032)
AUGUST 1995:
1,700 common shares repurchased
with cash (unaudited) ............. (1,700) (3,805)
SEPTEMBER 1995:
300 common shares repurchased
with cash (unaudited) ............. (300) (856)
NET LOSS (unaudited) ................ (1,214,032)
--------- --------- ------------ --------- ------- -----------
BALANCE AT MARCH 31, 1996
(unaudited) ....................... -- -- 2,553,622 $9,248,905 $93,972 $(7,337,999)
========= ========= =========== ========== ======= ===========
<FN>
See notes to financial statements. (Concluded)
</FN>
</TABLE>
F-6
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<CAPTION>
Period from
Inception
Nine Months Ended November 30,
Year Ended June 30, March 31, 1990) to
-------------------------------------------- ------------------------------ March 31,
1993 1994 1995 1995 1996 1996
---- ---- ---- ---- ---- ----
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss ............................ $(1,209,168) $(1,546,953) $(2,377,747) $(1,668,546) $(1,214,032) $(7,313,168)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization ..... 9,466 29,500 32,051 23,108 26,886 105,616
Common shares issued for
services ........................ 18,000
Changes in operating assets
and liabilities:
Research and development
supplies ........................ (200,000) (200,000)
Inventory ........................ 7,415
Prepaid expenses and other
current assets .................. 5,120 (51,540) 53,543 (6,137) (40,805) (91,536)
Deposits ......................... (1,850) (5,400) (5,400) (9,700)
Organizational Costs ............. (4,196)
Accounts Payable ................. (66,892) 9,661 267,326 40,375 (215,709) 93,990
---------- ---------- ---------- ---------- ---------- ----------
Net cash used in operating
activities ......................... (1,255,909) (1,559,332) (2,030,227) (1,616,600) (1,643,660) (7,400,994)
---------- ---------- ---------- ---------- ---------- ----------
INVESTING ACTIVITIES:
Sale of investments ................. 197,400
Purchase of short-term
investments ........................ (1,946,203) (5,000,000) (3,000,000) (3,000,000) (9,946,203)
Redemption of short-term
investments ........................ 1,934,000 8,000,000 5,000,000 9,934,000
Purchase of equipment and
furniture .......................... (41,440) (41,420) (59,624) (59,626) (4,929) (159,840)
---------- ---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
investing activities ............... (1,987,643) (3,107,420) 4,940,376 1,940,374 (4,929) 25,357
---------- ---------- ---------- ---------- ---------- ----------
<FN>
(Continued)
</FN>
</TABLE>
F-7
<PAGE>
<TABLE>
BIOTIME, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<CAPTION>
Period from
Inception
Nine Months Ended November 30,
Year Ended June 30, December 31, 1990) to
------------------------------------ ----------------------- March 31,
1993 1994 1995 1995 1996 1996
---------- ---------- ---------- ---------- ---------- ----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES:
Issuance of preferred shares for
cash ............................ 600,000
Preferred shares placement costs.. (125,700)
Issuance of common shares for
cash ............................ 4,792,900 10,710,926
Common shares placement costs .... (54,458) (865,826) (1,881,699)
Contributed capital - cash ....... 77,547
Dividends paid on preferred
shares .......................... (24,831)
Repurchase of common shares ...... (188,299) (181,866) (14,420) (202,719)
---------- ---------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities ........... (54,458) 3,927,074 (188,299) (181,866) (14,420) 9,153,524
---------- ---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS ...................... (3,298,010) (739,678) 2,721,850 141,908 (1,663,009) 1,777,887
CASH AND CASH
EQUIVALENTS:
At beginning of period ........... 4,756,734 1,458,724 719,046 719,046 3,440,896 --
---------- ---------- ---------- ---------- ---------- ----------
At end of period ................. $1,458,724 $ 719,046 $3,440,896 $ 860,954 $1,777,887 $1,777,887
========== ========== ========== ========== ========== ==========
NON CASH 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
Accrued public offering costs .... $ 54,458
Accrued common shares
repurchase ...................... $ 1,730 $ 1,730
<FN>
See notes to financial statements. (Concluded)
</FN>
</TABLE>
F-8
<PAGE>
BIOTIME, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(All information with respect to the periods ended March 31, 1995 and 1996 and
the period from inception (November 30, 1990) to March 31, 1996, and as of March
31, 1996, is unaudited)
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 research,
development and marketing of synthetic plasma expanders, blood
substitute solutions, and organ preservation solutions, for use in
surgery, trauma care, organ transplant procedures, and other areas of
medicine.
Development Stage Enterprise - Since inception, the Company has been
engaged in research and development activities in connection with the
development of synthetic blood substitute and organ preservation
products. The Company has not had any significant operating revenues
and has incurred operating losses of $7,313,168 from inception to March
31, 1996. The successful completion of the Company's product
development program and, ultimately, achieving profitable operations is
dependent upon future events including maintaining adequate capital to
finance its future development activities, obtaining regulatory
approvals for products that may be ultimately developed and achieving a
level of sales adequate to support the Company's cost structure.
While the Company successfully completed two public offerings of its
common stock and, at March 31, 1996, had remaining financial resources
of over $1,700,000 resulting therefrom, management believes that
additional funds may be required for the successful completion of its
product development activities.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents include cash, money market funds, and U.S.
Government securities with original maturities of three months or less.
Short-term investments include debt securities at June 30, 1994. These
investments have maturities greater than three months but less than
twelve months. Those debt securities are carried at amortized cost and
had a market value of $4,984,400 at June 30, 1994, based on quoted
market prices.
Equipment is stated at cost or, in the case of donated equipment, at
fair market value. Equipment is being depreciated using the
straight-line method over a period of sixty months.
Organizational costs are amortized over a period of sixty months.
F-9
<PAGE>
Patent costs associated with obtaining patents on products being
developed are expensed as research and development expenses when
incurred. These costs totaled $83,430 for the year ended June 30, 1995,
$60,777 for the year ended June 30, 1994, $23,494 for the year ended
June 30, 1993, and cumulatively, $181,019 for the period from inception
(November 30, 1990) to June 30, 1995.
Research and development costs, consisting principally of salaries,
payroll taxes, research and laboratory fees, are expensed as incurred.
Income Taxes: At June 30, 1995, the Company has not realized any
taxable income since its inception and has federal and state loss
carryforwards of $6,069,000 and $3,035,000 for both financial statement
and tax purposes as follows:
Year of
Expiration Federal State
---------- ------- -----
2006 $ 255,000 $ 128,000
2007 710,000 355,000
2008 1,209,000 604,000
2009 1,547,000 774,000
2010 2,348,000 1,174,000
---------- ----------
Total $6,069,000 $3,035,000
========== ==========
In the event of a significant change in the ownership of the Company,
the utilization of such loss carryforwards could be substantially
limited.
Net Loss Per Share is based on the weighted average number of common
shares outstanding during the periods presented. For purposes of
computing weighted average number of common shares outstanding, all
common shares and preferred shares issued prior to the initial public
offering, and those options issued in October 1991, were assumed to be
outstanding for the periods ending June 30, 1992 and 1991 in accordance
with rules of the Securities and Exchange Commission relating to stock
issued within one year of an initial public offering. For all periods
presented, all unexercised warrants and options are considered to be
antidilutive and were not included in the computation.
Unaudited Data: The Balance Sheet as of March 31, 1996, the Statements
of Operations for the nine month periods ended March 31, 1995 and 1996,
the Statement of Shareholders' Equity for the nine month period ended
March 31, 1996, and the Statements of Cash Flows for the nine month
periods ended March 31, 1995 and 1996 have been prepared by the Company
without audit. In the opinion of management, all adjustments,
consisting of normal recurring accruals, necessary to present fairly
the financial position at March 31, 1996, and the results of operations
and cash flows for all periods presented have been made.
F-10
<PAGE>
3. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with five officers/shareholders
for the three-year period commencing February 1, 1993 that provide for
compensation at $60,000 for the first year, $65,000 for the second
year, and $70,000 for the third year. These officers/shareholders have
signed an intellectual property agreement with the Company as a
condition of their employment.
The Company has an employment agreement with the Chairman of the
Board/shareholder for the three year period commencing April 25, 1994
that provides for compensation at $60,000 for the first year, $100,000
for the second year, and $105,000 for the third year. The Chairman has
signed an intellectual property agreement with the Company as a
condition of his employment.
In December 1990, the Company was granted a fully paid, royalty-free
worldwide irrevocable nonexclusive license to make, have made, use and
sell CMSI's hypothermic blood substitute solution that exists in CMSI's
patent application. The license granted by CMSI will terminate if
certain officers/shareholders in the aggregate do not own at least 33
1/3% of the interest in the Company not sold to the public or otherwise
owned by public shareholders. At June 30, 1995 the license is still in
effect.
4. LEASES
In June 1993, the Company entered into a two-year lease agreement for
its principal office and research facilities. Rent expense totaled
$53,388 for the year ended June 30, 1995, $25,200 for the year ended
June 30, 1994, $15,600 for the year ended June 30, 1993. During July
1994, the lease was amended to include additional space and to extend
the expiration period to May 31, 1997, subject to the Company's option
to renew the lease for an additional 24 month period. Rent for the
initial term of the new lease is $4,500 per month for the first year,
$4,900 per month for the second year, and $5,000 per month for the
third year. If the Company exercises its option to renew the lease,
rent during the option period will be $5,300 per month, plus the cost
of utilities.
The Company utilized additional facilities owned by
officers/shareholders. Rent and utilities are charged to the Company
and totaled $5,300 for the year ended June 30, 1995 $10,300 for the
year ended June 30, 1994, $11,400 for the years ended June 30, 1993.
5. SHAREHOLDERS' EQUITY
In May 1991, the Company received $121,763, net of offering costs of
$6,237, in a private placement offering in exchange for 71,117 common
shares. The investors in certain states where this investment has been
offered may have the right to rescind their investment in 37,392 shares
purchased. If these investors choose to do so, the maximum amount that
must be repaid by the
F-11
<PAGE>
Company to these investors is $67,300. Accordingly, 37,392 shares and
related amounts have been excluded from shareholders' equity in the
financial statements.
In December 1991, the Company completed the private placement of 60,000
units (120,000 preferred shares and 60,000 warrants) at $10.00 per
unit. Offering costs (consisting of commissions of $60,000 and other
costs of $65,700), have been charged against the proceeds of the
private placement on a pro rata basis. Each preferred share was
automatically converted into one common share upon the closing of the
initial public offering in March 1992. Each warrant is exercisable for
one common share at $8.00 until the earlier of the date 30 calendar
days after the date of this Prospectus or June 30, 1996 (unless the
expiration date is extended to a later date by the Company), or the day
immediately preceding the date on which the Warrants are redeemed by
the Company.
In March 1992, the Company completed an underwritten initial public
offering of 724,500 common shares, at an initial price to the public of
$8.00 per share. The net proceeds to the Company, after deducting
expenses of the offering, was $4,780,127.
Under the terms of the underwriting agreement for the public offering,
the Company sold to the underwriter, for $60, warrants to purchase
61,889 common shares at an exercise price of $9.60 per share, subject
to adjustment to prevent dilution. The underwriter's warrants will
expire on March 4, 1997.
In March 1994, the Company completed a second underwritten public
offering of 935,200 common shares, at an initial price to the public of
$5.125 per share. The net proceeds to the Company, after deducting
expenses of the offering, was $3,927,074. Under the terms of the
underwriting agreement for the public offering, the Company sold to the
underwriter, for $5, warrants to purchase 90,000 common shares at an
exercise price of $7.18 per share, subject to adjustment to prevent
dilution. The underwriter's warrants will expire on March 4, 2000.
The Board of Directors of the Company adopted the 1992 Stock Option
Plan (the "Plan") in September 1992, which was approved by the
shareholders at the 1992 Annual Meeting of Shareholders, on December 1,
1992. Under the Plan, as amended, the Company has reserved 400,000
Common Shares for issuance under options granted to eligible persons.
No options may be granted under the Plan more than ten years after the
date the Plan was adopted by the Board of Directors, and no options
granted under the Plan may be exercised after the expiration of ten
years from the date of grant.
Under the Plan, options for the purchase of 287,000 shares have been
granted to eligible persons including employees, officers and
directors, members of the scientific advisory board and certain
consultants to the Company as of March 31, 1996. Such options are
exercisable at prices ranging from $1.99 to $10.79 beginning from one
to two years after the grant date and expire after five to ten years
from the grant date. Certain options require the achievement of
performance criteria. At March 31, 1996 224,498 options were
exercisable at prices ranging from $1.99 to $10.79. No granted options
have been exercised as of March 31, 1996.
F-12
<PAGE>
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which requires the
Company to adopt the disclosure provisions of that accounting standard
for fiscal year 1997. Pursuant to the new standard, companies are
encouraged, but are not required, to adopt the fair value method of
accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," but would be required to disclose pro forma results of
operations in a note to the financial statements and, if presented, per
share amounts as if the company had applied the new method of
accounting. The Company has not yet determined if it will elect to
change to the fair value method, nor has it determined the effect the
new standard will have on operating results and related per share
amounts should it elect to make such change. Adoption of the new
standard will have no effect on the Company's cash flows.
In June 1994, the Board of Directors authorized management to
repurchase up to 200,000 shares of the Company's common shares at
market price at the time of purchase. As of March 31, 1996, 90,800
shares have been repurchased and retired.
6. RELATED PARTY TRANSACTIONS
In December 1990, three officers/shareholders transferred 137,400
shares of CMSI common stock to the Company in exchange for 350,070
common shares of the Company. The Company simultaneously sold these
shares back to CMSI for $137,400 in cash.
In May 1991, Trans Time, Inc. transferred 60,000 shares of CMSI common
stock to the Company in exchange for 33,340 common shares of the
Company valued at $1.80 per share. The Company simultaneously sold
these shares back to CMSI for $60,000 in cash. Certain officers and
directors of the Company own in the aggregate approximately 25.4% of
the total Trans Time, Inc. common stock outstanding at March 31, 1996.
In July 1991, the Company issued 10,000 common shares to the Chairman
of the Board as consideration for services performed on behalf of the
Company. The issuance of such shares, valued at $1.80 per share,
resulted in a charge to compensation expense of $18,000 during the year
ended June 30, 1992.
During the year ended June 30, 1995, $81,043 in fees for legal and
consulting services was paid to a shareholder/member of the Board of
Directors. During the nine months ended March 31, 1995 and 1996, the
Company paid $71,742 and $14,880, respectively, to such
shareholder/director for legal and consulting services rendered.
F-13
<PAGE>
7. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
Summarized results of operations for each quarter of fiscal 1993, 1994
and 1995 are as follows:
<CAPTION>
First Second Third Fourth Total
1993 Quarter Quarter Quarter Quarter Year
---- ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Net loss $275,530 $344,010 $248,044 $341,584 $1,209,168
Net loss per share $ .16 $ .20 $ .14 $ .19 $ .69
1994
----
Net loss $318,717 $431,161 $301,441 $495,634 $1,546,953
Net loss per share $ .18 $ .25 $ .15 $ .18 $ .76
1995
----
Net loss $483,737 $631,714 $553,095 $709,201 $2,377,747
Net loss per share $ .18 $ .24 $ .21 $ .27 $ .90
</TABLE>
F-14
<PAGE>
============================================= ==============================
No dealer, salesperson or other person has
been authorized in connection with this
offering to give any information or to make
any representations other than those
contained in this Prospectus. This Prospectus
does not constitute an offer or a BIOTIME, INC.
solicitation in any jurisdiction to any
person to whom it is unlawful to make such an
offer or solicitation. Neither the delivery
of this Prospectus nor any sale made
hereunder shall, under any circumstances,
create an implication that there has been no
change in the circumstances of the Company or
the facts herein set forth since the date
hereof.
----------------------
TABLE OF CONTENTS
Prospectus Summary...........................3
The Company..................................6
Risk Factors.................................7
Market Price of Common Shares...............14 90,000 Common Shares
Dividend Policy.............................15
Capitalization..............................15
Selected Financial Information..............16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations...............................17
Business....................................21
Management..................................36
Principal Shareholders......................40
Certain Transactions........................41
Description of Securities...................41
Shares Eligible for Future Sale.............42
Plan of Distribution........................43
Legal Matters...............................45 ----------
Experts.....................................45 PROSPECTUS
Additional Information......................45 ----------
Financial Statements........................F1
MAY 15, 1996
============================================= ==============================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Indemnification of Directors and Officers.
Section 317 of the California Corporations Code permits
indemnification of directors, officers, employees and other agents of
corporations under certain conditions and subject to certain limitations. In
addition, Section 204(a)(10) of the California Corporations Code permits a
corporation to provide, in its articles of incorporation, that directors shall
not have liability to the corporation or its shareholders for monetary damages
for breach of fiduciary duty, subject to certain prescribed exceptions. Article
Four of the Articles of Incorporation of the Registrant (Exhibit 3(a)) contains
provisions for the indemnification of directors, officers, employees and other
agents within the limitations permitted by Section 317 and for the limitation on
the personal liability of directors permitted by Section 204(b)(10), subject to
the exceptions required thereby.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit
Numbers Description
- ------- -----------
3 (a) Articles of Incorporation as Amended.+
(c) By-Laws, As Amended.#
4 (a) Specimen of Common Share Certificate.+
(b) Form of Warrant.#
(c) Form of Underwriter's Warrant.#
(d) Form of Underwriter's Warrant.**
5 Opinion of Counsel.**
10 (a) Lease Agreement dated July 1, 1994 between the Registrant and Robert
and Norah Brower, relating to principal executive offices of the
Registrant.*
10 (b) Employment Agreement dated February 1, 1993 between the Company and
Paul Segall.^
10 (c) Employment Agreement dated February 1, 1993 between the Company and
Hal Sternberg.^
10 (d) Employment Agreement dated February 1, 1993 between the Company and
Harold Waitz.^
10 (e) Employment Agreement dated February 1, 1993 between the Company and
Judith Segall.^
II-2
<PAGE>
10 (f) Employment Agreement dated February 1, 1993 between the Company and
Victoria Bellport.^
10 (g) Intellectual Property Agreement between the Company and Paul Segall.+
10 (h) Intellectual Property Agreement between the Company and Hal
Sternberg.+
10 (i) Intellectual Property Agreement between the Company and Harold Waitz.+
10 (j) Intellectual Property Agreement between the Company and Judith
Segall.+
10 (k) Intellectual Property Agreement between the Company and Victoria
Bellport.+
10 (l) Agreement between CMSI and BioTime Officers Releasing Employment
Agreements, Selling Shares, and Transferring Non-Exclusive License.+
10 (m) Agreement for Trans Time, Inc. to Exchange CMSI Common Stock for
BioTime, Inc. Common Shares.+
10 (n) 1992 Stock Option Plan, as amended.^
10 (o) Employment Agreement dated April 1, 1994 between the Company and
Lawrence Cohen.*
10 (p) Intellectual Property Agreement between the Company and Lawrence
Cohen.^
23 (a) Consent of Deloitte & Touche LLP++
27 Financial Data Schedule++
+ 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, 1993.
** Previously filed.
* Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1994.
++ Filed herewith.
II-3
<PAGE>
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file during any period in which offers or sales are made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Berkeley, State of California on May 9, 1996.
BIOTIME, INC.
By Paul Segall
------------------------
Paul Segall, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
- --------------------- Chairman of the Board of May ____, 1996
LAWRENCE COHEN Directors
Paul Segall
--------------------- President and Director May 9, 1996
PAUL SEGALL (Principal Executive Officer)
Harold Waitz
- --------------------- Vice President and Director May 9, 1996
HAROLD WAITZ
Hal Sternberg
- --------------------- Vice President and Director May 9, 1996
HAL STERNBERG
Victoria Bellport Chief Financial Officer and
- --------------------- Director (Principal Financial May 9, 1996
VICTORIA BELLPORT and Accounting Officer)
Judith Segall
- --------------------- Secretary and Director May 9, 1996
JUDITH SEGALL
Ronald S. Barkin
- --------------------- Director May 9, 1996
RONALD S. BARKIN
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Numbers Description
- ------- ------------
3 (a) Articles of Incorporation as Amended.+
(c) By-Laws, As Amended.#
4 (a) Specimen of Common Share Certificate.+
(b) Form of Warrant.#
(c) Form of Underwriter's Warrant.#
(d) Form of Underwriter's Warrant.**
5 Opinion of Counsel.**
10 (a) Lease Agreement dated July 1, 1994 between the Registrant and Robert
and Norah Brower, relating to principal executive offices of the
Registrant.*
10 (b) Employment Agreement dated February 1, 1993 between the Company and
Paul Segall.^
10 (c) Employment Agreement dated February 1, 1993 between the Company and
Hal Sternberg.^
10 (d) Employment Agreement dated February 1, 1993 between the Company and
Harold Waitz.^
10 (e) Employment Agreement dated February 1, 1993 between the Company and
Judith Segall.^
10 (f) Employment Agreement dated February 1, 1993 between the Company and
Victoria Bellport.^
10 (g) Intellectual Property Agreement between the Company and Paul Segall.+
10 (h) Intellectual Property Agreement between the Company and Hal
Sternberg.+
10 (i) Intellectual Property Agreement between the Company and Harold Waitz.+
10 (j) Intellectual Property Agreement between the Company and Judith
Segall.+
10 (k) Intellectual Property Agreement between the Company and Victoria
Bellport.+
<PAGE>
10 (l) Agreement between CMSI and BioTime Officers Releasing Employment
Agreements, Selling Shares, and Transferring Non-Exclusive License.+
10 (m) Agreement for Trans Time, Inc. to Exchange CMSI Common Stock for
BioTime, Inc. Common Shares.+
10 (n) 1992 Stock Option Plan, as amended.^
10 (o) Employment Agreement dated April 1, 1994 between the Company and
Lawrence Cohen.*
10 (p) Intellectual Property Agreement between the Company and Lawrence
Cohen.^
23 (a) Consent of Deloitte & Touche LLP++
27 Financial Data Schedule++
+ 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, 1993.
** Previously filed.
* Incorporated by reference to the Company's Form 10-K for the fiscal year ended
June 30, 1994.
++ Filed herewith.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
BioTime Inc.:
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 33-73256 of BioTime, Inc. on Form S-1 of our report dated August
25, 1995, appearing in the Prospectus, which is a part of this Registration
Statement and to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Oakland, California
May 14, 1996
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