As of December 31, 2016, OncoCyte’s assets, liabilities and net assets are included in the consolidated balance sheet of BioTime, after intercompany eliminations.
OncoCyte’s results of operations, comprehensive income or loss, and cash flows for the period from January 1, 2017 through February 16, 2017 are included in BioTime’s condensed consolidated statement of operations, condensed statement of comprehensive income or loss and condensed statement of cash flows for the six months ended June 30, 2017, after intercompany eliminations (see Notes 3 and 4). OncoCyte’s results are not included in BioTime’s condensed consolidated statements of operations for the three months ended June 30, 2017.
OncoCyte’s results of operations, comprehensive income or loss and cash flows for the three and six months ended June 30, 2016 are included in BioTime’s condensed consolidated statement of operations, condensed statement of comprehensive income or loss and condensed statement of cash flows, after intercompany eliminations (sees Notes 3 and 4).
Asterias’ results of operations, comprehensive income or loss, and cash flows for the period from January 1, 2016 through May 12, 2016 are included in BioTime’s condensed consolidated statement of operations, condensed statement of comprehensive income or loss and condensed statement of cash flows for the three and six months ended June 30, 2016.
Liquidity – Since inception, BioTime has incurred significant operating losses and has funded its operations primarily through the issuance of equity securities, payments from research grants, royalties from product sales and sales of research products and services. At June 30, 2017, BioTime had an accumulated deficit of approximately $159 million, working capital of $12 million and shareholders’ equity of $178 million. BioTime has evaluated its projected cash flows and believes that its $15.8 million of cash, cash equivalents and available for sale securities, and its shares of Asterias and OncoCyte, with a combined value of $153.5 million at June 30, 2017, which may be sold in part or in their entirety, provide sufficient cash, cash equivalents and liquidity to carry out BioTime’s current operations through at least twelve months from the issuance date of the condensed consolidated financial statements included herein. Although BioTime has no present plans to liquidate its holdings of Asterias or OncoCyte shares, if BioTime needs near term working capital or liquidity to supplement its cash and cash equivalents for its operations, BioTime may sell some, or all, of its Asterias or OncoCyte shares, as necessary.
BioTime’s projected cash flows are subject to various risks and uncertainties. For example, clinical trials for BioTime’s OpRegen® program will be funded in part with funds from grants and not from cash on hand. If the OpRegen® program were to lose its grant funding or BioTime is unable to continue to provide working capital to fund OpRegen®, or both, BioTime may be required to delay, postpone, or cancel its clinical trials or limit the number of clinical trial sites, or otherwise reduce or curtail its operations unless it is able to obtain adequate financing from another source that could be used for its clinical trial. The unavailability or inadequacy of financing to meet future capital needs could force BioTime to modify, curtail, delay, or suspend some or all aspects of its planned operations. BioTime’s determination as to when it will seek new financing and the amount of financing that it will need will be based on BioTime’s evaluation of the progress it makes in its research and development programs, any changes to the scope and focus of those programs, and projection of future costs, revenues, and rates of expenditure. BioTime cannot assure that adequate financing will be available on favorable terms, if at all. Sales of additional equity securities by BioTime or its subsidiaries could result in the dilution of the interests of present shareholders.
Upon completion of the offer and sale of AgeX common stock to new investors AgeX will have $10 million of cash capital to fund its operations and early-stage, pre-clinical programs (see Note 13). However, BioTime cannot assure that that adequate financing will be available to AgeX in the future to fund the AgeX programs.
Equity method accounting for Asterias and OncoCyte, at fair value – BioTime uses the equity method of accounting when it has the ability to exercise significant influence, but not control, as determined in accordance with GAAP, over the operating and financial policies of a company. For equity method investments which BioTime has elected to measure at fair value, unrealized gains and losses are reported in the consolidated statements of operations in other income and expenses, net.
As further discussed in Notes 4 and 5, BioTime has elected to account for its Asterias and OncoCyte shares at fair value using the equity method of accounting because beginning on May 13, 2016 and February 17, 2017, the respective dates on which BioTime deconsolidated Asterias and OncoCyte, BioTime has not had control of Asterias and OncoCyte, as defined by GAAP, but BioTime continues to exercise significant influence over Asterias and OncoCyte. Under the fair value method, the value of the shares of common stock BioTime holds in Asterias and OncoCyte is marked to market using the closing prices of Asterias and OncoCyte common stock on the NYSE MKT multiplied by the number of shares of Asterias and OncoCyte held by BioTime, with changes in the fair value of the Asterias and OncoCyte shares included in other income and expenses, net, in the condensed consolidated statements of operations. The Asterias and OncoCyte shares are considered level 1 assets as defined by ASC 820, Fair Value Measurements and Disclosures.