NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Organization and Business Overview
General – BioTime is a clinical-stage, biotechnology company focused on developing and commercializing products addressing degenerative diseases. Its clinical programs are targeting three primary sectors: aesthetics, ophthalmology and cell/drug delivery. BioTime’s clinical programs are based on two platform technologies, one in cell therapy and one in cell/drug delivery. The foundation of BioTime’s core therapeutic technology platform is pluripotent cells that are capable of becoming any of the cell types in the human body. The foundation of BioTime’s cell delivery platform is its HyStem® 3-D cell and drug delivery matrix technology.
BioTime also has significant equity holdings in two publicly traded companies, Asterias Biotherapeutics, Inc. (“Asterias”) and OncoCyte Corporation (“OncoCyte”), which BioTime founded and, until recently, were majority-owned and consolidated subsidiaries. Asterias (NYSE MKT: AST) is developing three clinical-stage programs that have the potential to address areas of high unmet medical need in the fields of neurology (spinal cord injury) and oncology (acute myeloid leukemia and lung cancer). OncoCyte (NYSE MKT: OCX) is developing confirmatory diagnostic tests for lung cancer, breast cancer, and bladder cancer utilizing novel liquid biopsy technology.
Beginning on February 17, 2017, BioTime deconsolidated OncoCyte’s financial statements and results of operations from BioTime (the “OncoCyte Deconsolidation”) (see Notes 3 and 4).
Beginning on May 13, 2016, BioTime also deconsolidated Asterias financial statements and results of operations from BioTime (the “Asterias Deconsolidation”) (see Notes 3 and 5).
BioTime also seeks to leverage its substantial intellectual property portfolio by advancing early-stage programs. On January 6, 2017, BioTime formed AgeX Therapeutics, Inc. (“AgeX”), a wholly-owned subsidiary, to continue development of early-stage programs. AgeX will focus on the development of regenerative medicine technologies targeting the diseases of aging and metabolic disorders. Its initial programs will focus on utilizing brown adipose tissue (“brown fat”) targeting diabetes and obesity, regenerative vascular progenitors for cardiovascular repair and our PureStem® technology with new discoveries in telomerase manipulation to create induced tissue regeneration (“iTR”). AgeX may pursue other early-stage programs. See Notes 2 and 13 regarding liquidity and funding of AgeX by potential new investors.
Basis of Presentation, Liquidity and Summary of Significant Accounting Policies
The unaudited condensed consolidated financial statements presented herein, and discussed below, have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in comprehensive consolidated financial statements have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of December 31, 2016 was derived from the audited consolidated financial statements at that date, but does not include all the information and footnotes required by GAAP. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in BioTime’s Annual Report on Form 10-K for the year ended December 31, 2016.
The accompanying interim condensed consolidated financial statements, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of BioTime’s financial condition and results of operations. The condensed consolidated results of operations are not necessarily indicative of the results to be expected for any other interim period or for the entire year.
Principles of consolidation – BioTime’s consolidated financial statements present the operating results of all of its wholly-owned and majority-owned subsidiaries that it consolidates as required under GAAP. All material intercompany accounts and transactions have been eliminated in consolidation. BioTime consolidated ReCyte Therapeutics, Inc. (“ReCyte”), OrthoCyte Corporation (“OrthoCyte”), ES Cell International, Pte Ltd (“ESI”), Cell Cure Neurosciences, Ltd (“Cell Cure”), BioTime Asia, Limited (“BioTime Asia”), LifeMap Sciences, Inc. (“LifeMap Sciences”) LifeMap Sciences, Ltd., LifeMap Solutions, Inc. (“LifeMap Solutions”) and AgeX Therapeutics, Inc. (“AgeX”), as BioTime has the ability to control their operating and financial decisions and policies through its ownership or representation on the board of directors, and the noncontrolling interest is reflected as a separate element of shareholders’ equity on BioTime’s condensed consolidated balance sheets.
Although beginning on February 17, 2017 and May 13, 2016, respectively, OncoCyte and Asterias financial statements and results are no longer a part of BioTime’s consolidated financial statements and results, the market value of OncoCyte and Asterias common stock, as of those respective dates, held by BioTime is reflected on BioTime’s consolidated balance sheet and the subsequent changes in the market value of those shares will be reflected in BioTime’s consolidated balance sheet and consolidated statements of operations, allowing BioTime shareholders to evaluate the value of the respective OncoCyte and Asterias’ portion of BioTime’s business.