LCTX

SEC Filing Summary: BioTime, Inc. (10-Q)

Business Context and Reporting Period

This Quarterly Report on Form 10-Q covers the period ended September 30, 2010. The registrant is BioTime, Inc., a biotechnology company focused on regenerative medicine (stem cell technology) and plasma volume expanders. The company operates through subsidiaries including Embryome Sciences, OncoCyte, OrthoCyte, BioTime Asia, and ES Cell International (ESI), acquired in May 2010. The filing notes that the company is a "smaller reporting company" and has no preferred shares outstanding.

Key Financial Metrics

Note: The company reported no long-term debt as of September 30, 2010. Interest expense was negligible ($127 for the quarter) compared to the prior year due to the repayment of lines of credit in 2009.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 82% for the three months ended September 30, 2010, compared to the same period in 2009 ($815,284 vs. $446,993). This was driven primarily by a significant increase in grant income ($418,412 vs. $144,899) and sales of research products ($108,523 vs. $3,350).
• Expense Increases: Research and development (R&D) expenses surged 143% for the quarter ($1.81M vs. $744k) due to increased employee compensation, consulting fees, and laboratory costs. General and administrative (G&A) expenses decreased 44% ($1.46M vs. $2.64M), largely due to a reduction in stock appreciation rights compensation liability.
• Net Loss Expansion: Net loss attributable to BioTime increased to $4.67M for the quarter from $3.57M in the prior year. This was significantly impacted by a one-time non-cash charge of $2.14M for the modification of warrants.
• Balance Sheet Strength: Cash and cash equivalents more than doubled from $12.2M at year-end 2009 to $25.4M at September 30, 2010, primarily due to warrant exercises.

Guidance, Outlook, and Risks

Management Commentary and Outlook: BioTime is transitioning its focus from plasma volume expanders (Hextend) to regenerative medicine. The company anticipates near-term revenue from research products distributed by Millipore Corporation and grant income from the California Institute of Regenerative Medicine (CIRM). Management expects to launch 29 additional cell lines within 12 months. Future capital needs remain uncertain, and the company may require additional debt or equity financing.

Unusual Items: A significant non-cash expense of $2,142,201 was recorded for the modification of warrants. This resulted from a discount offer to warrant holders to exercise their warrants prior to expiration, which generated $9.2M in proceeds.

Risks and Contingencies:

• Regulatory Approval: Therapeutic products are in early preclinical stages; success depends on FDA and foreign regulatory approvals.
• Liquidity: The company relies on royalties, grants, and equity financing. Inadequate financing could force curtailment of operations.
• Acquisition Integration: The company recently acquired ESI and increased its stake in Cell Cure Neurosciences, introducing integration risks.

Investor Verification Checklist

• Warrant Expiration: Verify the status of the remaining 24,976 warrants that expired unexercised on November 1, 2010, and the impact of the $2.14M modification cost on future dilution.
• Grant Sustainability: Confirm the timeline and conditions for the $4.7M CIRM grant and the newly awarded $733k QTDP grants to assess revenue stability.
• Cell Cure Consolidation: Review the implications of the October 2010 acquisition of additional Cell Cure shares, which will result in full consolidation of Cell Cure's financials starting December 31, 2010.
• Royalty Timing: Note that royalty revenues are recognized when reports are received, not when sales occur; verify the timing of Q4 2010 royalty receipts from Hospira and CJ.
• Lease Obligations: Confirm the terms of the new Alameda facility lease commencing December 1, 2010, which increases monthly rent to $27,086.