<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
----------------
FORM 10-Q
----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________ .
COMMISSION FILE NUMBER: 0-20859
----------------
GERON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2287752
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
230 CONSTITUTION DRIVE, MENLO PARK, CA 94025
(ADDRESS, INCLUDING ZIP CODE, OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (650) 473-7700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK $0.001 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class: Common Stock $0.001 par value Outstanding at May 8, 2000: 21,423,981
================================================================================
<PAGE> 2
GERON CORPORATION
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements........................................... 3
Condensed Consolidated Balance Sheets as of March 31, 2000 and December 31, 3
1999........................................................................
Condensed Consolidated Statements of Operations for the three months ended
March 31, 2000 and 1999..................................................... 4
Condensed Consolidated Statements of Cash Flows for the three months ended 5
March 31, 2000 and 1999.....................................................
Notes to Consolidated Financial Statements.................................. 6
Item 2: Management's Discussion and Analysis of Financial Condition and Results of 9
Operations..................................................................
Item 3: Quantitative and Qualitative Disclosures About Market Risk.................. 25
PART II. OTHER INFORMATION
Item 1: Legal Proceedings........................................................... 26
Item 2: Changes In Securities and Use of Proceeds................................... 26
Item 3: Defaults upon Senior Securities............................................. 26
Item 4: Submission of Matters to a Vote of Security Holders......................... 26
Item 5: Other Information........................................................... 26
Item 6: Exhibits and Reports on Form 8-K............................................ 26
SIGNATURES................................................................................ 27
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GERON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............. $ 52,525 $ 7,835
Short-term investments ................ 2,478 31,452
Interest and other receivables ........ 950 743
Other current assets .................. 569 399
--------- ---------
Total current assets .......... 56,522 40,429
Long-term investments ................... 22,916 3,636
Property and equipment, net ............. 3,567 3,783
Deposits and other assets ............... 939 576
Intangibles ............................. 14,561 15,277
--------- ---------
$ 98,505 $ 63,701
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................... $ 2,052 $ 1,321
Accrued liabilities ................... 2,814 2,723
Current portion of capital lease
obligations and equipment loans ..... 1,131 1,183
Current portion of accrued
research funding commitment ......... 2,699 2,721
--------- ---------
Total current liabilities ..... 8,696 7,948
Noncurrent portion of capital lease
obligations and equipment loans ..... 1,613 1,787
Accrued research funding commitment ..... 12,159 12,413
Convertible debentures .................. 6,313 15,327
Commitments
Stockholders' equity:
Common stock ............................ 21 17
Additional paid-in-capital .............. 181,050 131,183
Notes receivable from stockholders ...... -- (70)
Deferred compensation ................... (721) (853)
Accumulated deficit ..................... (110,563) (103,969)
Accumulated other comprehensive
(loss)/income ....................... (63) (82)
--------- ---------
Total stockholders' equity .... 69,724 26,226
--------- ---------
$ 98,505 $ 63,701
========= =========
</TABLE>
See accompanying notes.
3
<PAGE> 4
GERON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues from collaborative agreements ...... $ 1,250 $ 1,494
License fees and royalties .................. 21 1
------------ ------------
Total revenues .......................... 1,271 1,495
Operating expenses:
Research and development .................. 5,812 4,425
General and administrative ................ 2,534 943
------------ ------------
Total operating expenses ................ 8,346 5,368
------------ ------------
Loss from operations ........................ (7,075) (3,873)
Interest and other income ................... 833 676
Interest and other expense .................. (352) (146)
------------ ------------
Net loss .................................... $ (6,594) $ (3,343)
Accretion of redemption value of
redeemable convertible preferred stock .... -- (51)
------------ ------------
Net loss applicable to common
stockholders .......................... $ (6,594) $ (3,394)
============ ============
Basic and diluted net loss per share ........ $ (0.35) $ (0.25)
============ ============
Weighted average shares used in
computing basic and diluted net loss
per share ................................. 18,709,106 13,663,948
============ ============
</TABLE>
See accompanying notes.
4
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GERON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CHANGE IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss .............................................................. $ (6,594) $ (3,343)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ...................................... 376 285
Interest from convertible debentures ............................... 62 60
Issuance of common and preferred stock in exchange
for services rendered ............................................ 363 191
Accretion of interest on research funding obligation ............... 123 --
Deferred compensation .............................................. 132 132
Changes in assets and liabilities:
Other current and noncurrent assets ................................ (24) (222)
Other current and noncurrent liabilities ........................... 1,531 153
Translation adjustment ............................................. (22) --
-------- --------
Net cash used in operating activities ................................... (4,053) (2,744)
Cash flows from investing activities:
Capital expenditures .................................................. (160) (1,501)
Purchases of securities available-for-sale ............................ (9,383) (12,552)
Proceeds from sales/calls of securities available-for-sale ............ 7,102 --
Proceeds from maturities of securities available-for-sale ............. 12,000 8,100
Accrued research funding payments ..................................... (383) --
-------- --------
Net cash provided by (used in) investing activities ..................... 9,176 (5,953)
Cash flows from financing activities:
Proceeds from equipment loans ......................................... 79 1,037
Payments of obligations under capital leases and equipment loans ...... (305) (336)
Proceeds from issuance of common and preferred stock, net ............. 39,793 15
-------- --------
Net cash provided by financing activities ............................... 39,567 716
-------- --------
Net increase (decrease) in cash and cash equivalents .................... 44,690 (7,981)
Cash and cash equivalents at the beginning of the period ................ 7,835 16,360
-------- --------
Cash and cash equivalents at the end of the period ...................... $ 52,525 $ 8,379
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
GERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed consolidated unaudited balance sheet as of
March 31, 2000 and condensed consolidated statements of operations for the three
month period ended March 31, 2000 and 1999 have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000 or any other period. These financial statements and
notes should be read in conjunction with the financial statements for the year
ended December 31, 1999, included in the Company's Annual Report on Form 10-K.
The consolidated financial statements include the accounts of Geron
Corporation, and its wholly owned subsidiary, Geron Bio-Med Ltd., a company
organized under the laws of the United Kingdom. All material intercompany
accounts, transactions, and expenses have been eliminated in consolidation.
The financial statements of the Company's subsidiary outside the United
States are measured using the local currency as the functional currency. Assets
and liabilities of this subsidiary are translated at the rates of exchange at
the balance sheet date. The resultant translation adjustments are included in
accumulated other comprehensive income/(loss), a separate component of
stockholders' equity. Income and expense items are translated at average monthly
rates of exchange.
Certain reclassifications of prior year amounts have been made to conform
to current year presentation.
NET LOSS PER SHARE
Basic earnings (loss) per share is calculated using the weighted average
number of common shares outstanding. Because the Company is in a net loss
position, diluted earnings per share is also calculated using the weighted
average number of common shares outstanding and excludes the effects of options,
warrants and convertible securities which are antidilutive. Had the Company been
in a net income position, diluted earnings per share would have included the
shares used in the computation of basic net loss per share as well as an
additional 2,104,315 and 1,508,453 shares for 2000 and 1999, respectively,
related to outstanding options and warrants not included above (as determined
using the treasury stock method at the estimated average market value).
COMPREHENSIVE LOSS
Comprehensive income (loss) is comprised of net income (loss) and other
comprehensive income (loss). Other comprehensive income (loss) includes certain
changes in equity that are excluded from net income (loss). Specifically,
unrealized holding losses on our available-for-sale securities of $88.000, which
were reported separately in stockholders' equity, and cumulative translation
adjustment of $25,000 are included in accumulated other comprehensive income
(loss). Comprehensive income (loss) for years ended December 31, 1999, 1998 and
1997 has been reflected in the consolidated statement of stockholders' equity.
REVENUE RECOGNITION
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"). SAB 101 summarizes certain areas of the
Staff's views in applying generally accepted accounting principles
6
<PAGE> 7
to revenue recognition. The Company has not completed its assessment of the
impact of SAB 101, but does not expect that the implementation of SAB 101 will
have a material effect.
2. CASH EQUIVALENTS AND INVESTMENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company
places its cash and cash equivalents in interest-bearing money market funds,
municipal notes and commercial paper. As of March 31, 2000, the Company's
investments consisted primarily of corporate notes with maturities ranging from
three to 16 months.
3. CONVERTIBLE DEBENTURES
SERIES A AND B DEBENTURES AND WARRANTS
On December 10, 1998, the Company entered into an agreement to sell $15.0
million in convertible zero coupon debentures and warrants to purchase 1,250,000
shares of Common Stock at an exercise price of $12.00 per share to investment
funds managed by three institutional investors. One-half of the proceeds were
funded upon signing the agreement, at which time $7.5 million of series A
convertible debentures and warrants to purchase 625,000 shares of Common Stock
were issued. In June 1999, $7.5 million of series B convertible debentures and
warrants to purchase 625,000 shares of Common Stock were sold under the
agreement entered into in December 1998.
All of the series A convertible debentures had been converted into Common
Stock as of December 31, 1999. During the first quarter of 2000, an aggregate
principal amount of $3.0 million of series B convertible debentures converted
into 300,000 shares of Geron Common Stock at $10.00 per share. As of March 31,
2000, no series B convertible debentures remained outstanding.
During the first quarter of 2000, institutional investors exercised all of
the warrants issued with the series A and series B convertible debentures. The
Company received $15.0 million in proceeds from these warrant exercises.
SERIES C DEBENTURES AND WARRANTS
On September 30, 1999, the Company sold $12.5 million in series C
convertible two-percent coupon debentures and warrants to purchase 1,100,000
shares of Common Stock to an institutional investor. The debentures are
convertible at any time by the holder at a fixed conversion price of $10.25 per
share. The debentures convert at the Company's option when the Common Stock has
traded at a certain premium to the fixed conversion price for ten consecutive
trading days.
The warrants to purchase 1,000,000 shares of Common Stock are exercisable
at $12.50 per share and the warrants to purchase 100,000 shares of Common Stock
are exercisable at $12.75 per share. The warrants are exercisable for Common
Stock at the option of the holder until June 2, 2001.
During the first quarter 2000, an aggregate principal amount of $6.25
million of series C convertible debentures plus accrued interest converted into
615,069 shares of Geron Common Stock at $10.25 per share. As of March 31, 2000,
an aggregate principal amount of $6.25 million of series C convertible
debentures remained outstanding.
During the first quarter of 2000, all of the warrants issued with the
series C convertible debentures were exercised. The Company received $13.8
million in proceeds from the warrant exercises.
4. PRIVATE FINANCING
In March 2000, Geron sold a total of 380,855 shares of Common Stock and
warrants to purchase 300,000 shares of its common stock to a single investor for
$9.0 million. Warrants to purchase 100,000 shares of Common Stock are
exercisable at $12.50 per share and the warrants to purchase 200,000 shares of
Common Stock are exercisable at $67.09 per share.
7
<PAGE> 8
5. SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131") in its fiscal year ended December 31, 1998. SFAS 131 establishes standards
for reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision making group, in making decisions
how to allocate resources and assess performance. The Company's chief decision
maker, as defined under SFAS 131, is the Chief Executive Officer. To date, the
Company has viewed its operations as principally one segment, the discovery and
development of therapeutic and diagnostic products for applications in oncology,
drug discovery and regenerative medicine. As a result, the financial information
disclosed herein materially represents all of the financial information related
to the Company's principal operating segment.
6. UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma consolidated statement of operations data for the
three months ended March 31, 1999 set forth below gives effect to the
acquisition of Roslin Bio-Med Ltd. as if it occurred on January 1, 1999.
<TABLE>
<CAPTION>
(IN THOUSANDS, THREE MONTHS ENDED
EXCEPT PER SHARE AMOUNTS) MARCH 31, 1999
------------------
<S> <C>
Revenues................................... $ 1,495
Net loss................................... $(10,147)
Basic and diluted net loss per share....... $ (0.66)
</TABLE>
7. CONSOLIDATED STATEMENT OF CASH FLOW DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
(IN THOUSANDS) MARCH 31, 2000 MARCH 31, 1999
------------------ ------------------
<S> <C> <C>
Supplementary investing and
financing activities
Common stock issued for services ............. $ 709 $ --
Accretion of premium on convertible
preferred stock ............................ $ -- $ 51
Conversion of convertible debentures, net .... $ 9,076 $ --
Net unrealized gain (loss) on
available-for-sale securities .............. $ (25) $ 67
</TABLE>
8
<PAGE> 9
GERON CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
This Form 10-Q contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipate", "believe", "plan", "expect",
"future", "intend" and similar expressions to identify forward-looking
statements. These statements appear throughout the Form 10-Q and are statements
regarding our intent, belief, or current expectations, primarily with respect to
our operations and related industry developments. You should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this Form 10-Q. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us and described under the heading "Risk Factors" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, in the section of this Item 2 titled "Additional Factors That May Affect
Future Results," and elsewhere in this Form 10-Q.
The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included in Part I, Item 1 of this
Quarterly Report and with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999.
We are a biopharmaceutical company focused on discovering, developing and
commercializing therapeutic and diagnostic products for applications in
oncology, drug discovery and regenerative medicine. Our product development
programs are based upon three patented, independent and synergistic
technologies: telomerase, human pluripotent stem cells and nuclear transfer.
Since inception, substantially all of our revenues have been generated
from license and research agreements with collaborators. In addition, we receive
license payments and royalties from license and marketing agreements with
various diagnostic and research tool collaborators. We recognize revenue from
the license and research agreements with collaborators as the related research
and development costs are incurred under the collaborative agreements.
In January 2000, we extended our three-way license and research
collaboration agreement with Kyowa Hakko and Pharmacia. The agreement extends
the research and compound selection periods by one additional year to March 2002
and provides for additional research funding. In January 2000, we received $1.25
million from Pharmacia. In April 2000, we received $2.0 million from Kyowa Hakko
as a result of their extension.
In March 2000, we sold a total of 380,855 shares of our common stock and
300,000 warrants to purchase our common stock to a single investor for $9.0
million. We structured the sale of securities in two parts. We priced the first
$6.4 million of common stock at $50.32 per share, and set the exercise price for
200,000 warrants at $67.09 per share. We priced the remaining $2.6 million of
common stock at $10.25 per share, and set the exercise price for the remaining
100,000 warrants at $12.50 per share. The common stock and the common stock
underlying the warrants are not registered for resale and are subject to a
two-year prohibition on sale by agreement. As of March 31, 2000, all of the
warrants remained outstanding.
During the first quarter of 2000, institutional investors exercised series
A warrants to purchase 625,000 shares of Geron common stock, series B warrants
to purchase 625,000 shares of Geron common stock and series C warrants to
purchase 1,100,000 shares of Geron common stock. In total, we received $28.8
million in proceeds from the exercise of these warrants.
In the first quarter of 2000, an institutional investor converted an
aggregate principal amount of $6.25 million plus accrued interest of series C
convertible debentures into 615,069 shares of Geron common stock. In addition,
an institutional investor converted an aggregate principal amount of $3.0
million of series B convertible debentures into 300,000 shares of Geron common
stock. As of March 31, 2000, an aggregate principal amount of $6.25 million of
series C convertible debentures and no series B convertible debentures remained
outstanding.
9
<PAGE> 10
Our results of operations have fluctuated from period to period and may
continue to fluctuate in the future based upon the timing and composition of
funding under our various collaborative agreements, as well as the progress of
our research and development efforts and variations in the level of expenses
related to developmental efforts during any given period. Results of operations
for any period may be unrelated to results of operations for any other period.
In addition, historical results should not be viewed as indicative of future
operating results. We are subject to risks common to companies in our industry
and at our stage of development, including risks inherent in our research and
development efforts, reliance upon our collaborative partners, enforcement of
our patent and proprietary rights, need for future capital, potential
competition and uncertainty of regulatory approvals or clearances. In order for
a product to be commercialized based on our research, we and our collaborators
must conduct preclinical tests and clinical trials, demonstrate the efficacy and
safety of our product candidates, obtain regulatory approvals or clearances and
enter into manufacturing, distribution and marketing arrangements, as well as
obtain market acceptance. We do not expect to receive revenues or royalties
based on therapeutic products for a period of years, if at all.
RESULTS OF OPERATIONS
REVENUES
We recognized revenues from collaborative agreements of $1.3 million for
the three months ended March 31, 2000, compared to $1.5 million for the
comparable period in 1999. Revenues in 2000 represented research support
payments from our collaborative agreement with Pharmacia. Revenues in 1999
represented research support payments from our collaborative agreements with
Pharmacia and Kyowa Hakko. Lower revenues in 2000 were a result of reduced
research funding from Kyowa Hakko. We expect revenues from collaborative
agreements to increase in the remainder of 2000 as compared to 1999 as a result
of the renewed research commitments from Kyowa Hakko and Pharmacia. As a result
of the extensions of our agreements with these parties, these agreements provide
for additional funding from Kyowa Hakko and Pharmacia.
We receive license payments and royalties from license and marketing
agreements with various diagnostic collaborators. We received royalties of
$21,000 for the three months ended March 31, 2000, from Kyowa Medex, Intergen,
Roche Diagnostics, and PharMingen (a Becton Dickinson company) on the sale of
diagnostic kits to the research-use-only market, compared to $1,000 for the
comparable period in 1999. We did not receive any license fees in the first
quarter of 2000 or for the comparable period in 1999.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were $5.8 million for the three months
ended March 31, 2000, compared to $4.4 million for the comparable period in
1999. The increase in research and development expenses in the 2000 period
compared to the 1999 period was primarily the result of amortization of the
research obligation to the Roslin Institute of $700,000, increased personnel
related costs of $200,000, additional research expenditures of $190,000 at Geron
Bio-Med and increased scientific supplies of $150,000. We expect research and
development expenses to increase significantly in the future as a result of
continued development of our therapeutic and diagnostic programs.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $2.5 million for the three months
ended March 31, 2000, compared to $943,000 for the comparable period in 1999.
The increase in general and administrative expenses in the 2000 period compared
to the 1999 period was primarily the result of increased business consulting
costs of $1.1 million, $240,000 in administrative expenses at Geron Bio-Med,
increased personnel related costs of $150,000, and increased public and investor
relations costs of $100,000.
INTEREST AND OTHER INCOME
Interest income was $793,000 for the three months ended March 31, 2000,
compared to $556,000 for the comparable period in 1999. The increase in interest
income for 2000 compared to 1999 was primarily the result of higher cash
balances in 2000 than 1999 as a result of receiving proceeds of $28.8 million
from the exercise of warrants and $9.0 million from the sale of common stock to
a private investor. Interest earned in the future will depend on any future
funding cycles and prevailing interest rates. We also received $40,000 in
research payments
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<PAGE> 11
under government grants for the three months ended March 31, 2000, compared to
$120,000 for the comparable period in 1999. We expect income from government
grants to decrease in the future.
INTEREST AND OTHER EXPENSE
Interest and other expense was $352,000 for the three months ended March
31, 2000, compared to $146,000 for the comparable period in 1999. The increase
in interest and other expense for 2000 compared to 1999 was primarily the result
of imputing interest for the accretion of our research funding obligation to the
Roslin Institute of $123,000, and accrual of interest on series C convertible
debentures of $54,000.
NET LOSS
Net loss was $6.6 million for the three months ended March 31, 2000,
compared to $3.3 million for the comparable period in 1999. The increase in net
loss for 2000 compared to 1999 was primarily the result of increased operating
expenses combined with a decline in revenues from collaborative agreements. We
expect net loss to increase in the future as a result of increased operating
expenses.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and investments at March 31, 2000 were $77.9
million compared to $42.9 million at December 31, 1999. The increase in cash,
cash equivalents and investments in 2000 was the result of proceeds received
from the exercise of warrants and the sale of common stock to a private
investor. We have an investment policy to invest these funds in liquid,
investment-grade securities, such as interest-bearing money market funds,
commercial paper and federal agency notes.
Net cash used in operations was $4.1 million for the three months ended
March 31, 2000 compared to $2.7 million for the comparable period in 1999. The
increase was primarily due to a higher net loss recognized in 2000 as a result
of increased operating expenses in 2000 with a decrease in revenues from
collaborative agreements. We expect net cash used in operations to increase as a
result of increased research and development expenditures.
Through March 31, 2000, we have invested approximately $9.9 million in
property and equipment, of which approximately $7.5 million was financed through
equipment financing. For the three months ended March 31, 2000, additions of
equipment and leasehold improvements totaled approximately $160,000, most of
which were financed through equipment financing arrangements. Minimum annual
payments due under the equipment financing arrangements are expected to total
$1.2 million, $895,000, $772,000, $182,000 and $2,000 in 2000, 2001, 2002, 2003
and 2004, respectively. As of March 31, 2000, we had approximately $1.0 million
available for borrowing under our equipment financing arrangements. The drawdown
period under the equipment financing arrangements expires on July 31, 2000. We
intend to renew the commitment for new equipment financing arrangements in 2000
to further fund equipment purchases. If we are unable to renew the commitment,
then we will need to spend our own resources for equipment purchases.
We have agreed to fund scientific research at academic and research
institutions. Under these research arrangements, we are obligated to make
minimum annual payments of approximately $3.1 million and $2.5 million in 2000
and 2001, respectively. As of March 31, 2000, we have made payments of
approximately $698,000 to academic and research institutions.
In March 2000, we sold a total of 380,855 shares of our common stock and
300,000 warrants to purchase our common stock to a single investor for $9
million. We structured the sale of securities in two parts. We priced the first
$6.4 million of common stock at $50.32 per share, and set the exercise price for
200,000 warrants at $67.09 per share. We priced the remaining $2.6 million of
common stock at $10.25 per share, and set the exercise price for the remaining
100,000 warrants at $12.50 per share. The common stock and the stock underlying
the warrants are not registered for resale and are subject to a two-year
prohibition on sale by agreement. As of March 31, 2000, all of the warrants
remained outstanding.
During the first quarter of 2000, institutional investors exercised series
A warrants to purchase 625,000 shares of Geron common stock, series B warrants
to purchase 625,000 shares of Geron common stock and series C warrants
11
<PAGE> 12
to purchase 1,100,000 shares of Geron common stock. In total, we received $28.8
million in proceeds from the exercise of these warrants.
In the first quarter of 2000, an institutional investor converted an
aggregate principal amount of $6.25 million plus accrued interest of series C
convertible debentures into 615,069 shares of Geron common stock. In addition,
an institutional investor converted an aggregate principal amount of $3.0
million of series B convertible debentures into 300,000 shares of Geron common
stock. As of March 31, 2000, an aggregate principal amount of $6.25 million of
series C convertible debentures and no series B convertible debentures remained
outstanding.
We estimate that our existing capital resources, payments expected to be
made under the Kyowa Hakko and Pharmacia collaborative agreements, interest
income and equipment financing will be sufficient to fund our current level of
operations through June 2002. Changes in our research and development plans or
other changes affecting our operating expenses may result in the expenditure of
available resources before such time, and in any event, we will need to raise
substantial additional capital to fund our operations in the future. We intend
to seek additional funding through strategic collaborations, public or private
equity financings, capital lease transactions or other financing sources that
may be available.
YEAR 2000 COMPUTER SYSTEMS COMPLIANCE
All of our computer hardware and software has been upgraded for Year 2000
compliance. All of our key vendors have provided assurance that they are Year
2000 compliant. While we are aware of no Year 2000 related problems at the
commencement of the Year 2000, we are maintaining our contingency plans in the
event any problems arise in the future.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
Our business is subject to various risks, including those described below.
You should carefully consider these risk factors, together with all of the other
information included in this Form 10-Q. Any of these risks could materially
adversely affect our business, operating results and financial condition.
OUR BUSINESS IS AT AN EARLY STAGE OF DEVELOPMENT AND WE MAY NOT DEVELOP ANY
PRODUCTS THAT REACH CLINICAL TRIALS
The study of the mechanisms of cellular aging and cellular immortality,
including telomere biology and telomerase, the study of human pluripotent stem
cells, and the process of nuclear transfer are relatively new areas of research.
Our business is at an early stage of development. We have not yet produced any
products that have progressed to clinical trials and we may never do so. Our
ability to produce products that progress to clinical trials is subject to our
ability to, among other things:
- continue to have success with our research and development efforts;
- select therapeutic compounds for development;
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- obtain the required regulatory approvals; and
- manufacture and market resulting products.
If and when potential lead drug compounds or product candidates are
identified through our research programs, they will require significant
preclinical and clinical testing prior to regulatory approval in the United
States and elsewhere. In addition, we will also need to determine whether any of
these potential products can be manufactured in commercial quantities at an
acceptable cost. Our efforts may not result in a product that can be marketed.
Because of the significant scientific, regulatory and commercial milestones that
must be reached for any of our research programs to be successful, any program
may be abandoned, even after significant resources have been expended.
WE HAVE A HISTORY OF OPERATING LOSSES AND ANTICIPATE FUTURE LOSSES; CONTINUED
LOSSES COULD IMPAIR OUR ABILITY TO SUSTAIN OPERATIONS
We have incurred net operating losses every year since our operations
began in 1990. As of March 31, 2000, our accumulated deficit was approximately
$110.6 million. Losses have resulted principally from costs incurred in
connection with our research and development activities and from general and
administrative costs associated with our operations. We expect to incur
additional operating losses over the next several years as our research and
development efforts and preclinical testing activities are expanded.
Substantially all of our revenues to date have been research support payments
under the collaboration agreements with Kyowa Hakko and Pharmacia. The
agreements provide that through 2001, Kyowa Hakko and Pharmacia will provide
additional funding. We may be unsuccessful in entering into any new corporate
collaboration that results in revenues. Even if we are able to obtain new
collaboration arrangements with third parties the revenues generated from these
arrangements will be insufficient to continue or expand our research activities
and otherwise sustain our operations.
We are unable to estimate at this time the level of revenue to be received
from the sale of diagnostic products, and do not currently expect to receive
significant revenues from the sale of research-use-only kits. Our ability to
continue or expand our research activities and otherwise sustain our operations
is dependent on our ability, alone or with others to, among other things,
manufacture and market therapeutic products.
We may never receive material revenues from product sales or that
revenues, if any, may not be sufficient to continue or expand our research
activities and otherwise sustain our operations.
WE WILL NEED ADDITIONAL CAPITAL TO CONDUCT OUR OPERATIONS AND DEVELOP OUR
PRODUCTS, AND OUR ABILITY TO OBTAIN THE NECESSARY FUNDING IS UNCERTAIN
We will require substantial capital resources in order to conduct our
operations and develop our products. While we estimate that our existing capital
resources, payments under the Kyowa Hakko and Pharmacia collaborative
agreements, interest income and equipment financing arrangements will be
sufficient to fund our current level of operations through June 2002, we cannot
guarantee that this will be the case. The timing and degree of any future
capital requirements will depend on many factors, including:
- the accuracy of the assumptions underlying our estimates for our
capital needs in 2000 and beyond;
- continued scientific progress in our research and development
programs;
- the magnitude and scope of our research and development programs;
- our ability to maintain and establish strategic arrangements for
research, development, clinical testing, manufacturing and
marketing;
- our progress with preclinical and clinical trials;
- the time and costs involved in obtaining regulatory approvals;
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- the costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims; and
- the potential for new technologies and products.
We intend to acquire additional funding through strategic collaborations,
public or private equity financings and capital lease transactions. Additional
financing may not be available on acceptable terms, or at all. Additional equity
financings could result in significant dilution to stockholders. Further, in the
event that additional funds are obtained through arrangements with collaborative
partners, these arrangements may require us to relinquish rights to some of our
technologies, product candidates or products that we would otherwise seek to
develop or commercialize ourselves. If sufficient capital is not available, we
may be required to delay, reduce the scope of or eliminate one or more of our
research or development programs, each of which could have a material adverse
effect on our business.
OUR INABILITY TO IDENTIFY AN EFFECTIVE INHIBITOR FOR TELOMERASE MAY PREVENT US
FROM DEVELOPING A VIABLE CANCER TREATMENT PRODUCT, WHICH WOULD ADVERSELY IMPACT
OUR FUTURE BUSINESS PROSPECTS
As a result of our drug discovery efforts to date, we have identified
compounds in laboratory studies that demonstrate potential for inhibiting
telomerase in humans. However, additional development efforts will be required
before we select a lead compound for preclinical development and clinical trials
as a telomerase inhibitor for cancer. We will have to conduct additional
research before we can select a compound and we may never identify a compound
that will enable us to fully develop a commercially viable treatment for cancer.
If and when selected, a lead compound may prove to have undesirable and
unintended side effects or other characteristics affecting its safety or
effectiveness that may prevent or limit its commercial use. In terms of safety,
our discoveries may result in cancer treatment solutions that cause unacceptable
side effects for the human body. Our discoveries may also not be as effective as
is necessary to market a commercially viable product for the treatment of
cancer. As a result, telomerase inhibition may need to be used in conjunction
with other cancer therapies. Accordingly, it may become extremely difficult for
us to proceed with preclinical and clinical development, to obtain regulatory
approval or to market a telomerase inhibitor for the treatment of cancer. If we
abandon our research for cancer treatment for any of these reasons or for other
reasons, our business prospects would be materially and adversely affected.
IF OUR ACCESS TO NECESSARY TISSUE SAMPLES, INFORMATION OR LICENSED TECHNOLOGIES
IS RESTRICTED, WE WILL NOT BE ABLE TO DEVELOP OUR BUSINESS
To continue the research and development of our therapeutic and diagnostic
products, we need access to normal and diseased human and other tissue samples,
other biological materials and related clinical and other information. We
compete with many other companies for these materials and information. We may
not be able to obtain or maintain access to these materials and information on
acceptable terms, if at all. In addition, government regulation in the United
States and foreign countries could result in restricted access to, or
prohibiting the use of, human and other tissue samples. If we lose access to
sufficient numbers or sources of tissue samples, or if tighter restrictions are
imposed on our use of the information generated from tissue samples, our
business will be materially harmed.
SOME OF OUR COMPETITORS MAY DEVELOP TECHNOLOGIES THAT ARE SUPERIOR TO OR MORE
COST-EFFECTIVE THAN OURS, WHICH MAY IMPACT THE COMMERCIAL VIABILITY OF OUR
TECHNOLOGIES AND WHICH MAY SIGNIFICANTLY DAMAGE OUR ABILITY TO SUSTAIN
OPERATIONS
The pharmaceutical and biotechnology industries are intensely competitive.
We believe that other pharmaceutical and biotechnology companies and research
organizations currently engage in or have in the past engaged in efforts related
to the biological mechanisms of cell aging and cell immortality, including the
study of telomeres, telomerase, human pluripotent stem cells, and nuclear
transfer. In addition, other products and therapies that could compete directly
with the products that we are seeking to develop and market currently exist or
are being developed by pharmaceutical and biopharmaceutical companies and by
academic and other research organizations.
Many companies are also developing alternative therapies to treat cancer
and, in this regard, are competitors of ours. Many of the pharmaceutical
companies developing and marketing these competing products have significantly
greater financial resources and expertise than we do in:
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- research and development;
- manufacturing;
- preclinical and clinical testing;
- obtaining regulatory approvals; and
- marketing.
Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. Academic institutions, government agencies and other public and
private research organizations may also conduct research, seek patent protection
and establish collaborative arrangements for research, clinical development and
marketing of products similar to ours. These companies and institutions compete
with us in recruiting and retaining qualified scientific and management
personnel as well as in acquiring technologies complementary to our programs.
There is also competition for access to libraries of compounds to use for
screening. Should we fail to secure and maintain access to sufficiently broad
libraries of compounds for screening potential targets, our business would be
materially harmed.
In addition to the above factors, we expect to face competition in the
following areas:
- product efficacy and safety;
- the timing and scope of regulatory consents;
- availability of resources;
- reimbursement coverage;
- price; and
- patent position, including potentially dominant patent positions of
others.
As a result of the foregoing, our competitors may develop more effective
or more affordable products, or achieve earlier patent protection or product
commercialization than us. Most significantly, competitive products may render
the products that we develop obsolete.
THE ETHICAL, LEGAL AND SOCIAL IMPLICATIONS OF OUR RESEARCH USING PLURIPOTENT
STEM CELLS AND NUCLEAR TRANSFER COULD PREVENT US FROM DEVELOPING OR GAINING
ACCEPTANCE FOR COMMERCIALLY VIABLE PRODUCTS IN THIS AREA
Our programs in regenerative medicine may involve the use of human
pluripotent stem cells that would be derived from human embryonic or fetal
tissue. The use of human pluripotent stem cells gives rise to ethical, legal and
social issues regarding the appropriate use of these cells. In the event that
our research related to human pluripotent stem cells becomes the subject of
adverse commentary or publicity, the market price for our common stock could be
significantly harmed.
Some groups have voiced opposition to our technology and practices. The
concepts of cell regeneration, cell immortality, and genetic cloning have
stimulated significant ethical debates in both the social and political arenas.
We use human pluripotent stem cells derived through a process that uses either
donated embryos that are no longer necessary following a successful in vitro
fertilization procedure or donated fetal material as the starting material.
Further, many research institutions, including some of our scientific
collaborators, have adopted policies regarding the ethical use of human
embryonic and fetal tissue. These policies may have the effect of limiting the
scope of research conducted using human pluripotent stem cells, resulting in
reduced scientific progress. In addition, the United States government and its
agencies currently do not fund research which involves the use of human
embryonic tissue and may in the future regulate or otherwise restrict or
prohibit the public or private use of human embryonic or fetal tissue. Our
inability to conduct research
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using human pluripotent stem cells due to such factors as government regulation
or otherwise could have a material adverse effect on us. Finally we acquired
Roslin Bio-Med to gain the rights to nuclear transfer technology. The Roslin
Institute produced Dolly the sheep in 1997 -- the first mammal cloned from an
adult cell in history. Geron acquired exclusive rights to this technology for
all areas except human cloning and certain other limited applications. Although
we will not be pursuing human reproductive cloning, all of the techniques we
continue to develop for use in agricultural cloning and our nuclear transfer
work for organ regeneration are directly applicable to human cloning should some
other group in the future decide to pursue this avenue. Negative associations
with any or all of these practices could:
- harm our ability to establish critical partnerships and
collaborations;
- prompt government regulation of our technologies;
- cause delays in our research and development; and
- cause a decrease in the price of our stock.
Also, if regulatory bodies were to ban nuclear transfer processes, our
research using nuclear transfer technology could be cancelled and our business
could be significantly harmed.
PUBLIC ATTITUDES TOWARDS GENE THERAPY MAY NEGATIVELY AFFECT REGULATORY
APPROVAL OR PUBLIC PERCEPTION OF OUR PRODUCTS
The commercial success of our product candidates will depend in part on
public acceptance of the use of gene therapies for the prevention or treatment
of human diseases. Public attitudes may be influenced by claims that gene
therapy is unsafe, and gene therapy may not gain the acceptance of the public or
the medical community. Adverse events in the field of gene therapy that have
occurred or may occur in the future also may result in greater governmental
regulation of our product candidates and potential regulatory delays relating to
the testing or approval of our product candidates.
Negative public reaction to gene therapy in the development of certain of
our therapies could result in greater government regulation, stricter clinical
trial oversight, commercial product labeling requirements of gene therapies and
could cause a decrease in the demand for any products that we may develop. The
subject of genetically modified organisms has received negative publicity in
Europe, which has aroused public debate. The adverse publicity in Europe could
lead to greater regulation and trade restrictions on imports of genetically
altered products. If similar adverse public reaction occurs in the United
States, genetic research and resultant products could be subject to greater
domestic regulation and could cause a decrease in the demand for our potential
products.
EVEN IF WE REACH CLINICAL TRIALS WITH ONE OR MORE OF OUR PRODUCTS, THEY MAY NOT
RESULT IN ANY COMMERCIALLY VIABLE PRODUCTS
We do not expect to generate any significant revenues from product sales
for a period of several years. We may never generate revenues from product sales
or become profitable because of a variety of risks inherent in our business,
including risks that:
- clinical trials may not demonstrate the safety and efficacy of our
products;
- completion of clinical trials may be delayed, or costs of clinical
trials may exceed anticipated amounts;
- we may not be able to obtain regulatory approval of our products, or
may experience delays in obtaining such approvals;
- we may not be able to manufacture our drugs economically on a
commercial scale;
- we and our licensees may not be able to successfully market our
products;
- physicians may not prescribe our products, or patients may not
accept such products;
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- others may have proprietary rights which prevent us from marketing
our products; and
- competitors may sell similar, superior or lower-cost products.
IMPAIRMENT OF OUR INTELLECTUAL PROPERTY RIGHTS MAY LIMIT OUR ABILITY TO PURSUE
THE DEVELOPMENT OF OUR INTENDED TECHNOLOGIES AND PRODUCTS
Our success will depend on our ability to obtain and enforce patents for our
discoveries; however, legal principles for biotechnology patents in the United
States and in other countries are not firmly established and the extent to which
we will be able to obtain patent coverage is uncertain
Protection of our proprietary compounds and technology is critically
important to our business. Our success will depend in part on our ability to
obtain and enforce our patents and maintain trade secrets, both in the United
States and in other countries. The patent positions of pharmaceutical and
biopharmaceutical companies, including ours, are highly uncertain and involve
complex legal and technical questions for which legal principles are not firmly
established. We may not continue to develop products or processes that are
patentable, and it is possible that patents will not issue from any of our
pending applications, including allowed patent applications. Further, our
current patents, or patents that issue on pending applications, may be
challenged, invalidated or circumvented, and our current or future patent rights
may not provide proprietary protection or competitive advantages to us. In the
event that we are unsuccessful in obtaining and enforcing patents, our business
would be negatively impacted.
Patent applications in the United States are maintained in secrecy until
patents issue. Publication of discoveries in the scientific or patent literature
tends to lag behind actual discoveries by at least several months and sometimes
several years. Therefore, the persons or entities that we or our licensors name
as inventors in our patents and patent applications may not have been the first
to invent the inventions disclosed in the patent applications or patents, or
file patent applications for these inventions. As a result, we may not be able
to obtain patents from discoveries that we otherwise would consider patentable
and that we consider to be extremely significant to our future success.
Patent prosecution or litigation may also be necessary to obtain patents,
enforce any patents issued or licensed to us or to determine the scope and
validity of our proprietary rights or the proprietary rights of another. We may
not be successful in any patent prosecution or litigation. Patent prosecution
and litigation in general can be extremely expensive and time consuming, even if
the outcome is favorable to us. An adverse outcome in a patent prosecution,
litigation or any other proceeding in a court or patent office could subject our
business to significant liabilities to other parties, require disputed rights to
be licensed from other parties or require us to cease using the disputed
technology.
We may be subject to infringement claims that are costly to defend, and which
may limit our ability to use disputed technologies and prevent us from pursuing
research and development or commercialization of potential products
Our commercial success depends significantly on our ability to operate
without infringing patents and proprietary rights of others. Our technologies
may infringe the patents or proprietary rights of others. In addition, we may
become aware of discoveries and technology controlled by third parties that are
advantageous to our research programs. In the event our technologies do infringe
on the rights of others or we require the use of discoveries and technology
controlled by third parties, we may be prevented from pursuing research,
development or commercialization of potential products or may be required to
obtain licenses to these patents or other proprietary rights or develop or
obtain alternative technologies. We may not be able to obtain alternative
technologies or any required license on commercially favorable terms, if at all.
If we do not obtain the necessary licenses or alternative technologies, we may
be delayed or prevented from pursuing the development of some potential
products. Our breach of an existing license or failure to obtain alternative
technologies or a license to any technology that we may require to develop or
commercialize our products will significantly and negatively affect our
business.
Patent law relating to the scope and enforceability of claims in the
technology fields in which we operate is still evolving, and the degree of
future protection for any of our proprietary rights is highly uncertain. In this
regard, patents may not issue from any of our patent applications. As a result,
our success may become dependent on our ability to obtain licenses for using the
patented discoveries of others. We are aware of patent applications and
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patents that have been filed by others with respect to our technologies and we
may have to obtain licenses to use these technologies. Moreover, other patent
applications may be granted priority over patent applications that we or any of
our licensors have filed. Furthermore, others may independently develop similar
or alternative technologies, duplicate any of our technologies or design around
the patented technologies we have developed. In the event that we are unable to
acquire licenses to critical technologies that we cannot patent ourselves, we
may be required to expend significant time and resources to develop similar
technology, and we may not be successful in this regard. If we cannot acquire or
develop the necessary technology, we may be prevented from pursuing some of our
business objectives. Moreover, one of our competitors could acquire or license
the necessary technology. Any of these events could materially harm our
business.
We may be subject to claims or litigation as a result of entering into
license agreements with third parties or infringing on the patents of others.
For example, we signed a licensing and sponsored research agreement relating to
our research relating to pluripotent stem cells with The Johns Hopkins
University School of Medicine in August 1997. Prior to signing this agreement,
we had been informed by a third party that we and Johns Hopkins University would
violate the rights of that third party and another academic institution in doing
so. After a review of the correspondence with the third party and Johns Hopkins
University, as well as related documents, including an issued United States
patent, we believe that both we and Johns Hopkins University have substantial
defenses to any claims that might be asserted by the third party. We have agreed
to provide indemnification to Johns Hopkins University relating to potential
claims. However, any litigation resulting from this matter may divert
significant resources, both financial and otherwise, from our research programs.
We may be unsuccessful if the matter is litigated. If the outcome of litigation
is unfavorable to us, our business could be materially and adversely affected.
Much of the information and know-how that is critical to our business is not
patentable and we may not be able to prevent others from obtaining this
information and establishing competitive enterprises
We rely extensively on trade secrets to protect our proprietary
technology, especially in circumstances in which patent protection is not
believed to be appropriate or obtainable. We attempt to protect our proprietary
technology in part by confidentiality agreements with our employees, consultants
and contractors. We cannot assure you that these agreements will not be
breached, that we would have adequate remedies for any breach, or that our trade
secrets will not otherwise become known or be independently discovered by
competitors, any of which would harm our business significantly.
SOME OF OUR PATENTS AND PATENT APPLICATIONS RELATING TO TELOMERASE MAY BE
SUBJECT TO CHALLENGE OR BE SUSPENDED BY THE UNITED STATES PATENT AND TRADEMARK
OFFICE, WHICH COULD JEOPARDIZE OUR ABILITY TO COMMERCIALIZE TELOMERASE PRODUCTS
Our patents and patent applications relating to telomerase are critically
important to our development and commercialization of therapeutic and diagnostic
products for applications in oncology and regenerative medicine. Patent
applications covering cloned human telomerase and its uses are pending in
several countries and patent prosecution is ongoing. Although we have been
granted patents in the United Kingdom and Switzerland, we have received
rejections in certain other countries and we may be unable to overcome those
rejections or any others that we may encounter.
The United States Patent and Trademark Office has advised us that the
claims of two of our United States patent applications relating to cloned human
telomerase are allowable, but that further prosecution of these applications has
been suspended pending a determination of whether the initiation of an
interference proceeding is appropriate to ascertain who made the claimed
inventions first. We believe this event indicates, among other things, that the
Patent and Trademark Office has established that at least one other entity has
filed a United States patent application also claiming cloned human telomerase
or its uses. As a result, one or more interferences could be declared, in which
case the United States Patent and Trademark Office would undertake a multi-year
process to decide who made the underlying invention or inventions first. If an
interference is declared one result is that another entity could be awarded the
patents.
Based on the information presently available to us, we believe that we
cloned human telomerase protein prior to any other entity. However, we do not
yet have access to other entities' invention records or their patent application
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files, which are maintained in secrecy by the United States Patent and Trademark
Office. We, therefore, do not have access to all pertinent information for this
analysis. Moreover, as interferences are typically complex, highly contested
legal proceedings subject to appeal, accurately predicting an outcome is not
possible, particularly at this stage. An interference would divert significant
resources, both financial and otherwise, from our research programs.
If interferences or other challenges to our patents are not resolved
promptly in our favor, our existing business relationships could be jeopardized
and we could be delayed or prevented from entering into new collaborations or
from commercializing telomerase products, which could materially harm our
business.
WE DEPEND ON OUR COLLABORATORS TO HELP US COMPLETE THE PROCESS OF DEVELOPING AND
TESTING OUR PRODUCTS AND OUR ABILITY TO DEVELOP AND COMMERCIALIZE PRODUCTS MAY
BE IMPAIRED OR DELAYED IF OUR COLLABORATIVE PARTNERSHIPS ARE UNSUCCESSFUL
Our strategy for the development, clinical testing and commercialization
of our products requires entering into collaborations with corporate partners,
licensors, licensees and others. We are dependent upon the subsequent success of
these other parties in performing their respective responsibilities and the
continued cooperation of our partners. Our collaborators may not cooperate with
us or perform their obligations under our agreements with them. We cannot
control the amount and timing of our collaborators' resources that will be
devoted to our research activities related to our collaborative agreements with
them. Our collaborators may choose to pursue existing or alternative
technologies in preference to those being developed in collaboration with us.
Our ability to successfully develop and commercialize telomerase
inhibition products depends on our corporate alliances with Kyowa Hakko and
Pharmacia, and our ability to successfully develop and commercialize telomerase
diagnostic products depends on our corporate alliance with Roche Diagnostics.
Under our collaborative agreements with these collaborators, we rely
significantly on them, among other activities, to:
- design and conduct advanced clinical trials in the event that we
reach clinical trials;
- fund research and development activities with us;
- pay us fees upon the achievement of milestones; and
- co-promote with us any commercial products that result from our
collaborations.
The development and commercialization of products from these
collaborations will be delayed if Kyowa Hakko, Pharmacia or Roche Diagnostics
fail to conduct these collaborative activities in a timely manner or at all. In
addition, Kyowa Hakko, Pharmacia or Roche Diagnostics could terminate these
agreements and we may not receive any development or milestone payments. If we
do not receive research funds or achieve milestones set forth in the agreements,
or if Kyowa Hakko, Pharmacia or Roche Diagnostics or any of our future
collaborators breach or terminate collaborative agreements with us, our business
may be materially harmed.
OUR RELIANCE ON THE RESEARCH ACTIVITIES OF OUR NON-EMPLOYEE SCIENTIFIC ADVISORS
AND OTHER RESEARCH INSTITUTIONS, WHOSE ACTIVITIES ARE NOT WHOLLY WITHIN OUR
CONTROL, MAY LEAD TO DELAYS IN TECHNOLOGICAL DEVELOPMENTS
We rely extensively and have relationships with scientific advisors at
academic and other institutions, some of whom conduct research at our request.
These scientific advisors are not our employees and may have commitments to, or
consulting or advisory contracts with, other entities that may limit their
availability to us. We have limited control over the activities of these
advisors and, except as otherwise required by our collaboration and consulting
agreements, can expect only limited amounts of their time to be dedicated to our
activities. If our scientific advisors are unable or refuse to contribute to the
development of any of our potential discoveries, our ability to generate
significant advances in our technologies will be significantly harmed.
In addition, we have formed research collaborations with many academic and
other research institutions throughout the world, including the Roslin
Institute. These research facilities may have commitments to other commercial
and non-commercial entities. We have limited control over the operations of
these laboratories and can expect only limited amounts of time to be dedicated
to our research goals.
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UNEXPECTED COSTS AND OTHER DIFFICULTIES ARISING FROM OUR ACQUISITION OF ROSLIN
BIO-MED LTD. AND SIMULTANEOUS RESEARCH COLLABORATION WITH THE ROSLIN INSTITUTE
MAY DRAIN HUMAN AND FINANCIAL RESOURCES, OR OTHERWISE NEGATIVELY AFFECT OUR
OPERATIONS
In May 1999, we acquired Roslin Bio-Med, a private company located in
Scotland which was established by the Roslin Institute to develop nuclear
transfer technology. Our acquisition of Roslin Bio-Med and formation of a
research collaboration with the Roslin Institute have expanded the scope of our
business and operations. As a result, we may be presented with operational
issues that we have not previously faced as a company, but which generally
accompany acquisitions and research collaborations of this nature, including:
- the potential disruption of ongoing business and distraction of
management;
- unanticipated expenses related to technology and research
integration; and
- the difficulty of implementing and maintaining uniform standards,
controls, procedures and policies.
We may not be able to overcome any of these obstacles, and our failure to
do so could prevent us from achieving the perceived benefits of the acquisition
and collaboration and negatively impact our research activities and results of
operations.
In addition, our agreement with the Roslin Institute obligated us to
provide approximately $20 million in development funding. If we are unable to
fulfill this significant obligation, the Roslin Institute could terminate the
agreement and we would lose our rights to the technology.
THE ACQUISITION OF ROSLIN BIO-MED HAS SUBJECTED US TO THE UNCERTAINTY INHERENT
IN INTERNATIONAL OPERATIONS, AND WE HAVE LIMITED EXPERIENCE WITH INTERNATIONAL
OPERATIONS
To date, we have only limited experience in managing operations
internationally. Our acquisition of Roslin Bio-Med represents our first
experience in managing international operations. As a result of our
international expansion, we are now subject to the uncertainties inherent in
international operations, including:
- unexpected changes in regulatory requirements;
- compliance with international laws;
- difficulties in staffing and managing international operations
including those that arise as a result of distance, language and
cultural differences;
- currency exchange rate fluctuations;
- political instability;
- export restrictions; and
- potentially adverse tax consequences.
One or more of these factors could materially harm our future
international operations, the success of our acquisition of Roslin Bio-Med and,
consequently, our business, operating results, and financial condition.
Similarly, our collaborations with international partners such as the Roslin
Institute, Pharmacia, Kyowa Hakko and Roche Diagnostics could also subject us to
the above described international uncertainties.
THE LOSS OF KEY PERSONNEL COULD SLOW OUR ABILITY TO CONDUCT RESEARCH AND DEVELOP
PRODUCTS
Our future success depends to a significant extent on the skills,
experience and efforts of our executive officers and key members of our
scientific staff. Competition for personnel is intense and we may be unable to
retain our
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current personnel or attract or assimilate other highly qualified management and
scientific personnel in the future. The loss of any or all of these individuals
could harm our business and might significantly delay or prevent the achievement
of research, development or business objectives.
We also rely on consultants and advisors, including the members of our
Scientific Advisory Board, who assist us in formulating our research and
development strategy. We face intense competition for qualified individuals from
numerous pharmaceutical, biopharmaceutical and biotechnology companies, as well
as academic and other research institutions. We may not be able to attract and
retain these individuals on acceptable terms. Failure to do so would materially
harm our business.
WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN SUFFICIENT INSURANCE ON COMMERCIALLY
REASONABLE TERMS OR WITH ADEQUATE COVERAGE AGAINST POTENTIAL LIABILITIES IN
ORDER TO PROTECT OURSELVES AGAINST PRODUCT LIABILITY CLAIMS
Our business exposes us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of human therapeutic and
diagnostic products. We may become subject to product liability claims if the
use of our products is alleged to have injured subjects or patients. This risk
exists for products tested in human clinical trials as well as products that are
sold commercially. We currently have no clinical trial liability insurance and
we may not be able to obtain and maintain this type of insurance for any of our
clinical trials. In addition, product liability insurance is becoming
increasingly expensive. As a result, we may not be able to obtain or maintain
product liability insurance in the future on acceptable terms or with adequate
coverage against potential liabilities which could have a material adverse
effect on us.
BECAUSE WE OR OUR COLLABORATORS MUST OBTAIN REGULATORY APPROVAL TO MARKET OUR
PRODUCTS IN THE UNITED STATES AND FOREIGN JURISDICTIONS, WE CANNOT PREDICT
WHETHER OR WHEN WE WILL BE PERMITTED TO COMMERCIALIZE OUR PRODUCTS
Federal, state and local governments in the United States and governments
in other countries have significant regulations in place that govern many of our
activities. The preclinical testing and clinical trials of the products that we
develop ourselves or that our collaborators develop are subject to intense
government regulation and may prevent us from creating commercially viable
products from our discoveries. In addition, the sale by us or our collaborators
of any commercially viable product will be subject to government regulation from
several standpoints, including the processes of:
- manufacturing;
- advertising and promoting;
- selling and marketing;
- labeling; and
- distributing.
We may not obtain regulatory approval for the products we develop and our
collaborators may not obtain regulatory approval for the products they develop.
Regulatory approval may also entail limitations on the indicated uses of a
proposed product. Because certain of our product candidates involve the
application of new technologies and may be based upon a new therapeutic
approach, such products may be subject to substantial additional review by
various government regulatory authorities, and, as a result, we may obtain
regulatory approvals for such products more slowly than for products based upon
more conventional technologies. If, and to the extent that, we are unable to
comply with these regulations, our ability to earn revenues will be materially
and negatively impacted.
The regulatory process, particularly for biopharmaceutical products like
ours, is uncertain, can take many years and requires the expenditure of
substantial resources. Any product that we or our collaborative partners develop
must receive all relevant regulatory agency approvals or clearances, if any,
before it may be marketed in the United States or other countries. Generally,
biological drugs and non-biological drugs are regulated more rigorously than
medical devices. In particular, human pharmaceutical therapeutic products,
including a telomerase inhibitor, are
21
<PAGE> 22
subject to rigorous preclinical and clinical testing and other requirements by
the Food and Drug Administration in the United States and similar health
authorities in foreign countries. The regulatory process, which includes
extensive preclinical testing and clinical trials of each product in order to
establish its safety and efficacy, is uncertain, can take many years and
requires the expenditure of substantial resources.
Data obtained from preclinical and clinical activities is susceptible to
varying interpretations that could delay, limit or prevent regulatory agency
approvals or clearances. In addition, delays or rejections may be encountered
based upon changes in regulatory agency policy during the period of product
development and/or the period of review of any application for regulatory agency
approval or clearance for a product. Delays in obtaining regulatory agency
approvals or clearances could:
- significantly harm the marketing of any products that we or our
collaborators develop;
- impose costly procedures upon our activities or the activities of
our collaborators;
- diminish any competitive advantages that we or our collaborative
partners may attain; or
- adversely affect our ability to receive royalties and generate
revenues and profits.
Even if we commit the time and resources, both economic and otherwise,
that are necessary, the required regulatory agency approvals or clearances may
not be obtained for any products developed by or in collaboration with us. If
regulatory agency approval or clearance for a new product is obtained, this
approval or clearance may entail limitations on the indicated uses for which it
may be marketed that could limit the potential commercial use of the product.
Furthermore, approved products and their manufacturers are subject to continual
review, and discovery of previously unknown problems with a product or its
manufacturer may result in restrictions on the product or manufacturer,
including withdrawal of the product from the market. Failure to comply with
regulatory requirements can result in severe civil and criminal penalties,
including but not limited to:
- recall or seizure of products;
- injunction against manufacture, distribution, sales and marketing;
and
- criminal prosecution.
The imposition of any of these penalties could significantly impair our
business, financial condition and results of operations.
TO BE SUCCESSFUL, OUR PRODUCTS MUST BE ACCEPTED BY THE HEALTH CARE COMMUNITY,
WHICH CAN BE VERY SLOW TO ADOPT OR UNRECEPTIVE TO NEW TECHNOLOGIES AND PRODUCTS
Our products and those developed by our collaborative partners, if
approved for marketing, may not achieve market acceptance since physicians,
patients or the medical community in general may decide to not accept and
utilize these products. The products that we are attempting to develop may
represent substantial departures from established treatment methods and will
compete with a number of traditional drugs and therapies manufactured and
marketed by major pharmaceutical companies. The degree of market acceptance of
any of our developed products will depend on a number of factors, including:
- our establishment and demonstration to the medical community of the
clinical efficacy and safety of our product candidates;
- our ability to create products that are superior to alternatives
currently on the market;
- our ability to establish in the medical community the potential
advantage of our treatments over alternative treatment methods; and
- reimbursement policies of government and third-party payors.
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<PAGE> 23
If the health care community does not accept our products for any of the
foregoing reasons, or for any other reason, our business would be materially
harmed.
THE REIMBURSEMENT STATUS OF NEWLY-APPROVED HEALTH CARE PRODUCTS IS UNCERTAIN AND
FAILURE TO OBTAIN REIMBURSEMENT APPROVAL COULD SEVERELY LIMIT THE USE OF OUR
PRODUCTS
Significant uncertainty exists as to the reimbursement status of newly
approved health care products, including pharmaceuticals. If we fail to generate
adequate third party reimbursement for the users of our potential products and
treatments, then we may be unable to maintain price levels sufficient to realize
an appropriate return on our investment in product development.
In both domestic and foreign markets, sales of our products, if any, will
depend in part on the availability of reimbursement from third-party payors,
examples of which include:
- government health administration authorities;
- private health insurers;
- health maintenance organizations; and
- pharmacy benefit management companies.
Both federal and state governments in the United States and foreign
governments continue to propose and pass legislation designed to contain or
reduce the cost of health care through various means. Legislation and
regulations affecting the pricing of pharmaceuticals and other medical products
may change or be adopted before any of our potential products are approved for
marketing. Cost control initiatives could decrease the price that we receive for
any product we may develop in the future. In addition, third-party payors are
increasingly challenging the price and cost-effectiveness of medical products
and services and any of our potential products and treatments may ultimately not
be considered cost effective by these third parties. Any of these initiatives or
developments could materially harm our business.
OUR ACTIVITIES INVOLVE HAZARDOUS MATERIALS AND IMPROPER HANDLING OF THESE
MATERIALS BY OUR EMPLOYEES OR AGENTS COULD EXPOSE US TO SIGNIFICANT LEGAL AND
FINANCIAL PENALTIES
Our research and development activities involve the controlled use of
hazardous materials, chemicals and various radioactive compounds. As a
consequence, we are subject to numerous environmental and safety laws and
regulations, including those governing laboratory procedures, exposure to
blood-borne pathogens and the handling of biohazardous materials. We may be
required to incur significant costs to comply with current or future
environmental laws and regulations and may be adversely affected by the cost of
compliance with these laws and regulations.
Although we believe that our safety procedures for using, handling,
storing and disposing of hazardous materials comply with the standards
prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be eliminated. In the event
of such an accident, state or federal authorities could curtail our use of these
materials and we could be liable for any civil damages that result, the cost of
which could be substantial. Further, any failure by us to control the use,
disposal, removal or storage of, or to adequately restrict the discharge of, or
assist in the cleanup of, hazardous chemicals or hazardous, infectious or toxic
substances could subject us to significant liabilities, including joint and
several liability under certain statutes, and any liability could exceed our
resources and could have a material adverse effect on our business, financial
condition and results of operations. Additionally, an accident could damage our
research and manufacturing facilities and operations.
Additional federal, state and local laws and regulations affecting us may
be adopted in the future. We may incur substantial costs to comply with and
substantial fines or penalties if we violate any of these laws or regulations.
23
<PAGE> 24
OUR STOCK PRICE HAS HISTORICALLY BEEN VERY VOLATILE.
Stock prices and trading volumes for many biopharmaceutical companies
fluctuate widely for a number of reasons, including some reasons which may be
unrelated to their businesses or results of operations such as media coverage,
legislation and regulatory measures and the activities of various protest groups
or organizations. This market volatility, as well as general domestic or
international economic, market and political conditions, could materially and
adversely affect the market price of our common stock and your return on your
investment.
Historically, our stock price has been extremely volatile. Between January
1998 and March 31, 2000, our stock has traded as high as $75.88 per share and as
low as $3.50 per share. The significant market price fluctuations of our common
stock are due to a variety of factors, including:
- depth of the market for the common stock;
- the experimental nature of our prospective products;
- fluctuations in our operating results;
- market conditions relating to the biopharmaceutical and
pharmaceutical industries;
- any announcements of technological innovations, new commercial
products or clinical progress or lack thereof by us, our
collaborative partners or our competitors; or
- announcements concerning regulatory developments, developments with
respect to proprietary rights and our collaborations.
In addition, the stock market is subject to other factors outside our
control that can cause extreme price and volume fluctuations. Securities class
action litigation has often been brought against companies, including many
biotechnology companies, which then experience volatility in the market price of
their securities. Litigation brought against us could result in substantial
costs and a diversion of management's attention and resources, which could
adversely affect our business.
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES, INCLUDING SHARES THAT WILL BECOME
ELIGIBLE FOR SALE IN THE NEAR FUTURE, MAY ADVERSELY AFFECT THE MARKET PRICE FOR
OUR COMMON STOCK
Sales of substantial number of shares of our common stock in the public
market could significantly and negatively affect the market price for our common
stock. As of March 31, 2000, we had approximately 21,422,490 shares of common
stock outstanding. Of these shares, approximately 8,017,367 shares were issued
(including shares issuable upon conversion or exercise of convertible notes or
warrants) since December 1998 pursuant to private placements. Of these shares,
approximately 7,336,512 shares have been registered pursuant to shelf
registration statements and therefore may be resold (if not sold prior to the
date hereof) in the public market and approximately 680,855 of the remaining
shares may be resold pursuant to Rule 144 into the public markets as early as
March 9, 2002 upon the expiration of a lockup agreement with us.
OUR UNDESIGNATED PREFERRED STOCK MAY INHIBIT POTENTIAL ACQUISITION BIDS; THIS
MAY ADVERSELY AFFECT THE MARKET PRICE FOR OUR COMMON STOCK AND THE VOTING RIGHTS
OF THE HOLDERS OF COMMON STOCK
Our certificate of incorporation provides our board of directors with the
authority to issue up to 3,000,000 shares of undesignated preferred stock and to
determine the rights, preferences, privileges and restrictions of these shares
without further vote or action by the stockholders. As of the date of this Form
10-Q, the Board of Directors still has authority to designate and issue up to
3,000,000 shares of preferred stock. The rights of the holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of shares
of preferred stock may delay or prevent a change in control transaction without
further action by our stockholders. As a result, the market price of our common
stock may be adversely affected. The issuance of preferred stock may also result
in the loss of voting control by others.
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<PAGE> 25
PROVISIONS IN OUR CHARTER AND BYLAWS, AND PROVISIONS OF DELAWARE LAW, MAY
INHIBIT POTENTIAL ACQUISITION BIDS FOR US, WHICH MAY PREVENT HOLDERS OF OUR
COMMON STOCK FROM BENEFITING FROM WHAT THEY BELIEVE MAY BE THE POSITIVE ASPECTS
OF ACQUISITIONS AND TAKEOVERS
In addition to the undesignated preferred stock, provisions of our charter
documents and bylaws may make it substantially more difficult for a third party
to acquire control of us and may prevent changes in our management, including
provisions that:
- prevent stockholders from taking actions by written consent;
- divide the board of directors into separate classes with terms of
office that are structured to prevent all of the directors from
being elected in any one year; and
- set forth procedures for nominating directors and submitting
proposals for consideration at stockholders' meetings.
Provisions of Delaware law may also inhibit potential acquisition bids for
us or prevent us from engaging in business combinations.
Either collectively or individually, these provisions may prevent holders
of our common stock from benefiting from what they may believe are the positive
aspects of acquisitions and takeovers, including the potential realization of a
higher rate of return on their investment from these types of transactions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to changes in interest rates and
foreign currency exchange rates. We do not use derivative financial instruments
for speculative or trading purposes.
Interest Rate Sensitivity. The fair value of our available for sale
securities at March 31, 2000 was $74.7 million. These investments include $49.3
million of cash and cash equivalents which are due in less than 90 days, $2.5
million of short-term investments which are due in less than one year and $22.9
million in long-term investments which are due in one to two years. Our
investment policy is to manage our marketable securities portfolio to preserve
principal and liquidity while maximizing the return on the investment portfolio
through the full investment of available funds. We diversify the marketable
securities portfolio by investing in multiple types of investment grade
securities. We primarily invest our marketable securities portfolio in
short-term securities with at least an investment grade rating to minimize
interest rate and credit risk as well as to provide for an immediate source of
funds. Although changes in interest rates may affect the fair value of the
marketable securities portfolio and cause unrealized gains or losses, such gains
or losses would not be realized unless the investments are sold. Due to the
nature of our investments, which are primarily corporate and municipal notes and
money market funds, we have concluded that there is no material market risk
exposure.
Foreign Currency Exchange Risk. Because we translate foreign currencies
into United States dollars for reporting purposes, currency fluctuations can
have an impact, though generally immaterial, on our results. We believe that our
exposure to currency exchange fluctuation risk is insignificant primarily
because our international subsidiary satisfies its financial obligations almost
exclusively in its local currencies. For the three moths ended March 31, 2000,
there was an immaterial currency exchange impact from our intercompany
transactions. However, the financial obligations of Geron to the Roslin
Institute over the next five years are stated in British pounds sterling. This
obligation may become more expensive for us if the United States dollar becomes
weaker against the British pounds sterling. As of March 31, 2000, we did not
engage in foreign currency hedging activities.
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<PAGE> 26
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In March 2000, we sold a total of 380,855 shares of our common stock and
300,000 warrants to purchase our common stock to a single investor for $9
million. We structured the sale of securities in two parts. We priced the first
$6.4 million of common stock at $50.32 per share, and set the exercise price for
200,000 warrants at $67.09 per share. We priced the remaining $2.6 million of
common stock at $10.25 per share, and set the exercise price for the remaining
100,000 warrants at $12.50 per share. The common stock and the stock underlying
the warrants are not registered for resale and are subject to a two-year
prohibition on sale by agreement. As of March 31, 2000, all of the warrants
remained outstanding. This transaction was exempt from registration under the
Securities Act of 1933, as amended, under Section 4(2) thereof, as a transaction
not involving a public offering.
During the first quarter of 2000, institutional investors exercised series
A warrants to purchase 625,000 shares of Geron common stock, series B warrants
to purchase 625,000 shares of Geron common stock and series C warrants to
purchase 1,100,000 shares of Geron common stock. In total, we received $28.8
million in proceeds from the exercise of these warrants. These transactions
were exempt from registration under the Securities Act of 1933, as amended,
under Section 4(2) thereof, as a transaction not involving a public offering.
In the first quarter of 2000, an institutional investor converted an
aggregate principal amount of $6.25 million plus accrued interest of series C
convertible debentures into 615,069 shares of Geron common stock. In addition,
an institutional investor converted an aggregate principal amount of $3.0
million of series B convertible debentures into 300,000 shares of Geron common
stock of $0.00 per share. As of March 31, 2000, an aggregate principal amount of
$6.25 million of series C convertible debentures and no series B convertible
debentures remained outstanding. This issuance was exempt from registration
under the Securities Act of 1933 pursuant to Section 3(a)(9) thereof as an
exchange with an existing security holder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<S> <C>
4.7 Securities Purchase Agreement
4.8 Warrant - EMP100
4.9 Warrant - EMP101
27.1 Financial Data Schedule
</TABLE>
(b) REPORTS ON FORM 8-K
(i) The Company filed a report on Form 8-K dated March 14, 2000
reporting the sale of common stock to a private investor.
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<PAGE> 27
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, thereunto duly authorized.
GERON CORPORATION
By: /s/ DAVID L. GREENWOOD
----------------------------------
David L. Greenwood
Senior Vice President and
Chief Financial Officer
(Duly Authorized Signatory)
Date: May 10, 2000
27
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
4.7 Securities Purchase Agreement
4.8 Warrant - EMP100
4.9 Warrant - EMP101
27.1 Financial Data Schedule
</TABLE>
28
<PAGE> 1
EXHIBIT 4.7
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is made as of the 9th day of March,
2000 (the "Effective Date"), by and between Geron Corporation, a Delaware
corporation having its principal place of business at 230 Constitution Drive,
Menlo Park, California, U.S.A. 94025 (the "Company"), and Eve M. Patton, an
individual residing at Penthouse 28A, Harston Tower, 109 Repulse Bay Road, Hong
Kong, China (the "Investor").
RECITALS
WHEREAS, the Company is a reporting company under the Securities and
Exchange Act of 1934, as amended; and
WHEREAS, the Investor has agreed to purchase, and the Company has agreed
to sell, in a private placement transaction, certain shares of the Company's
common stock, par value $ 0.001 per share (the "Common Stock") and certain
warrants, in the form attached hereto as EXHIBIT B (the "Warrants") to purchase
additional shares of Common Stock (the "Warrant Shares") (the Warrant Shares,
the Common Stock and the Warrants referred to in aggregate as the "Securities"),
on the terms set forth in this Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
ARTICLE I.
PURCHASE AND SALE OF THE COMMON STOCK AND THE WARRANTS.
1.1 Sale and Issuance of Common Stock and Warrants.
Subject to the terms and conditions of this Agreement, the Company shall
issue and sell to the Investor, and the Investor shall purchase from the
Company:
(A) At the Closing (as defined below):
(i) Common Stock: (a) 253,658 shares of Common Stock at a purchase
price of $10.25 per share, and (b) 127,197 shares of Common Stock at a
purchase price of $50.32 per share, for an aggregate total of 380,855
shares of Common Stock; and
(ii) Warrants: Warrants to purchase (a) 100,000 Warrant Shares at
an exercise price of $12.50 per Warrant Share, and (b) 200,000 Warrant
Shares at an exercise price of $67.09 per Warrant Share.
1
<PAGE> 2
(B) Such Common Stock and Warrants are summarized on EXHIBIT A hereto,
which Exhibit is hereby incorporated by reference as though set forth in
its entirety herein.
1.2 Consideration.
In consideration of the sale and issuance of the Common Stock and Warrants
as set forth above, Investor shall pay the Company the sum of nine million
United States dollars (U.S. $9,000,000) (the "Consideration") no later
than March 9, 2000, or such other date as may be mutually agreed in
writing, by wire transfer to a bank account designated by the Company.
1.3 The Closing.
The closing of the purchase and sale of the Common Stock and Warrants
shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom
LLP, 525 University Avenue, Suite 220, Palo Alto, CA 93401 at 9:00 A.M. on
March 9, 2000 (the "Closing"). At the Closing and subject to payment by
Investor of the Consideration, the Company shall deliver to the Investor
(i) a certificate representing 380,855 shares of Common Stock and (ii)
Warrants to purchase 100,000 Warrant Shares at an exercise price of $12.50
per Warrant Share and 200,000 Warrant Shares at an exercise price of
$67.09 per Warrant Share, against delivery to the Company by the Investor
of a wire transfer in the amount of U.S. $9,000,000 payable to the
Company's order.
1.4 No Registration of Shares.
Investor acknowledges that (i) the shares of Common Stock and the Warrant
Shares will be issued to Investor without registration under the
Securities Act of 1933, as amended (the "Securities Act"), in a private
placement that is exempt from the registration provisions of the
Securities Act and in reliance on Rule 501 promulgated thereunder by the
United States Securities and Exchange Commission (the "SEC") and (ii) the
availability of such exemption and the applicability of exemption and Rule
501 depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the representations set forth in Article II, and the
Investor hereby consents to such reliance.
ARTICLE II.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR.
2.1 The Investor hereby represents, warrants and covenants that:
(a) Authorization. The Investor has full power and authority to enter
into this Agreement. This Agreement has been duly authorized,
executed and delivered by such Investor and constitutes the
Investor's valid and legally
2
<PAGE> 3
binding obligation, enforceable in accordance with its terms,
subject to bankruptcy and other laws of general application
affecting the rights of creditors, and except to the extent that the
availability of any equitable remedy is subject to the discretion of
a court.
(b) Purchase Entirely for Own Account. This Agreement is made with the
Investor in reliance upon the Investor's representations to the
Company, which by the Investor's execution of this Agreement the
Investor hereby confirms, that the Securities will be acquired for
investment for the Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part
thereof, and that the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same.
By executing this Agreement, the Investor further represents that
the Investor does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation
to such person or to any third person, with respect to any of the
shares of Common Stock or the Warrants.
(c) Disclosure of Information. The Investor hereby acknowledges that the
Investor has obtained a copy of (i) the Company's annual report on
Form 10-K for the year ended December 31, 1998 (the "Annual Report")
and (ii) the Company's quarterly report on Form 10-Q for the quarter
ended September 30, 1999 (the "September 10-Q"). Investor also
acknowledges that the Investor has had an opportunity to ask
questions and receive answers from the Company regarding the
Company's business and the terms and conditions of the sale and
issuance of the Common Stock and the Warrants.
(d) Investment Experience. The Investor represents and warrants that the
Investor can bear the economic risk of the investment hereunder and
has such knowledge and experience in financial or business matters
that the Investor is capable of evaluating the merits and risks of
the investment in the Common Stock and the Warrants. The Investor is
and will continue at all times to be an "accredited investor" as
defined in Rule 501 under the Securities Act.
(e) Consents. No consent, approval or authorization of or designation,
declaration or filing with any state, federal or foreign
governmental authority on the part of the Investor is required in
connection with the valid execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and
thereby.
(f) No Public Solicitation. The offering, issuance and sale of the
Common Stock and the Warrants of the Company to the Investor was and
is made solely in connection with negotiations between the parties
and not as part of any public solicitation.
(g) Transfer and Use Restrictions. If the Investor should decide to
dispose of the Common Stock, the Warrants or the Warrant Shares held
by the Investor, the
3
<PAGE> 4
Investor understands and agrees that it may do so only (i) to the
Company, (ii) pursuant to an available exemption from the
registration requirements of the Securities Act, or (iii) pursuant
to Rule 144 under the Securities Act. In connection with any
transfer of any Common Stock, Warrant, or Warrant Shares pursuant to
clause (ii) of the preceding sentence, the Investor shall provide to
the Company a written opinion of counsel experienced in the area of
United States securities laws selected by the Investor and
acceptable to the Company, the form and substance of which opinion
shall be customary for opinions of counsel in comparable
transactions, to the effect that such transfer does not require
registration of such transferred securities under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register any transfer by the Investor to (i) Noel
Thomas Patton, (ii) the immediate family members (i.e. parents,
siblings or children, thereof) of the Investor or Noel Thomas
Patton, or (iii) entities controlled by the Investor or Noel Thomas
Patton or their immediate family members, provided that the
transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501 under the Securities Act and agrees
to be bound by the terms of this Agreement. Such transferee shall
have the rights and obligations of the Investor under this
Agreement. Investor acknowledges and agrees that neither the Common
Stock nor the Warrants shall be used in connection with any hedging,
derivative or other trading strategy, whether by Investor or any
third party. Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account; provided,
however, that upon execution of any such pledge, the pledgee shall
be subject to the restrictions on transfer of the Securities
contained in this Agreement. Any transfer of the Securities in
contravention of this Section 2.1(g) shall be null and void.
(h) Restrictive Legend. The Investor agrees to the imprinting, so long
as is required by this Agreement, of the following legend on the
Common Stock, the Warrants and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY
BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
Neither the Common Stock, the Warrants, nor the Warrant Shares shall
contain the legend set forth above if (i) in the written opinion of
counsel to the Company such legend is not required under applicable
requirements of the
4
<PAGE> 5
Securities Act, (ii) the Registered Holder provides the Company with
reasonable assurances that such security can be sold pursuant to
Rule 144 under the Securities Act and such security is sold pursuant
to Rule 144, or (iii) such Common Stock, Warrants or Warrant Shares
may be sold pursuant to Rule 144 (k) under the Securities Act. The
Company agrees that it will provide the Investor, upon request, with
a certificate or certificates representing Common Stock, Warrants or
Warrant Shares, free from such legend at such time as such legend is
no longer required hereunder. Investor agrees to sell all Common
Stock, Warrants and Warrant Shares, including those from which the
legend set forth in this section has been removed, in compliance
with all applicable prospectus delivery requirements under the
Securities Act pursuant to Rule 144 under the Securities Act or
pursuant to another available exemption under the Securities Act.
(i) Stop Transfer Instruction. The Company may make notations on its
records or give instructions to any transfer agent with regard to
the restrictions on transfer set forth in Section 2.1(g) and Section
2.1(h) hereof; provided, however, the Company may not make any
notation on its records or give instructions to any transfer agent
of the Company which enlarge the restrictions on transfer set forth
in Section 2.1(g) and Section 2.1(h).
ARTICLE III.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
3.1 Organization. The Company (a) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware; (b)
it and each of its subsidiaries has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as it is presently being conducted; and (c) it and each of its
subsidiaries is qualified and is in good standing as a foreign corporation
in all jurisdictions in which the failure to so qualify would have a
Material Adverse Effect on its business or properties. "Material Adverse
Effect" means any material adverse effect on (i) the business, operations,
assets or financial condition of the Company and its subsidiaries, if any,
taken as a whole, or (ii) the authority or the ability of the Company to
perform its obligations under this Agreement or the Warrants.
3.2 Authorization. The Company has requisite power and authority to enter into
this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes its valid and legally binding
obligation, enforceable in accordance with its terms, subject to
bankruptcy and other laws of general application affecting the rights of
creditors, and except to the extent that the availability of any equitable
remedy is subject to the discretion of the court.
3.3 Validity of Shares. The shares of Common Stock to be delivered to the
Investor pursuant to this Agreement, when issued in accordance with the
terms and
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<PAGE> 6
provisions of this Agreement, will be validly authorized, validly issued,
fully paid and nonassessable.
3.4 SEC Documents. The Company has filed or obtained an extension with respect
to all required reports, schedules, forms, statements and other documents
with the SEC since December 1, 1996 (the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act, or the Securities Exchange Act of
1934, as amended, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such SEC Documents.
3.5 Capital Structure. The authorized capital stock of the Company consists of
35,000,000 shares of common stock, $.001 par value, and 3,000,000 shares
of preferred stock, $.001 par value. At the close of business on March 1,
2000 (i) 18,523,503 shares of Common Stock were issued and outstanding;
(ii) no shares of Common Stock were held in treasury; (iii) 6,501,713
shares of Common Stock were reserved for issuance upon the conversion of
outstanding debentures, or exercise of warrants or options; and (iv) no
shares of preferred stock were outstanding.
3.6 Non-Contravention. To the Company's knowledge, neither the execution and
delivery of this Agreement nor the consummation or performance of the sale
of Common Stock or Warrants hereby will (with or without notice or lapse
of time): (i) contravene, conflict with, or result in a violation of (a)
any provision of the certificate of incorporation or other organizational
documents of the Company, or (b) any resolution adopted by the Board of
Directors or the stockholders of the Company; or (ii) contravene, conflict
with, or result in a violation or breach of any material provision of, or
give any person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to terminate,
any material agreement of the Company filed as an exhibit(s) in the SEC
Documents.
3.7 No Adverse Change. Since September 30, 1999, except as disclosed to the
Investor in writing or as disclosed in the SEC Documents, there has not
been:
(a) any change in the assets, properties, liabilities, financial
condition, operating results, or business of the Company from that
reflected in the September 10-Q, except changes in the ordinary
course of business which have not, in the aggregate, had a Material
Adverse Effect; or
(b) any incurrence of any other liabilities which, individually or in
the aggregate, would have a Material Adverse Effect.
3.8 Litigation. Except as set forth in the SEC Documents, there is no action,
proceeding or investigation pending, to the Company's knowledge, that if
determined adversely to the Company, would have, individually or in the
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<PAGE> 7
aggregate, a Material Adverse Effect. To the Company's knowledge, there is
no judgment, decree or order of any court, or governmental or regulatory
authority in effect against the Company. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company presently intends to initiate.
3.9 Intellectual Property Rights. Except as described in the SEC Documents or
as otherwise disclosed in writing to Investor and its counsel: (a) to the
Company's knowledge, the Company has not received any communications from
any third party alleging that the Company has violated or would violate
the IP Rights (as defined below) of that third party by conducting its
business as now conducted, except where such violation would not have a
Material Adverse Effect on the Company; and (b) other than its publicly
disclosed agreements, the Company has not granted any options, licenses or
other rights to others with respect to the commercial use in any country
of its IP Rights in the field of the Skin Project; as defined below. "IP
Rights" means all material patents, trademarks and applications therefor,
service marks, trade names, copyrights, trade secrets, know how and
license or option rights from third parties to any of the foregoing.
3.10 Board of Directors. The Board of Directors (the "Board") of the Company
shall consider the election of Noel Thomas Patton to the Board within
three (3) years of the Effective Date. However, if at the end of the three
(3) year period, upon a determination by the Board that Mr. Patton's
election to the Board would not materially enhance the Company's business
success, this undertaking will terminate. During such period that Mr.
Patton is not a Director, he shall be entitled to review minutes of Board
meetings, and all presentations made to the Board pertaining to Skin
Projects. Further, the Company will provide, orally, a comprehensive
summary of presentations and issues discussed by the Board as well as
other information that management deems useful in order for Mr. Patton to
understand general strategic issues and the overall business of the
Company. Mr. Patton will adhere to the Company's Insider Trading Policies
and pre-clear any trading activity in the Company's Common Stock with the
Chief Compliance Officer. The provisions of this Section 3.10 and Article
V are conditioned upon retention by the Investor of all Common Stock and
Warrants issued hereunder for a period of two (2) years after the
Effective Date; after which period the provisions of this Section 3.10 and
Article V shall be conditioned upon retention by the Investor of aggregate
holdings of at least 300,000 shares of the Common Stock at all times.
ARTICLE IV.
CONDITIONS OF CLOSING.
4.1 Conditions Precedent to the Obligation of the Investor to Purchase the
Common Stock and Warrants. The obligations of the Investor under Sections
1.1 and 1.2 of this Agreement to acquire and pay for the Common Stock and
Warrants are
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<PAGE> 8
subject to the fulfillment by the Company on or before the Closing (or the
waiver by Investor with prior written notice to the Company) of the
following conditions:
(i) Representations and Warranties. The representations and warranties
of the Company contained in Article III shall be true and correct on
and as of the Closing; and
(ii) Delivery of Common Stock and Warrants. The Company shall have issued
instructions to the Company's Transfer Agent to deliver a
certificate representing the Common Stock and the Warrants being
purchased by the Investor pursuant to this Agreement.
4.2 Conditions Precedent to the Obligation of the Company to Sell and Deliver
the Common Stock and Warrants. The obligations of the Company under
Section 1.1 of this Agreement to sell and deliver the Common Stock and
Warrants are subject to the fulfillment by the Investor on or before the
Closing (or the waiver by Investor with prior written notice to the
Company) of the following conditions:
(i) Representations and Warranties. The representations and warranties
of the Investor contained in Article II shall be true and correct on
and as of the Closing; and
(ii) Payment for Common Stock and Warrants. The Investor shall have
issued instructions to transfer $9,000,000 by wire transfer to the
Company's bank account(s) as per the Company's instructions.
ARTICLE V
SKIN PROJECTS.
5.1 The funds provided by the sale of the Common Stock and Warrants are
intended to be used to finance research and development by the Company of
products for human medical, cosmetic and/or cosmeceutical applications for
treating skin disorders, including diseases, burns, wounds, ulcers,
wrinkles, sun damage, or other age related conditions, incorporating any
of the Company's telomerase, stem cell, nuclear transfer, or other present
or future technologies (the "Skin Project").
5.2 Not less than 80% of the net proceeds to the Company will be utilized to
finance the Skin Project.
5.3 Steering Committee. The Skin Project will be directed by a Steering
Committee comprised of five individuals, with three being appointed and
replaced by the Company and the remaining two being appointed and replaced
by the Investor. This Committee will give consideration to the potential
of developing over-the-counter skin products in addition to prescription
drugs.
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<PAGE> 9
ARTICLE VI
MISCELLANEOUS.
6.1 Survival of Warranties. The representations and warranties of the Investor
and the Company contained in or made pursuant to this Agreement shall be
effective as of the execution and delivery of this Agreement and shall in
no way be affected by any investigation of the subject matter thereof made
by or on behalf of either party; provided, that such representations and
warranties shall speak only as of the date of this Agreement and of the
Closing, as applicable, and thereafter shall be of no further force and
effect.
6.2 Benefit of Agreement; Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of
the parties (including permitted transferees of the Common Stock and the
Warrants). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as otherwise expressly
provided in this Agreement.
6.3 Governing Law. This Agreement shall be governed by and construed under the
laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
6.4 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
6.5 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
6.6 Notices. Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively
given upon personal or courier delivery to the party to be notified, or
upon ten (10) days after deposit with the United States Post Office,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the first page hereof, or at such other
address as such party may designate by ten (10) days advance written
notice to the other party.
6.7 Expenses. Each party shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement and all other transactions contemplated hereby.
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<PAGE> 10
6.8 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively),
only with the written consent of the Company and the Investor. Any
amendment or waiver effected in accordance with this Section shall be
binding upon each holder of any securities purchased under this Agreement
at the time outstanding (including securities into which such securities
are convertible or exchanged), each future holder of all such securities
permitted under Section 2.1(g) hereof, and the Company.
6.9 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance
with its terms.
6.10 Entire Agreement. This Agreement and the Warrants constitute the entire
agreement between the parties regarding the sale of Common Stock and
Warrants to the Investor and shall supercede any written or oral
discussions, agreements, or arrangements, express or implied, including
any term sheets, by or among the parties and their affiliates, including
Giant Lion Trading, Ltd. Neither party shall be liable or bound to the
other in any manner with regard to such sale by any warranties,
representations, or covenants except as specifically set forth herein.
[Signature Page Follows]
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<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GERON CORPORATION
By: /s/ DAVID L. GREENWOOD
----------------------------------
David L. Greenwood
Chief Financial Officer
By: /s/ EVE M. PATTON
----------------------------------
Eve M. Patton
11
<PAGE> 12
EXHIBIT A
EVE M. PATTON COMMON STOCK AND WARRANTS
<TABLE>
<CAPTION>
# of shares
-----------
<S> <C> <C>
Common Stock: 2.6 M/$10.25 = 253,658
6.4 M/($55.90625 x .90) = $50.315625 127,197
-------
Total stock: 380,855
(Blended price/share: $23.63017)
Warrants: 100,000 @ $12.50/share 100,000
200,000 @ ($55.90625 x 1.2) = $67.09/share 200,000
-------
Total Warrants: 300,000
-------
Total Issued and Converted Shares: 680,855
=======
</TABLE>
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<PAGE> 13
EXHIBIT B
FORM OF WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND HAS BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT.
Warrant No.: ____________________ Number of Shares: _______________
Date of Issuance:
GERON CORPORATION
COMMON STOCK WARRANT AGREEMENT
Geron Corporation (the "Company"), for value received, hereby certifies that Eve
M. Patton or her registered assigns (in accordance with Section 3 below) (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 6 below), up to [ ] shares of Common
Stock of the Company, as adjusted from time to time pursuant to the terms of
this Common Stock Warrant Agreement ("Warrant"), at a purchase price of [ ] per
share. The shares purchasable upon exercise of this Warrant are hereinafter
referred to as the "Warrant Stock." The exercise price per share of Warrant
Stock is hereinafter referred to as the "Purchase Price."
1. EXERCISE.
(a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder, in whole or in part, provided that in no event shall partial
exercise be for less than 20,000 Warrant Shares, by surrendering this Warrant,
with the purchase form appended hereto as EXHIBIT A duly executed by such
Registered Holder or by such Registered Holder's duly authorized
attorney-in-fact, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full by
cash, check or wire transfer of the Purchase Price payable in respect of the
number of shares of Warrant Stock purchased upon such exercise.
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<PAGE> 14
(b) EFFECTIVE TIME OF EXERCISE. The exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company, with
payment of the applicable Purchase Price, as provided in Section 1(a) above. At
such time, the person or persons in whose name or names any certificates for
Warrant Stock shall be issuable upon such exercise as provided in Section 1(c)
below shall be deemed to have become the holder or holders of record of the
Warrant Stock represented by such certificates.
(c) DELIVERY TO REGISTERED HOLDER. As soon as practicable after
the exercise of this Warrant, and in any event within ten (10) business days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Registered Holder (upon
payment by such Registered Holder of any applicable transfer taxes) may direct,
a certificate or certificates for the number of shares of Warrant Stock to which
such Registered Holder shall be entitled.
2. CERTAIN ADJUSTMENTS.
(a) MERGERS AND CONSOLIDATIONS. If at any time there shall be a
merger or consolidation of the Company with another corporation, then, as a part
of such merger or consolidation, lawful provision shall be made so that the
Registered Holder shall thereafter be entitled to receive upon exercise of this
Warrant during the period specified in this Warrant and upon payment of the
Purchase Price, the number of shares of stock or other securities or property of
the Company or the successor corporation resulting from such merger or
consolidation, to which a holder of the Common Stock deliverable upon exercise
of this Warrant would have been entitled under the provisions of the agreement
in such merger or consolidation if this Warrant had been exercised immediately
before that merger or consolidation. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant with respect to the rights
and interests of the Registered Holder after the merger or consolidation to the
end that the provisions of this Warrant (including adjustment of the Purchase
Price then in effect and the number of shares of Warrant Stock) shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant.
(b) SPLITS, SUBDIVISIONS AND DIVIDENDS. In the event the Company
should at any time or from time to time fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of the holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as the "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or Common
Stock Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such distribution, split or subdivision if no record date is fixed), the per
share Purchase Price
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<PAGE> 15
shall be appropriately decreased and the number of shares of Warrant Stock shall
be appropriately increased in proportion to such increase (or potential
increase) of outstanding shares.
(c) COMBINATION OF SHARES. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, the per share Purchase Price shall be
appropriately increased and the number of shares of Warrant Stock shall be
appropriately decreased in proportion to such decrease in outstanding shares.
(d) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
made in the securities issuable upon exercise of this Warrant, the Company shall
mail to the Registered Holder a certificate setting forth a statement of the
facts requiring such adjustment. Such certificate shall also set forth the kind
and amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events specified in
this Section 2.
3. TRANSFER RESTRICTIONS; REPRESENTATIONS.
(a) The Registered Holder acknowledges that this Warrant and the
Warrant Stock have not been registered under the Securities Act, and agrees not
to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of
this Warrant or any Warrant Stock issued upon its exercise in the absence of an
opinion of counsel, reasonably satisfactory to the Company, that registration
and qualification are not required. Subject to the foregoing, the Company hereby
consents to transfer by the Registered Holder to (i) Noel Thomas Patton, (ii)
the immediate family members (i.e. parents, siblings or children, thereof) of
the Registered Holder or Noel Thomas Patton, or (iii) entities controlled by the
Registered Holder or Noel Thomas Patton or their immediate family members,
provided that the transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501 under the Securities Act and agrees to be bound
by the terms of this Warrant. It is understood and agreed that this provision
does not apply to, or limit the sale, pledge, distribution, offers for sale,
transfer or other disposition of Warrant Stock after any exercise thereof
pursuant to Section 1 hereof.
(b) The Registered Holder hereby further represents and warrants
to the Company with respect to the issuance of the Warrant and the purchase of
the Warrant Stock as follows:
(i) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Warrant is
issued to the Registered Holder in reliance upon such Registered Holder's
representation to the Company, which by such Registered Holder's execution of
this Warrant such Registered Holder hereby confirms, that the Warrant and the
Warrant Stock will be acquired for investment for such Registered Holder's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Registered Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the same.
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<PAGE> 16
(ii) KNOWLEDGE AND EXPERIENCE; ABILITY TO BEAR ECONOMIC
RISKS. The Registered Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
investment contemplated by this Warrant and such party is able to bear the
economic risk of its investment in the Company (including a complete loss of its
investment). The Registered Holder is and will continue to be an "accredited
investor" as defined by Rule 501 of the Securities Act.
(iii) RESALE. The Registered Holder understands that the
Warrant being issued hereunder and the Warrant Stock to be purchased hereunder
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations,
such securities may be resold without registration under the Securities Act only
in certain circumstances. In this regard, the Registered Holder represents that
she is familiar with Rule 144 under the Securities Act, and understands the
resale limitations imposed thereby and by the Securities Act.
(iv) LEGENDS. The Registered Holder acknowledges that all
stock certificates representing shares of stock issued to the Registered Holder
upon exercise of this Warrant may, if such Warrant Stock is not registered under
the Securities Act, have affixed thereto a legend substantially in the following
form:
(x) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH SECURITIES ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO AN EXEMPTION TO SUCH SECURITIES ACT."
(y) Any legend required by the laws of any state in
which the securities will be issued.
(c) Subject to the provisions of Section 3(a) hereof, this Warrant and
all rights hereunder are transferable in whole or in part upon surrender of the
Warrant with a properly executed assignment (in the form of EXHIBIT B hereto) at
the principal office of the Company, provided that in no event shall such
transfer be for less than 20,000 Warrant Shares.
(d) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change such Registered Holder's address as shown on the warrant register by
written notice to the Company requesting such change.
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<PAGE> 17
(f) The Company hereby represents and warrants to the Registered Holder
as follows:
(i) The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware.
(ii) The Company has requisite corporate right, power and authority
(including the due authorization by all necessary corporate action) to enter
into this Warrant and to perform its obligations hereunder without the need for
the consent of any other person; and this Warrant has been duly authorized,
executed and delivered and constitutes legal, valid and binding obligations of
the Company enforceable against it in accordance with the terms hereof. The
execution, delivery and performance of this Warrant by the Company do not
contravene or violate any laws, rules or regulations applicable to it.
(iii) The Company has taken such corporate action as is necessary or
appropriate to enable it to perform its obligations hereunder, including, but
not limited to, the issuance, sale and delivery of the Warrant.
(iv) The Warrant Stock, when issued and paid for in compliance with
the provisions of this Warrant, will be validly issued, fully paid and
non-assessable.
4. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to fulfill its obligations hereunder.
5. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the tenth anniversary of the Date of
Issuance (the "Expiration Date").
6. NOTICES OF CERTAIN TRANSACTIONS. In the event that:
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) the Company shall effect any consolidation or merger of the
Company with or into another corporation (other than a consolidation or merger
in which the Company is the surviving entity), or any transfer of all or
substantially all of the assets of the Company, or
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<PAGE> 18
(c) the Company voluntarily or involuntarily dissolves, liquidates
or winds-up its business or affairs,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, and (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is expected to take place, and the record date for determining
shareholders entitled to vote thereon. Such notice shall be mailed at least ten
(10) calendar days prior to the record date or effective date for the event
specified in such notice.
7. RESERVATION OF STOCK. The Company shall at all times reserve and
keep available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock or other stock or securities, as from time
to time shall be issuable upon the exercise of this Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant, properly endorsed, to the Company at the principal office of the
Company, the Company will, subject to the provisions of Section 3(a) hereof,
issue and deliver to permitted individuals under Section 2.1(g) of that certain
Securities Purchase Agreement, dated as of even date herewith, by and between
the Company and the Registered Holder, at the Company's expense, a new warrant
in a form substantially similar to this Warrant, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
thereof for the number of shares of Common Stock called for on the face of the
Warrant so surrendered.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, upon delivery of an
indemnity agreement, with surety if reasonably required, in an amount reasonably
satisfactory to the Company, or, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
warrant in a form substantially similar to this Warrant.
10. MAILING OF NOTICES. Any notice required or permitted by this Warrant
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS) or confirmed facsimile, or forty-eight (48) hours after being
deposited in the U.S. mail as certified or registered mail with postage prepaid,
if such notice is addressed to the party to be notified at such party's address
or facsimile number as set forth below or as subsequently modified by written
notice.
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11. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company (including without limitation the
right to notification of stockholder meetings or the right to receive any notice
or other communication concerning the business or affairs of the Company).
12. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
13. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
14. SUCCESSORS AND ASSIGNS. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the
Registered Holder and their respective permitted successors and assigns (in the
case of the Registered Holder, in accordance with Section 3(a) hereof).
16. GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law thereof.
GERON CORPORATION REGISTERED HOLDER
By: /s/ DAVID L. GREENWOOD Signature: /s/ EVE M PATTON
---------------------------------- ---------------------------
Name: David L. Greenwood Name: Eve M. Patton
Title: Chief Financial Officer Address: Penthouse 28A,
Address: Geron Corporation Harston Tower
230 Constitution Drive 109 Repulse Bay Road
Menlo Park, CA 94025 Hong Kong, China
Facsimile: (650) 473-8654 Facsimile: (011) 852-2813-1899
(Hong Kong)
Dated: Dated: March 9th, 2000
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<PAGE> 20
EXHIBIT A
PURCHASE FORM
To: GERON CORPORATION
Date: ___________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase shares of the Common Stock
covered by such Warrant and herewith makes payment of $___________, representing
the full purchase price for such shares at the price per share provided for in
such Warrant.
The undersigned hereby affirms and acknowledges the investment
representations and warranties made in the Warrant are true and correct as of
the date hereof, and accepts such shares subject to the restrictions of the
Warrant, copies of which are available from the Secretary of the Company.
Signature: __________________________
Name:
Title:
Address:
8
<PAGE> 21
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, __________________ hereby sells, assigns and transfers all
of the rights of the undersigned under the attached Warrant with respect to the
number of shares of Common Stock covered thereby set forth below, unto:
<TABLE>
<CAPTION>
NAME OF ASSIGNEE ADDRESS No. OF SHARES
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
Signature: _______________________________
Witness: _________________________________
Dated: _____________________
9
<PAGE> 1
EXHIBIT 4.8
FORM OF WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND HAS BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT.
Warrant No.:EMP-100 Number of Shares:100,000
Date of Issuance:
GERON CORPORATION
COMMON STOCK WARRANT AGREEMENT
Geron Corporation (the "Company"), for value received, hereby certifies that Eve
M. Patton or her registered assigns (in accordance with Section 3 below) (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 6 below), up to 100,000 shares of
Common Stock of the Company, as adjusted from time to time pursuant to the terms
of this Common Stock Warrant Agreement ("Warrant"), at a purchase price of
$12.50 per share. The shares purchasable upon exercise of this Warrant are
hereinafter referred to as the "Warrant Stock." The exercise price per share of
Warrant Stock is hereinafter referred to as the "Purchase Price."
1. EXERCISE.
(a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder, in whole or in part, provided that in no event shall partial
exercise be for less than 20,000 Warrant Shares, by surrendering this Warrant,
with the purchase form appended hereto as EXHIBIT A duly executed by such
Registered Holder or by such Registered Holder's duly authorized
attorney-in-fact, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full by
cash, check or wire transfer of the Purchase Price payable in respect of the
number of shares of Warrant Stock purchased upon such exercise.
(b) EFFECTIVE TIME OF EXERCISE. The exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company, with
payment of the
1
<PAGE> 2
applicable Purchase Price, as provided in Section 1(a) above. At such time, the
person or persons in whose name or names any certificates for Warrant Stock
shall be issuable upon such exercise as provided in Section 1(c) below shall be
deemed to have become the holder or holders of record of the Warrant Stock
represented by such certificates.
(c) DELIVERY TO REGISTERED HOLDER. As soon as practicable after
the exercise of this Warrant, and in any event within ten (10) business days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Registered Holder (upon
payment by such Registered Holder of any applicable transfer taxes) may direct,
a certificate or certificates for the number of shares of Warrant Stock to which
such Registered Holder shall be entitled.
2. CERTAIN ADJUSTMENTS.
(a) MERGERS AND CONSOLIDATIONS. If at any time there shall be a
merger or consolidation of the Company with another corporation, then, as a part
of such merger or consolidation, lawful provision shall be made so that the
Registered Holder shall thereafter be entitled to receive upon exercise of this
Warrant during the period specified in this Warrant and upon payment of the
Purchase Price, the number of shares of stock or other securities or property of
the Company or the successor corporation resulting from such merger or
consolidation, to which a holder of the Common Stock deliverable upon exercise
of this Warrant would have been entitled under the provisions of the agreement
in such merger or consolidation if this Warrant had been exercised immediately
before that merger or consolidation. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant with respect to the rights
and interests of the Registered Holder after the merger or consolidation to the
end that the provisions of this Warrant (including adjustment of the Purchase
Price then in effect and the number of shares of Warrant Stock) shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant.
(b) SPLITS, SUBDIVISIONS AND DIVIDENDS. In the event the Company
should at any time or from time to time fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of the holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as the "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or Common
Stock Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such distribution, split or subdivision if no record date is fixed), the per
share Purchase Price shall be appropriately decreased and the number of shares
of Warrant Stock shall be appropriately increased in proportion to such increase
(or potential increase) of outstanding shares.
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<PAGE> 3
(c) COMBINATION OF SHARES. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, the per share Purchase Price shall be
appropriately increased and the number of shares of Warrant Stock shall be
appropriately decreased in proportion to such decrease in outstanding shares.
(d) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
made in the securities issuable upon exercise of this Warrant, the Company shall
mail to the Registered Holder a certificate setting forth a statement of the
facts requiring such adjustment. Such certificate shall also set forth the kind
and amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events specified in
this Section 2.
3. TRANSFER RESTRICTIONS; REPRESENTATIONS.
(a) The Registered Holder acknowledges that this Warrant and the
Warrant Stock have not been registered under the Securities Act, and agrees not
to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of
this Warrant or any Warrant Stock issued upon its exercise in the absence of an
opinion of counsel, reasonably satisfactory to the Company, that registration
and qualification are not required. Subject to the foregoing, the Company hereby
consents to transfer by the Registered Holder to (i) Noel Thomas Patton, (ii)
the immediate family members (i.e. parents, siblings or children, thereof) of
the Registered Holder or Noel Thomas Patton, or (iii) entities controlled by the
Registered Holder or Noel Thomas Patton or their immediate family members,
provided that the transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501 under the Securities Act and agrees to be bound
by the terms of this Warrant. It is understood and agreed that this provision
does not apply to, or limit the sale, pledge, distribution, offers for sale,
transfer or other disposition of Warrant Stock after any exercise thereof
pursuant to Section 1 hereof.
(b) The Registered Holder hereby further represents and warrants
to the Company with respect to the issuance of the Warrant and the purchase of
the Warrant Stock as follows:
(i) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Warrant is
issued to the Registered Holder in reliance upon such Registered Holder's
representation to the Company, which by such Registered Holder's execution of
this Warrant such Registered Holder hereby confirms, that the Warrant and the
Warrant Stock will be acquired for investment for such Registered Holder's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Registered Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the same.
(ii) KNOWLEDGE AND EXPERIENCE; ABILITY TO BEAR ECONOMIC
RISKS. The Registered Holder has such knowledge and experience in financial and
3
<PAGE> 4
business matters that it is capable of evaluating the merits and risks of the
investment contemplated by this Warrant and such party is able to bear the
economic risk of its investment in the Company (including a complete loss of its
investment). The Registered Holder is and will continue to be an "accredited
investor" as defined by Rule 501 of the Securities Act.
(iii) RESALE. The Registered Holder understands that the
Warrant being issued hereunder and the Warrant Stock to be purchased hereunder
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations,
such securities may be resold without registration under the Securities Act only
in certain circumstances. In this regard, the Registered Holder represents that
she is familiar with Rule 144 under the Securities Act, and understands the
resale limitations imposed thereby and by the Securities Act.
(iv) LEGENDS. The Registered Holder acknowledges that all
stock certificates representing shares of stock issued to the Registered Holder
upon exercise of this Warrant may, if such Warrant Stock is not registered under
the Securities Act, have affixed thereto a legend substantially in the following
form:
(x) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH SECURITIES ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO AN EXEMPTION TO SUCH SECURITIES ACT."
(y) Any legend required by the laws of any state in
which the securities will be issued.
(c) Subject to the provisions of Section 3(a) hereof, this Warrant
and all rights hereunder are transferable in whole or in part upon surrender of
the Warrant with a properly executed assignment (in the form of EXHIBIT B
hereto) at the principal office of the Company, provided that in no event shall
such transfer be for less than 20,000 Warrant Shares.
(d) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change such Registered Holder's address as shown on the warrant register by
written notice to the Company requesting such change.
(f) The Company hereby represents and warrants to the Registered
Holder as follows:
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<PAGE> 5
(i) The Company is a corporation validly existing and in
good standing under the laws of the State of Delaware.
(ii) The Company has requisite corporate right, power and
authority (including the due authorization by all necessary corporate action) to
enter into this Warrant and to perform its obligations hereunder without the
need for the consent of any other person; and this Warrant has been duly
authorized, executed and delivered and constitutes legal, valid and binding
obligations of the Company enforceable against it in accordance with the terms
hereof. The execution, delivery and performance of this Warrant by the Company
do not contravene or violate any laws, rules or regulations applicable to it.
(iii) The Company has taken such corporate action as is
necessary or appropriate to enable it to perform its obligations hereunder,
including, but not limited to, the issuance, sale and delivery of the Warrant.
(iv) The Warrant Stock, when issued and paid for in
compliance with the provisions of this Warrant, will be validly issued, fully
paid and non-assessable.
4. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to fulfill its obligations hereunder.
5. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the tenth anniversary of the Date of
Issuance (the "Expiration Date").
6. NOTICES OF CERTAIN TRANSACTIONS. In the event that:
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) the Company shall effect any consolidation or merger of the
Company with or into another corporation (other than a consolidation or merger
in which the Company is the surviving entity), or any transfer of all or
substantially all of the assets of the Company, or
(c) the Company voluntarily or involuntarily dissolves, liquidates
or winds-up its business or affairs,
5
<PAGE> 6
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, and (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is expected to take place, and the record date for determining
shareholders entitled to vote thereon. Such notice shall be mailed at least ten
(10) calendar days prior to the record date or effective date for the event
specified in such notice.
7. RESERVATION OF STOCK. The Company shall at all times reserve and
keep available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock or other stock or securities, as from time
to time shall be issuable upon the exercise of this Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant, properly endorsed, to the Company at the principal office of the
Company, the Company will, subject to the provisions of Section 3(a) hereof,
issue and deliver to permitted individuals under Section 2.1(g) of that certain
Securities Purchase Agreement, dated as of even date herewith, by and between
the Company and the Registered Holder, at the Company's expense, a new warrant
in a form substantially similar to this Warrant, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
thereof for the number of shares of Common Stock called for on the face of the
Warrant so surrendered.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, upon delivery of an
indemnity agreement, with surety if reasonably required, in an amount reasonably
satisfactory to the Company, or, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
warrant in a form substantially similar to this Warrant.
10. MAILING OF NOTICES. Any notice required or permitted by this Warrant
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS) or confirmed facsimile, or forty-eight (48) hours after being
deposited in the U.S. mail as certified or registered mail with postage prepaid,
if such notice is addressed to the party to be notified at such party's address
or facsimile number as set forth below or as subsequently modified by written
notice.
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<PAGE> 7
11. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company (including without limitation the
right to notification of stockholder meetings or the right to receive any notice
or other communication concerning the business or affairs of the Company).
12. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
13. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
14. SUCCESSORS AND ASSIGNS. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the
Registered Holder and their respective permitted successors and assigns (in the
case of the Registered Holder, in accordance with Section 3(a) hereof).
16. GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law thereof.
GERON CORPORATION REGISTERED HOLDER
By: /s/ DAVID L. GREENWOOD Signature: /s/ EVE M. PATTON
------------------------------ ---------------------------
Name: David L. Greenwood Name: Eve M. Patton
Title: Chief Financial Officer Address: Penthouse 28A,
Address: Geron Corporation Harston Tower
230 Constitution Drive 109 Repulse Bay Road
Menlo Park, CA 94025 Hong Kong, China
Facsimile: (650) 473-8654 Facsimile: (011)852-2813-1899
Dated: March 9, 2000 (HONG KONG)
Dated: March 9, 2000
7
<PAGE> 8
EXHIBIT A
PURCHASE FORM
To: GERON CORPORATION
Date: ___________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase ___________ shares of the Common
Stock covered by such Warrant and herewith makes payment of $___________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
The undersigned hereby affirms and acknowledges the investment
representations and warranties made in the Warrant are true and correct as of
the date hereof, and accepts such shares subject to the restrictions of the
Warrant, copies of which are available from the Secretary of the Company.
Signature: __________________________
Name:
Title:
Address:
8
<PAGE> 9
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________ hereby sells, assigns and transfers all
of the rights of the undersigned under the attached Warrant with respect to the
number of shares of Common Stock covered thereby set forth below, unto:
<TABLE>
<CAPTION>
NAME OF ASSIGNEE ADDRESS No. OF SHARES
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
Signature: _______________________________
Witness: _________________________________
Dated: _____________________
9
<PAGE> 1
EXHIBIT 4.9
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND HAS BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT.
Warrant No.:EMP-101 Number of Shares:200,000
Date of Issuance:
GERON CORPORATION
COMMON STOCK WARRANT AGREEMENT
Geron Corporation (the "Company"), for value received, hereby certifies that Eve
M. Patton or her registered assigns (in accordance with Section 3 below) (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 6 below), up to 200,000 shares of
Common Stock of the Company, as adjusted from time to time pursuant to the terms
of this Common Stock Warrant Agreement ("Warrant"), at a purchase price of
$67.09 per share. The shares purchasable upon exercise of this Warrant are
hereinafter referred to as the "Warrant Stock." The exercise price per share of
Warrant Stock is hereinafter referred to as the "Purchase Price."
1. EXERCISE.
(a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder, in whole or in part, provided that in no event shall partial
exercise be for less than 20,000 Warrant Shares, by surrendering this Warrant,
with the purchase form appended hereto as EXHIBIT A duly executed by such
Registered Holder or by such Registered Holder's duly authorized
attorney-in-fact, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment in full by
cash, check or wire transfer of the Purchase Price payable in respect of the
number of shares of Warrant Stock purchased upon such exercise.
(b) EFFECTIVE TIME OF EXERCISE. The exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the day on which this Warrant shall have been surrendered to the Company, with
payment of the
1
<PAGE> 2
applicable Purchase Price, as provided in Section 1(a) above. At such time, the
person or persons in whose name or names any certificates for Warrant Stock
shall be issuable upon such exercise as provided in Section 1(c) below shall be
deemed to have become the holder or holders of record of the Warrant Stock
represented by such certificates.
(c) DELIVERY TO REGISTERED HOLDER. As soon as practicable after
the exercise of this Warrant, and in any event within ten (10) business days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Registered Holder (upon
payment by such Registered Holder of any applicable transfer taxes) may direct,
a certificate or certificates for the number of shares of Warrant Stock to which
such Registered Holder shall be entitled.
2. CERTAIN ADJUSTMENTS.
(a) MERGERS AND CONSOLIDATIONS. If at any time there shall be a
merger or consolidation of the Company with another corporation, then, as a part
of such merger or consolidation, lawful provision shall be made so that the
Registered Holder shall thereafter be entitled to receive upon exercise of this
Warrant during the period specified in this Warrant and upon payment of the
Purchase Price, the number of shares of stock or other securities or property of
the Company or the successor corporation resulting from such merger or
consolidation, to which a holder of the Common Stock deliverable upon exercise
of this Warrant would have been entitled under the provisions of the agreement
in such merger or consolidation if this Warrant had been exercised immediately
before that merger or consolidation. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant with respect to the rights
and interests of the Registered Holder after the merger or consolidation to the
end that the provisions of this Warrant (including adjustment of the Purchase
Price then in effect and the number of shares of Warrant Stock) shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant.
(b) SPLITS, SUBDIVISIONS AND DIVIDENDS. In the event the Company
should at any time or from time to time fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of the holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as the "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or Common
Stock Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such distribution, split or subdivision if no record date is fixed), the per
share Purchase Price shall be appropriately decreased and the number of shares
of Warrant Stock shall be appropriately increased in proportion to such increase
(or potential increase) of outstanding shares.
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<PAGE> 3
(c) COMBINATION OF SHARES. If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, the per share Purchase Price shall be
appropriately increased and the number of shares of Warrant Stock shall be
appropriately decreased in proportion to such decrease in outstanding shares.
(d) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
made in the securities issuable upon exercise of this Warrant, the Company shall
mail to the Registered Holder a certificate setting forth a statement of the
facts requiring such adjustment. Such certificate shall also set forth the kind
and amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events specified in
this Section 2.
3. TRANSFER RESTRICTIONS; REPRESENTATIONS.
(a) The Registered Holder acknowledges that this Warrant and the
Warrant Stock have not been registered under the Securities Act, and agrees not
to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of
this Warrant or any Warrant Stock issued upon its exercise in the absence of an
opinion of counsel, reasonably satisfactory to the Company, that registration
and qualification are not required. Subject to the foregoing, the Company hereby
consents to transfer by the Registered Holder to (i) Noel Thomas Patton, (ii)
the immediate family members (i.e. parents, siblings or children, thereof) of
the Registered Holder or Noel Thomas Patton, or (iii) entities controlled by the
Registered Holder or Noel Thomas Patton or their immediate family members,
provided that the transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501 under the Securities Act and agrees to be bound
by the terms of this Warrant. It is understood and agreed that this provision
does not apply to, or limit the sale, pledge, distribution, offers for sale,
transfer or other disposition of Warrant Stock after any exercise thereof
pursuant to Section 1 hereof.
(b) The Registered Holder hereby further represents and warrants
to the Company with respect to the issuance of the Warrant and the purchase of
the Warrant Stock as follows:
(i) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Warrant is
issued to the Registered Holder in reliance upon such Registered Holder's
representation to the Company, which by such Registered Holder's execution of
this Warrant such Registered Holder hereby confirms, that the Warrant and the
Warrant Stock will be acquired for investment for such Registered Holder's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Registered Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the same.
(ii) KNOWLEDGE AND EXPERIENCE; ABILITY TO BEAR ECONOMIC
RISKS. The Registered Holder has such knowledge and experience in financial and
3
<PAGE> 4
business matters that it is capable of evaluating the merits and risks of the
investment contemplated by this Warrant and such party is able to bear the
economic risk of its investment in the Company (including a complete loss of its
investment). The Registered Holder is and will continue to be an "accredited
investor" as defined by Rule 501 of the Securities Act.
(iii) RESALE. The Registered Holder understands that the
Warrant being issued hereunder and the Warrant Stock to be purchased hereunder
are characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations,
such securities may be resold without registration under the Securities Act only
in certain circumstances. In this regard, the Registered Holder represents that
she is familiar with Rule 144 under the Securities Act, and understands the
resale limitations imposed thereby and by the Securities Act.
(iv) LEGENDS. The Registered Holder acknowledges that all
stock certificates representing shares of stock issued to the Registered Holder
upon exercise of this Warrant may, if such Warrant Stock is not registered under
the Securities Act, have affixed thereto a legend substantially in the following
form:
(x) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH SECURITIES ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO AN EXEMPTION TO SUCH SECURITIES ACT."
(y) Any legend required by the laws of any state in
which the securities will be issued.
(c) Subject to the provisions of Section 3(a) hereof, this Warrant
and all rights hereunder are transferable in whole or in part upon surrender of
the Warrant with a properly executed assignment (in the form of EXHIBIT B
hereto) at the principal office of the Company, provided that in no event shall
such transfer be for less than 20,000 Warrant Shares.
(d) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change such Registered Holder's address as shown on the warrant register by
written notice to the Company requesting such change.
(f) The Company hereby represents and warrants to the Registered
Holder as follows:
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<PAGE> 5
(i) The Company is a corporation validly existing and in
good standing under the laws of the State of Delaware.
(ii) The Company has requisite corporate right, power and
authority (including the due authorization by all necessary corporate action) to
enter into this Warrant and to perform its obligations hereunder without the
need for the consent of any other person; and this Warrant has been duly
authorized, executed and delivered and constitutes legal, valid and binding
obligations of the Company enforceable against it in accordance with the terms
hereof. The execution, delivery and performance of this Warrant by the Company
do not contravene or violate any laws, rules or regulations applicable to it.
(iii) The Company has taken such corporate action as is
necessary or appropriate to enable it to perform its obligations hereunder,
including, but not limited to, the issuance, sale and delivery of the Warrant.
(iv) The Warrant Stock, when issued and paid for in
compliance with the provisions of this Warrant, will be validly issued, fully
paid and non-assessable.
4. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to fulfill its obligations hereunder.
5. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the tenth anniversary of the Date of
Issuance (the "Expiration Date").
6. NOTICES OF CERTAIN TRANSACTIONS. In the event that:
(a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right; or
(b) the Company shall effect any consolidation or merger of the
Company with or into another corporation (other than a consolidation or merger
in which the Company is the surviving entity), or any transfer of all or
substantially all of the assets of the Company, or
(c) the Company voluntarily or involuntarily dissolves, liquidates
or winds-up its business or affairs,
5
<PAGE> 6
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, and (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is expected to take place, and the record date for determining
shareholders entitled to vote thereon. Such notice shall be mailed at least ten
(10) calendar days prior to the record date or effective date for the event
specified in such notice.
7. RESERVATION OF STOCK. The Company shall at all times reserve and
keep available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock or other stock or securities, as from time
to time shall be issuable upon the exercise of this Warrant.
8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant, properly endorsed, to the Company at the principal office of the
Company, the Company will, subject to the provisions of Section 3(a) hereof,
issue and deliver to permitted individuals under Section 2.1(g) of that certain
Securities Purchase Agreement, dated as of even date herewith, by and between
the Company and the Registered Holder, at the Company's expense, a new warrant
in a form substantially similar to this Warrant, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
thereof for the number of shares of Common Stock called for on the face of the
Warrant so surrendered.
9. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, upon delivery of an
indemnity agreement, with surety if reasonably required, in an amount reasonably
satisfactory to the Company, or, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
warrant in a form substantially similar to this Warrant.
10. MAILING OF NOTICES. Any notice required or permitted by this Warrant
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS) or confirmed facsimile, or forty-eight (48) hours after being
deposited in the U.S. mail as certified or registered mail with postage prepaid,
if such notice is addressed to the party to be notified at such party's address
or facsimile number as set forth below or as subsequently modified by written
notice.
6
<PAGE> 7
11. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company (including without limitation the
right to notification of stockholder meetings or the right to receive any notice
or other communication concerning the business or affairs of the Company).
12. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
13. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
14. SUCCESSORS AND ASSIGNS. The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and the
Registered Holder and their respective permitted successors and assigns (in the
case of the Registered Holder, in accordance with Section 3(a) hereof).
16. GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law thereof.
GERON CORPORATION REGISTERED HOLDER
By: /s/ DAVID L. GREENWOOD Signature: /s/ EVE M. PATTON
-------------------------------- ---------------------------
Name: David L. Greenwood Name: Eve M. Patton
Title: Chief Financial Officer Address: Penthouse 28A,
Address: Geron Corporation Harston Tower
230 Constitution Drive 109 Repulse Bay Road
Menlo Park, CA 94025 Hong Kong, China
Facsimile: (650) 473-8654 Facsimile: (011) 852-2813-1899
(Hong Kong)
Dated: March 9, 2000 Dated: March 9th, 2000
7
<PAGE> 8
EXHIBIT A
PURCHASE FORM
To: GERON CORPORATION
Date: ___________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase ___________ shares of the Common
Stock covered by such Warrant and herewith makes payment of $___________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
The undersigned hereby affirms and acknowledges the investment
representations and warranties made in the Warrant are true and correct as of
the date hereof, and accepts such shares subject to the restrictions of the
Warrant, copies of which are available from the Secretary of the Company.
Signature: __________________________
Name:
Title:
Address:
8
<PAGE> 9
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________ hereby sells, assigns and transfers all
of the rights of the undersigned under the attached Warrant with respect to the
number of shares of Common Stock covered thereby set forth below, unto:
<TABLE>
<CAPTION>
NAME OF ASSIGNEE ADDRESS No. OF SHARES
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
Signature: _______________________________
Witness: _________________________________
Dated: _____________________
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 52,525
<SECURITIES> 25,394
<RECEIVABLES> 950
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,522
<PP&E> 10,024
<DEPRECIATION> (6,457)
<TOTAL-ASSETS> 98,505
<CURRENT-LIABILITIES> 8,696
<BONDS> 6,313
0
0
<COMMON> 21
<OTHER-SE> 69,703
<TOTAL-LIABILITY-AND-EQUITY> 98,505
<SALES> 0
<TOTAL-REVENUES> 1,271
<CGS> 0
<TOTAL-COSTS> 8,346
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 352
<INCOME-PRETAX> (6,594)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,594)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,594)
<EPS-BASIC> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
