Page
|
||
Prospectus Summary
|
5
|
|
Risk Factors
|
9
|
|
Use of Proceeds
|
27
|
|
Forward-Looking Statements
|
27
|
|
Selling Security Holders
|
28
|
|
Plan of Distribution
|
32
|
|
Description of Securities to be
Registered
|
33
|
|
Interests of Named Experts and
Counsel
|
34
|
|
Description of Business
|
34
|
|
Description of Property
|
47
|
|
Legal Proceedings
|
47
|
|
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
|
48
|
|
Market Price of and Dividends on Registrant's Common
Equity and Related Stockholder Matters
|
60
|
|
Directors, Executive Officers, Promoters and Control
Persons
|
62
|
|
Changes in Accountants
|
62
|
|
Executive Compensation
|
63
|
|
Security Ownership of Certain Beneficial Owners and
Management
|
65
|
|
Certain Relationships and Related Transactions, and
Corporate Governance
|
66
|
|
Additional Information
|
67
|
|
Indemnification for Securities Act
Liabilities
|
61
|
|
Legal Matters
|
68
|
|
Experts
|
68
|
|
Unaudited Financial Statements
|
F-1
|
|
Audited Financial Statements
|
F-32
|
·
|
The size, date and pace of filing, and focus of the
portfolio.
|
·
|
The relative immaturity of this field of
study.
|
·
|
The limited number of truly competitive portfolios of
intellectual property.
|
·
|
The Company agreed to sell, and the Investor agreed
to purchase, in one or more purchases from time to time (“Tranches”) in
the Company’s sole discretion (subject to the conditions set forth
therein), (i) up to 1,000 shares of Series B Preferred Stock (the
“Preferred Shares”) at a purchase price of $10,000 per share, for an
aggregate purchase price of up to $10,000,000, and (ii) five-year warrants
(the “Optimus Warrants”) to purchase shares of the Company’s common stock,
with an aggregate exercise price equal to 135% of the purchase price paid
by the Investor, at an exercise price per share equal to the closing bid
price of the Company’s common stock on the date the Company provides
notice of such Tranche. The Optimus Warrants were issued on the
Effective Date to Optimus CG II Ltd., Optimus’s designee, and will vest
and become exercisable in replacement of a five-year warrant to purchase
119,469,027 shares of common stock with an exercise price per share of
$0.113 the Company issued on the Effective Date (which may only be
exercised for such number of shares of common stock equal in amount to
135% of the cumulative purchase price paid by the Investor). The business
purpose of exchanging the warrants to be issued with each Tranche for the
warrants originally issued on November 2, 2009, is to enable the holder to
have separate instruments for the vested portion of the warrants, and to
allow the parties to more easily track the warrants that are
vested. Rather than being required to track these potential
multiple combinations of numbers, the parties believed that it would be
simpler to adopt the “replacement” warrant process. The process
is comparable to what happens when a warrant holder exercises only a
portion of an existing warrant, or anytime a holder divides a warrant into
two or more separate instruments that together represent all of the rights
embodied in the original instrument. For these reasons, we do
not believe that the “replacement warrant” should be viewed as a newly
issued warrant, but rather as a replacement issued as a substitute for a
portion of the previously issued warrant that was
surrendered.
|
·
|
The Company agreed to pay to the Investor a
commitment fee of $500,000 (the “Commitment Fee”), at the earlier of the
closing of the first Tranche or the six month anniversary of the Effective
Date, payable at the Company’s election in cash or common stock valued at
90% of the volume weighted average price of the Company’s common stock on
the five trading days preceding the payment
date.
|
·
|
The Company agreed to use its best efforts to file
within 60 days of the Effective Date, and cause to become effective as
soon as possible thereafter, a registration statement with the Securities
and Exchange Commission for the resale of all shares of common stock
issuable pursuant to the Purchase Agreement, including the shares of
common stock underlying the Optimus Warrants, and shares issuable in
payment of the Commitment Fee.
|
·
|
On November 3, 2009, the Company filed a
certificate of designations for the Series B Preferred Stock (the
“Certificate of Designations”). Pursuant to the Certificate of
Designations, the Preferred Shares shall, with respect to dividend, rights upon
liquidation, winding-up or dissolution, rank: (i) senior to the Company’s
common stock, and any other class or series of preferred stock of the
Company, except Series A-1 Convertible Preferred Stock which shall rank
senior in right of liquidation and pari passu with respect
to dividends; and (ii) junior to all existing and future indebtedness of
the Company. In addition, the Preferred Shares (a) shall accrue dividends
at a rate of 10% per annum, payable in Preferred Shares, (ii)
shall not have voting rights, and (iii) may be redeemed at the
Company’s option, commencing 4 years from the issuance date at a price per
share of (a) $10,000 per share plus accrued but unpaid
dividends (the “Series B Liquidation Value”), or, at a price per share of
: (x) 127% of the Series B Liquidation Value if redeemed on or after the
first anniversary but prior to the second anniversary of the initial
issuance date, (y) 118% of the Series B Liquidation Value if redeemed on
or after the second anniversary but prior to the third anniversary of the
initial issuance date, and (z) 109% of the Series B Liquidation Value if
redeemed on or after the third anniversary but prior to the fourth
anniversary of the initial Issuance
Date
|
●
|
33,000 shares of common stock issuable upon exercise
of warrants with an exercise price of $0.10, issued to William Woodward,
on September 15, 2005, for consulting services. The warrants terminate on
December 30, 2014.
|
●
|
650,000 shares of common stock issuable upon exercise
of warrants, with an exercise price of $0.05, issued to Nancy Burrows, in
2004,
in connection with a private equity financing. The warrants
terminate on December 31, 2012.
|
●
|
An aggregate of 1,026,000 shares of common stock
issuable upon exercise of warrants, with an exercise price of $0.05,
issued to Andwell,
LLC, on November 26, 2004, in connection with a private equity
financing. Andwell, LLC is an entity affiliated with William Caldwell, our
chief executive officer. The warrants terminate on December 31,
2012.
|
Common Stock offered by the selling
stockholders
|
Up to 176,802,658 shares of Common Stock (including
135,198.027 shares of common stock issuable upon exercise of
warrants, 34,230,000 shares of common stock issuable upon
conversion of notes, and 7,374,631 shares of common stock issuable as
payment of a commitment fee).
|
Common Stock outstanding prior to the
offering
|
613,885,468 (1)
|
|
Common Stock to be outstanding after the
offering
|
790,688,126 assuming the full exercise of the
warrants and full conversion of the notes the underlying shares of which
are included in this prospectus, and the issuance of 7,374,631 shares as
payment of a commitment fee.
|
Use of proceeds
|
We will not receive any proceeds from the sale of the
Common Stock hereunder.
|
|
(1) Based upon the total number of issued
and outstanding shares as of November 13,
2009.
|
·
|
we will succeed in obtaining any patents in a timely
manner or at all, or that the breadth or degree of protection of any such
patents will protect our interests,
|
·
|
the use of our technology will not infringe on the
proprietary rights of others,
|
·
|
patent applications relating to our potential
products or technologies will result in the issuance of any patents or
that, if issued, such patents will afford adequate protection to us or not
be challenged invalidated or infringed,
or
|
·
|
patents will not issue to other parties, which may be
infringed by our potential products or
technologies.
|
·
|
Our ability to provide acceptable evidence and the
perception of patients and the healthcare community, including third party
payors, of the positive characteristics of our product candidates relative
to existing treatment methods, including their safety, efficacy, cost
effectiveness and/or other potential
advantages,
|
·
|
The incidence and severity of any adverse side
effects of our product candidates,
|
·
|
The availability of alternative
treatments,
|
·
|
The labeling requirements imposed by the FDA and
foreign regulatory agencies, including the scope of approved indications
and any safety warnings,
|
·
|
Our ability to obtain sufficient third party
insurance coverage or reimbursement for our products
candidates,
|
·
|
The inclusion of our products on insurance company
coverage policies,
|
·
|
The willingness and ability of patients and the
healthcare community to adopt new
technologies,
|
·
|
The procedure time associated with the use of our
product candidates,
|
·
|
Our ability to manufacture or obtain from third party
manufacturers sufficient quantities of our product candidates with
acceptable quality and at an acceptable cost to meet demand,
and
|
·
|
Marketing and distribution support for our
products.
|
·
|
The continued progress and cost of our research and
development programs,
|
·
|
The progress with pre-clinical studies and clinical
trials,
|
·
|
The time and costs involved in obtaining regulatory
clearance,
|
·
|
The costs in preparing, filing, prosecuting,
maintaining and enforcing patent
claims,
|
·
|
The costs of developing sales, marketing and
distribution channels and our ability to sell the therapies/products if
developed,
|
·
|
The costs involved in establishing manufacturing
capabilities for commercial quantities of our proposed
products,
|
·
|
Competing technological and market
developments,
|
·
|
Market acceptance of our proposed
products,
|
·
|
The costs for recruiting and retaining employees and
consultants, and
|
·
|
The costs for educating and training physicians about
our proposed therapies/products.
|
-
|
Except for certain permitted indebtedness, enter
into, create, incur, assume, guarantee or suffer to exist any indebtedness
for borrowed money of any kind, including but not limited to, a guarantee,
on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom,
|
-
|
Except for certain permitted liens, enter into,
create, incur, assume or suffer to exist any liens of any kind, on or with
respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits
therefrom,
|
-
|
Amend our certificate of incorporation, bylaws or
other charter documents so as to materially and adversely affect any
rights of holders of the Debentures and
Warrants,
|
-
|
Repay, repurchase or offer to repay, repurchase or
otherwise acquire more than a de minimis number of shares of our common
stock or common stock equivalents,
|
-
|
Enter into any transaction with any of our
affiliates, which would be required to be disclosed in any public filing
with the Securities and Exchange Commission, unless such transaction is
made on an arm's-length basis and expressly approved by a majority of our
disinterested directors (even if less than a quorum otherwise required for
board approval),
|
-
|
Pay cash dividends or distributions on any of our
equity securities,
|
-
|
Grant certain registration
rights,
|
-
|
Enter into any agreement with respect to any of the
foregoing, or
|
-
|
Make cash expenditures in excess of $1,000,000 per
calendar month, subject to certain specified
exceptions.
|
·
|
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
|
·
|
Market with us any commercial products that result
from our collaborations.
|
·
|
The FDA or similar foreign regulatory authorities may
find that our product candidates are not sufficiently safe or effective or
may find our cell culturing processes or facilities
unsatisfactory,
|
·
|
Officials at the FDA or similar foreign regulatory
authorities may interpret data from preclinical studies and clinical
trials differently than we do,
|
·
|
Our clinical trials may produce negative or
inconclusive results or may not meet the level of statistical significance
required by the FDA or other regulatory authorities, and we may decide, or
regulators may require us, to conduct additional preclinical studies
and/or clinical trials or to abandon one or more of our development
programs,
|
·
|
The FDA or similar foreign regulatory authorities may
change their approval policies or adopt new
regulations,
|
·
|
There may be delays or failure in obtaining approval
of our clinical trial protocols from the FDA or other regulatory
authorities or obtaining institutional review board approvals or
government approvals to conduct clinical trials at prospective
sites,
|
·
|
We, or regulators, may suspend or terminate our
clinical trials because the participating patients are being exposed to
unacceptable health risks or undesirable side
effects,
|
·
|
We may experience difficulties in managing multiple
clinical sites,
|
·
|
Enrollment in our clinical trials for our product
candidates may occur more slowly than we anticipate, or we may experience
high drop-out rates of subjects in our clinical trials, resulting in
significant delays,
|
·
|
We may be unable to manufacture or obtain from third
party manufacturers sufficient quantities of our product candidates for
use in clinical trials, and
|
·
|
Our product candidates may be deemed unsafe or
ineffective, or may be perceived as being unsafe or ineffective, by
healthcare providers for a particular
indication.
|
·
|
Clinical trial
results,
|
·
|
The amount of cash resources and ability to obtain
additional funding,
|
·
|
Announcements of research activities, business
developments, technological innovations or new products by companies or
their competitors,
|
·
|
Entering into or terminating strategic
relationships,
|
·
|
Changes in government
regulation,
|
·
|
Disputes concerning patents or proprietary
rights,
|
·
|
Changes in revenues or expense
levels,
|
·
|
Public concern regarding the safety, efficacy or
other aspects of the products or methodologies being
developed,
|
·
|
Reports by securities
analysts,
|
·
|
Activities of various interest groups or
organizations,
|
·
|
Media coverage,
and
|
·
|
Status of the investment
markets.
|
Name of Selling Shareholder
|
Beneficial Ownership Before the Offering
(1)
|
Percentage of Ownership Before the
Offering
|
Shares of Common Stock Included in
Prospectus
|
Beneficial Ownership After the
Offering
|
Percentage of Ownership After Completion of Offering
(2)
|
William R. McAdam
149 Mill Valley, CA 94941
|
2,000,000 (3)
|
*
|
2,000,000 (3)
|
0
|
*
|
John A. Kryzanowski
480 Throckmorton Avenue
Mill Valley, CA 94941
|
2,000,000 (3)
|
*
|
2,000,000 (3)
|
0
|
*
|
Alpha Capital Anstalt
9490 Furstentums
Vaduz, Lichtenstein
|
12,000,000 (4)
|
1.92%
|
12,000,000 (4)
|
0
|
*
|
Brio Capital L.P.
401 E. 34th
Street—Suite South 33C
New York, NY 10016
|
3,000,000 (5)
|
*
|
3,000,000 (5)
|
0
|
*
|
Brio Capital Select LLC
523 Albermarle Road
Cedarhurst, NY 11516
|
1,700,000 (6)
|
*
|
1,700,000 (6)
|
0
|
*
|
Paragon Capital LP
110 East 59th
Street, 29th
Floor
New York, NY 10022
|
1,000,000 (7)
|
*
|
1,000,000 (7)
|
0
|
*
|
Barbara McShane
39 Southwind Cir.
Richmond, CA 94804
|
1,000,000 (7)
|
*
|
1,000,000 (7)
|
0
|
*
|
Midsummer Investment, Ltd.
294 Madison Avenue—38th
Floor
New York, NY 10014
|
5,000,000 (8)
|
*
|
5,000,000 (8)
|
0
|
*
|
Gemini Master Fund, Ltd.
135 Liverpool Drive, #C
Cardiff, CA 92007
|
6,000,000 (9)
|
*
|
6,000,000 (9)
|
0
|
*
|
Pierce Atwood LLP
One Monument Square
Portland, ME 04101
|
1,350,000 (10)
|
*
|
1,350,000 (10)
|
0
|
*
|
Optimus CG II, Ltd.
11150 Santa Monica Boulevard, Suite 1500
Los Angeles, CA 90025
|
0
|
*
|
126,843,658 (11)
|
0
|
*
|
JMJ Financial
|
12,000,000 (12)
|
2.12%
|
13,200,000 (13)
|
0
|
*
|
Andwell, LLC (14)
c/o Advanced Cell Technology, Inc.
381 Plantation Street
Worcester, MA 01605
|
1,026,000 (15)
|
*
|
1,026,000 (15)
|
0
|
*
|
Nancy Burrows (16)
c/o Advanced Cell Technology, Inc.
381 Plantation Street
Worcester, MA 01605
|
650,000 (15)
|
*
|
650,000 (15)
|
0
|
*
|
William Woodward
|
33,000 (17)
|
*
|
33,000 (17)
|
0
|
*
|
·
|
ordinary brokerage transactions and transactions in
which the broker-dealer solicits
purchasers;
|
·
|
block trades in which the broker-dealer will attempt
to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the
transaction;
|
·
|
purchases by a broker-dealer as principal and resale
by the broker-dealer for its
account;
|
·
|
an exchange distribution in accordance with the rules
of the applicable exchange;
|
·
|
privately negotiated
transactions;
|
·
|
settlement of short sales entered into after the
effective date of the registration statement of which this prospectus is a
part;
|
·
|
broker-dealers may agree with the selling
stockholders to sell a specified number of such shares at a stipulated
price per share;
|
·
|
Through the writing or settlement of options or other
hedging transactions, whether through an options exchange or
otherwise;
|
·
|
a combination of any such methods of sale;
or
|
·
|
Any other method permitted pursuant to applicable
law.
|
·
|
The Company agreed to sell, and the Investor agreed
to purchase, in one or more purchases from time to time (“Tranches”) in
the Company’s sole discretion (subject to the conditions set forth
therein), (i) up to 1,000 shares of Series B Preferred Stock (the
“Preferred Shares”) at a purchase price of $10,000 per share, for an
aggregate purchase price of up to $10,000,000, and (ii) five-year warrants
(the “Optimus Warrants”) to purchase shares of the Company’s common stock,
with an aggregate exercise price equal to 135% of the purchase price paid
by the Investor, at an exercise price per share equal to the closing bid
price of the Company’s common stock on the date the Company provides
notice of such Tranche. The Optimus Warrants were issued on the
Effective Date to Optimus CG II Ltd., Optimus’s designee, and will vest
and become exercisable in replacement of a five-year warrant to purchase
119,469,027 shares of common stock with an exercise price per share of
$0.113 the Company issued on the Effective Date (which may only be
exercised for such number of shares of common stock equal in amount to
135% of the cumulative purchase price paid by the Investor). The business
purpose of exchanging the warrants to be issued with each Tranche for the
warrants originally issued on November 2, 2009, is to enable the holder to
have separate instruments for the vested portion of the warrants, and to
allow the parties to more easily track the warrants that are
vested. Rather than being required to track these potential
multiple combinations of numbers, the parties believed that it would be
simpler to adopt the “replacement” warrant process. The process
is comparable to what happens when a warrant holder exercises only a
portion of an existing warrant, or anytime a holder divides a warrant into
two or more separate instruments that together represent all of the rights
embodied in the original instrument. For these reasons, we do
not believe that the “replacement warrant” should be viewed as a newly
issued warrant, but rather as a replacement issued as a substitute for a
portion of the previously issued warrant that was
surrendered.
|
·
|
The Company agreed to pay to the Investor a
commitment fee of $500,000 (the “Commitment Fee”), at the earlier of the
closing of the first Tranche or the six month anniversary of the Effective
Date, payable at the Company’s election in cash or common stock valued at
90% of the volume weighted average price of the Company’s common stock on
the five trading days preceding the payment
date.
|
·
|
The Company agreed to use its best efforts to file
within 60 days of the Effective Date, and cause to become effective as
soon as possible thereafter, a registration statement with the Securities
and Exchange Commission for the resale of all shares of common stock
issuable pursuant to the Purchase Agreement, including the shares of
common stock underlying the Optimus Warrants, and shares issuable in
payment of the Commitment Fee.
|
·
|
On November 3, 2009, the Company filed a certificate
of designations for the Series B Preferred Stock (the “Certificate of
Designations”). Pursuant to the Certificate of Designations, the Preferred
Shares shall, with respect to dividend, rights upon
liquidation, winding-up or dissolution, rank: (i) senior to the Company’s
common stock, and any other class or series of preferred stock of the
Company, except Series A-1 Convertible Preferred Stock which shall rank
senior in right of liquidation and pari passu with respect
to dividends; and (ii) junior to all existing and future indebtedness of
the Company. In addition, the Preferred Shares (a) shall accrue dividends
at a rate of 10% per annum, payable in Preferred Shares, (ii)
shall not have voting rights, and (iii) may be redeemed at the
Company’s option, commencing 4 years from the issuance date at a price per
share of (a) $10,000 per share plus accrued but unpaid
dividends (the “Series B Liquidation Value”), or, at a price per share of
: (x) 127% of the Series B Liquidation Value if redeemed on or after the
first anniversary but prior to the second anniversary of the initial
issuance date, (y) 118% of the Series B Liquidation Value if redeemed on
or after the second anniversary but prior to the third anniversary of the
initial issuance date, and (z) 109% of the Series B Liquidation Value if
redeemed on or after the third anniversary but prior to the fourth
anniversary of the initial Issuance
Date
|
·
|
The size, date and pace of filing, and focus of the
portfolio.
|
·
|
The relative immaturity of this field of
study.
|
·
|
The limited number of truly competitive portfolios of
intellectual property.
|
·
|
isolating and purifying cell
lines,
|
·
|
growing stable cell lines in culture for long periods
without mutations,
|
·
|
manufacturing cell lines in numbers sufficient for
therapy,
|
·
|
differentiating ES cells into all of the cell types
desired for therapies, and
|
·
|
solving the potential rejection of ES cells used in
therapies due to immuno-incompatibility with the
patient.
|
Medical Condition
|
Number of
Patients*
|
|
Cardiovascular disease
|
70 million
|
|
Autoimmune disease
|
50 million
|
|
Diabetes
|
18 million
|
|
Osteoporosis
|
10 million
|
|
Cancer
|
10 million
|
|
Alzheimer's disease
|
4.5 million
|
|
Parkinson's disease
|
1 million
|
|
Burns (severe)
|
1.1 million
|
|
Spinal-cord injuries
|
0.25 million
|
|
Birth defects
|
0.15 million/year
|
·
|
Ability to restore cardiac function through new
muscle formation
|
·
|
Ability to prevent further decline of heart
function
|
·
|
No risk immunological rejection of myoblasts due to
autologous nature of the therapy
|
·
|
Complementary to and capable of improving outcomes of
current therapeutic options for heart
disease
|
·
|
hematopoietic cells for blood diseases and
cancer,
|
·
|
myocardial and endothelial vascular tissue for
cardiovascular disease,
|
·
|
congestive heart failure, myocardial infarction and
other cardiovascular disease
|
·
|
skin cells for dermatological
conditions,
|
·
|
retinal pigment epithelium cells as treatment for
macular degeneration and retinal
pigmentosis,
|
·
|
neural cells for spinal cord injury, Parkinson's
disease and other neuro-degenerative
diseases,
|
·
|
pancreatic islet Я cells for
diabetes,
|
·
|
liver cells for hepatitis and
cirrhosis,
|
·
|
cartilage cells for arthritis,
and
|
·
|
lung cells for a variety of pulmonary
diseases.
|
Number
Patent
|
Country
|
Filing
Date
|
Issue
Date
|
Expiration
Date*
|
Title
|
|||||
6,808,704
|
United States (US)
|
09/06/2000
|
10/26/2004
|
09/6/2020
|
Method for Generating Immune-Compatible Cells and
Tissues Using Nuclear Transfer Techniques
|
|||||
783162
|
Australia (AU)
|
09/06/2000
|
01/12/2006
|
09/6/2020
|
Method for Generating Immune-Compatible Cells and
Tissues Using Nuclear Transfer Techniques
|
|||||
265679
|
Mexico
|
09/06/2000
|
04/03/2009
|
09/06/2020
|
Method for Generating Immune-Compatible Cells and
Tissues Using Nuclear Transfer Techniques
|
|||||
536786
|
New Zealand (NZ)
|
09/06/2000
|
01/11/2007
|
09/6/2020
|
Method for Generating Immune-Compatible Cells and
Tissues Using Nuclear Transfer Techniques
|
|||||
782385
|
AU
|
10/13/2000
|
11/3/2005
|
10/13/2020
|
Method of Differentiation of Morula or Inner Cell
Mass Cells and Method of Making Lineage-Defective Embryonic Stem
Cells
|
|||||
518191
|
NZ
|
10/13/2000
|
05/10/2004
|
10/13/2020
|
Method of Differentiation of Morula or Inner Cell
Mass Cells and Method of Making Lineage-Defective Embryonic Stem
Cells
|
|||||
516236
|
NZ
|
06/30/2000
|
08/07/2005
|
06/30/2020
|
Cytoplasmic Transfer to De-Differentiate Recipient
Cells
|
|||||
782286
|
AU
|
06/30/2000
|
10/27/2005
|
06/30/2020
|
Cytoplasmic Transfer to De-Differentiate Recipient
Cells
|
|||||
531844
|
NZ
|
09/06/2000
|
12/08/05
|
09/06/2020
|
Telomere Restoration and Extension of Cell Life-Span
in Animals Cloned from Senescent Somatic Cells
|
|||||
519347
|
NZ
|
12/20/2000
|
11/11/2004
|
12/20/2020
|
Method to Produce Cloned Embryos and Adults from
Cultured Cells
|
|||||
00818200.0
|
China
(CN)
|
12/20/2000
|
10/18/2006
|
12/20/2020
|
Method to Produce Cloned Embryos and Adults from
Cultured Cells
|
|||||
5,453,366
|
US
|
03/15/1993
|
09/26/1995
|
09/26/2012
|
Method of Cloning Bovine
Embryos
|
|||||
6,011,197
|
US
|
01/28/1999
|
01/04/2000
|
03/06/2017
|
Method of Cloning Bovines Using Reprogrammed
Non-Embryonic Bovine Cells
|
|||||
6,395,958
|
US
|
07/15/1999
|
05/28/2002
|
03/06/2017
|
Method of Producing a Polypeptide in an
Ungulate
|
|||||
5,496,720
|
US
|
02/10/1993
|
03/05/1996
|
03/05/2013
|
Parthenogenic Oocyte
Activation
|
|||||
5,843,754
|
US
|
06/06/1995
|
12/01/1998
|
12/01/2015
|
Parthenogenic Bovine Oocyte
Activation
|
|||||
6,194,202
|
US
|
03/04/1996
|
02/27/2001
|
02/10/2013
|
Parthenogenic Oocyte
Activation
|
|||||
6,077,710
|
US
|
10/21/1998
|
06/20/2000
|
02/10/2013
|
Parthenogenic Oocyte
Activation
|
|||||
5,346,990
|
US
|
03/12/1991
|
09/13/1994
|
09/13/2011
|
Sex-Associated Membrane Proteins and Methods for
Increasing the Probability that Offspring will be of a Desired
Sex
|
Number
Patent
|
Country
|
Filing
Date
|
Issue
Date
|
Expiration
Date*
|
Title
|
|||||
6,673,604
|
US
|
07/24/2000
|
01/06/2004
|
07/24/2020
|
Muscle Cells and Their Use in Cardiac
Repair**
|
|||||
6,432,711
|
US
|
11/01/1994
|
08/13/2002
|
08/13/2019
|
Embryonic Stem Cells Capable of Differentiating into
Desired Cell Lines
|
|||||
2,174,746
|
Canada
(CA)
|
11/02/1994
|
04/24/2007
|
11/02/2014
|
Embryonic Stem Cells Capable of Differentiating into
Desired Cell Lines
|
Number
Patent
|
Country
|
Filing Date
|
Issue Date
|
Expiration
Date*
|
Title
|
|||||
518365
|
NZ
|
10/27/2000
|
08/12/2004
|
10/27/2020
|
Gynogenetic or Androgenetic Production of Pluripotent
Cells and Cell Lines, and Use Thereof to Produce Differentiated Cells and
Tissues
|
|||||
782846
|
AU
|
10/27/2000
|
12/15/2005
|
10/27/2020
|
Gynogenetic or Androgenetic Production of Pluripotent
Cells and Cell Lines, and Use Thereof to Produce Differentiated Cells and
Tissues
|
|||||
5994619
|
US
|
12/16/1996
|
11/30/1999
|
04/01/2016
|
Production of Chimeric Bovine or Porcine Animals
Using Cultured Inner Cell Mass Cells
|
|||||
5905042
|
US
|
04/01/1996
|
05/08/1999
|
04/01/2016
|
Production of Chimeric Bovine or Porcine Animals
Using Cultured Inner Cell Mass
Cells
|
·
|
the cloning, development, manufacture and sale of
cloned non-human animals, including without limitation, bovine, hircine,
ovine, porcine, equine animals and ungulates (as well as any transgenic
variance or enhancements thereto) or products that are composed of, made
in or derived, extracted or isolated from cells or tissues of such animals
for the production of food or fiber, and the rendering of services or uses
that relate to the production of such
products;
|
·
|
the cloning, development, manufacture and sale of
endangered species for purposes of researching, aiding, reproducing or
assisting in the reproduction of such endangered
species;
|
·
|
the cloning, development, and sale of hircine, ovine,
feline, canine and equine animals (as well as any transgenic variance or
enhancements thereto) for personal, business or commercial purposes,
specifically excluding the sale of these animals as scientific research
laboratory subjects; and
|
·
|
the cloning, development, manufacture and sale of
cloned equine animals (as well as any transgenic variance or enhancements
thereto) or products that are composed of, made in or derived, extracted
or isolated from cells or tissues of such animals for non-therapeutic
purposes, including but not limited to, for use in agriculture, for use as
food, for use as companion, service, work or recreational animals, or for
use as racing or other equine event animals, and the rendering of services
or uses that relate to the production of such
products.
|
·
|
the research, development, manufacture and sale of
human and non-human animal cells for commercial research
and
|
·
|
the manufacture and selling of human cells for
therapeutic and diagnostic use in the treatment of human diabetes and
liver diseases, and retinal diseases and retinal degenerative
diseases.
|
·
|
the research, development, manufacture and sale of
human and non-human animal cells and defined animal cell lines for
commercial research,
|
·
|
the manufacture and selling of human cells for
therapeutic and diagnostic use in the treatment of human diabetes and
liver diseases and retinal diseases and retinal degenerative diseases,
and
|
·
|
the use of defined animal cell lines in the process
of manufacturing and selling human cells for therapeutic and diagnostic
use in the treatment of human diabetes and liver
diseases.
|
-
|
Level 1 inputs to the valuation methodology are
quoted prices for identical assets or liabilities in active
markets.
|
-
|
Level 2 inputs to the valuation methodology include
quoted prices for similar assets and liabilities in active markets, and
inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial
instrument.
|
-
|
Level 3 inputs to the valuation methodology are
unobservable and significant to the fair value
measurement.
|
Three months ended September 30,
|
Three months ended September 30,
|
|||||||||||||||
2009
|
2008
|
|||||||||||||||
% of
|
% of
|
|||||||||||||||
Amount
|
Revenue
|
Amount
|
Revenue
|
|||||||||||||
REVENUE
|
$
|
248,141
|
100.0
|
%
|
$
|
242,195
|
100.0
|
%
|
||||||||
COST OF REVENUE
|
108,049
|
43.5
|
%
|
95,180
|
39.3
|
%
|
||||||||||
GROSS PROFIT
|
140,092
|
56.5
|
%
|
147,015
|
60.7
|
%
|
||||||||||
RESEARCH AND DEVELOPMENT EXPENSES AND GRANT
REIMBURSEMENTS
|
700,818
|
282.4
|
%
|
1,434,896
|
592.5
|
%
|
||||||||||
GENERAL AND ADMINSTRATIVE EXPENSES
|
453,561
|
182.8
|
%
|
594,663
|
245.5
|
%
|
||||||||||
LOSS ON SETTLEMENT OF LITIGATION
|
110,000
|
44.3
|
%
|
740,849
|
305.9
|
%
|
||||||||||
OTHER INCOME (EXPENSE)
|
(79,987
|
)
|
-32.2
|
%
|
(9,978,249
|
)
|
-4119.9
|
%
|
||||||||
NET LOSS
|
$
|
(1,204,274
|
)
|
-485.3
|
%
|
$
|
(12,601,642
|
)
|
-5203.1
|
%
|
·
|
Note A: The
original issue discount has been increased by 10%, or $60,000, such that
the new principal amount is $660,000.
|
|
·
|
Note B: The
original issue discount has been increased by 10%, or $120,000, such that
the new principal amount is
$1,320,000.
|
Nine months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
|
2009
|
2008
|
||||||||||||||
|
% of
|
% of
|
||||||||||||||
|
Amount
|
Revenue
|
Amount
|
Revenue
|
||||||||||||
REVENUE
|
$
|
785,112
|
100.0
|
%
|
$
|
540,926
|
100.0
|
%
|
||||||||
COST OF REVENUE
|
324,148
|
41.3
|
%
|
406,094
|
75.1
|
%
|
||||||||||
GROSS PROFIT
|
460,964
|
58.7
|
%
|
134,832
|
24.9
|
%
|
||||||||||
RESEARCH AND DEVELOPMENT EXPENSES AND GRANT
REIMBURSEMENTS
|
2,138,843
|
272.4
|
%
|
8,084,149
|
1494.5
|
%
|
||||||||||
GENERAL AND ADMINSTRATIVE EXPENSES
|
1,961,195
|
249.8
|
%
|
4,160,601
|
769.2
|
%
|
||||||||||
LOSS ON SETTLEMENT OF LITIGATION
|
4,903,949
|
624.6
|
%
|
740,849
|
137.0
|
%
|
||||||||||
OTHER INCOME (EXPENSE)
|
(41,097,931
|
)
|
-5234.7
|
%
|
(14,859,951
|
)
|
-2747.1
|
%
|
||||||||
NET INCOME (LOSS)
|
$
|
(49,640,954
|
)
|
-6322.8
|
%
|
$
|
(27,710,718
|
)
|
-5122.8
|
%
|
Nine months ended September 30,
|
||||||||
2009
|
2008
|
|||||||
Net cash used in operating activities
|
$
|
(3,059,608
|
)
|
$
|
(3,772,675
|
)
|
||
Net cash used in investing activities
|
(7,538
|
)
|
(174,017
|
)
|
||||
Net cash provided by financing
activities
|
3,308,000
|
2,790,122
|
||||||
Net increase (decrease) in cash and cash
equivalents
|
240,854
|
(1,156,570
|
)
|
|||||
Cash and cash equivalents at the end of the
period
|
$
|
1,057,758
|
$
|
9,546
|
·
|
On December 18, 2008, we entered into a license
agreement with an Ireland-based investor, Transition Holdings Inc.
(“Transition”), for certain of our non-core technology. Under the
agreement, Transition agreed to acquire a license to the technology for
$3.5 million in cash. As of September 30, 2009, we received the entire
$3.5 million in cash under this agreement.
|
|
·
|
On March 30, 2009, we entered into a license
agreement with CHA under which we will license our RPE technology, for the
treatment of diseases of the eye, to CHA for development and
commercialization exclusively in Korea. We are eligible to receive up to a
total of $1.9 million in fees based upon the parties achieving certain
milestones, including us making an IND submission to the US FDA to
commence clinical trials in humans using the technology. We received an
up-front fee under the license in the amount of $1,100,000. Under the
agreement, CHA will incur all of the cost associated with the RPA clinical
trials in Korea. The agreement is part of the joint venture between the
two companies.
|
|
·
|
On March 11, 2009, we entered into a $5 million
credit facility (“Facility”) with a life sciences fund. Under the
agreement, the proceeds from the Facility must be used exclusively for us
to file an investigational new drug (“IND”) for our retinal pigment
epithelium (“RPE”) program, and will allow us to complete both Phase I and
Phase II studies in humans. An IND is required to commence clinical
trials. Under the terms of the agreement, we may draw down funds, as
needed for clinical development of the RPE program, from the investor
through the issuance of Series A-1 convertible preferred stock. The
preferred stock pays dividends, in kind of preferred stock, at an annual
rate of 10%, matures in four years from the initial issuance date, and is
convertible into common stock at $0.75 per share. On October 19, 2009, we
entered into two letter agreements with Volation Life Sciences Capital
Partners, LLC (“Volation”) (See Note 10), pursuant to which (i) the
Company reduced the conversion price of its outstanding Series A-1
convertible preferred stock issued to Volation to $.10 per share resulting
in 22,880,000 shares of Common Stock upon conversion, (ii) issued Volation
2,500,000 shares of its Common Stock at $0.10 per share in payment of an
outstanding commitment fee, and (iii) Volation waived the delinquency
in non-payment of the $250,000 commitment fee required pursuant
to the preferred stock purchase agreement between the Company and
Volation.
|
|
·
|
On May 13, 2009, the Company entered into
another license agreement with CHA under which the Company will
license its proprietary “single blastomere technology,” which has the
potential to generate stable cell lines, including RPE for the treatment
of diseases of the eye, for development and commercialization exclusively
in Korea. We received an upfront license fee of
$300,000.
|
|
·
|
On July 29, 2009, we entered into a consent,
amendment and exchange agreement with holders of our outstanding
convertible debentures and warrants, which were issued in private
placements in 2005, 2006, 2007 and 2008. We agreed to issue to each
debenture holder in exchange for the holder’s debenture an amended and
restated debenture in a principal amount equal to the principal amount of
the holder’s debenture times 1.35 minus any interest paid thereon. The
conversion price under the amended and restated debentures was reduced to
$0.10, subject to certain customary anti-dilution adjustments. The
maturity date under the amended and restated debentures was extended until
December 30, 2010. The amended and restated debentures bear interest at
12% per annum. Further, we agreed to issue to each holder in exchange for
the holder’s warrants amended and restated warrants, as well as additional
warrants exercisable into 79,076,873 shares of our common stock for a
total of warrants exercisable into 192,172,519 shares of common stock,
both warrants containing a reduced exercise price of $0.10, subject to
certain customary anti-dilution adjustments. The termination date under
the amended and restated warrants was extended until June 30, 2014.
Simultaneously with the signing of this agreement, we and the debenture
holders entered into a standstill and forbearance agreement, whereby the
debenture holders agreed to forbear from exercising their rights and
remedies under the original debentures and transaction
documents.
|
|
·
|
During September 2009, we received $1,020,000 under
its convertible promissory notes with JMJ Financial, originally executed
on February 14, 2008.
|
|
·
|
On October 19, 2009, we entered into two
letter agreements with Volation Life Sciences Capital Partners, LLC
(“Volation”), pursuant to which (i) we reduced the conversion
price of our outstanding Series A-1 convertible preferred stock issued to
Volation to $.10 per share resulting in 22,880,000 shares of Common Stock
upon conversion, (ii) issued Volation 2,500,000 shares of our Common Stock
at $0.10 per share in payment of an outstanding commitment fee, and (iii)
Volation waived the delinquency in non-payment of the $250,000
commitment fee required pursuant to the preferred stock purchase agreement
between us and Volation.
|
·
|
In connection with an amendment to an agreement
between us and JMJ Financial, on October 1, 2009, we borrowed $1,000,000
and issued a convertible promissory note for $1,200,000. We
shall pay a one-time interest payment of 10% of the principal of the
promissory note which is due on the maturity date of the promissory note,
which is October 1, 2012. The promissory note is
convertible into shares of our common stock at a conversion price of the
lesser of (i) $.25 per share or (ii) eighty percent of the average of the
three lowest trade prices in the 20 trading days prior to the
conversion.
|
|
·
|
In connection with an amendment to an agreement
between us and JMJ Financial, on October 1, 2009, we borrowed $1,000,000
and issued a secured & collateralized promissory note. We shall pay a
one-time interest payment of 12% of the principal of the promissory note
which is due on the maturity date of the promissory note, which is October
1, 2012.
|
|
·
|
On November 2, 2009 (“Effective Date”), we entered
into a preferred stock purchase agreement with Optimus Life Sciences
Capital Partners, LLC (“Investor”). Pursuant to the purchase agreement,
the Company agreed to sell, and the Investor agreed to purchase, in one or
more purchases from time to time (“Tranches”) in the Company’s sole
discretion (subject to the conditions set forth therein), (i) up to 1,000
shares of Series B Preferred Stock (the “Preferred Shares”) at a purchase
price of $10,000 per share, for an aggregate purchase price of up to
$10,000,000, and (ii) five-year warrants (the “Optimus Warrants”) to
purchase shares of the Company’s common stock, with an aggregate exercise
price equal to 135% of the purchase price paid by the Investor, at an
exercise price per share equal to the closing bid price of the Company’s
common stock on the date the Company provides notice of such
Tranche. The Optimus Warrants were issued on the Effective Date
to Optimus CG II Ltd., Optimus’s designee, and will vest and become
exercisable in replacement of a five-year warrant to purchase 119,469,027
shares of common stock with an exercise price per share of $0.113 the
Company issued on the Effective Date (which may only be exercised for such
number of shares of common stock equal in amount to 135% of the cumulative
purchase price paid by the Investor). The business purpose of exchanging
the warrants to be issued with each Tranche for the warrants originally
issued on November 2, 2009, is to enable the holder to have separate
instruments for the vested portion of the warrants, and to allow the
parties to more easily track the warrants that are
vested. Rather than being required to track these potential
multiple combinations of numbers, the parties believed that it would be
simpler to adopt the “replacement” warrant process. The process
is comparable to what happens when a warrant holder exercises only a
portion of an existing warrant, or anytime a holder divides a warrant into
two or more separate instruments that together represent all of the rights
embodied in the original instrument. For these reasons, we do
not believe that the “replacement warrant” should be viewed as a newly
issued warrant, but rather as a replacement issued as a substitute for a
portion of the previously issued warrant that was
surrendered.
|
·
|
On November 12, 2009, we entered into a subscription
agreement (the “Subscription Agreement”) with the subscribers (the
“Subscribers”). Pursuant to the subscription agreement, we agreed to sell,
and the subscribers agreed to purchase, subject to the terms and
conditions therein, promissory notes in the principal amount of a minimum
of $2,400,000, for a purchase price of a minimum of $2,000,000 (the
“Notes”). The Notes will be convertible into shares of our common stock at
a conversion price of $0.10. The initial closing under the Subscription
Agreement occurred on November 12, 2009, pursuant to which, we sold Notes
in the principal amount of $1,662,000, for a purchase price of $1,385,000,
and issued 11,080,000 Class A Warrants and Additional Investment Rights
for the purchase of (a) up to $3,324,000 principal amount of AIR Notes for
a purchase price of up to $2,770,000 and (b) up to 22,160,000 Class B
Warrants. In addition, on November 13, 2009, we sold Notes in the
principal amount of $441,000 for a purchase price of $367,500 (including
$67,500 paid for in forgiveness of legal fees owed to a subscriber) and
issued Additional Investment Rights for the purchase of (a) up to $882,000
principal amount of Notes for a purchase price of up to $735,000 and (b)
up to 5,880,000 Class B Warrants. The closing that occurred on November
13, 2009 was deemed part of the initial
closing.
|
2008
|
2007
|
|||||||||||||||
% of
|
% of
|
|||||||||||||||
Amount
|
Revenue
|
Amount
|
Revenue
|
|||||||||||||
Revenue
|
$
|
787,106
|
100.0
|
%
|
$
|
647,349
|
100.0
|
%
|
||||||||
Cost of Revenue
|
765,769
|
97.3
|
%
|
428,913
|
66.3
|
%
|
||||||||||
Gross profit
|
21,337
|
2.7
|
%
|
218,436
|
33.7
|
%
|
||||||||||
Research and development expenses and Grant
reimbursements
|
8,530,408
|
1083.8
|
%
|
16,772,470
|
2590.9
|
%
|
||||||||||
General and administrative
expenses
|
5,009,418
|
636.4
|
%
|
6,781,705
|
1047.6
|
%
|
||||||||||
Non-operating income (expense):
|
(20,385,024
|
)
|
-2589.9
|
%
|
7,437,014
|
1148.8
|
%
|
|||||||||
Net loss
|
$
|
(33,903,513
|
)
|
-4307.4
|
%
|
$
|
(15,898,725
|
)
|
-2456.0
|
%
|
2008
|
2007
|
|||||||
Net cash used in operating
activities
|
$
|
(2,964,820
|
)
|
$
|
(16,031,464
|
)
|
||
Net cash used in investing
activities
|
(174,514
|
)
|
(139,873
|
)
|
||||
Net cash provided by financing
activities
|
2,790,122
|
8,648,117
|
||||||
Net decrease in cash and cash
equivalents
|
(349,212
|
)
|
(7,523,220
|
)
|
||||
Cash and cash equivalents at the end of the
period
|
$
|
816,904
|
$
|
1,166,116
|
Calendar Quarter
|
High Bid
|
Low Bid
|
||||||
2007 First Quarter
|
$
|
1.19
|
$
|
0.54
|
||||
2007 Second Quarter
|
$
|
1.10
|
$
|
0.32
|
||||
2007 Third Quarter
|
$
|
0.52
|
$
|
0.26
|
||||
2007 Fourth Quarter
|
$
|
0.31
|
$
|
0.15
|
||||
2008 First Quarter
|
$
|
0.25
|
$
|
0.14
|
||||
2008 Second Quarter
|
$
|
0.13
|
$
|
0.06
|
||||
2008 Third Quarter
|
$
|
0.07
|
$
|
0.01
|
||||
2008 Fourth Quarter
|
$
|
0.05
|
$
|
0.02
|
||||
2009 First Quarter
|
$
|
0.29
|
$
|
0.04
|
||||
2009 Second Quarter
|
$
|
0.26
|
$
|
0.10
|
||||
2009 Third Quarter
|
$
|
0.24
|
$
|
0.11
|
||||
2009 Fourth Quarter (as of December
21, 2009)
|
$
|
0.14
|
$
|
0.09
|
Plan Category
|
Number of securities to be issued upon exercise of
outstanding options, warrants and rights
|
Weighted average exercise price of outstanding
options, warrants and rights
|
Number of securities remaining available for issuance
under equity complensation plans (excluding securities reflected in column
(a))
|
||||||||||
(a)
|
(b)
|
(c)
|
|||||||||||
Equity compensation plans approved by security
holders
|
28,986,853 | (1) | $ | 0.32 | 119,325,558 | (2) | |||||||
Equity compensation plans not approved by security
holders
|
5,930,391 | 0.50 | - | ||||||||||
Total
|
34,917,244 | 0.35 | 119,325,558 | ||||||||||
(1) Awards for 2,492,000 options have been issued
under the Advanced Cell Technology, Inc. 2004 Stock Option Plan I ("2004
Plan 1"), 1,301,161 options have been issued
|
||||||||
under the Advanced Cell Technology, Inc. 2004 Stock
Option Plan II ("2004 Plan 2" and together with the 2004 Plan I, the "2004
ACT Plans"), and 26,881,692 options have been
|
||||||||
issued under the 2005 Stock Plan.
|
||||||||
(2) This number included 308,000 shares available
under the 2004 Plan I and 15,722,589 shares available under the 2005 Stock
Plan.
|
||||||||
Name
|
Age
|
Position
|
||
William M. Caldwell, IV
|
61
|
Chief Executive Officer and Chairman of the Board of
Directors
|
||
Robert P. Lanza M.D.
|
52
|
Chief Scientific Officer
|
||
Alan C. Shapiro, Ph.D.
|
63
|
Member of the Board of
Directors
|
||
Erkki Ruoslahti, M.D., Ph.D.
|
68
|
Member of the Board of
Directors
|
||
Gary Rabin
|
43
|
Member of the Board of
Directors
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
All Other Compensation
|
Total
|
||||||||||||||||||||
Name and Principal Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||||||||||||||||||
William M. Caldwell, IV
|
2009
|
382,500
|
40,000
|
-
|
131,826
|
1,879
|
(1)
|
556,205
|
|||||||||||||||||
Chief Executive Officer and
|
2008
|
350,000
|
-
|
-
|
-
|
995
|
(1)
|
350,995
|
|||||||||||||||||
Chairman of the Board of
Directors
|
|||||||||||||||||||||||||
Robert P. Lanza, M.D.,
|
2009
|
311,250
|
81,250
|
-
|
320,515
|
1,524
|
(1)
|
714,539
|
|||||||||||||||||
Chief Scientific Officer
|
2008
|
290,000
|
35,000
|
-
|
168,237
|
636
|
(1)
|
493,873
|
|||||||||||||||||
Jonathan F. Atzen
|
2008
|
78,077
|
-
|
93,669
|
1,598
|
3,001
|
(2)
|
176,345
|
|||||||||||||||||
Sr. Vice President, General
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Counsel and Secretary (3)
|
·
|
Robert P. Lanza will continue to serve as the
Company’s chief scientific officer, for a term of two years commencing on
October 1, 2009, subject to earlier termination as provided therein. The
term under the Agreement may be extended by mutual written
agreement.
|
·
|
The Company will pay Mr. Lanza a base salary of
$375,000 per annum, which may be increased during the term at the sole
discretion of the Company’s board of directors. The Company may also pay
Mr. Lanza annual bonuses in the Company’s sole
discretion.
|
·
|
The Company will recommend to the Company’s board of
directors that the Company issue to Mr. Lanza restricted common stock in
an amount equal to the greater of (a) 20,000,000 shares or (b) 3% of any
newly authorized employee stock pool. Such issuance will be made by no
later than the January 2010 meeting of the board of
directors.
|
·
|
If Mr. Lanza’s employment under the Agreement is
terminated by the Company without cause (as defined therein), the Company
will pay Mr. Lanza severance of one year’s base
salary.
|
Fees Earned
|
Stock
|
Option
|
All Other
|
||||||||||||||||||
or Paid in Cash
|
Awards
|
Awards
|
Compensation
|
Total
|
|||||||||||||||||
Name and Principal Position
|
Year
|
($)
|
($)
|
($)
|
($)
|
($)
|
|||||||||||||||
Alan C. Shapiro, Ph.D.
|
2009
|
72,188
|
-
|
-
|
-
|
72,188
|
|||||||||||||||
Erkki Ruoslahti, M.D., Ph.D.
|
2009
|
105,850
|
-
|
-
|
-
|
105,850
|
|||||||||||||||
Gary Rabin
|
2009
|
141,250
|
-
|
-
|
-
|
141,250
|
Number of
|
Number of
|
||||||||||||||
Securities
|
Securities
|
||||||||||||||
Underlying
|
Underlying
|
Option
|
Option
|
||||||||||||
Unexercised
|
Unexercised
|
Exercise
|
Expiration
|
||||||||||||
Options (#)
|
Options (#)
|
Price
|
Date
|
||||||||||||
Name
|
Exercisable
|
Unexercisable
|
($)
|
($)
|
|||||||||||
William M. Caldwell, IV
|
651,161 | (1) | - | 0.25 |
12/31/2014
|
||||||||||
Chief Executive Officer and
|
1,903,112 | (1) | - | 0.85 |
1/31/2015
|
||||||||||
Chairman of the Board of Directors
|
1,383,565 | (2) | 1,170,708 | 0.098 |
11/13/2019
|
||||||||||
Robert P. Lanza, M.D.,
|
750,000 | (3) | - | 0.05 |
8/12/2014
|
||||||||||
Chief Scientific Officer
|
500,000 | (4) | - | 0.85 |
1/31/2015
|
||||||||||
250,000 | (3) | - | 2.2 |
9/15/2015
|
|||||||||||
1,896,552 | (5) | 2,103,448 | 0.21 |
2/7/2018
|
|||||||||||
2,897,917 | (6) | 2,452,083 | 0.098 |
11/13/2019
|
(1)
|
These options held by Mr. Caldwell vested in
full as of December 31, 2008.
|
||||||||||||
(2)
|
These options held by Mr. Caldwell vest as
follows: 50% of the shares vest immediately with the remaining vesting at
1/12 per month.
|
||||||||||||
(3)
|
These options held by Dr. Lanza vested in full
as of December 31, 2006.
|
||||||||||||
(4)
|
These options held by Dr. Lanza vested in full
as of January 31, 2009.
|
||||||||||||
(5)
|
These options held by Dr. Lanza vest in equal
monthly installments over 48 months.
|
||||||||||||
(6)
|
These options held by Dr. Lanza vest as follows:
50% of the shares vest immediately with the remaining vesting at 1/12 per
month.
|
Number of
|
||||||||
Shares
|
||||||||
Beneficially
|
||||||||
Name and Address
of Beneficial Owner (1)
|
Owned
|
Percentage (2)
|
||||||
5% or Greater Stockholders
|
||||||||
None
|
||||||||
Directors and Named Executive
Officers
|
||||||||
William M. Caldwell, IV
|
2,801,021
|
(3)
|
*
|
|||||
Robert P. Lanza, M.D.
|
2,686,135
|
(4)
|
*
|
|||||
Alan C. Shapiro
|
6,129,432
|
(5)
|
*
|
|||||
Erkki Ruoslahti
|
120,086
|
(6)
|
*
|
|||||
Gary Rabin
|
1,862,960
|
(7)
|
*
|
|||||
Directors and Executive Officers as a Group ( 5
Persons)
|
13,599,634
|
2.18
|
%
|
(1)
|
Except as otherwise indicated, the address of each
beneficial owner is c/o Advanced Cell Technology, Inc., 381 Plantation
Street, Worcester, MA 01605.
|
(2)
|
Applicable percentage ownership is based on
613,885,468 shares of Common Stock outstanding as of November 10, 2009,
together with securities exercisable or convertible into shares of Common
Stock within 60 days of November 10, 2009 for each stockholder.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
that are currently exercisable or exercisable within 60 days of November
10, 2009 are deemed to be beneficially owned by the person holding such
securities for the purpose of computing the percentage of ownership of
such person, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other
person.
|
(3)
|
Includes 2,554,273 shares issuable upon exercise of
stock options that are currently exercisable or exercisable within 60 days
of November 10, 2009 that are held directly by Mr.
Caldwell.
|
(4)
|
Includes 2,386,135 shares issuable upon exercise of
stock options that are currently exercisable or exercisable within 60 days
of November 10, 2009.
|
(5)
|
Includes (i) indirect ownership of 1,682,346 shares
and 2,565,778 shares issuable upon conversion of convertible debentures
held by The Shapiro Family Trust and of which Dr. Shapiro may be deemed
the beneficial owner, (ii) 1,694,245 shares issuable upon exercise of
warrants held by The Shapiro Family Trust and of which Dr. Shapiro may be
deemed the beneficial owner, and (iii) 100,000 shares issuable upon
exercise of stock options that are currently exercisable or exercisable
within 60 days of November 10,
2009.
|
(6)
|
Includes 100,000 shares issuable upon exercise of
stock options that are currently exercisable or exercisable within 60 days
of November 10, 2009.
|
(7)
|
Includes indirect ownership of 1,862,960 shares
issuable upon exercise of certain warrants and upon conversion of the
debentures held by PDP I, LLC, which such number of shares represents Mr.
Rabin's proportional interest in the total number of shares held by PDP I,
LLC, based on his 33.33% equity interest in the
entity.
|
·
|
Any of our directors or
officers,
|
·
|
Any person proposed as a nominee for election as a
director,
|
·
|
Any person who beneficially owns, directly or
indirectly, shares carrying more than 5% of the voting rights attached to
our outstanding shares of common
stock,
|
·
|
Any of our promoters,
and
|
·
|
Any relative or spouse of any of the foregoing
persons who has the same house as such
person.
|
September 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
1,057,758
|
$
|
816,904
|
||||
Accounts receivable
|
-
|
261,504
|
||||||
Prepaid expenses
|
55,466
|
32,476
|
||||||
Deposits
|
2,170
|
-
|
||||||
Deferred royalty fees, current
portion
|
182,198
|
182,198
|
||||||
Total current assets
|
1,297,592
|
1,293,082
|
||||||
Property and equipment, net
|
182,055
|
400,008
|
||||||
Investment in joint venture
|
-
|
225,200
|
||||||
Deferred royalty fees, less current
portion
|
522,840
|
659,488
|
||||||
Deferred issuance costs, net of amortization of
$603,448 and $8,666,387
|
4,377,553
|
-
|
||||||
TOTAL ASSETS
|
$
|
6,380,040
|
$
|
2,577,778
|
||||
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$
|
6,835,891
|
$
|
8,287,786
|
||||
Accrued expenses
|
1,425,513
|
2,741,591
|
||||||
Accrued default interest
|
-
|
3,717,384
|
||||||
Deferred revenue, current portion
|
992,664
|
834,578
|
||||||
Advances payable, other
|
130,000
|
130,000
|
||||||
2005 Convertible debenture and embedded derivatives,
net of discounts of $0 and $0
|
-
|
85,997
|
||||||
2006 Convertible debenture and embedded derivatives
(fair value $0 and $1,993,354)
|
-
|
1,993,354
|
||||||
2007 Convertible debenture and embedded derivatives
(fair value $0 and $7,706,344)
|
-
|
7,706,344
|
||||||
February 2008 Convertible promissory note and
embedded derivatives (fair value $0 and $1,757,470)
|
-
|
1,757,470
|
||||||
April 2008 Convertible debenture and embedded
derivatives (fair value $0 and $4,066,505)
|
-
|
4,066,505
|
||||||
Amended and restated convertible debentures, current
portion, net of discounts of $1,240,575 and $0,
respectively
|
12,849,395
|
-
|
||||||
Amended and restated convertible promissory note,
current portion, net of discounts of $225,827 and $0,
respectively
|
857,861
|
-
|
||||||
Warrant derivative liabilities
|
25,003,235
|
2,655,849
|
||||||
Embedded conversion option
liabilities
|
17,605,348
|
-
|
||||||
Deferred joint venture obligations, current
portion
|
94,412
|
167,335
|
||||||
Short term capital leases
|
12,955
|
12,955
|
||||||
Notes payable, other
|
468,425
|
468,425
|
||||||
Total current liabilities
|
66,275,699
|
34,625,573
|
||||||
Amended and restated debentures, less current
portion, net of discounts of $283,465 and $0, respectively
|
2,936,018
|
-
|
||||||
Deferred joint venture obligations, less current
portion
|
11,232
|
63,473
|
||||||
Deferred revenue, less current
portion
|
5,924,518
|
3,817,716
|
||||||
Total liabilities
|
75,147,467
|
38,506,762
|
||||||
Series A-1 Convertible Preferred Stock, $0.001 par
value; 50,000,000 shares authorized,
|
||||||||
229 and 0 shares issued and outstanding; aggregate
liquidation value, net of discounts: $2,372,209 and $0,
respectively
|
2,050,471
|
-
|
||||||
Commitments and contingencies
|
-
|
-
|
||||||
STOCKHOLDERS' DEFICIT:
|
||||||||
Common stock, $0.001par value; 1,750,000,000 shares
authorized,
|
||||||||
547,964,766 and 429,448,381 issued and
outstanding
|
547,964
|
429,448
|
||||||
Additional paid-in capital
|
68,092,696
|
53,459,172
|
||||||
Accumulated deficit
|
(139,458,558
|
)
|
(89,817,604
|
)
|
||||
Total stockholders' deficit
|
(70,817,898
|
)
|
(35,928,984
|
)
|
||||
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
$
|
6,380,040
|
$
|
2,577,778
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue (License fees
and royalties)
|
$
|
248,141
|
$
|
242,195
|
$
|
785,112
|
$
|
540,926
|
||||||||
Cost of Revenue
|
108,049
|
95,180
|
324,148
|
406,094
|
||||||||||||
Gross profit
|
140,092
|
147,015
|
460,964
|
134,832
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
700,818
|
1,434,896
|
2,275,683
|
8,189,318
|
||||||||||||
Grant reimbursements
|
-
|
-
|
(136,840
|
)
|
(105,169
|
)
|
||||||||||
General and administrative expenses
|
453,561
|
594,663
|
1,961,195
|
4,160,601
|
||||||||||||
Loss on settlement of litigation
|
110,000
|
740,849
|
4,903,949
|
740,849
|
||||||||||||
Total operating
expenses
|
1,264,379
|
2,770,408
|
9,003,987
|
12,985,599
|
||||||||||||
Loss from operations
|
(1,124,287
|
)
|
(2,623,393
|
)
|
(8,543,023
|
)
|
(12,850,767
|
)
|
||||||||
Non-operating income (expense):
|
||||||||||||||||
Interest income
|
371
|
70
|
2,129
|
8,236
|
||||||||||||
Interest expense and late fees
|
(2,354,537
|
)
|
(13,740,858
|
)
|
(3,890,447
|
)
|
(26,488,148
|
)
|
||||||||
Charges related to issuance of 2008 convertible
debentures
|
-
|
-
|
-
|
(1,217,342
|
)
|
|||||||||||
Income related to repricing of 2006 and 2007
convertible debentures and warrants
|
-
|
-
|
-
|
847,588
|
||||||||||||
Adjustments to fair value of
derivatives
|
36,754,306
|
3,762,539
|
(788,680
|
)
|
11,989,715
|
|||||||||||
Losses attributable to equity method
investment
|
-
|
-
|
(144,438
|
)
|
-
|
|||||||||||
Loss on extinguishment of convertible debentures and
note
|
(34,480,127
|
)
|
-
|
(36,276,495
|
)
|
-
|
||||||||||
Total non-operating
income (expense)
|
(79,987
|
)
|
(9,978,249
|
)
|
(41,097,931
|
)
|
(14,859,951
|
)
|
||||||||
Loss before income tax
|
(1,204,274
|
)
|
(12,601,642
|
)
|
(49,640,954
|
)
|
(27,710,718
|
)
|
||||||||
Income tax
|
-
|
-
|
-
|
-
|
||||||||||||
Net loss
|
$
|
(1,204,274
|
)
|
$
|
(12,601,642
|
)
|
$
|
(49,640,954
|
)
|
$
|
(27,710,718
|
)
|
||||
Weighted average shares outstanding :
|
||||||||||||||||
Basic
|
501,293,320
|
194,417,191
|
477,394,516
|
148,070,055
|
||||||||||||
Diluted
|
501,293,320
|
194,417,191
|
477,394,516
|
148,070,055
|
||||||||||||
Loss per share:
|
||||||||||||||||
Basic
|
$
|
(0.00
|
)
|
$
|
(0.06
|
)
|
$
|
(0.10
|
)
|
$
|
(0.19
|
)
|
||||
Diluted
|
$
|
(0.00
|
)
|
$
|
(0.06
|
)
|
$
|
(0.10
|
)
|
$
|
(0.19
|
)
|
Additional
|
Total
|
|||||||||||||||||||
Common Stock
|
Paid-in
|
Accumulated
|
Stockholders'
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
||||||||||||||||
Balance December 31, 2008
|
429,448,381
|
$
|
429,448
|
$
|
53,459,172
|
$
|
(89,817,604
|
)
|
$
|
(35,928,984
|
)
|
|||||||||
Convertible debentures redemptions
|
12,627,425
|
12,627
|
1,250,115
|
1,262,742
|
||||||||||||||||
Convertible debenture and promissory note
conversions
|
41,608,113
|
41,608
|
3,140,191
|
3,181,799
|
||||||||||||||||
Option compensation charges
|
277,351
|
277,351
|
||||||||||||||||||
Issuance of stock in settlement of accounts
payable
|
39,380,847
|
39,381
|
5,259,767
|
5,299,148
|
||||||||||||||||
Issuance of stock in payment of debt issue costs for
preferred stock credit facility
|
24,900,000
|
24,900
|
4,706,100
|
4,731,000
|
||||||||||||||||
Net loss for the nine months ended September 30,
2009
|
(49,640,954
|
)
|
(49,640,954
|
)
|
||||||||||||||||
Balance September 30, 2009
|
547,964,766
|
$
|
547,964
|
$
|
68,092,696
|
$
|
(139,458,558
|
)
|
$
|
(70,817,898
|
)
|
Nine Months Ended September 30,
|
||||||||
2009
|
2008
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(49,640,954
|
)
|
$
|
(27,710,718
|
)
|
||
Adjustments to reconcile net loss to net
cash
|
||||||||
used in operating activities:
|
||||||||
Depreciation and amortization
|
304,083
|
312,672
|
||||||
Write-off of uncollectible accounts
receivable
|
-
|
25,000
|
||||||
Amortization of deferred charges
|
136,648
|
528,593
|
||||||
Amortization of deferred revenue
|
(785,112
|
)
|
(553,355
|
)
|
||||
Redeemable preferred stock dividend
accrual
|
84,209
|
-
|
||||||
Stock based compensation
|
277,351
|
768,193
|
||||||
Amortization of deferred issuance
costs
|
603,447
|
4,792,087
|
||||||
Amortization of discounts
|
1,805,531
|
17,458,660
|
||||||
Loss on extinguishment of convertible debentures and
note
|
36,276,495
|
-
|
||||||
Adjustments to fair value of
derivatives
|
788,680
|
(11,989,715
|
)
|
|||||
Charges related to issuance of February 2008
convertible notes
|
-
|
685,573
|
||||||
Charges related to issuance of April 2008 convertible
notes
|
-
|
531,769
|
||||||
Repricing of 2006 and 2007 convertible debentures and
warrants
|
-
|
(847,588
|
)
|
|||||
Shares of common stock issued for
services
|
-
|
9,496
|
||||||
Warrants issued for consulting
services
|
-
|
155,281
|
||||||
Charges related to settlement of anti-dilution
provision
|
-
|
15,581
|
||||||
Issuance of note for services
received
|
-
|
750,000
|
||||||
Shares of common stock issued for financing
costs
|
-
|
697,834
|
||||||
Non-cash rent expense
|
-
|
254,231
|
||||||
Forfeiture of rent deposits
|
-
|
88,504
|
||||||
Loss on settlement of litigation
|
4,903,949
|
740,849
|
||||||
Loss attributable to investment in joint
venture
|
144,438
|
-
|
||||||
Amortization of deferred joint venture
obligations
|
(125,164
|
)
|
-
|
|||||
(Increase) / decrease in assets:
|
||||||||
Accounts receivable
|
261,504
|
(4,767
|
)
|
|||||
Prepaid expenses
|
(22,990
|
)
|
(1,626
|
)
|
||||
Increase / (decrease) in current
liabilities:
|
||||||||
Accounts payable and accrued expenses
|
(2,433,053
|
)
|
5,065,128
|
|||||
Accrued interest
|
1,311,330
|
3,535,643
|
||||||
Deferred revenue
|
3,050,000
|
920,000
|
||||||
Net cash used in operating activities
|
(3,059,608
|
)
|
(3,772,675
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchases of property and equipment
|
(5,368
|
)
|
(174,017
|
)
|
||||
Payment of deposits
|
(2,170
|
)
|
-
|
|||||
Net cash used in investing activities
|
(7,538
|
)
|
(174,017
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from issuance of convertible
notes
|
1,020,000
|
2,182,432
|
||||||
Payments on notes and leases
|
-
|
(18,650
|
)
|
|||||
Proceeds from notes payable
|
-
|
630,000
|
||||||
Payment for issuance costs on note
payable
|
-
|
(3,660
|
)
|
|||||
Proceeds from issuance of Series A-1 convertible
preferred stock
|
2,288,000
|
-
|
||||||
Net cash provided by financing
activities
|
3,308,000
|
2,790,122
|
||||||
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
|
240,854
|
(1,156,570
|
)
|
|||||
CASH AND CASH EQUIVALENTS, BEGINNING
BALANCE
|
816,904
|
1,166,116
|
||||||
CASH AND CASH EQUIVALENTS, ENDING
BALANCE
|
$
|
1,057,758
|
$
|
9,546
|
||||
CASH PAID FOR:
|
||||||||
Interest
|
$
|
-
|
$
|
2,504
|
||||
Income taxes
|
$
|
514
|
$
|
-
|
||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES:
|
||||||||
Issuance of 12,627,425 and 59,805,820 shares of
common stock in redemption of convertible debentures
|
$
|
1,262,742
|
$
|
5,307,226
|
||||
Issuance of 41,608,113 and 38,100,654 shares of
common stock in conversion of convertible debentures
|
$
|
3,181,799
|
$
|
5,915,442
|
||||
Issuance of 24,900,000 shares of common stock in
payment convertible preferred stock issuance costs
|
$
|
4,731,000
|
$
|
-
|
||||
Issuance of 39,380,847 shares of common stock in
settlement of litigation
|
$
|
5,299,148
|
$
|
-
|
||||
Issuance of 70,503 shares of common stock to settle
an anti-dilution provision feature of convertible
debenture
|
$
|
-
|
$
|
15,581
|
||||
Issuance of 1,200,000 shares of common stock upon
exercise of employee stock options
|
$
|
-
|
$
|
60,000
|
·
|
On March 30, 2009, the Company entered into a license
agreement with CHA Bio & Diostech Co., Ltd . (“CHA”) under which
the Company will license its retinal pigment epithelium (“RPE”)
technology, for the treatment of diseases of the eye, to CHA for
development and commercialization exclusively in Korea. The Company is
eligible to receive up to a total of $1.9 million in fees based upon the
parties achieving certain milestones, including the Company making an IND
submission to the US FDA to commence clinical trials in humans using the
technology. The Company received an up-front fee under the license in the
amount of $1,100,000 during the nine months ended September 30, 2009.
Under the agreement, CHA will incur all of the costs associated with the
RPA clinical trials in Korea. The agreement is part of continuing
cooperation and collaboration between the two companies. See Note
3.
|
·
|
On March 11, 2009, the Company entered into a $5
million credit facility (“Facility”) with a life sciences fund. Under the
terms of the agreement, the Company may draw down funds from the investor
through the issuance of Series A-1 redeemable convertible preferred stock.
The preferred stock pays dividends, in kind of preferred stock, at an
annual rate of 10%, matures in four years from the initial issuance date,
and is convertible anytime into common stock at $0.75 per share. As of
November 3, 2009, the Company has drawn down approximately $2,288,000 on
this facility. See Note 10. On October 19, 2009, the Company entered into
two letter agreements with Volation Life Sciences Capital Partners, LLC
(“Volation”) (See Note 10), pursuant to which (i) the Company reduced the
conversion price of its outstanding Series A-1 convertible preferred stock
issued to Volation to $.10 per share resulting in 22,880,000 shares of
Common Stock upon conversion, (ii) issued Volation 2,500,000 shares of its
Common Stock at $0.10 per share in payment of an outstanding commitment
fee, and (iii) Volation waived the delinquency in non-payment
of the $250,000 commitment fee required pursuant to the preferred stock
purchase agreement between the Company and
Volation.
|
·
|
On May 13, 2009, the Company entered into another
license agreement with CHA under which the Company will license its
proprietary “single blastomere technology,” which has the potential to
generate stable cell lines, including RPE for the treatment of diseases of
the eye, for development and commercialization exclusively in Korea. The
Company received an upfront license fee of $300,000. See Note
3.
|
·
|
On July 29, 2009, the Company entered into a consent,
amendment and exchange agreement with holders of the Company’s outstanding
convertible debentures and warrants, which were issued in private
placements to the 2005, 2006, 2007 and 2008 debentures. The Company agreed
to issue to each debenture holder in exchange for the holder’s debenture
an amended and restated debenture in a principal amount equal to the
principal amount of the holder’s debenture times 1.35 minus any interest
paid thereon. The conversion price under the amended and restated
debentures was reduced to $0.10, subject to certain customary
anti-dilution adjustments. The maturity date under the amended and
restated debentures was extended until December 30, 2010. The amended and
restated debentures bear interest at 12% per annum. Further, the Company
agreed to issue to each holder in exchange for the holder’s warrants
amended and restated warrants, as well as additional warrants exercisable
into 79,076,873 shares of the Company’s common stock for a total of
warrants exercisable into 192,172,519 shares of common stock, both
warrants containing a reduced exercise price of $0.10, subject to certain
customary anti-dilution adjustments. The termination date under the
amended and restated warrants was extended until June 30, 2014.
Simultaneously with the signing of this agreement, the Company and the
debenture holders entered into a standstill and forbearance agreement,
whereby the debenture holders agreed to forbear from exercising their
rights and remedies under the original debentures and transaction
documents.
|
·
|
During September 2009, the Company received
$1,020,000 under its convertible promissory notes with JMJ Financial,
originally executed on February 14, 2008. See Note 6.
|
|||
·
|
See Note 16 “Subsequent Events” for additional
financing procured through November 16, 2009.
|
|||
·
|
Management anticipates raising additional future capital from its current convertible debenture holders, or other financing sources, that will be used to fund any capital shortfalls. The terms of any financing will likely be negotiated based upon current market terms for similar financings. No commitments have been received for additional investment and no assurances can be given that this financing will ultimately be completed. | |||
·
|
Management has focused its scientific operations on
product development in order to accelerate the time to market products
which will ultimately generate revenues. While the amount or timing of
such revenues cannot be determined, management believes that focused
development will ultimately provide a quicker path to revenues, and an
increased likelihood of raising additional financing.
|
|||
·
|
Management will continue to pursue licensing opportunities of the Company’s extensive intellectual property portfolio. |
Machinery & equipment
|
4 years
|
|
Computer equipment
|
3 years
|
|
Office furniture
|
4 years
|
|
Leasehold improvements
|
Lesser of lease life or economic
life
|
|
Capital leases
|
Lesser of lease life or economic
life
|
·
|
Level 1 inputs to the valuation methodology are
quoted prices for identical assets or liabilities in active
markets.
|
·
|
Level 2 inputs to the valuation methodology include
quoted prices for similar assets and liabilities in active markets, and
inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial
instrument.
|
·
|
Level 3 inputs to the valuation methodology are
unobservable and significant to the fair value
measurement.
|
Fair Value Measurements at
|
||||||||||||||||
|
Fair Value
|
September 30, 2009
|
||||||||||||||
|
As of
|
Using Fair Value Hierarchy
|
||||||||||||||
Derivative Liabilities
|
September 30, 2009
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Warrant derivative liabilities
|
$
|
25,003,235
|
$
|
-
|
25,003,235
|
-
|
||||||||||
Embedded conversion option
liabilities
|
17,605,348
|
-
|
17,605,348
|
-
|
||||||||||||
$
|
42,608,583
|
$
|
-
|
42,608,583
|
-
|
3 Months Ended
|
9 Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Genzyme Transgenics Corporation
|
13%
|
13%
|
12%
|
18%
|
||||||||||||
Exeter Life Sciences, Inc.
|
12%
|
13%
|
12%
|
17%
|
||||||||||||
Start Licensing, Inc.
|
10%
|
10%
|
10%
|
14%
|
||||||||||||
Terumo Corporation
|
**
|
31%
|
13%
|
23%
|
||||||||||||
International Stem Cell Corporation
|
15%
|
15%
|
*
|
*
|
||||||||||||
Transition Holdings, Inc.
|
21%
|
**
|
19%
|
**
|
||||||||||||
CHA Biotech Co., Ltd.
|
11%
|
**
|
*
|
**
|
Current assets
|
$
|
152,902
|
||
Noncurrent assets
|
$
|
509,310
|
||
Current liabilities
|
$
|
296,762
|
||
Noncurrent liabilities
|
$
|
494,990
|
||
Net revenue
|
$
|
20,082
|
||
Net loss
|
$
|
(1,028,792
|
)
|
Balance, December 31, 2008
|
$
|
225,200
|
||
Losses attributable to investment
|
(144,438
|
)
|
||
Amortization of premium
|
(80,762
|
)
|
||
Balance, September 30, 2009
|
$
|
-
|
December 31, 2008
|
||||
2005 Convertible debenture and embedded derivatives,
net of discounts of $0
|
$
|
85,997
|
||
2006 Convertible debenture and embedded derivatives,
fair value
|
1,993,354
|
|||
2007 Convertible debenture and embedded derivatives,
fair value
|
7,706,344
|
|||
April 2008 Convertible debenture and embedded
derivatives
|
4,066,505
|
|||
Fair value 2005, 2006, 2007 and 2008 convertible
debentures
|
$
|
13,852,200
|
||
Nine months ended September 30, 2009
|
||||
Convertible debenture conversions
|
$
|
(3,376,229
|
)
|
|
Change in fair value of embedded derivatives through
July 29, 2009
|
6,823,641
|
|||
Adjustment to bifurcate embedded derivatives upon
adoption of FASB ASC 815
|
||||
on July 29, 2009
|
(7,629,147
|
)
|
||
Addition to principal to Alpha
Capital
|
110,000
|
|||
Accrued default interest on 2005, 2006, 2007 and 2008
convertible debentures,
|
||||
December 31, 2008
|
3,522,964
|
|||
Additional accrual of default interest through July
29, 2009
|
1,227,181
|
|||
Loss on extinguishment on July 29,
2009
|
767,778
|
|||
Amortization of debt discounts
|
487,025
|
|||
September 30, 2009 Balance, Amended and restated
convertible debentures
|
$
|
15,785,413
|
||
Less: current portion
|
(12,849,395
|
)
|
||
Non-current portion
|
$
|
2,936,018
|
·
|
Note A: The
original issue discount has been increased by 10%, or $60,000, such that
the new principal amount is $660,000.
|
|
·
|
Note B: The
original issue discount has been increased by 10%, or $120,000, such that
the new principal amount is
$1,320,000.
|
·
|
On March 17, 2008 — $60,000 for a net purchase price
of $50,000 (reflecting a 16.66% original issue
discount).
|
·
|
On June 17, 2008 — $60,000 for a net purchase price
of $50,000 (reflecting a 16.66% original issue
discount).
|
·
|
On September 8, 2009 — $316,964 for a net purchase
price of $250,000 (reflecting a 21.13% original issue
discount).
|
·
|
On September 30, 2009 — $976,250 for a net purchase
price of $770,000 (reflecting a 21.13% original issue
discount).
|
December 31, 2008
|
||||
Fair value convertible promissory notes, December 31,
2008
|
$
|
1,757,470
|
||
Nine months ended September 30, 2009
|
||||
Convertible promissory note
conversions
|
$
|
(1,068,312
|
)
|
|
Additional procceds from convertible promissory
notes
|
1,020,000
|
|||
Change in fair value of embedded derivatives through
August 15, 2009
|
(478,521
|
)
|
||
Adjustment to bifurcate embedded derivatives upon
adoption of FASB ASC 815
|
||||
on August 15, 2009
|
(558,949
|
)
|
||
Accrued default interest on convertible
promissory notes, December 31, 2008
|
194,420
|
|||
Additional accrual of default interest through August
15, 2009
|
84,151
|
|||
Accrued convertible promissory note interest through
August 15, 2009
|
79,720
|
|||
Gain on extinguishment on August 15,
2009
|
(249,473
|
)
|
||
Amortization of debt discounts
|
77,355
|
|||
September 30, 2009 Balance, Amended convertible
promissory notes
|
$
|
857,861
|
||
Less: current portion
|
(857,861
|
)
|
||
Non-current portion
|
$
|
-
|
|
September 30,
|
December 31,
|
||||||
|
2009
|
2008
|
||||||
Warrants - 2005 debenture
|
$
|
3,210,163
|
$
|
29,322
|
||||
Warrants - 2006 debenture
|
4,920,310
|
274,593
|
||||||
Warrants - 2007 debenture
|
12,026,820
|
737,745
|
||||||
Warrants - 2008 debenture
|
3,910,760
|
822,043
|
||||||
Other warrant derivatives
|
935,182
|
792,146
|
||||||
$
|
25,003,235
|
$
|
2,655,849
|
September 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Amended and restated 2005 debenture
|
$
|
126,090
|
$
|
-
|
||||
Amended and restated 2006 debenture
|
2,430,531
|
-
|
||||||
Amended and restated 2007 debenture
|
8,505,258
|
-
|
||||||
Amended and restated 2008 debenture
|
5,547,987
|
-
|
||||||
Amended and restated 2008 convertible promissory
note
|
669,529
|
-
|
||||||
Series A-1 convertible preferred
stock
|
325,953
|
-
|
||||||
$
|
17,605,348
|
$
|
-
|
Three Months Ended
September 30, 2009
|
Three Months Ended
September 30, 2008
|
|||||||
Embedded conversion option liability –
2005 debenture
|
$
|
(86,036
|
)
|
$
|
1,030
|
|||
Embedded conversion option liability – 2006
debenture
|
(1,972,378
|
)
|
68,832
|
|||||
Embedded conversion option liability – 2007
debenture
|
(10,730,207
|
)
|
(168,902
|
)
|
||||
Embedded conversion option liability – 2008
convertible promissory note
|
(436,430
|
)
|
119,913
|
|||||
Embedded conversion option liability – 2008
debenture
|
(6,342,706
|
)
|
220,290
|
|||||
Embedded conversion option liability – Series A-1
convertible preferred stock
|
(295,670
|
)
|
-
|
|||||
Original warrants 2005 debenture, excluding
replacement warrants
|
(956,796
|
)
|
(59,919
|
)
|
||||
2005 debenture - replacement warrants
|
(497,679
|
)
|
(379,198
|
)
|
||||
Warrants – 2006 debenture
|
(1,603,254
|
)
|
(600,929
|
)
|
||||
Warrants – 2007 debenture
|
(6,485,510
|
)
|
(1,497,367
|
)
|
||||
Warrants – 2008 debenture
|
(3,698,252
|
)
|
(991,988
|
)
|
||||
Other warrant derivatives
|
(3,649,387
|
)
|
(474,301
|
)
|
||||
$
|
(36,754,306
|
)
|
$
|
(3,762,539
|
)
|
Nine Months Ended
September 30, 2009
|
Nine Months Ended
September 30, 2008
|
|||||||
Embedded conversion option liability – 2005
debenture
|
$
|
(36,214
|
)
|
$
|
(167,827
|
)
|
||
Embedded conversion option liability – 2006
debenture
|
(1,145,667
|
)
|
(626,959
|
)
|
||||
Embedded conversion option liability – 2007
debenture
|
(1,651,491
|
)
|
1,132,374
|
|||||
Embedded conversion option liability – 2008
convertible promissory note
|
(417,996
|
)
|
(138,719
|
)
|
||||
Embedded conversion option liability – 2008
debenture
|
(2,720,663
|
)
|
79,185
|
|||||
Embedded conversion option liability – Series A-1
convertible preferred stock
|
(26,916
|
)
|
-
|
|||||
Original warrants 2005 debenture, excluding
replacement warrants
|
(588,763
|
)
|
(215,933
|
)
|
||||
2005 debenture - replacement warrants
|
1,930,125
|
(1,336,716
|
)
|
|||||
Warrants – 2006 debenture
|
2,070,038
|
(2,079,265
|
)
|
|||||
Warrants – 2007 debenture
|
1,146,755
|
(4,784,154
|
)
|
|||||
Warrants – 2008 debenture
|
2,878,442
|
(1,808,220
|
)
|
|||||
Other warrant derivatives
|
(648,969
|
)
|
(2,044,021
|
)
|
||||
$
|
788,680
|
$
|
(11,989,715
|
)
|
|
|
Black-Scholes Assumptions
|
|||||||||||||||||||||
|
|
at Draw Date
|
|||||||||||||||||||||
|
|
||||||||||||||||||||||
Draw
|
Draw
|
Dividend
|
Expected
|
Risk-Free
|
Expected
|
Fair
|
|||||||||||||||||
Amount
|
Date
|
Yield
|
Volatility
|
Rate
|
Life (Yrs)
|
Value
|
|||||||||||||||||
$
|
1,100,000
|
4/6/2009
|
0
|
%
|
190
|
%
|
1.90
|
%
|
4.00
|
$
|
139,985
|
||||||||||||
87,000
|
4/28/2009
|
0
|
%
|
190
|
%
|
1.83
|
%
|
3.94
|
9,951
|
||||||||||||||
105,000
|
5/1/2009
|
0
|
%
|
190
|
%
|
2.03
|
%
|
3.93
|
12,007
|
||||||||||||||
81,036
|
5/19/2009
|
0
|
%
|
190
|
%
|
2.12
|
%
|
3.88
|
12,204
|
||||||||||||||
162,624
|
6/9/2009
|
0
|
%
|
190
|
%
|
2.86
|
%
|
3.83
|
28,428
|
||||||||||||||
131,644
|
6/15/2009
|
0
|
%
|
190
|
%
|
2.75
|
%
|
3.81
|
26,237
|
||||||||||||||
67,457
|
6/26/2009
|
0
|
%
|
190
|
%
|
2.53
|
%
|
3.78
|
20,145
|
||||||||||||||
75,000
|
6/29/2009
|
0
|
%
|
190
|
%
|
2.53
|
%
|
3.77
|
22,386
|
||||||||||||||
54,811
|
7/23/2009
|
0
|
%
|
185
|
%
|
2.60
|
%
|
3.71
|
10,658
|
||||||||||||||
34,224
|
7/23/2009
|
0
|
%
|
185
|
%
|
2.60
|
%
|
3.71
|
6,655
|
||||||||||||||
54,340
|
7/23/2009
|
0
|
%
|
185
|
%
|
2.60
|
%
|
3.71
|
10,566
|
||||||||||||||
40,755
|
7/24/2009
|
0
|
%
|
185
|
%
|
2.57
|
%
|
3.70
|
7,424
|
||||||||||||||
25,000
|
8/3/2009
|
0
|
%
|
185
|
%
|
2.66
|
%
|
3.68
|
4,544
|
||||||||||||||
75,000
|
8/5/2009
|
0
|
%
|
185
|
%
|
2.73
|
%
|
3.67
|
11,806
|
||||||||||||||
75,000
|
8/14/2009
|
0
|
%
|
185
|
%
|
2.73
|
%
|
3.65
|
12,686
|
||||||||||||||
119,109
|
8/28/2009
|
0
|
%
|
185
|
%
|
2.46
|
%
|
3.61
|
17,186
|
||||||||||||||
$
|
2,288,000
|
$
|
352,869
|
September 30,
|
Inception
|
Increase
|
||||||||||
|
2009
|
Dates*
|
(Decrease)
|
|||||||||
Principal due
|
$
|
2,288,000
|
$
|
2,288,000
|
$
|
-
|
||||||
Accrued dividend
|
84,209
|
-
|
84,209
|
|||||||||
Debt discount
|
(321,738
|
)
|
(352,869
|
)
|
31,131
|
|||||||
2,050,471
|
1,935,131
|
115,340
|
||||||||||
Less current portion
|
-
|
-
|
-
|
|||||||||
Non-current portion
|
$
|
2,050,471
|
$
|
1,935,131
|
$
|
115,340
|
||||||
Aggregate liquidation value**
|
2,372,209
|
$
|
2,288,000
|
$
|
199,549
|
Weighted
|
||||||||||||||||
|
Weighted
|
Average
|
Aggregate
|
|||||||||||||
|
Average
|
Remaining
|
Intrinsic
|
|||||||||||||
|
Number of
|
Exercise
|
Contractual
|
Value
|
||||||||||||
|
Warrants
|
Price
|
Life (in years)
|
(000)
|
||||||||||||
Outstanding, December 31, 2008
|
129,397,951
|
$
|
0.26
|
3.23
|
$
|
-
|
||||||||||
Granted
|
79,076,872
|
-
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited
|
(3,049,258
|
)
|
$
|
1.35
|
||||||||||||
Outstanding, September 30, 2009
|
205,425,565
|
$
|
0.14
|
4.56
|
5,765
|
|||||||||||
Vested and expected to vest at September 30,
2009
|
205,425,565
|
$
|
0.14
|
4.56
|
5,765
|
|||||||||||
Exercisable, September 30, 2009
|
205,425,565
|
$
|
0.14
|
4.56
|
5,765
|
Warrants Outstanding
|
Warrants Exercisable
|
||||||||||||||||||||
|
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||
|
Average
|
Average
|
Average
|
||||||||||||||||||
Exercise
|
Number
|
Remaining
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||
Price
|
of Shares
|
Life (Years)
|
Price
|
of Shares
|
Price
|
||||||||||||||||
$
|
0.10
|
192,172,518
|
4.75
|
$
|
0.10
|
192,172,518
|
$
|
0.10
|
|||||||||||||
0.34
|
3,720,588
|
1.01
|
0.34
|
3,720,588
|
0.34
|
||||||||||||||||
0.38 - 0.40
|
3,080,636
|
4.19
|
0.39
|
3,080,636
|
0.39
|
||||||||||||||||
0.85 - 0.96
|
5,734,831
|
1.21
|
0.95
|
5,734,831
|
0.95
|
||||||||||||||||
2.20
|
72,917
|
1.88
|
2.20
|
72,917
|
2.20
|
||||||||||||||||
2.48 - 2.54
|
644,075
|
0.81
|
2.54
|
644,075
|
2.54
|
||||||||||||||||
205,425,565
|
205,425,565
|
Debenture
|
||||||||||||
Impact on Debentures
|
Change
|
Face Value
|
% Change
|
|||||||||
2007 Debenture
|
$
|
1,319,354
|
$
|
6,739,214
|
20
|
%
|
||||||
April 2008 Debenture
|
$
|
477,014
|
$
|
4,038,880
|
12
|
%
|
||||||
1,796,368
|
$
|
10,778,094
|
Weighted
|
||||||||||||||||
|
Weighted
|
Average
|
Aggregate
|
|||||||||||||
|
Average
|
Remaining
|
Intrinsic
|
|||||||||||||
|
Number of
|
Exercise
|
Contractual
|
Value
|
||||||||||||
|
Options
|
Price
|
Life (in years)
|
(000)
|
||||||||||||
Outstanding, January 1, 2009
|
14,485,580
|
$
|
0.55
|
7.25
|
$
|
-
|
||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited
|
-
|
-
|
||||||||||||||
Outstanding, September 30, 2009
|
14,485,580
|
$
|
0.55
|
6.50
|
$
|
66
|
||||||||||
Vested and expected to vest at September 30,
2009
|
14,066,932
|
0.56
|
6.44
|
66
|
||||||||||||
Exercisable, September 30, 2009
|
11,265,207
|
0.64
|
5.97
|
66
|
Weighted
|
||||||||
Average
|
||||||||
Grant Date
|
||||||||
Fair Value
|
||||||||
Shares
|
Per Share
|
|||||||
Unvested at January 1, 2009
|
4,769,159
|
$
|
0.23
|
|||||
Granted
|
-
|
-
|
||||||
Vested
|
(1,548,786
|
)
|
0.27
|
|||||
Forfeited
|
-
|
-
|
||||||
Unvested at September 30, 2009
|
3,220,373
|
$
|
0.21
|
Options Outstanding
|
Options Exercisable
|
||||||||||||||||||||
|
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||
|
Average
|
Average
|
Average
|
||||||||||||||||||
Exercise
|
Number
|
Remaining
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||
Price
|
of Shares
|
Life (Years)
|
Price
|
of Shares
|
Price
|
||||||||||||||||
$
|
0.05
|
820,000
|
4.87
|
$
|
0.05
|
820,000
|
$
|
0.05
|
|||||||||||||
0.21
|
6,007,403
|
8.12
|
0.21
|
2,794,946
|
0.21
|
||||||||||||||||
0.25
|
1,301,161
|
5.25
|
0.25
|
1,301,161
|
0.25
|
||||||||||||||||
0.85
|
5,604,099
|
5.34
|
0.85
|
5,596,600
|
0.85
|
||||||||||||||||
1.35
|
150,000
|
6.56
|
1.35
|
150,000
|
1.35
|
||||||||||||||||
2.04 - 2.11
|
165,000
|
6.25
|
2.07
|
164,583
|
2.07
|
||||||||||||||||
2.20 - 2.48
|
437,917
|
5.93
|
2.27
|
437,917
|
2.27
|
||||||||||||||||
14,485,580
|
11,265,207
|
Year 1
|
$
|
156,800
|
||
Total
|
$
|
156,800
|
·
|
The Company agreed to sell, and the Investor agreed
to purchase, in one or more purchases from time to time (“Tranches”) in
the Company’s sole discretion (subject to the conditions set forth
therein), (i) up to 1,000 shares of Series B preferred stock (the
“Preferred Shares”) at a purchase price of $10,000 per share, for an
aggregate purchase price of up to $10,000,000, and (ii) five-year warrants
to purchase shares of the Company’s common stock with an
aggregate exercise price equal to 135% of the purchase price paid by the
Investor, at an exercise price per share equal to the closing bid price of
the Company’s common stock on the date the Company provides notice of such
Tranche. The Warrants will be issued in replacement of a five-year warrant
to purchase 119,469,027 shares of common stock with an exercise price per
share of $0.113 the Company issued on the Effective
Date.
|
·
|
the Company agreed to pay to the Investor a
commitment fee of $500,000, at the earlier of the closing of the first
Tranche or the six month anniversary of the effective date, payable at the
Company’s election in cash or common stock valued at 90% of the volume
weighted average price of the Company’s common stock on the five trading
days preceding the payment date.
|
·
|
the Company agreed to use its best efforts to file
within 60 days of the effective date, and cause to become effective as
soon as possible thereafter, a registration statement with the Securities
and Exchange Commission for the resale of all shares of common stock
issuable pursuant to the purchase agreement, including the shares of
common stock underlying the Warrants, and shares issuable in payment of
the commitment fee.
|
·
|
On November 3, 2009, the Company filed a certificate
of designations for the Series B preferred stock (the “Certificate of
Designations”). Pursuant to the Certificate of Designations, the preferred
shares shall, with respect to dividend, rights upon liquidation,
winding-up or dissolution, rank: (i) senior to the Company’s common stock,
and any other class or series of preferred stock of the Company, except
Series A-1 Convertible Preferred Stock which shall rank senior in right of
liquidation and pari
passu with respect to dividends; and (ii) junior to all existing
and future indebtedness of the Company. In addition, the preferred shares
(a) shall accrue dividends at a rate of 10% per annum, payable
in preferred shares, (ii) shall not have voting rights, and
(iii) may be redeemed at the Company’s option, commencing 4 years from the
issuance date at a price per share of (a) $10,000 per share
plus accrued but unpaid dividends (the “Series B Liquidation Value”), or,
at a price per share of : (x) 127% of the Series B Liquidation Value if
redeemed on or after the first anniversary but prior to the second
anniversary of the initial issuance date, (y) 118% of the Series B
Liquidation Value if redeemed on or after the second anniversary but prior
to the third anniversary of the initial issuance date, and (z) 109% of the
Series B Liquidation Value if redeemed on or after the third anniversary
but prior to the fourth anniversary of the initial issuance
date.
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
(restated)
|
||||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
816,904
|
$
|
1,166,116
|
||||
Accounts receivable
|
261,504
|
27,026
|
||||||
Prepaid expenses
|
32,476
|
68,416
|
||||||
Deferred royalty fees, current
portion
|
182,198
|
341,274
|
||||||
Total current assets
|
1,293,082
|
1,602,832
|
||||||
Property and equipment, net
|
400,008
|
914,504
|
||||||
Investment in joint venture
|
225,200
|
-
|
||||||
Deferred royalty fees, less current
portion
|
659,488
|
1,202,430
|
||||||
Deposits
|
-
|
115,192
|
||||||
Deferred issuance costs, net of amortization of
$8,666,387 and $3,874,300
|
-
|
4,772,087
|
||||||
TOTAL ASSETS
|
$
|
2,577,778
|
$
|
8,607,045
|
||||
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$
|
8,287,786
|
$
|
5,517,876
|
||||
Accrued expenses
|
2,741,591
|
1,120,781
|
||||||
Accrued default interest
|
3,717,384
|
-
|
||||||
Deferred revenue, current
portion
|
834,578
|
497,374
|
||||||
Advances payable - other
|
130,000
|
130,000
|
||||||
2005 Convertible debenture and embedded derivatives,
net of discounts of $0 and $600,246
|
85,997
|
1,276,871
|
||||||
2006 Convertible debenture and embedded derivatives
(fair value $1,993,354 and $3,939,862)
|
1,993,354
|
1,625,327
|
||||||
2007 Convertible debenture and embedded derivatives
(fair value $7,706,344 and $3,874,026)
|
7,706,344
|
1,160,847
|
||||||
February 2008 Convertible debenture and embedded
derivatives (fair value $1,757,470 and $0)
|
1,757,470
|
-
|
||||||
April 2008 Convertible debenture and embedded
derivatives (fair value $4,066,505 and $0)
|
4,066,505
|
-
|
||||||
Warrant and option derivatives, current
portion
|
2,655,849
|
14,574
|
||||||
Deferred joint venture obligations, current
portion
|
167,335
|
-
|
||||||
Short term capital leases
|
12,955
|
31,605
|
||||||
Notes payable, other
|
468,425
|
468,425
|
||||||
Total current liabilities
|
34,625,573
|
11,843,680
|
||||||
2006 Convertible debenture and embedded derivatives,
less current portion (fair value $0 and $3,447,230)
|
-
|
1,422,164
|
||||||
2007 Convertible debenture and embedded derivatives,
less current portion (fair value $0 and $7,748,052)
|
-
|
2,321,695
|
||||||
Warrant and option derivatives, less current
portion
|
-
|
13,011,751
|
||||||
Deferred joint venture obligations, less current
portion
|
63,473
|
-
|
||||||
Deferred revenue, less current
portion
|
3,817,716
|
1,534,485
|
||||||
Total liabilities
|
38,506,762
|
30,133,775
|
||||||
Commitments and contingencies
|
-
|
-
|
||||||
STOCKHOLDERS' DEFICIT:
|
||||||||
Preferred stock, $0.001 par value; 50,000,000 shares
authorized, 0 issued and outstanding
|
-
|
-
|
||||||
Common stock, $0.001par value; 500,000,000 shares
authorized, 429,448,381 and 85,027,461 issued and
outstanding
|
429,448
|
85,027
|
||||||
Additional paid-in capital
|
53,459,172
|
34,302,334
|
||||||
Accumulated deficit
|
(89,817,604
|
)
|
(55,914,091
|
)
|
||||
Total stockholders' deficit
|
(35,928,984
|
)
|
(21,526,730
|
)
|
||||
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
$
|
2,577,778
|
$
|
8,607,045
|
2008
|
2007
|
|||||||
(restated)
|
||||||||
Revenue (License fees
and royalties)
|
$
|
787,106
|
$
|
647,349
|
||||
Cost of Revenue
|
765,769
|
428,913
|
||||||
Gross profit
|
21,337
|
218,436
|
||||||
Operating expenses:
|
||||||||
Research and development
|
8,635,577
|
12,744,913
|
||||||
In-process R&D expense -
Mytogen
|
-
|
4,094,736
|
||||||
Grant reimbursements
|
(105,169
|
)
|
(67,179
|
)
|
||||
General and administrative
expenses
|
5,009,418
|
6,781,705
|
||||||
Total operating expenses
|
13,539,826
|
23,554,175
|
||||||
Loss from operations
|
(13,518,489
|
)
|
(23,335,739
|
)
|
||||
Non-operating income (expense):
|
||||||||
Interest income
|
7,933
|
162,091
|
||||||
Interest expense and late fees
|
(26,614,761
|
)
|
(21,023,663
|
)
|
||||
Finance cost
|
(806,079
|
)
|
(15,400
|
)
|
||||
Charges related to issuance of 2008 convertible
debentures
|
(1,217,342
|
)
|
-
|
|||||
Charges related to issuance of 2007 convertible
debenture and warrants
|
-
|
(3,871,656
|
)
|
|||||
Charges related to repricing of 2005 convertible
debenture and warrants
|
-
|
(843,277
|
)
|
|||||
Income related to repricing of 2006 and 2007
convertible debentures and warrants
|
847,588
|
-
|
||||||
Adjustments to fair value of
derivatives
|
13,082,247
|
32,835,057
|
||||||
Losses attributable to equity method
investment
|
(20,930
|
)
|
-
|
|||||
Loss on disposal of fixed
assets
|
(227,543
|
)
|
-
|
|||||
Gain (loss) on settlement
|
(5,436,137
|
)
|
193,862
|
|||||
Total non-operating income
(expense)
|
(20,385,024
|
)
|
7,437,014
|
|||||
Loss before income tax
|
(33,903,513
|
)
|
(15,898,725
|
)
|
||||
Income tax
|
-
|
-
|
||||||
Net loss
|
$
|
(33,903,513
|
)
|
$
|
(15,898,725
|
)
|
||
Weighted average shares outstanding
:
|
||||||||
Basic
|
245,279,135
|
61,115,618
|
||||||
Diluted
|
245,279,135
|
61,115,618
|
||||||
Loss per share:
|
||||||||
Basic
|
$
|
(0.14
|
)
|
$
|
(0.26
|
)
|
||
Diluted
|
$
|
(0.14
|
)
|
$
|
(0.26
|
)
|
Additional
|
Total
|
|||||||||||||||||||
Common Stock
|
Paid in
|
Accumulated
|
Stockholders'
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
||||||||||||||||
Balance December 31, 2006
(Restated)
|
39,318,070
|
39,318
|
12,291,873
|
(40,015,366
|
)
|
(27,684,175
|
)
|
|||||||||||||
Convertible debentures
redemptions
|
19,243,386
|
19,243
|
6,879,914
|
-
|
6,899,157
|
|||||||||||||||
Convertible debentures
conversions
|
16,625,579
|
16,626
|
11,069,317
|
-
|
11,085,943
|
|||||||||||||||
Issuance of stock in payment of board
fees
|
35,909
|
36
|
20,716
|
-
|
20,752
|
|||||||||||||||
Option compensation charges
|
-
|
-
|
531,113
|
-
|
531,113
|
|||||||||||||||
Issuance of stock in payment of license
fees
|
800,000
|
800
|
607,200
|
-
|
608,000
|
|||||||||||||||
Issuance of stock in payment of employee
bonuses
|
515,000
|
515
|
406,335
|
-
|
406,850
|
|||||||||||||||
Issuance of stock to employees
|
340,000
|
340
|
16,660
|
-
|
17,000
|
|||||||||||||||
Issuance of stock in payment of legal
fees
|
85,000
|
85
|
67,915
|
-
|
68,000
|
|||||||||||||||
Issuance of stock in acquisition of
Mytogen
|
9,064,517
|
8,064
|
2,411,291
|
-
|
2,419,355
|
|||||||||||||||
Net loss for the year ended December 31, 2007
(Restated)
|
-
|
-
|
-
|
(15,898,725
|
)
|
(15,898,725
|
)
|
|||||||||||||
Balance December 31, 2007
(Restated)
|
85,027,461
|
$
|
85,027
|
$
|
34,302,334
|
$
|
(55,914,091
|
)
|
$
|
(21,526,730
|
)
|
|||||||||
Convertible debentures
redemptions
|
65,463,111
|
65,463
|
5,390,989
|
-
|
5,456,452
|
|||||||||||||||
Convertible debentures
conversions
|
39,741,987
|
39,743
|
6,121,900
|
-
|
6,161,643
|
|||||||||||||||
Issuance of stock for debenture financing
costs
|
14,710,329
|
14,710
|
791,369
|
-
|
806,079
|
|||||||||||||||
Option compensation charges
|
-
|
-
|
527,243
|
-
|
527,243
|
|||||||||||||||
Adjustment to fair value of
derivatives
|
-
|
-
|
78,367
|
-
|
78,367
|
|||||||||||||||
Issuance in respect of anti-dilution provision of
convertible debenture
|
70,503
|
71
|
15,510
|
-
|
15,581
|
|||||||||||||||
Issuance of stock in payment of professional
fees
|
1,002,291
|
1,002
|
212,847
|
-
|
213,849
|
|||||||||||||||
Issuance of stock in settlement of accounts
payable
|
220,735,436
|
220,735
|
5,818,877
|
-
|
6,039,612
|
|||||||||||||||
Issuance of stock under stock incentive
plan
|
1,497,263
|
1,497
|
140,936
|
-
|
142,433
|
|||||||||||||||
Issuance of stock upon exercise of
options
|
1,200,000
|
1,200
|
58,800
|
-
|
60,000
|
|||||||||||||||
Net loss for the year ended December 31,
2008
|
-
|
-
|
-
|
(33,903,513
|
)
|
(33,903,513
|
)
|
|||||||||||||
Balance December 31, 2008
|
429,448,381
|
$
|
429,448
|
$
|
53,459,172
|
$
|
(89,817,604
|
)
|
$
|
(35,928,984
|
)
|
2008
|
2007
|
|||||||
(restated)
|
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net loss
|
$
|
(33,903,513
|
)
|
$
|
(15,898,725
|
)
|
||
Adjustments to reconcile net loss to net cash used in
operating activities:
|
||||||||
Depreciation and amortization
|
402,867
|
386,643
|
||||||
Write-off of uncollectible accounts
receivable
|
30,782
|
-
|
||||||
Amortization of deferred
charges
|
702,018
|
407,391
|
||||||
Amortization of deferred
revenue
|
(798,310
|
)
|
(497,349
|
)
|
||||
Stock based compensation
|
889,269
|
531,113
|
||||||
Amortization of deferred issuance
costs
|
4,792,087
|
3,874,300
|
||||||
Amortization of discounts
|
17,871,392
|
17,052,016
|
||||||
Gain on extinguishment of debt
|
-
|
(193,862
|
)
|
|||||
Adjustements to fair value of
derivatives
|
(13,082,247
|
)
|
(32,835,057
|
)
|
||||
Charges related to issuance of February 2008
convertible notes
|
685,573
|
-
|
||||||
Mytogen acquisition
|
-
|
4,094,736
|
||||||
Charges related to issuance of April 2008 convertible
notes
|
531,769
|
-
|
||||||
Charges related to issuance of 2007 convertible
debentures
|
-
|
3,871,656
|
||||||
Repricing of 2005 convertible debentures and
warrants
|
-
|
843,277
|
||||||
Repricing of 2006 and 2007 convertible debentures and
warrants
|
(847,588
|
)
|
-
|
|||||
Shares of common stock issued for professional
services
|
759,496
|
1,307,828
|
||||||
Shares of common stock issued for board
fees
|
-
|
20,752
|
||||||
Shares of common stock issued for financing
costs
|
806,079
|
-
|
||||||
Warrants issued for consulting
services
|
155,281
|
-
|
||||||
Charges related to settlement of anti-dilution
provision
|
15,581
|
-
|
||||||
Forfeiture of rent deposits
|
88,504
|
-
|
||||||
Loss on disposal of fixed
assets
|
227,543
|
-
|
||||||
Loss on settlement of
litigation
|
5,436,138
|
-
|
||||||
Loss attributable to investment in joint
venture
|
20,930
|
-
|
||||||
Amortization of deferred joint venture
obligations
|
(15,322
|
)
|
-
|
|||||
(Increase) / decrease in
assets:
|
||||||||
Accounts receivable
|
(265,260
|
)
|
39,293
|
|||||
Prepaid expenses
|
35,940
|
42,812
|
||||||
Deferred charges
|
-
|
(55,000
|
)
|
|||||
Increase / (decrease) in current
liabilities:
|
||||||||
Accounts payable and accrued
expenses
|
5,355,228
|
976,712
|
||||||
Interest Payable
|
3,722,198
|
-
|
||||||
Deferred revenue
|
3,418,745
|
-
|
||||||
Net cash used in operating
activities
|
(2,964,820
|
)
|
(16,031,464
|
)
|
||||
CASH FLOWS FROM INVESTING
ACTIVITIES
|
||||||||
Purchases of property and
equipment
|
(174,514
|
)
|
(158,522
|
)
|
||||
Return of deposits
|
-
|
18,649
|
||||||
Net cash used in investing
activities
|
(174,514
|
)
|
(139,873
|
)
|
||||
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
||||||||
Proceeds from exercise of stock
options
|
-
|
17,000
|
||||||
Proceeds from issuance of convertible notes, net of
cost
|
2,182,432
|
8,848,200
|
||||||
Payments on convertible
debentures
|
-
|
(139,123
|
)
|
|||||
Payments on notes and leases
|
(18,650
|
)
|
(77,960
|
)
|
||||
Proceeds from notes payable
|
630,000
|
-
|
||||||
Payment for issuance costs on note
payable
|
(3,660
|
)
|
-
|
|||||
Net cash provided by financing
activities
|
2,790,122
|
8,648,117
|
||||||
NET DECREASE IN CASH AND CASH
EQUIVALENTS
|
(349,212
|
)
|
(7,523,220
|
)
|
||||
CASH AND CASH EQUIVALENTS, BEGINNING
BALANCE
|
1,166,116
|
8,689,336
|
||||||
CASH AND CASH EQUIVALENTS, ENDING
BALANCE
|
$
|
816,904
|
$
|
1,166,116
|
||||
CASH PAID FOR:
|
||||||||
Interest
|
$
|
-
|
$
|
10,016
|
||||
Income taxes
|
$
|
1,549
|
$
|
-
|
||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES:
|
||||||||
Issuance of 65,463,111 and 19,243,386 shares of
common stock in redemption of convertible debentures
|
$
|
5,456,452
|
$
|
7,038,000
|
||||
Issuance of 39,741,987 and 16,625,579 shares of
common stock in conversion of convertible debentures
|
$
|
6,161,643
|
$
|
8,391,000
|
||||
Issuance of 70,503 shares of common stock to settle
an anti-dilution provision feature of convertible
debenture
|
$
|
15,581
|
$
|
-
|
||||
Issuance of 1,200,000 shares of common stock upon
exercise of employee stock options
|
$
|
60,000
|
$
|
-
|
||||
Issuance of 220,735,436 shares of common stock in
settlement of litigation
|
$
|
6,039,612
|
$
|
-
|
||||
Issuance of 35,909 shares of common stock in payment
of board fees
|
$
|
$
|
21,000
|
|||||
Issuance of 800,000 shares of common stock in payment
of license fees
|
$
|
$
|
608,000
|
|||||
Issuance of 515,000 shares of common stock in payment
of employee bonuses
|
$
|
$
|
407,000
|
|||||
Issuance of 85,000 shares of common stock in
settlement of legal fees
|
$
|
$
|
68,000
|
|||||
Issuance of 8,064,517 shares of common stock in
acquisition of Mytogen
|
$
|
-
|
$
|
2,419,000
|
1.
|
ORGANIZATIONAL
MATTERS
|
·
|
On April 4, 2008, the Company released closing
escrow on the issuance of $4,038,880 of its amortizing senior secured
convertible debentures and associated warrants. The purchasers purchased
from the Company senior secured convertible debentures and warrants to
purchase shares of the Company’s common stock. The net cash and cash
in-kind received by the Company related to this financing was
$2,212,432.
|
·
|
On April 30, 2008 the Company received a one time
payment of $300,000 from Terumo International which extended their ability
to commence a Phase I Clinical Trial in Japan by one year.
|
·
|
On May 31, 2008, the Company closed its Alameda,
California and Charlestown, Massachusetts facilities in an effort to
streamline and focus on its most advanced clinical programs as part of a
cost reduction program designed to reduce annual operating expenses by
$5-6 million. In conjunction with the cost reduction activities, the
Company has not renewed its Alameda, California sublease and has vacated
its Charlestown, Massachusetts
facility.
|
·
|
On June 17, 2008, the Company drew down $60,000 and
received $50,000 (reflecting a 16.66% original issue discount) under Note
B described in Note 8 to the financial
statements.
|
·
|
On July 10, 2008, the Company granted an exclusive
license to Embryome Sciences, Inc., a wholly owned subsidiary of BioTime,
Inc., to use its “ACTCellerate” embryonic stem cell technology and a bank
of over 140 diverse progenitor cell lines derived using that technology.
Under the agreement, the Company received an up-front payment of $470,000,
and is eligible to receive an 8% royalty on sales of products, services,
and processes that utilize the licensed technology. However, as discussed
in more detail in Note 18, in connection with unpaid rents ordered to be
paid to a landlord, the Company has assigned the landlord rights and
interest to 62.5% of all royalties on this contract, and 65% of all other
consideration payable under this license agreement until such time that
the Company has repaid amounts owed to the landlord that total
$475,000.
|
·
|
Between September 29, 2008 and January 20, 2009, the
Company settled certain past due accounts payable by the issuance of
shares of its common stock. In aggregate, the Company settled $1,108,673
in accounts payable through the issuance of 260,116,283 shares of its
common stock.
|
·
|
On December 1, 2008, the Company and CHA Bio &
Diostech Co., Ltd. (“CHA”), a leading
Korean-based biotechnology company focused on the development of stem cell
technologies, formed an international joint venture. The new company, Stem
Cell & Regenerative Medicine International, Inc. (“SCRMI”), will
develop human blood cells and other clinical therapies based on the
Company’s hemangioblast program, one of the Company’s core technologies.
CHA has agreed to contribute $150,000 cash and to fund operational costs
in order to conduct the hemangioblast program. Additionally, SCRMI has
agreed to pay the Company a fee of $500,000 for an exclusive, worldwide
license to the Hemangioblast Program. As of June 30, 2009, SCRMI has paid
the Company the entire $500,000 towards payment of the license fee. See
Note 6 for additional details of the joint
venture.
|
·
|
On December 18, 2008, the Company entered into a
license agreement with an Ireland-based investor, Transition Holdings Inc.
(“Transition”), for certain of its non-core technology. Under the
agreement, Transition agreed to acquire a license to the technology for
$3.5 million in cash. Through December 31, 2008, the Company had received
$2 million in cash under this agreement. As of June 30, 2009, the Company
has received the entire $3.5 million in cash under this agreement. The
Company expects to apply the proceeds towards its retinal epithelium
(“RPE”) cells program.
|
·
|
On March 30, 2009, the Company entered into a second
license agreement with CHA under which the Company will license its
retinal pigment epithelium (“RPE”) technology, for the treatment of
diseases of the eye, to CHA for development and commercialization
exclusively in Korea. The Company is eligible to receive up to a total of
$1.9 million in fees based upon the parties achieving certain milestones,
including the Company making an IND submission to the US FDA to commence
clinical trials in humans using the technology. The Company received an
up-front fee under the license in the amount of $1,000,000 on April 1,
2009. Under the agreement, CHA will incur all of the costs associated with
the RPA clinical trials in Korea. The agreement is part of continuing
cooperation and collaboration between the two
companies.
|
·
|
On March 11, 2009, the Company entered into a $5
million credit facility (“Facility”) with a life sciences fund. Under the
agreement, the proceeds from the Facility must be used exclusively for the
Company to file an investigational new drug (“IND”) for its retinal
pigment epithelium (“RPE”) program, and will allow the Company to complete
both Phase I and Phase II studies in humans. An IND is required to
commence clinical trials. Under the terms of the agreement, the Company
may draw down funds, as needed for clinical development of the RPE
program, from the investor through the issuance of Series A-1 convertible
preferred stock. The preferred stock pays dividends, in kind of preferred
stock, at an annual rate of 10%, matures in four years from the initial
issuance date, and is convertible into common stock at $0.75 per share. As
of June 30, 2009, the Company has drawn down approximately $1,505,000 on
this facility.
|
·
|
On May 13, 2009, the Company entered into a third
license agreement with CHA under which the Company will license its
proprietary “single blastomere technology,” which has the potential to
generate stable cell lines, including RPE for the treatment of diseases of
the eye, for development and commercialization exclusively in Korea. The
Company received an upfront license fee of
$300,000.
|
·
|
Management anticipates raising additional future
capital from its current convertible debenture holders, or other financing
sources, that will be used to fund any capital shortfalls. The terms of
any financing will likely be negotiated based upon current market terms
for similar financings. No commitments have been received for additional
investment and no assurances can be given that this financing will
ultimately be completed.
|
·
|
Management has focused its scientific operations on
product development in order to accelerate the time to market products
which will ultimately generate revenues. While the amount or timing of
such revenues cannot be determined, management believes that focused
development will ultimately provide a quicker path to revenues, and an
increased likelihood of raising additional
financing.
|
·
|
Management will continue to pursue licensing
opportunities of the Company’s extensive intellectual property
portfolio.
|
2.
|
RESTATEMENT
|
As Originally Reported
|
Restated
|
Difference
|
||||||||||
December 31, 2007
|
||||||||||||
Balance Sheet
|
||||||||||||
Deferred issuance costs
|
$
|
5,107,599
|
$
|
4,772,087
|
$
|
(335,512
|
)
|
|||||
2005 Convertible debenture and embedded derivatives –
current portion
|
$
|
1,040,156
|
$
|
1,276,871
|
$
|
236,715
|
||||||
2006 Convertible debenture and embedded derivatives –
current portion
|
$
|
906,860
|
$
|
1,625,327
|
$
|
718,467
|
||||||
2007 Convertible debenture and embedded derivatives –
current portion
|
$
|
363,805
|
$
|
1,160,847
|
$
|
797,042
|
||||||
2006 Convertible debenture and embedded derivatives,
less current portion
|
$
|
793,504
|
$
|
1,422,164
|
$
|
628,660
|
||||||
2007 Convertible debenture and embedded derivatives,
less current portion
|
$
|
2,364,731
|
$
|
2,321,695
|
$
|
(43,036
|
)
|
|||||
Accumulated deficit
|
$
|
(53,240,732
|
)
|
$
|
(55,914,091
|
)
|
$
|
(2,673,359
|
)
|
|||
Total stockholders’ deficit at December 31,
2007
|
$
|
(18,853,371
|
)
|
$
|
(21,526,730
|
)
|
$
|
(2,673,359
|
)
|
As Originally
Reported
|
Restated
|
Difference
|
||||||||||
Year Ended December 31, 2007
|
||||||||||||
Statement of Operations
|
||||||||||||
Interest expense
|
$
|
(18,350,304
|
)
|
$
|
($21,023,663
|
)
|
$
|
(2,673,359
|
)
|
|||
Net loss
|
$
|
(13,225,366
|
)
|
$
|
(15,898,725
|
)
|
$
|
(2,673,359
|
)
|
|||
Basic and diluted loss per
share
|
$
|
(0.32
|
)
|
$
|
(0.26
|
)
|
$
|
(0.06
|
)
|
|||
Weighted average shares – basic and
diluted
|
40,877,145
|
61,115,618
|
20,238,473
|
|||||||||
Statement of Cash Flows
|
||||||||||||
Net loss
|
$
|
(13,225,366
|
)
|
$
|
(15,898,725
|
)
|
$
|
(2,673,359
|
)
|
|||
Amortization of deferred issuance
cost
|
$
|
3,538,788
|
$
|
3,874,300
|
$
|
335,512
|
||||||
Amortization of discount
|
$
|
14,714,169
|
$
|
17,052,016
|
$
|
2,337,847
|
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
Machinery & equipment
|
4 years
|
|
Computer equipment
|
3 years
|
|
Office furniture
|
4 years
|
|
Leasehold improvements
|
Lesser of lease life or economic
life
|
|
Capital leases
|
Lesser of lease life or economic
life
|
·
|
Level 1 inputs to the valuation methodology are
quoted prices for identical assets or liabilities in active
markets.
|
·
|
Level 2 inputs to the valuation methodology include
quoted prices for similar assets and liabilities in active markets, and
inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial
instrument.
|
·
|
Level 3 inputs to the valuation methodology are
unobservable and significant to the fair value
measurement.
|
Fair Value Measurements at
|
||||||||||||||||
Fair Value
|
December 31, 2008
|
|||||||||||||||
As of
|
Using Fair Value Hierarchy
|
|||||||||||||||
Derivative Liabilities
|
December 31, 2008
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Conversion feature - 2005
debenture
|
4,075
|
-
|
4,075
|
-
|
||||||||||||
2006 Convertible debenture and embeded
derivatives
|
1,993,354
|
-
|
1,993,354
|
-
|
||||||||||||
2007 Convertible debenture and embedded
derivatives
|
7,706,344
|
-
|
7,706,344
|
-
|
||||||||||||
February 2008 Convertible debentures and embedded
derivatives
|
1,757,470
|
-
|
1,757,470
|
-
|
||||||||||||
April 2008 Convertible debenture and embedded
derivatives
|
4,066,505
|
-
|
4,066,505
|
-
|
||||||||||||
Warrant and option derivatives
|
2,655,849
|
-
|
2,655,849
|
-
|
||||||||||||
18,183,597
|
-
|
18,183,597
|
-
|
Year Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Expected life in years
|
4.0 | 4.0 | ||||||
Volatility
|
148 | % | 163 | % | ||||
Risk free interest rate
|
2.50 | % | 4.74 | % | ||||
Expected dividends
|
None
|
None
|
||||||
Expected forfeitures
|
13 | % | 13 | % |
2008
|
2007
|
|||||||
Genzyme Transgenics Corporation
|
17 | % | 20 | % | ||||
START Licensing, Inc.
|
13 | % | 15 | % | ||||
Exeter Life Sciences, Inc.
|
16 | % | 19 | % | ||||
Terumo Corporation
|
25 | % | N/A | |||||
International Stem Cell
Corporation
|
11 | % | N/A |
4.
|
LICENSE
REVENUE
|
5.
|
PROPERTY AND
EQUIPMENT
|
2008
|
2007
|
|||||||
Machinery & equipment
|
$
|
1,470,141
|
$
|
1,552,642
|
||||
Computer equipment
|
436,541
|
424,612
|
||||||
Office furniture
|
76,201
|
76,201
|
||||||
Leasehold improvements
|
127,197
|
127,197
|
||||||
Capital leases
|
51,235
|
238,754
|
||||||
Accumulated depreciation
|
(1,761,307
|
)
|
(1,504,902
|
)
|
||||
Property and equipment, net
|
$
|
400,008
|
$
|
914,504
|
6.
|
INVESTMENT IN JOINT
VENTURE
|
Current assets
|
$
|
179,400
|
||
Noncurrent assets
|
$
|
468,150
|
||
Current liabilities
|
$
|
76,869
|
||
Noncurrent liabilities
|
$
|
468,150
|
||
Net revenue
|
$
|
2,450
|
||
Net loss
|
$
|
(62,791
|
)
|
7.
|
CONVERTIBLE NOTE PAYABLE—APRIL
2008
|
Fair Value at
|
||||||||||||||||||
April 4,
|
December 31,
|
Increase
|
||||||||||||||||
Face Amount
|
Net Purchase Price
|
2008
|
2008
|
(Decrease)
|
||||||||||||||
$ | 4,038,880 | $ | 3,218,232 | $ | 4,570,649 | $ | 4,066,505 | $ | (504,144 | ) |
8.
|
CONVERTIBLE NOTES PAYABLE—FEBRUARY
2008
|
Fair Value at
|
||||||||||||||||||||
February 15,
|
December 31,
|
Increase
|
||||||||||||||||||
Face Amount
|
Net Purchase Price
|
2008
|
2008
|
(Decrease)
|
||||||||||||||||
Note A
|
$
|
600,000
|
$
|
500,000
|
$
|
1,229,466
|
$
|
1,464,558
|
$
|
235,092
|
||||||||||
Note B, Tranche 1
|
60,000
|
50,000
|
116,107
|
*
|
146,456
|
30,349
|
||||||||||||||
Note B, Tranche 2
|
60,000
|
50,000
|
110,641
|
**
|
146,456
|
35,815
|
||||||||||||||
Total
|
$
|
720,000
|
$
|
600,000
|
$
|
1,456,214
|
$
|
1,757,470
|
$
|
301,256
|
*
|
Fair value at March 17,
2008
|
**
|
Fair value at June 17,
2008
|
9.
|
CONVERTIBLE
DEBENTURES—2007
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
2007 convertible debentures at fair
value
|
$
|
7,706,344
|
$
|
11,622,078
|
||||
Original issue discount
|
-
|
(6,063,955
|
)
|
|||||
Warrant derivative discount
|
-
|
(2,075,581
|
)
|
|||||
Net convertible debentures
|
$
|
7,706,344
|
$
|
3,482,542
|
||||
Less current portion
|
(7,706,344
|
)
|
(1,160,847
|
)
|
||||
2007 convertible debenture and embedded derivatives -
long term
|
$
|
-
|
$
|
2,321,695
|
10.
|
CONVERTIBLE
DEBENTURES—2006
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
2006 convertible debentures at fair
value
|
$
|
1,993,354
|
$
|
7,386,912
|
||||
Original issue discount
|
-
|
(3,777,403
|
)
|
|||||
Warrant derivative discount
|
-
|
(562,018
|
)
|
|||||
Net convertible debentures
|
$
|
1,993,354
|
$
|
3,047,491
|
||||
Less current portion
|
(1,993,354
|
)
|
(1,625,327
|
)
|
||||
2006 convertible debenture and embedded derivatives -
long term
|
$
|
-
|
$
|
1,422,164
|
11.
|
CONVERTIBLE
DEBENTURES—2005
|
December 31,
|
December 31,
|
|||||||
2008
|
2007
|
|||||||
2005 convertible debenture at face
value
|
$
|
81,922
|
$
|
1,677,904
|
||||
Discounts on debentures
|
||||||||
Original issue discount
|
-
|
(152,073
|
)
|
|||||
Conversion feature derivative
|
-
|
(193,084
|
)
|
|||||
Warrant derivative
|
-
|
(245,825
|
)
|
|||||
Other derivatives
|
-
|
(9,266
|
)
|
|||||
Net convertible debentures
|
81,922
|
1,077,656
|
||||||
Embedded derivatives
|
4,075
|
199,215
|
||||||
2005 convertible debentures and embedded
derivatives
|
85,997
|
1,276,871
|
||||||
less current portion
|
(85,997
|
)
|
(1,276,871
|
)
|
||||
2005 convertible debenture and embedded derivatives -
long term portion
|
$
|
-
|
$
|
-
|
12.
|
ACCRUED DEFAULT
INTEREST
|
Accrued
|
||||
Penalty
|
||||
Interest
|
||||
2005 debenture
|
$
|
22,121
|
||
2006 debenture
|
524,284
|
|||
2007 debenture
|
1,885,951
|
|||
February 2008 debenture
|
194,420
|
|||
April 2008 debenture
|
1,090,608
|
|||
$
|
3,717,384
|
13.
|
WARRANT
DERIVATIVES—OTHER
|
14.
|
WARRANT
SUMMARY
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
Aggregate
|
||||||||||||||
Average
|
Remaining
|
Intrinsic
|
||||||||||||||
Number of
|
Exercise
|
Contractual
|
Value
|
|||||||||||||
Warrants
|
Price
|
Life (in years)
|
(000)
|
|||||||||||||
Outstanding, December 31, 2007
|
104,700,522
|
$
|
0.29
|
3.55
|
$
|
495
|
||||||||||
Granted
|
31,870,465
|
0.15
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited
|
(7,173,036
|
)
|
0.25
|
|||||||||||||
Outstanding, December 31, 2008
|
129,397,951
|
$
|
0.26
|
3.23
|
-
|
|||||||||||
Vested and expected to vest at December 31,
2008
|
129,397,951
|
0.26
|
3.23
|
-
|
||||||||||||
Exercisable, December 31, 2008
|
129,397,951
|
$
|
0.26
|
3.23
|
-
|
Warrants Outstanding
|
Warrants Exercisable
|
||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||||
Average
|
Average
|
Average
|
|||||||||||||||||||
Exercise
|
Number
|
Remaining
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||
Price
|
of Shares
|
Life (Years)
|
Price
|
of Shares
|
Price
|
||||||||||||||||
$
|
0.17
|
107,450,081
|
3.30
|
$
|
0.17
|
107,450,081
|
$
|
0.17
|
|||||||||||||
0.32
|
4,575,521
|
2.68
|
0.32
|
4,575,521
|
0.32
|
||||||||||||||||
0.38 - 0.40
|
9,409,526
|
4.08
|
0.38
|
9,409,526
|
0.38
|
||||||||||||||||
0.85 - 0.96
|
5,869,831
|
1.92
|
0.95
|
5,869,831
|
0.95
|
||||||||||||||||
2.20
|
72,917
|
2.63
|
2.20
|
72,917
|
2.20
|
||||||||||||||||
2.48 - 2.54
|
2,020,075
|
0.93
|
2.54
|
2,020,075
|
2.54
|
||||||||||||||||
129,397,951
|
129,397,951
|
15.
|
ADJUSTMENT TO FAIR VALUE OF
DERIVATIVES
|
December 31,
|
||||||||
2008
|
2007
|
|||||||
Embedded Pipe derivatives -
9.05
|
$
|
(195,140
|
)
|
$
|
(795,772
|
)
|
||
Pipe Hybrid instrument – 9.06
|
(937,712
|
)
|
(5,808,165
|
)
|
||||
Pipe Hybrid- FAS 155 – 8.07
|
1,649,969
|
(374,039
|
)
|
|||||
Pipe Hybrid- February 2008
|
351,897
|
-
|
||||||
Pipe Hybrid- April 2008
|
(504,144
|
)
|
-
|
|||||
Original warrants PIPE 2005 , excluding replacement
warrants
|
(234,392
|
)
|
(891,167
|
)
|
||||
Replacement Warrants
|
(1,402,947
|
)
|
(633,699
|
)
|
||||
Warrants – PIPE 2006-investors
|
(2,238,905
|
)
|
(7,924,612
|
)
|
||||
Warrants – PIPE 2007-investors
|
(5,262,623
|
)
|
(6,784,225
|
)
|
||||
Warrants – PIPE 2008-investors
|
(2,178,210
|
)
|
-
|
|||||
Other Warrant Derivatives- 2005 and
2006
|
(1,805,990
|
)
|
(7,182,045
|
)
|
||||
Other Warrants Derivatives -
2007
|
(324,050
|
)
|
(1,598,056
|
)
|
||||
$
|
(13,082,247
|
)
|
$
|
(31,991,780
|
)
|
16.
|
STOCKHOLDERS’ EQUITY
TRANSACTIONS
|
17.
|
STOCK-BASED
COMPENSATION
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
Aggregate
|
||||||||||||||
Average
|
Remaining
|
Intrinsic
|
||||||||||||||
Number of
|
Exercise
|
Contractual
|
Value
|
|||||||||||||
Options
|
Price
|
Life (in years)
|
(000)
|
|||||||||||||
Outstanding, January 1, 2007
|
12,874,163
|
$
|
0.71
|
8.20
|
$
|
1,771
|
||||||||||
Granted
|
1,300,000
|
0.75
|
||||||||||||||
Exercised
|
(340,000
|
)
|
0.05
|
|||||||||||||
Forfeited
|
(2,213,192
|
)
|
0.83
|
|||||||||||||
Outstanding, December 31, 2007
|
11,620,971
|
$
|
0.78
|
7.16
|
$
|
255
|
||||||||||
Granted
|
11,875,734
|
0.21
|
||||||||||||||
Exercised
|
(1,200,000
|
)
|
0.05
|
|||||||||||||
Forfeited
|
(8,169,015
|
)
|
0.53
|
|||||||||||||
Outstanding, December 31, 2008
|
14,127,690
|
$
|
0.51
|
7.71
|
$
|
-
|
||||||||||
Vested and expected to vest at December 31,
2008
|
13,359,485
|
0.52
|
7.64
|
-
|
||||||||||||
Exercisable, December 31, 2008
|
8,218,418
|
$
|
0.70
|
6.75
|
$
|
-
|
Weighted
|
||||||||
Average
|
||||||||
Grant Date
|
||||||||
Fair Value
|
||||||||
Shares
|
Per Share
|
|||||||
Unvested at January 1, 2008
|
783,814
|
$
|
0.46
|
|||||
Granted
|
11,875,734
|
0.21
|
||||||
Vested
|
(2,372,518
|
)
|
0.39
|
|||||
Forfeited
|
(4,377,758
|
)
|
0.26
|
|||||
Unvested at December 31, 2008
|
5,909,272
|
$
|
0.24
|
Options Outstanding
|
Options Exercisable
|
||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
|||||||||||||||||||
Average
|
Average
|
Average
|
|||||||||||||||||||
Exercise
|
Number
|
Remaining
|
Exercise
|
Number
|
Exercise
|
||||||||||||||||
Price
|
of Shares
|
Life (Years)
|
Price
|
of Shares
|
Price
|
||||||||||||||||
$
|
0.05
|
922,000
|
5.62
|
$
|
0.05
|
922,000
|
$
|
0.05
|
|||||||||||||
0.21
|
7,440,000
|
9.11
|
0.21
|
1,667,586
|
0.21
|
||||||||||||||||
0.25
|
1,301,161
|
6.00
|
0.25
|
1,301,161
|
0.25
|
||||||||||||||||
0.35
|
65,000
|
7.53
|
0.35
|
39,271
|
0.35
|
||||||||||||||||
0.75 - 0.76
|
20,000
|
7.82
|
0.75
|
10,837
|
0.75
|
||||||||||||||||
0.85
|
3,197,112
|
6.09
|
0.85
|
3,173,779
|
0.85
|
||||||||||||||||
1.35
|
235,000
|
7.31
|
1.35
|
205,782
|
1.35
|
||||||||||||||||
2.04 - 2.11
|
295,000
|
6.99
|
2.07
|
251,352
|
2.07
|
||||||||||||||||
2.20 - 2.48
|
652,417
|
6.65
|
2.34
|
646,650
|
2.34
|
||||||||||||||||
14,127,690
|
8,218,418
|
18.
|
COMMITMENTS AND
CONTINGENCIES
|
Year 1
|
$
|
265,677
|
||
Year 2
|
89,910
|
|||
Total
|
$
|
355,587
|
19.
|
INCOME TAXES
|
2008
|
2007
|
|||||||
Statutory federal income tax
rate
|
(34
|
)%
|
(34
|
)%
|
||||
State income taxes, net of federal
taxes
|
(6
|
)%
|
(6
|
)%
|
||||
Non-includable items
|
8
|
%
|
(19
|
)%
|
||||
Increase in valuation allowance
|
32
|
%
|
59
|
%
|
||||
Effective income tax rate
|
-
|
-
|
2008
|
2007
|
|||||||
Deferred tax assets:
|
(Restated)
|
|||||||
Net operating loss
carryforwards
|
$
|
39,265,458
|
$
|
25,312,676
|
||||
Employee non-qualified stock
options
|
1,008,424
|
797,000
|
||||||
Deferred interest and finance
charges
|
43,000
|
43,000
|
||||||
Deferred revenue
|
1,250,210
|
-
|
||||||
Capitalized R&D costs
|
441,000
|
441,000
|
||||||
Valuation allowance
|
(42,008,092
|
)
|
(26,593,676
|
)
|
||||
Net deferred tax asset
|
-
|
-
|
Total
|
||||
Balance at January 1, 2008
|
$
|
658,500
|
||
Increase related to prior period tax
positions
|
-
|
|||
Increase related to current year tax
positions
|
-
|
|||
Expiration of the statuts of limitations for the
assessment of taxes
|
-
|
|||
Other
|
-
|
|||
Balance at December 31, 2008
|
$
|
658,500
|
2008
|
2007
|
|||||||
Current federal income tax
|
$
|
-
|
$
|
-
|
||||
Current state income tax
|
-
|
-
|
||||||
Deferred taxes
|
15,414,416
|
9,192,476
|
||||||
Valuation allowance
|
(15,414,416
|
)
|
(9,192,476
|
)
|
||||
$
|
-
|
$
|
-
|
Open Tax
|
||
Jurisdiction
|
Years
|
|
Federal
|
2001 - 2006
|
|
States
|
2001 -
2006
|
20.
|
RELATED PARTY
TRANSACTIONS
|
21.
|
SUBSEQUENT
EVENTS
|