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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO.1
TO
FORM 8-K/A
CURRENT REPORT
PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): January 14, 2000
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STEMCELLS, INC.
(formerly CYTOTHERAPEUTICS, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-19871 94-3078125
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) (Identification Number)
525 DEL REY AVENUE, SUITE C
SUNNYVALE, CA 94085
(Address of principal executive offices, including zip code)
(408) 731-8670
(Registrant's Telephone number including area code)
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Page 1 of 6
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Pro Forma Financial Information
During the third quarter of 1999, management reached a decision to exit
the Company's Encapsulated Cell Therapy (ECT) activities, dispose of the
related intellectual property, facilities and equipment and relocate the
Lincoln, RI corporate headquarters to Sunnyvale, CA. The Company terminated
legal, professional, and consulting contractual arrangements in support of
ECT research, to meet regulatory requirements in support of its research
work, to support contractual arrangements with clinical sites, to provide
assistance at clinical sites in administering therapy and documenting
activities, and to assist in compliance with FDA and other regulations
regarding its clinical trials. ECT related patent law work was also
terminated. The Company also engaged professional consultants in connection
with the determination to exit its ECT activities and restructure its
operations, which concluded with the exit from ECT activities and relocation
of its corporate headquarters to California. The Company reduced its
workforce by approximately 58 employees who had been focused on ECT programs
and 10 administrative employees. At the same time, the Company accrued
various estimated expenses associated with the exit and wind-down of the ECT
activities, disposal of the related property and relocation of the corporate
headquarters. Additional accruals were provided in December 1999 for expenses
relating to settlement of a 1989 funding arrangement with the Rhode Island
Partnership for Science and Technology, further adjustment to asset carrying
values and estimated carrying costs associated with the Rhode Island
facilities through the expected disposition date of June 30, 2000. In
addition, during December 1999, the Company liquidated certain ECT equipment
and sold its ECT intellectual property to Neurotech, S.A. for $3,000,000. The
tabular unaudited pro forma consolidated statement of operations presents the
effects of the sale, wind-down and relocation, as if they had occurred at
January 1, 1999.
The tabular unaudited pro forma consolidated balance sheet along with the
accompanying notes are presented as if the sale of ECT intellectual property,
wind-down of ECT activities and relocation of the corporate headquarters had
occurred at December 31, 1999. The pro forma effects and adjustments were
determined based on available information and certain allocations that
management believes are reasonable. The pro forma financial information does
not purport to represent what the Company's operating results would have been
had the sale occurred at January 1, 1999 and may not be indicative of the
Company's financial position or operating results for any future date or
period.
Page 2 of 6
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CYTOTHERAPEUTICS, INC.
December 31, 1999
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Historical Pro Forma
Consolidated Consolidated
12/31/1999 Adjustments(A) 12/31/1999
------------ --------------- -----------
<S> <C> <C> <C>
Revenue from collaborative agreements......................... $ 5,021,707 $ (5,021,707)(1) $ --
Operating expenses:
Research and development..................................... 9,984,027 (5,332,331)(2) 4,571,696
(80,000)(5)
General and administrative................................... 4,927,303 (2,309,315)(3) 2,697,988
80,000 (5)
Encapsulated cell therapy wind-down and corporate relocation. 6,047,806 (6,047,806)(4) --
------------ ------------ -----------
20,959,136 (13,689,452) 7,269,684
------------ ------------ -----------
Loss from operations.......................................... (15,937,429) 8,667,745 (7,269,684)
Other income (expense):
Interest income.............................................. 564,006 -- 564,006
Interest expense............................................. (335,203) -- (335,203)
------------ ------------ -----------
228,803 -- 228,803
------------ ------------ -----------
------------ ------------ -----------
Net loss...................................................... $(15,708,626) $ 8,667,745 $(7,040,881)
------------ ------------ -----------
------------ ------------ -----------
Basic and diluted net loss per share.......................... $(0.84) $(0.46) $(0.38)
------------ ------------ -----------
------------ ------------ -----------
Shares used in computing basic and diluted net loss per share. 18,705,838 18,705,838 18,705,838
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
Page 3 of 6
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CYTOTHERAPEUTICS, INC.
December 31, 1999
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
Historical Pro Forma
December 31, 1999 Adjustments(A) December 31, 1999
----------------- ------------- -----------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,760,064 $ -- $ 4,760,064
Marketable securities -- --
Accrued interest receivable 42,212 42,212
Technology sale receivable 3,000,000 3,000,000
Debt service fund 609,905 609,905
Other current assets 558,674 558,674
------------- ----------- -------------
Total current assets 8,970,855 -- 8,970,855
Property held for sale 3,203,491(5) 3,203,491
Property, plant and equipment, net 5,251,376 (3,503,491)(5) 1,747,885
Other assets, net 1,858,768 1,858,768
------------- ----------- -------------
Total assets $ 16,080,999 $ (300,000) $ 15,780,999
------------- ----------- -------------
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 631,315 $ 631,315
Accrued expenses 2,905,068 (300,000)(6) 2,605,068
Current maturities of capitalized lease obligations 324,187 324,167
------------- ----------- -------------
Total current liabilities 3,860,550 (300,000) 3,560,550
Capitalized lease obligations, less current maturities 2,937,083 2,937,083
Deposits 26,000 26,000
Deferred Rent 502,353 502,353
Commitments and contingencies -- --
Redeemable common stock, $.01 par value;
524,337 shares issued and outstanding 5,248,610 5,248,610
Stockholders equity:
Convertible preferred stock, $.01 par value; 1,000,000
shares authorized; no shares issued and outstanding -- --
Common stock, $.01 par value; 45,000,000 shares
authorized; 18,635,565 shares issued and outstanding 186,355 186,355
Additional paid-in capital 123,917,758 123,917,758
Accumulated deficit (119,372,710) (119,372,710)
Deferred compensation (1,225,000) (1,225,000)
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Total stockholders' equity 3,506,403 -- 3,506,403
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Total liabilities and stockholders' equity $ 16,080,999 $ (300,000) $ 15,780,999
------------- ----------- -------------
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</TABLE>
Page 4 of 6
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NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND BALANCE SHEET
Note A-Pro Forma Adjustments
(1) To eliminate Encapsulated Cell Therapy collaborative revenue
arrangements.
(2) To eliminate research and development expenses, including employee
compensation ($1,566,479), external professional services ($875,818),
facilities and other supplies ($2,890,035) and various other expenses
directly related to encapsulated cell therapy activities. These expenses
were determined based on an individual account analysis and internal
employee tracking records.
(3) To eliminate general and administrative expenses, including employee
compensation ($761,000), legal, professional and consulting fees
($963,000) facilities costs ($306,000), amortization ($158,000) and
various other expenses ($121,000), directly relating to encapsulated cell
therapy. These expenses were determined based on an individual account
analysis.
(4) To eliminate Encapsulated Cell Therapy wind-down and corporate relocation
expenses, including Rhode Island facility carrying costs, employee
severance arrangements and the related settlement of a 1989 funding
arrangement with the Rhode Island Partnership for Science and Technology.
These expenses related to the Company's decision to eliminate 68
employees, relocate all remaining research and development and the
Company's headquarters to Sunnyvale, California as a result of a decision
to exit Encapsulated Cell Technology, and were included in wind-down
expenses. The wind-down expenses include employee severance costs of
approximately $1,554,000, losses and reserves for the write-down of
related patents and fixed assets of approximately $1,858,000, an accrual
of approximately $1,172,000 of costs relating to settlement of a 1989
funding agreement with the Rhode Island Partnership for Science and
Technology ("RIPSAT") associated with the Company's pilot manufacturing
facility, approximately $1,264,000 relating to carrying costs, including
lease payments, interest, utilities, taxes and other related expenses
associated with resolving the disposition of the Rhode Island facilities
and $200,000 of employee outplacement fees. The RIPSAT claim related
directly to funding the Company had received from RIPSAT. When the
Company reached the decision to exit its Encapsulated Cell Technology and
relocate all remaining research and the Company's corporate headquarters
from Rhode Island to Sunnyvale, California, RIPSAT claimed the Company
had violated terms of the funding arrangement. The Company did not agree
with this claim, however, management determined it was in the Company's
best interest to settle the issue. As a result, the costs associated with
the settlement were included in the wind-down amount.
(5) To allocate facilities costs to general and administrative expenses from
conversion of the former research and development facility in Sunnyvale,
CA to the Company's corporate headquarters.
(6) To reclassify the net book value of the Rhode Island property, plant and
equipment.
Page 5 of 6
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STEMCELLS, INC.
By /s/ George Koshy
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Title: Controller and Acting Chief
Financial Officer
Date: December 5, 2000
Page 6 of 6
