(Mark
One)
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ý
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the quarterly period ended September 30, 2008
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OR
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||
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period
from to
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Commission
file number 0-32501
|
CYTORI
THERAPEUTICS, INC.
|
(Exact
name of Registrant as Specified in Its
Charter)
|
DELAWARE
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33-0827593
|
|
(State
or Other Jurisdiction
of
Incorporation or Organization)
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(I.R.S.
Employer
Identification
No.)
|
|
3020
CALLAN ROAD, SAN DIEGO, CALIFORNIA
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92121
|
|
(Address
of principal executive offices)
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(Zip
Code)
|
|
Registrant’s
telephone number, including area code: (858)
458-0900
|
Large
Accelerated Filer o
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Accelerated
Filer ý
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Non-Accelerated
Filer o
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Smaller
reporting company o
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(Do
not check if a smaller reporting company)
|
As
of
September
30, 2008
|
As
of
December
31, 2007
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|||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 13,387,000 | $ | 11,465,000 | ||||
Accounts
receivable, net of allowance for doubtful accounts of $62,000 and $1,000
in 2008
and
2007, respectively
|
2,231,000 | 9,000 | ||||||
Inventories,
net
|
1,436,000 | — | ||||||
Other
current assets
|
1,053,000 | 764,000 | ||||||
Total
current assets
|
18,107,000 | 12,238,000 | ||||||
Property
and equipment, net
|
2,820,000 | 3,432,000 | ||||||
Investment
in joint venture
|
344,000 | 369,000 | ||||||
Other
assets
|
563,000 | 468,000 | ||||||
Intangibles,
net
|
912,000 | 1,078,000 | ||||||
Goodwill
|
3,922,000 | 3,922,000 | ||||||
Total
assets
|
$ | 26,668,000 | $ | 21,507,000 | ||||
Liabilities
and Stockholders’ Deficit
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 6,627,000 | $ | 7,349,000 | ||||
Current
portion of long-term obligations
|
370,000 | 721,000 | ||||||
Total
current liabilities
|
6,997,000 | 8,070,000 | ||||||
Deferred
revenues, related party
|
17,974,000 | 18,748,000 | ||||||
Deferred
revenues
|
2,446,000 | 2,379,000 | ||||||
Option
liability
|
1,200,000 | 1,000,000 | ||||||
Long-term
deferred rent
|
252,000 | 473,000 | ||||||
Long-term
obligations, less current portion
|
112,000 | 237,000 | ||||||
Total
liabilities
|
28,981,000 | 30,907,000 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
deficit:
|
||||||||
Preferred
stock, $0.001 par value; 5,000,000 shares authorized; -0- shares issued
and outstanding in 2008 and 2007
|
— | — | ||||||
Common
stock, $0.001 par value; 95,000,000 shares authorized; 31,128,341 and
25,962,222 shares issued and 29,255,507 and 24,089,388 shares outstanding
in 2008 and 2007, respectively
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31,000 | 26,000 | ||||||
Additional
paid-in capital
|
160,086,000 | 129,504,000 | ||||||
Accumulated
deficit
|
(155,636,000 | ) | (132,132,000 | ) | ||||
Treasury
stock, at cost
|
(6,794,000 | ) | (6,794,000 | ) | ||||
Amount
due from exercises of stock
options
|
— | (4,000 | ) | |||||
Total
stockholders’ deficit
|
(2,313,000 | ) | (9,400,000 | ) | ||||
Total
liabilities and stockholders’ deficit
|
$ | 26,668,000 | $ | 21,507,000 |
For
the Three Months
Ended
September 30,
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For
the Nine Months
Ended
September 30,
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|||||||||||||||
2008
|
2007
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2008
|
2007
|
|||||||||||||
Product
revenues:
|
||||||||||||||||
Related
party
|
$ | — | $ | — | $ | 28,000 | $ | 792,000 | ||||||||
Third
party
|
2,319,000 | — | 3,848,000 | — | ||||||||||||
2,319,000 | — | 3,876,000 | 792,000 | |||||||||||||
Cost
of product revenues
|
648,000 | — | 1,383,000 | 422,000 | ||||||||||||
Gross
profit
|
1,671,000 | — | 2,493,000 | 370,000 | ||||||||||||
Development
revenues:
|
||||||||||||||||
Development,
related party
|
— | 3,362,000 | 774,000 | 5,158,000 | ||||||||||||
Development
|
— | — | — | 10,000 | ||||||||||||
Research
grant and other
|
1,000 | 11,000 | 50,000 | 65,000 | ||||||||||||
1,000 | 3,373,000 | 824,000 | 5,233,000 | |||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development
|
3,875,000 | 5,193,000 | 13,873,000 | 14,583,000 | ||||||||||||
Sales
and marketing
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1,357,000 | 613,000 | 3,431,000 | 1,678,000 | ||||||||||||
General
and administrative
|
3,049,000 | 3,177,000 | 9,322,000 | 9,777,000 | ||||||||||||
Change
in fair value of option liabilities
|
200,000 | — | 200,000 | 100,000 | ||||||||||||
Total
operating expenses
|
8,481,000 | 8,983,000 | 26,826,000 | 26,138,000 | ||||||||||||
Operating
loss
|
(6,809,000 | ) | (5,610,000 | ) | (23,509,000 | ) | (20,535,000 | ) | ||||||||
Other
income (expense):
|
||||||||||||||||
Gain
on sale of assets
|
— | — | — | 1,858,000 | ||||||||||||
Interest
income
|
49,000 | 302,000 | 163,000 | 849,000 | ||||||||||||
Interest
expense
|
(19,000 | ) | (33,000 | ) | (60,000 | ) | (128,000 | ) | ||||||||
Other
income (expense), net
|
(30,000 | ) | 18,000 | (72,000 | ) | (37,000 | ) | |||||||||
Equity
gain (loss) from investment in joint venture
|
(8,000 | ) | (5,000 | ) | (26,000 | ) | 1,000 | |||||||||
Total
other income (expense)
|
(8,000 | ) | 282,000 | 5,000 | 2,543,000 | |||||||||||
Net
loss
|
(6,817,000 | ) | (5,328,000 | ) | (23,504,000 | ) | (17,992,000 | ) | ||||||||
Other
comprehensive loss – unrealized holding loss
|
— | — | — | (1,000 | ) | |||||||||||
Comprehensive
loss
|
$ | (6,817,000 | ) | $ | (5,328,000 | ) | $ | (23,504,000 | ) | $ | (17,993,000 | ) | ||||
Basic
and diluted net loss per common share
|
$ | (0.24 | ) | $ | (0.22 | ) | $ | (0.90 | ) | $ | (0.80 | ) | ||||
Basic
and diluted weighted average common shares
|
27,951,369 | 23,903,082 | 26,078,196 | 22,502,133 | ||||||||||||
For
the Nine Months Ended September 30,
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||||||||
2008
|
2007
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
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$ | (23,504,000 | ) | $ | (17,992,000 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
1,164,000 | 1,227,000 | ||||||
Inventory
provision
|
— | 70,000 | ||||||
Warranty
provision
|
(33,000 | ) | (54,000 | ) | ||||
Increase
in allowance for doubtful accounts
|
62,000 | 1,000 | ||||||
Change
in fair value of option liabilities
|
200,000 | 100,000 | ||||||
Stock-based
compensation expense
|
1,742,000 | 1,762,000 | ||||||
Gain
on sale of assets
|
— | (1,858,000 | ) | |||||
Equity
(gain) loss from investment in joint venture
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25,000 | (1,000 | ) | |||||
Increases
(decreases) in cash caused by changes in operating assets and
liabilities:
|
||||||||
Accounts
receivable
|
(2,284,000 | ) | 193,000 | |||||
Inventories
|
(1,436,000 | ) | — | |||||
Other
current assets
|
(289,000 | ) | (94,000 | ) | ||||
Other
assets
|
(95,000 | ) | 3,000 | |||||
Accounts
payable and accrued expenses
|
(689,000 | ) | (632,000 | ) | ||||
Deferred
revenues, related party
|
(774,000 | ) | (5,158,000 | ) | ||||
Deferred
revenues
|
67,000 | (10,000 | ) | |||||
Long-term
deferred rent
|
(221,000 | ) | (194,000 | ) | ||||
Net
cash used in operating activities
|
(26,065,000 | ) | (22,637,000 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Proceeds
from sale and maturity of short-term investments
|
5,736,000 | 25,479,000 | ||||||
Purchases
of short-term investments
|
(5,736,000 | ) | (22,498,000 | ) | ||||
Proceeds
from sale of assets
|
— | 3,175,000 | ||||||
Costs
from sale of assets
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— | (305,000 | ) | |||||
Purchases
of property and equipment
|
(349,000 | ) | (437,000 | ) | ||||
Net
cash provided by (used in) investing activities
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(349,000 | ) | 5,414,000 | |||||
Cash
flows from financing activities:
|
||||||||
Principal
payments on long-term obligations
|
(513,000 | ) | (1,022,000 | ) | ||||
Proceeds
from exercise of employee stock options
|
745,000 | 1,381,000 | ||||||
Proceeds
from sale of common stock and warrants
|
28,954,000 | 21,500,000 | ||||||
Costs
from sale of common stock
|
(850,000 | ) | (1,599,000 | ) | ||||
Proceeds
from sale of treasury stock
|
— | 6,000,000 | ||||||
Net
cash provided by financing activities
|
28,336,000 | 26,260,000 | ||||||
Net
increase in cash and cash equivalents
|
1,922,000 | 9,037,000 | ||||||
Cash
and cash equivalents at beginning of period
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11,465,000 | 8,902,000 | ||||||
Cash
and cash equivalents at end of period
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$ | 13,387,000 | $ | 17,939,000 | ||||
Supplemental
disclosure of cash flows information:
|
||||||||
Cash
paid during period for:
|
||||||||
Interest
|
$ | 65,000 | $ | 131,000 | ||||
Taxes
|
— | 2,000 | ||||||
1.
|
Basis
of Presentation
|
2.
|
Use
of Estimates
|
3.
|
Liquidity
|
4.
|
Segment
Information
|
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues:
|
||||||||||||||||
Regenerative
cell technology
|
$ | 2,320,000 | $ | 3,373,000 | $ | 4,700,000 | $ | 5,223,000 | ||||||||
MacroPore
Biosurgery
|
— | — | — | 802,000 | ||||||||||||
Total
revenues
|
$ | 2,320,000 | $ | 3,373,000 | $ | 4,700,000 | $ | 6,025,000 | ||||||||
Segment
operating income (losses):
|
||||||||||||||||
Regenerative
cell technology
|
$ | (3,521,000 | ) | $ | (2,313,000 | ) | $ | (13,842,000 | ) | $ | (10,677,000 | ) | ||||
MacroPore
Biosurgery
|
(39,000 | ) | (120,000 | ) | (145,000 | ) | 19,000 | |||||||||
General
and administrative expenses
|
(3,049,000 | ) | (3,177,000 | ) | (9,322,000 | ) | (9,777,000 | ) | ||||||||
Changes
in fair value of option liabilities
|
(200,000 | ) | — | (200,000 | ) | (100,000 | ) | |||||||||
Total
operating loss
|
$ | (6,809,000 | ) | $ | (5,610,000 | ) | $ | (23,509,000 | ) | $ | (20,535,000 | ) |
As
of September 30,
|
As
of December 31,
|
|||||||
2008
|
2007
|
|||||||
Assets:
|
||||||||
Regenerative
cell technology
|
$ | 15,050,000 | $ | 11,591,000 | ||||
MacroPore
Biosurgery
|
— | — | ||||||
Corporate
assets
|
11,618,000 | 9,916,000 | ||||||
Total
assets
|
$ | 26,668,000 | $ | 21,507,000 |
5.
|
Short-Term
Investments
|
6.
|
Summary
of Significant Accounting Policies
|
|
Inventories
|
|
Revenue
Recognition
|
·
|
In
2004, we received a nonrefundable payment of $1,250,000 from Senko after
filing an initial regulatory application with the Japanese Ministry of
Health, Labour and Welfare or the MHLW, related to the Thin Film product
line. We initially recorded this payment as deferred revenues
of $1,250,000.
|
·
|
Upon
the achievement of commercialization (i.e., regulatory approval by the
MHLW), we will be entitled to an additional nonrefundable payment of
$250,000.
|
7.
|
Inventories
|
As
of
September
30, 2008
|
||||
Raw
materials
|
$ | 457,000 | ||
Work-in-progress
|
465,000 | |||
Finished
goods
|
514,000 | |||
Total
|
$ | 1,436,000 |
8.
|
Long-Lived
Assets
|
9.
|
Share-Based
Compensation
|
10.
|
Loss
per Share
|
11.
|
Commitments
and Contingencies
|
12.
|
License
Agreement
|
13.
|
Transactions
with Olympus Corporation
|
·
|
Olympus
paid $30,000,000 for its 50% interest in the Joint
Venture. Moreover, Olympus simultaneously entered into a
License/Joint Development Agreement with the Joint Venture and us to
develop a second generation commercial system and manufacturing
capabilities.
|
·
|
We
licensed our device technology, including the Celution® System
platform and certain related intellectual property, to the Joint Venture
for use in future generation devices. These devices will
process and purify regenerative cells residing in adipose tissue for
various therapeutic clinical applications. In exchange for this
license, we received a 50% interest in the Joint Venture, as well as an
initial $11,000,000 payment from the Joint Venture; the source of this
payment was the $30,000,000 contributed to the Joint Venture by
Olympus. Moreover, upon receipt of a CE mark for the
Celution®
600 in January 2006, we received an additional $11,000,000 development
milestone payment from the Joint
Venture.
|
September
30, 2008
|
December
31, 2007
|
November
4, 2005
|
||||||||||
Expected
volatility of
Cytori
|
62.00 | % | 60.00 | % | 63.20 | % | ||||||
Expected
volatility of the Joint Venture
|
62.00 | % | 60.00 | % | 69.10 | % | ||||||
Bankruptcy
recovery rate for
Cytori
|
21.00 | % | 21.00 | % | 21.00 | % | ||||||
Bankruptcy
threshold for
Cytori
|
$ | 9,824,000 | $ | 9,324,000 | $ | 10,780,000 | ||||||
Probability
of a change of control event for Cytori
|
2.80 | % | 2.17 | % | 3.04 | % | ||||||
Expected
correlation between fair values of Cytori and the Joint Venture in the
future
|
99.00 | % | 99.00 | % | 99.00 | % | ||||||
Risk
free interest
rate
|
3.85 | % | 4.04 | % | 4.66 | % |
Balance
as of
|
Basis
of Fair Value Measurements
|
|||||||||||||||
September 30, 2008
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash
equivalents
|
$ | 11,381,000 | $ | 11,381,000 | $ | — | $ | — | ||||||||
Liabilities:
|
||||||||||||||||
Put
option liability
|
$ | (1,200,000 | ) | $ | — | $ | — | $ | (1,200,000 | ) |
Three
months ended
|
Nine
months ended
|
|||||||
Put
option liability
|
September
30, 2008
|
September
30, 2008
|
||||||
Beginning
balance
|
$ | (1,000,000 | ) | $ | (1,000,000 | ) | ||
Decrease
in fair value recognized in operating expenses
|
(200,000 | ) | (200,000 | ) | ||||
Ending
balance
|
$ | (1,200,000 | ) | $ | (1,200,000 | ) |
15.
|
Stockholders’
Deficit
|
16.
|
Subsequent
Events
|
·
|
Overview
that discusses our operating results and some of the trends that affect
our business.
|
·
|
Results
of Operations that includes a more detailed discussion of our revenue and
expenses.
|
·
|
Liquidity
and Capital Resources which discusses key aspects of our statements of
cash flows, changes in our financial position and our financial
commitments.
|
·
|
Significant
changes since our most recent Annual Report on Form 10-K in the Critical
Accounting Policies and Estimates that we believe are important to
understanding the assumptions and judgments underlying our financial
statements.
|
·
|
Expanding
commercialization of the Celution®
800/CRS in the European and Asia-Pacific reconstructive surgery
markets
|
·
|
Selling
additional StemSource®
Cell Banks to hospitals and companies around the
globe
|
·
|
Completing
our post-marketing study in Europe with the Celution®
800/CRS for the reconstruction of breast tissue following partial
mastectomy to support expanded marketing efforts and
reimbursement
|
·
|
Advancing
our cardiovascular disease product pipeline through clinical
development
|
·
|
Seeking
strategic commercialization
partnerships
|
·
|
Olympus
paid $30,000,000 for its 50% interest in the Joint
Venture. Moreover, Olympus simultaneously entered into a
License/Joint Development Agreement with the Joint Venture and us to
develop a second generation commercial system and manufacturing
capabilities.
|
·
|
We
licensed our device technology, including the Celution®
System platform and certain related intellectual property, to the Joint
Venture for use in future generation devices. These devices
will process and purify adult stem and regenerative cells residing in
adipose (fat) tissue for various therapeutic clinical
applications. In exchange for this license, we received a 50%
interest in the Joint Venture, as well as an initial $11,000,000 payment
from the Joint Venture; the source of this payment was the $30,000,000
contributed to the Joint Venture by Olympus. Moreover, upon
receipt of a CE mark for the first generation Celution®
System platform in January 2006, we received an additional $11,000,000
development milestone payment from the Joint
Venture.
|
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Regenerative cell
technology:
|
||||||||||||||||
Celution®
Products
|
||||||||||||||||
Related
party
|
$ | — | $ | — | $ | 28,000 | $ | — | ||||||||
Third
party
|
2,319,000 | — | 3,848,000 | — | ||||||||||||
MacroPore
Biosurgery:
|
||||||||||||||||
Spine
and orthopedic products
|
— | — | — | 792,000 | ||||||||||||
Total
product revenues
|
$ | 2,319,000 | $ | — | $ | 3,876,000 | $ | 792,000 | ||||||||
%
attributable to Medtronic
|
— | — | — | 100.0 | % | |||||||||||
%
attributable to Olympus
|
— | — | 0.7 | % | — |
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Regenerative cell
technology:
|
||||||||||||||||
Cost
of product revenues
|
$ | 635,000 | $ | — | $ | 1,351,000 | $ | — | ||||||||
Share-based
compensation
|
13,000 | — | 32,000 | — | ||||||||||||
Total
regenerative cell technology
|
648,000 | — | 1,383,000 | — | ||||||||||||
MacroPore
Biosurgery:
|
||||||||||||||||
Cost
of product revenues
|
— | — | — | 403,000 | ||||||||||||
Share-based
compensation
|
— | — | — | 19,000 | ||||||||||||
Total
MacroPore Biosurgery
|
— | — | — | 422,000 | ||||||||||||
Total
cost of product revenues
|
$ | 648,000 | $ | — | $ | 1,383,000 | $ | 422,000 | ||||||||
Total
cost of product revenues as % of product revenues
|
27.9 | % | — | 35.7 | % | 53.3 | % | |||||||||
|
·
|
The
increase in cost of product revenues for the three and nine months ended
September 30, 2008 as compared to the same periods in 2007 was due to
Celution®
System product sales for which revenue was recognized during the three and
nine months ended September 30, 2008. Cost of sales included an
economic benefit of approximately $69,000 and $321,000, respectively,
related to material cost and labor/overhead previously expensed as
research and development prior to commercialization date of March 1, 2008
that was sold during the three and nine months ended September 30,
2008. Cost of product revenues as a percentage of product
revenues was 27.9% and 35.7% for the three and nine months ended September
30, 2008, respectively. An overall fluctuation is primarily due
to the product mix comprising the revenue for the
period.
|
·
|
Cost
of product revenues included approximately $13,000 and $32,000 of
share-based compensation expense for the three and nine months ended
September 30, 2008, respectively. For further details, see
share-based compensation discussion
below.
|
|
·
|
The
decrease in cost of product revenues for the three and nine months ended
September 30, 2008 as compared to the same period in 2007 was due to a
decrease in production of MacroPore Biosurgery spine and orthopedic
products, followed by our sale of the product line in May
2007.
|
|
·
|
Cost
of product revenues included approximately $0 and $19,000 of share-based
compensation expense for the three and nine months ended September 30,
2007, respectively. For further details, see share-based
compensation discussion below.
|
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Regenerative cell
technology:
|
||||||||||||||||
Development
(Olympus)
|
$ | — | $ | 3,362,000 | $ | 774,000 | $ | 5,158,000 | ||||||||
Regenerative
cell storage services and other
|
1,000 | 11,000 | 50,000 | 65,000 | ||||||||||||
Total
regenerative cell technology
|
1,000 | 3,373,000 | 824,000 | 5,223,000 | ||||||||||||
MacroPore
Biosurgery:
|
||||||||||||||||
Development
(Senko)
|
— | — | — | 10,000 | ||||||||||||
Total
development revenues
|
$ | 1,000 | $ | 3,373,000 | $ | 824,000 | $ | 5,233,000 |
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Regenerative cell
technology:
|
||||||||||||||||
Regenerative
cell technology
|
$ | 3,114,000 | $ | 3,224,000 | $ | 11,593,000 | $ | 9,298,000 | ||||||||
Development
milestone (Joint Venture)
|
655,000 | 1,727,000 | 1,868,000 | 4,560,000 | ||||||||||||
Share-based
compensation
|
106,000 | 165,000 | 407,000 | 492,000 | ||||||||||||
Total
regenerative cell technology
|
3,875,000 | 5,116,000 | 13,868,000 | 14,350,000 | ||||||||||||
MacroPore Biosurgery:
|
||||||||||||||||
Bioresorbable
polymer implants
|
— | — | 5,000 | 111,000 | ||||||||||||
Development
milestone (Senko)
|
— | 77,000 | — | 120,000 | ||||||||||||
Share-based
compensation
|
— | — | — | 2,000 | ||||||||||||
Total
MacroPore Biosurgery
|
— | 77,000 | 5,000 | 233,000 | ||||||||||||
Total
research and development expenses
|
$ | 3,875,000 | $ | 5,193,000 | $ | 13,873,000 | $ | 14,583,000 |
·
|
Regenerative
cell technology expenses relate to the development of a technology
platform that involves using adipose tissue as a source of autologous
regenerative cells for therapeutic applications. These
expenses, in conjunction with our continued development efforts related to
our Celution®
System, result primarily from the broad expansion of our research and
development efforts enabled by the funding we received from Olympus in
2005 and 2006 and from other investors during the last few
years. Labor-related expenses, not including share-based
compensation, decreased by $492,000 and $801,000 for the three and nine
months ended September 30, 2008, respectively, as compared to the same
periods in 2007 primarily due to the decrease in headcount for our
research and development department as a result of achievement of
commercialization and transfer of employees from research and development
to the manufacturing department. Professional services expense
increased by $110,000 and $444,000 for the three and nine months ended
September 30, 2008, respectively, as compared to the same periods in
2007. This was due to increased use of consultants and
temporary labor for the three and nine months ended September 30,
2008. Pre-clinical and clinical study expense decreased by
$555,000 and $277,000 for the three and nine months ended September 30,
2008, respectively as compared to the same periods in
2007. This fluctuation was due primarily to a reduction in
pre-clinical study activity as we focus on our clinical studies.
Additionally, although the overall cost of a clinical trial is generally
higher than for a preclinical study, such costs are typically spread out
over a longer period of time. Expenses for supplies decreased
by $50,000 and increased by $327,000 for the three and nine months ended
September 30, 2008, respectively, as compared to the same periods in 2007,
primarily due to timing of use of inventory supplies for research purposes
and purchases of production supplies prior to the related product line
commercialization.
|
·
|
Expenditures
related to the Joint Venture with Olympus, which are included in the
variation analysis above, include costs that are necessary to support the
commercialization of future generation devices based on our Celution® System. These
development activities, which began in November 2005, include performing
pre-clinical and clinical studies, seeking regulatory approval, and
performing product development related to therapeutic applications for
adipose regenerative cells for multiple large markets. For the
three and nine months ended September 30, 2008, costs associated with the
development of the device were $655,000 and $1,868,000,
respectively. For the three and nine months ended September 30,
2007, costs associated with the development of the device were $1,727,000
and $4,560,000, respectively. The decrease in the costs related
to the Joint Venture with Olympus is primarily due to the completion of
product development milestone activities. Expenses for the
three months ended September 30, 2008 and 2007 were composed of $430,000
and $758,000, respectively, in labor and related benefits, $86,000 and
$665,000, respectively, in consulting and other professional services,
$29,000 and $158,000 in supplies and $110,000 and $146,000, respectively,
in other miscellaneous expense. Expenses for the nine months
ended September 30, 2008 and 2007 were composed of $1,090,000 and
$2,477,000, respectively, in labor and related benefits, $316,000 and
$1,195,000, respectively, in consulting and other professional services,
$77,000 and $499,000, respectively, in supplies and $385,000 and $390,000,
respectively, in other miscellaneous
expense.
|
·
|
Share-based
compensation for the regenerative cell technology segment of research and
development was $106,000 and $407,000 for the three and nine months ended
September 30, 2008, respectively. Share-based compensation for
the regenerative cell technology segment of research and development was
$165,000 and $492,000 for the three and nine months ended September 30,
2007, respectively. See share-based compensation discussion
below for more details.
|
·
|
Research
and development expenses for bioresorbable polymer implants substantially
decreased in 2007 and were essentially ceased by 2008, due to the
termination of spine and orthopedics product research upon sale of that
product line in May 2007.
|
·
|
Under
a distribution agreement with Senko, we are responsible for the completion
of the initial regulatory application to the MHLW and commercialization of
the Thin Film product line in Japan. Commercialization occurs
when one or more Thin Film product registrations are completed with the
MHLW. During the three and nine months ended September 30,
2007, we incurred $77,000 and $120,000, respectively, of expenses related
to this regulatory and registration process. We did not incur
any expenses related to this regulatory and registration process for the
three and nine months ended September 30,
2008.
|
·
|
Share-based
compensation for the MacroPore Biosurgery segment of research and
development for the three and nine months ended September 30, 2007 was $0
and $2,000, respectively. There were no share-based
compensation expenses for the MacroPore Biosurgery segment of research and
development for the three and nine months ended September 30,
2008. See share-based compensation discussion below for more
details.
|
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Regenerative cell
technology:
|
||||||||||||||||
International
sales and marketing
|
$ | 1,217,000 | $ | 508,000 | $ | 3,026,000 | $ | 1,355,000 | ||||||||
Share-based
compensation
|
101,000 | 62,000 | 265,000 | 196,000 | ||||||||||||
Total
regenerative cell technology
|
1,318,000 | 570,000 | 3,291,000 | 1,551,000 | ||||||||||||
MacroPore Biosurgery:
|
||||||||||||||||
General
corporate marketing
|
— | — | — | 21,000 | ||||||||||||
International
sales and marketing
|
39,000 | 43,000 | 140,000 | 106,000 | ||||||||||||
Total
MacroPore Biosurgery
|
39,000 | 43,000 | 140,000 | 127,000 | ||||||||||||
Total
sales and marketing expenses
|
$ | 1,357,000 | $ | 613,000 | $ | 3,431,000 | $ | 1,678,000 |
·
|
The
increase in international sales and marketing expense for the three and
nine months ended September 30, 2008 as compared to the same periods in
2007 was mainly attributed to the increase in salary and related benefits
expense of $413,000 and $895,000, respectively, not including share-based
compensation, an increase in travel related expenses of $88,000 and
$228,000, respectively; and an increase in printing, supplies, and postage
of $72,000 and $170,000, respectively, which are due to our emphasis in
seeking strategic alliances and/or co-development partners for our
regenerative cell technology as well as sales and marketing efforts
related to our commercialization
activities.
|
·
|
Share-based
compensation for the regenerative cell segment of sales and marketing for
the three and nine months ended September 30, 2008 was $101,000 and
$265,000, respectively. Share-based compensation for the
regenerative cell segment of sales and marketing for the three and nine
months ended September 30, 2007 was $62,000 and $196,000,
respectively. See share-based compensation discussion below for
more details.
|
·
|
General
corporate marketing expenditures relate to expenditures for maintaining
our corporate image and reputation within the research and surgical
communities relevant to bioresorbable
implants. Expenditures in this area declined to $0 in
2008 as we focused on our regenerative cell technology business and exited
from our spine and orthopedic implant
business.
|
·
|
International
sales and marketing expenditures relate to costs associated with
developing an international bioresorbable Thin Film distributor and
supporting a bioresorbable Thin Film sales office in
Japan.
|
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
General
and administrative
|
$ | 2,726,000 | $ | 2,797,000 | $ | 8,284,000 | $ | 8,724,000 | ||||||||
Share-based
compensation
|
323,000 | 380,000 | 1,038,000 | 1,053,000 | ||||||||||||
Total
general and administrative expenses
|
$ | 3,049,000 | $ | 3,177,000 | $ | 9,322,000 | $ | 9,777,000 |
·
|
An
overall decrease in general and administrative expenses (excluding
share-based compensation) occurred during the three and nine months ended
September 30, 2008 as compared to the same periods in
2007. This resulted primarily from a decrease in legal fees
related to the ‘231 Patent license of $167,000 and $528,000, respectively,
for the three and nine months ended September 30, 2008 as compared to the
same periods in 2007.
|
·
|
We
have incurred substantial legal expenses in connection with the University
of Pittsburgh’s lawsuit. Although we are not litigants and are
not responsible for any settlement costs, if we are not successful in
overturning the Court’s decision on the ‘231 Patent, our license rights to
the ‘231 Patent will be lost. Since our current products and
products under development do not practice the ‘231 Patent, our primary
ongoing business activities and product development pipeline should not be
affected by the Court’s decision. Although the ‘231 Patent is unrelated to
our current products and product pipeline, we believe that the ‘231 Patent
and/or the other technology licensed from UC may have long term potential
to be useful for future product developments, and so we have elected to
support UC’s legal efforts in the appeal of the Court’s final
order. The amended license agreement we signed with UC in the
third quarter of 2006 clarified that we are responsible for patent
prosecution and litigation costs related to this lawsuit. In
the three and nine months ended September 30, 2008, we expensed $186,000
and $426,000, respectively, for legal fees related to this
license. In the same periods in 2007, we expensed $353,000 and
$954,000, respectively, for legal fees related to this
license. Our legal expenses related to this lawsuit and the
appeal will fluctuate depending upon the activity incurred during each
period.
|
·
|
Share-based
compensation expense related to general and administrative expense for the
three and nine months ended September 30, 2008 was $323,000 and
$1,038,000, respectively. For the same periods in 2007,
share-based compensation expense related to general and administrative
expense was $380,000 and $1,053,000, respectively. See
share-based compensation discussion below for more
details.
|
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Regenerative cell
technology:
|
||||||||||||||||
Cost
of product
revenues
|
$ | 13,000 | $ | — | $ | 32,000 | $ | — | ||||||||
Research
and development-related
|
106,000 | 165,000 | 407,000 | 492,000 | ||||||||||||
Sales
and marketing-related
|
101,000 | 62,000 | 265,000 | 196,000 | ||||||||||||
Total
regenerative cell technology
|
220,000 | 227,000 | 704,000 | 688,000 | ||||||||||||
MacroPore Biosurgery:
|
||||||||||||||||
Cost
of product
revenues
|
— | — | — | 19,000 | ||||||||||||
Research
and development – related
|
— | — | — | 2,000 | ||||||||||||
Total
MacroPore Biosurgery
|
— | — | — | 21,000 | ||||||||||||
General
and administrative-related
|
323,000 | 380,000 | 1,038,000 | 1,053,000 | ||||||||||||
Total
share-based compensation
|
$ | 543,000 | $ | 607,000 | $ | 1,742,000 | $ | 1,762,000 |
For
the three months ended September 30,
|
For
the nine months ended September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Change
in fair value of put option liability
|
200,000 | — | 200,000 | 100,000 |
·
|
In
reference to the Joint Venture, the Shareholders’ Agreement between Cytori
and Olympus provides that in certain specified circumstances of insolvency
or if we experience a change in control, Olympus will have the right to
(i) repurchase our interests in the Joint Venture at the fair value of
such interests or (ii) sell its own interests in the Joint Venture to us
at the higher of (a) $22,000,000 or (b) the Put’s fair
value. The Put value has been classified as a
liability.
|
September
30, 2008
|
December
31, 2007
|
November
4, 2005
|
||||||||||
Expected
volatility of
Cytori
|
62.00 | % | 60.00 | % | 63.20 | % | ||||||
Expected
volatility of the Joint Venture
|
62.00 | % | 60.00 | % | 69.10 | % | ||||||
Bankruptcy
recovery rate for
Cytori
|
21.00 | % | 21.00 | % | 21.00 | % | ||||||
Bankruptcy
threshold for
Cytori
|
$ | 9,824,000 | $ | 9,324,000 | $ | 10,780,000 | ||||||
Probability
of a change of control event for Cytori
|
2.80 | % | 2.17 | % | 3.04 | % | ||||||
Expected
correlation between fair values of Cytori and the Joint Venture in the
future
|
99.00 | % | 99.00 | % | 99.00 | % | ||||||
Risk
free interest
rate
|
3.85 | % | 4.04 | % | 4.66 | % |
Carrying
Value Prior to Disposition
|
||||
Inventory
|
$ | 94,000 | ||
Other
current assets
|
17,000 | |||
Assets
held for sale
|
436,000 | |||
Goodwill
|
465,000 | |||
$ | 1,012,000 |
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues
|
$ | — | $ | — | $ | — | $ | 792,000 | ||||||||
Cost
of product revenues
|
— | — | — | (422,000 | ) | |||||||||||
Research
& development
|
— | — | — | (113,000 | ) | |||||||||||
Sales
& marketing
|
— | — | — | (21,000 | ) |
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Interest
income
|
$ | 49,000 | $ | 302,000 | $ | 163,000 | $ | 849,000 | ||||||||
Interest
expense
|
(19,000 | ) | (33,000 | ) | (60,000 | ) | (128,000 | ) | ||||||||
Other
income (expense)
|
(30,000 | ) | 18,000 | (72,000 | ) | (37,000 | ) | |||||||||
Total
|
$ | — | $ | 287,000 | $ | 31,000 | $ | 684,000 |
·
|
Interest
income decreased for the three and nine months ended September 30, 2008 as
compared to the same periods in 2007 due to a decrease in interest rates
and cash balance available for
investment.
|
·
|
Interest
expense decreased for the three and nine months ended September 30, 2008
as compared to the same periods in 2007 due to lower principal balances on
our long-term equipment-financed
borrowings.
|
·
|
The
changes in other income (expense) in the three and nine months ended
September 30, 2008 as compared to the same periods in 2007 resulted
primarily from changes in foreign currency exchange
rates.
|
For
the three months
ended
September 30,
|
For
the nine months
ended
September 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Equity
gain (loss) in investment
|
$ | (8,000 | ) | $ | (5,000 | ) | $ | (26,000 | ) | $ | 1,000 |
September
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
Cash
and cash equivalents
|
$ | 13,387,000 | $ | 11,465,000 | ||||
Current
assets
|
$ | 18,107,000 | $ | 12,238,000 | ||||
Current
liabilities
|
6,997,000 | 8,070,000 | ||||||
Working
capital
|
$ | 11,110,000 | $ | 4,168,000 |
·
|
Issuing
stock in pre-IPO transactions, a 2000 initial public offering in Germany,
and stock option exercises,
|
·
|
Generating
revenues,
|
·
|
Selling
the bioresorbable implant CMF product line in September
2002,
|
·
|
Selling
the bioresorbable implant Thin Film product line (except for the territory
of Japan), in May 2004,
|
·
|
Licensing
distribution rights to Thin Film in Japan, in exchange for an upfront
license fee in July 2004 and an initial development milestone payment in
October 2004,
|
·
|
Obtaining
a modest amount of capital equipment long-term
financing,
|
·
|
Selling
1,100,000 shares of common stock to Olympus under an agreement which
closed in May 2005,
|
·
|
Upfront
and milestone fees from our Joint Venture with Olympus, which was entered
into in November 2005,
|
·
|
Receiving
funds in exchange for granting Olympus an exclusive right to negotiate in
February 2006,
|
·
|
Receiving
$16,219,000 in net proceeds from a common stock sale under the shelf
registration statement in August
2006,
|
·
|
Receiving
$19,901,000 in net proceeds from the sale of common stock plus common
stock warrants under the shelf registration statement in February
2007,
|
·
|
Receiving
$6,000,000 in net proceeds from a private placement to Green Hospital
Supply, Inc. in April 2007,
|
·
|
Receiving
gross proceeds of $3,175,000 from the sale of our bioresorbable spine and
orthopedic surgical implant product line to Kensey Nash in May 2007,
and
|
·
|
Receiving
$12,000,000 in net proceeds from a private placement to Green Hospital
Supply, Inc. during first half
2008.
|
·
|
Receiving
$17,000,000 in gross proceeds in August 2008 from a private placement of
2,825,517 unregistered shares of common stock and 1,412,758 common stock
warrants (with an original exercise price of $8.50 per share) to a
syndicate of investors including Olympus Corporation, who acquired
1,000,000 unregistered shares and 500,000 common stock warrants in
exchange for $6,000,000 of the total proceeds
raised.
|
|
Payments
due by period
|
||||||||||||||||||||
Contractual
Obligations
|
Total
|
Less
than 1
year
|
1
– 3 years
|
3
– 5 years
|
More
than
5
years
|
|||||||||||||||
Long-term
obligations
|
$ | 482,000 | $ | 370,000 | $ | 90,000 | $ | 22,000 | $ | — | ||||||||||
Interest
commitment on long-term obligations
|
74,000 | 38,000 | 27,000 | 9,000 | — | |||||||||||||||
Operating
lease obligations
|
3,155,000 | 1,735,000 | 1,302,000 | 103,000 | 15,000 | |||||||||||||||
Minimum
purchase requirements
|
2,670,000 | 970,000 | 1,700,000 | — | — | |||||||||||||||
Pre-clinical
research study obligations
|
569,000 | 569,000 | — | — | — | |||||||||||||||
Clinical
research study obligations
|
8,129,000 | 5,540,000 | 2,589,000 | — | — | |||||||||||||||
Total
|
$ | 15,079,000 | $ | 9,222,000 | $ | 5,708,000 | $ | 134,000 | $ | 15,000 |
For
the nine months ended September 30,
|
||||||||
2008
|
2007
|
|||||||
Net
cash used in operating activities
|
$ | (26,065,000 | ) | $ | (22,637,000 | ) | ||
Net
cash provided by (used in) investing activities
|
(349,000 | ) | 5,414,000 | |||||
Net
cash provided by financing activities
|
28,336,000 | 26,260,000 |
·
|
Fees
for achieving certain defined milestones under research and/or development
arrangements.
|
·
|
Product
sales, and
|
·
|
Payments
under license or distribution
agreements.
|
·
|
A
distribution license fee (which was paid at the outset of the
arrangement),
|
·
|
Milestone
payments for achieving commercialization of the Thin Film product line in
Japan,
|
·
|
Training
for representatives of Senko,
|
·
|
Sales
of Thin Film products to Senko, and
|
·
|
Payments
in the nature of royalties on future product sales made by Senko to its
end customers.
|
·
|
The
delivered element has stand alone value to the
customer,
|
·
|
There
is objective evidence of the fair value of the remaining undelivered
elements, and
|
·
|
If
the arrangement contains a general right of return related to any products
delivered, delivery of the remaining goods and services is probable and
within the complete control of the
seller.
|
·
|
Product
Revenues
|
o
|
Beginning
in March of 2008, we began sales and shipments of our Celution® 800/CRS
System to the European and Asia-Pacific reconstructive surgery
markets. Assuming all other applicable revenue recognition
criteria have been met, revenue for these product sales will generally be
recognized upon delivery to the customer, as all risks and rewards of
ownership have been substantively transferred to the customer at that
point. For product sales to customers who arrange for and
manage all aspects of the shipping process, we recognize revenue upon
shipment from our facilities. For product sales that include a
combination of equipment, services, or other multiple deliverables that
will be provided in the future, we defer recognition of the estimated fair
value of those future deliverables from product revenue until such
deliverables have been provided, or earned, in accordance with EITF
00-21. Shipping and handling costs that are billed to our
customers are classified as revenue, in accordance with Emerging Issues
Task Force Issue No. 00-10, “Accounting for Shipping and Handling Fees and
Costs” (“EITF 00-10).
|
·
|
Upfront
License Fees/Milestones
|
o
|
As
part of the Senko Distribution Agreement, we received an upfront license
fee upon execution of the arrangement, which, as noted previously, was not
separable under EITF 00-21. Accordingly, the license has been
combined with the development (milestones) element to form a single
accounting unit. This single element of $3,000,000 in fees
includes $1,500,000, which is potentially refundable. We have
recognized, and will continue to recognize, the non-contingent fees
allocated to this combined element as revenues as we complete each of the
performance obligations associated with the milestones component of this
combined deliverable. Note that the timing of when we have
recognized revenues to date does not correspond with the cash we received
upon achieving certain milestones. For example, the first such
milestone payment for $1,250,000 became payable to us when we filed a
commercialization application with the Japanese regulatory
authorities. However, we determined that the payment received
was not commensurate with the level of effort expended, particularly when
compared with other steps we believe are necessary to commercialize the
Thin Film product line in Japan. Accordingly, we did not
recognize the entire $1,250,000 received as revenues, but instead all but
$371,000 of this amount is classified as deferred
revenues. Approximately $371,000 ($10,000 in 2007, $152,000 in
2006, $51,000 in 2005 and $158,000 in 2004) has been recognized to date as
development revenues based on our estimates of the level of effort
expended for completed milestones as compared with the total level of
effort we expect to incur under the arrangement to successfully achieve
regulatory approval of the Thin Film product line in
Japan. These estimates were subject to judgment and there may
be changes to these estimates as we continue to seek regulatory
approval. In fact there can be no assurance that
commercialization in Japan will ever be achieved, as we have yet to
receive approval from the MHLW.
|
o
|
We
also received upfront fees as part of the Olympus arrangements (although,
unlike in the Senko agreement, these fees were
non-refundable). Specifically, in exchange for an upfront fee,
we granted the Joint Venture an exclusive, perpetual license to certain of
our intellectual property and agreed to perform additional development
activities. This upfront fee has been recorded in the liability
account entitled deferred revenues, related party, on our consolidated
balance sheet. Similar to the Senko agreement, we expect to
recognize revenues from the combined license/development accounting unit
as we perform our obligations under the agreements, as this represents our
final obligation underlying the combined accounting
unit. Specifically, we have recognized revenues from the
license/development accounting unit using a “proportional performance”
methodology, resulting in the de-recognition of amounts recorded in the
deferred revenues, related party, account as we complete various
milestones underlying the development services. Proportional
performance methodology was elected due to the nature of our development
obligations and efforts in support of the Joint Venture with Olympus,
including product development activities, and regulatory efforts to
support the commercialization of the JV products. The application of this
methodology uses the achievement of R&D milestones as outputs of value
to the JV. We received up-front, non-refundable payments in
connection with these development obligations, which we have broken down
into specific R&D milestones that are definable and substantive in
nature, and which will result in value to the JV when
achieved. Revenue will be recognized as the above mentioned
R&D milestones are completed. We established the R&D
milestones based upon our development obligations to the JV and the
specific R&D support activities to be performed to achieve these
obligations. Our R&D milestones consist of the following
primary performance categories: product development, regulatory
approvals, and generally associated pre-clinical and clinical
trials. Within each category are milestones that take
substantive effort to complete and are critical pieces of the overall
progress towards completion of the next generation product, which we are
obligated to support within the agreements entered into with
Olympus. To determine whether substantive effort was required
to achieve the milestones, we considered the external costs, required
personnel and relevant skill levels, the amount of time required to
complete each milestone, and the interdependent relationships between the
milestones, in that the benefits associated with the completion of one
milestone generally support and contribute to the achievement of the
next. Determination of the relative values assigned to each
milestone involved substantial judgment. The assignment process
was based on discussions with persons responsible for the development
process and the relative costs of completing each milestone. We
considered the costs of completing the milestones in allocating the
portion of the “deferred revenues, related party” account balance to each
milestone. Management believes that, while the costs incurred
in achieving the various milestones are subject to estimation, due to the
high correlation of such costs to outputs achieved, the use of external
contract research organization costs and internal labor costs as the basis
for the allocation process provides management the ability to accurately
and reasonably estimate such costs. The accounting policy
described above could result in revenues being recorded in an earlier
accounting period than had other judgments or assumptions been made by
us.
|
·
|
Government
Grants
|
o
|
We
are eligible to receive grants from the NIH related to our research on
adipose derived cell therapy to treat myocardial
infarctions. Revenues derived from reimbursement of direct
out-of-pocket expenses for research costs associated with grants are
recorded in compliance with EITF Issue No. 99-19, “Reporting Revenue
Gross as a Principal Versus Net as an Agent”, and EITF Issue No.
01-14, “Income Statement Characterization of Reimbursements Received for
“Out-of-Pocket” Expenses Incurred”. In accordance with the criteria
established by these EITF Issues, the Company records grant revenue for
the gross amount of the reimbursement. The costs associated with
these reimbursements are reflected as a component of research and
development expense in the consolidated statements of
operations. Additionally, research arrangements we have with
NIH, as well commercial enterprises such as Olympus and Senko, are
considered a key component of our central and ongoing
operations. Moreover, the government obtains rights under the
arrangement, in the same manner (but perhaps not to the same extent) as a
commercial customer that similarly contracts with us to perform research
activities. For instance, the government and any authorized
third parties may use our federally funded research and/or inventions
without payment of royalties to us. Accordingly, the inflows
from such arrangements are presented as revenues in the consolidated
statements of operations.
|
·
|
Company
assets and liabilities, including goodwill, are allocated to each
reporting unit for purposes of completing the goodwill impairment
test.
|
·
|
The
carrying value of each reporting unit – that is, the sum of all of the net
assets allocated to the reporting unit – is then compared to its fair
value.
|
·
|
If
the fair value of the reporting unit is lower than its carrying amount,
goodwill may be impaired – additional testing is
required.
|
·
|
The
asset will be employed in or the liability relates to the operations of a
reporting unit.
|
·
|
The
asset or liability will be considered in determining the fair value of the
reporting unit.
|
·
|
Under
FIN 46R, an entity is a VIE if it has insufficient equity to finance its
activities. We recognized that the initial cash contributed to
the Joint Venture formed by Olympus and Cytori ($30,000,000) would be
completely utilized by the first quarter of 2006. Moreover, it
was highly unlikely that the Joint Venture would be able to obtain the
necessary financing from third party lenders without additional
subordinated financial support – such as personal guarantees by one or
both of the Joint Venture stockholders. Accordingly, the Joint
Venture will require additional financial support from Olympus and Cytori
to finance its ongoing operations, indicating that the Joint Venture is a
VIE. We contributed $300,000 and $150,000 in the fourth quarter
of 2007 and first quarter of 2006, respectively, to fund the Joint
Venture’s ongoing operations.
|
·
|
Moreover,
Olympus has a contingent put option that would, in specified
circumstances, require Cytori to purchase Olympus’s interests in the Joint
Venture for a fixed amount of $22,000,000. Accordingly, Olympus
is protected in some circumstances from absorbing all expected losses in
the Joint Venture. Under FIN 46R, this means that Olympus may
not be an “at-risk” equity holder, although Olympus clearly has decision
rights over the operations of the Joint
Venture.
|
·
|
The
business operations of the Joint Venture will be most closely aligned to
those of Olympus (i.e., the manufacture of
devices).
|
·
|
Olympus
controls the Board of Directors, as well as the day-to-day operations of
the Joint Venture.
|
|
None
|
For
|
Withheld
|
Abstain
|
||||||||||
Ronald
D. Henriksen
|
14,560,685 | 57,038 | 2,275 | |||||||||
Christopher
J. Calhoun
|
14,564,614 | 34,608 | 20,775 | |||||||||
Marc
H. Hedrick, MD
|
14,605,954 | 11,970 | 2,075 | |||||||||
Richard
J. Hawkins
|
14,526,473 | 61,756 | 31,769 | |||||||||
Paul
W. Hawran
|
14,529,528 | 62,695 | 27,775 | |||||||||
E.
Carmack Holmes, MD
|
14,578,460 | 32,464 | 9,075 | |||||||||
David
M. Rickey
|
14,541,960 | 68,813 | 9,225 |
For
|
Against
|
Abstain
|
||||||||
14,558,299 | 26,114 | 35,585 |
Regenerative
Cell Technology
|
Corporate
|
Total
|
||||||||||
Manufacturing
|
20 | — | 20 | |||||||||
Research
& Development
|
61 | — | 61 | |||||||||
Sales
and Marketing
|
16 | — | 16 | |||||||||
General
& Administrative
|
— | 31 | 31 | |||||||||
Total
|
97 | 31 | 128 |
Exhibit
No.
|
Description
|
|
10.32
|
Common
Stock Purchase Agreement, dated August 7, 2008, by and between Cytori
Therapeutics, Inc. and Olympus Corporation (filed as Exhibit 10.32 to our
current report on Form 8-K filed on August 8, 2008 and incorporated by
reference herein)
|
|
10.32.1
|
Amendment
No. 1 to Common Stock Purchase Agreement, dated August 8, 2008, by and
between Cytori Therapeutics, Inc. and Olympus Corporation (filed as
Exhibit 10.32.1 to our current report on Form 8-K filed on August 14, 2008
and incorporated by reference herein)
|
|
10.33
|
Securities
Purchase Agreement, dated August 7, 2008, by and among Cytori
Therapeutics, Inc. and the Purchasers identified on the signature pages
thereto (filed as Exhibit 10.33 to our current report on Form 8-K filed on
August 8, 2008 and incorporated by reference herein)
|
|
10.34
|
Form
of Warrant to Purchase Common Stock issued on August 11, 2008 pursuant to
the Securities Purchase Agreement, dated August 7, 2008, by and among
Cytori Therapeutics, Inc. and the Purchasers identified on the signature
pages thereto (filed as Exhibit 10.34 to our current report on Form 8-K
filed on August 8, 2008 and incorporated by reference
herein)
|
|
10.35
|
Registration
Rights Agreement, dated August 7, 2008, by and among Cytori Therapeutics,
Inc. and the Purchasers identified on the signature pages thereto (filed
as Exhibit 10.35 to our current report on Form 8-K filed on August 8, 2008
and incorporated by reference herein)
|
|
31.1
|
Certification
of Principal Executive Officer Pursuant to Securities Exchange Act Rule
13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (filed herewith).
|
|
31.2
|
Certification
of Principal Financial Officer Pursuant to Securities Exchange Act Rule
13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (filed herewith).
|
|
32.1*
|
Certifications
Pursuant to 18 U.S.C. Section 1350/ Securities Exchange Act Rule
13a-14(b), as adopted pursuant to Section 906 of the Sarbanes - Oxley Act
of 2002 (filed herewith).
|
CYTORI
THERAPEUTICS, INC.
|
||
By:
|
/s/
Christopher J. Calhoun
|
|
Dated:
November 10, 2008
|
Christopher
J. Calhoun
|
|
Chief
Executive Officer
|
||
By:
|
/s/
Mark E. Saad
|
|
Dated:
November 10, 2008
|
Mark
E. Saad
|
|
Chief
Financial Officer
|
Date:
November 10, 2008
|
|
/s/
Christopher J. Calhoun
|
|
Christopher
J. Calhoun,
|
|
Chief
Executive Officer
|
Date:
November 10, 2008
|
|
/s/
Mark E. Saad
|
|
Mark
E. Saad
|
|
Chief
Financial Officer
|
1.
|
The
Form 10-Q report of Cytori Therapeutics, Inc. that this certification
accompanies fully complies with the requirements of Section 13(a) of
the Securities Exchange Act of
1934.
|
2.
|
The
information contained in the Form 10-Q report of Cytori Therapeutics, Inc.
that this certification accompanies fairly presents, in all material
respects, the financial condition and results of operations of Cytori
Therapeutics, Inc.
|
By:
|
/s/
Christopher J. Calhoun
|
|
Dated:
November 10, 2008
|
Christopher
J. Calhoun
|
|
Chief
Executive Officer
|
||
By:
|
/s/
Mark E. Saad
|
|
Dated:
November 10, 2008
|
Mark
E. Saad
|
|
Chief
Financial Officer
|