Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Asterias Biotherapeutics, Inc. (1572552) 10-Q published on Nov 09, 2018 at 4:01 pm
Reporting Period: Sep 29, 2018
During the three months ended September 30, 2018, the Company and Novo Nordisk A/S ("Novo Nordisk") entered into an option for Novo Nordisk or its designated U.S. affiliate to license, on a non-exclusive basis, certain intellectual property related to culturing pluripotent stem cells, such as hES cells, in suspension. Under the terms of the option, Asterias will receive a one-time upfront payment of $1.0 million, in exchange for a 24-month period to negotiate a non-exclusive license during which time Asterias has agreed to not grant any exclusive licenses inconsistent with the Novo Nordisk option. This option is considered a performance obligation as it provides NNRCSI with a material right that NNRCSI would not receive without entering into the contract. This $1.0 million has been included in deferred revenue on the Company's balance sheet at September 30, 2018. The Company will recognize revenue from the option agreement at the earlier of a) the date the Company and Novo Nordisk enter into a license agreement or b) if no license agreement is consummated, at the end of the 24-month period to negotiate a non-exclusive license.
On September 28, 2018, Asterias entered into a Sublease agreement for office and research facilities located at its current location in Fremont, California. This sublease initially consists of a total of 31,373 square feet of space of which 16,452 square feet of space is for the exclusive use of Asterias and 14,921 square feet of space that will be shared with the sublessor. On October 31, 2020, the sublease space will be reduced to 23,108 square feet of space, excluding the research space. The leased facilities are being used by Asterias as a combined office and research facility. Under the terms of the Sublease, the initial monthly rent for the subleased space is $67,814. As a result of the Sublease, the Company expects to lower its facilities related costs over the next several years by approximately $1.0 million annually. The Sublease expires on December 31, 2021. The Company may terminate the Sublease, with no penalty, prior to its expiration upon three months prior written notice.
The merger agreement has set the exchange ratio at 0.71 shares of BioTime common stock for every one share of Asterias common stock. Any changes in the market price of BioTime common stock or Asterias common stock before the closing of the merger will not change the number of shares Asterias securityholders will be entitled to receive pursuant to the merger agreement. Therefore, if before the closing of the merger the market price of BioTime common stock declines, or the market price of Asterias common stock increases, from their respective market prices on the date of the merger agreement, then Asterias stockholders could receive merger consideration with substantially lower value for their shares of Asterias capital stock than the parties had negotiated for in the establishment of the exchange ratio. Similarly, if before the closing of the merger the market price of BioTime common stock increases or the market price of Asterias common stock decreases from the their respective market prices on the date of the merger agreement, then Asterias stockholders could receive merger consideration with substantially more value for their shares of Asterias capital stock than the parties had negotiated for in the establishment of the exchange ratio.
Changes in the market prices of our common stock may result from a variety of factors that are beyond our control, including changes in our business, operations and prospects, capital requirements, regulatory considerations, governmental actions, and legal proceedings and developments. Market assessments of the benefits of the merger, the likelihood that the merger will be completed, and general and industry-specific market and economic conditions may also have an effect on the market price of our common stock. Changes in the market price of our common stock may also be caused by fluctuations and developments affecting domestic and global securities markets. Neither BioTime nor Asterias is permitted to terminate the merger agreement solely because of changes in the market price of either party’s respective common stock price.
The consummation of the proposed merger is subject to many contingencies, including, the approval of our shareholders, the approval of the BioTime shareholders, the absence of any event, change or other circumstances that could give rise to the termination of the merger agreement, and the effectiveness of the BioTime registration statement on Form S-4, among other conditions to consummation specified in the merger agreement. We cannot make any assurances that the proposed merger will be successfully completed. In the event that the proposed merger is not completed, we may be required to pay a termination fee, as well as certain costs relating to the merger, such as significant fees and expenses relating to legal, accounting, financial advisory and printing fees. In addition, if the merger is not completed, we may experience negative reactions from the financial markets. We also could be subject to litigation related to a failure to complete the merger or to enforce our rights under the merger agreement. If the merger is not consummated, we cannot assure you that the risks described will not materially affect our business, financial results and stock price.
The combined company may be required to raise additional funds sooner than currently planned. Additional financing may not be available to the combined company when needed, on favorable terms, or at all. To the extent that the combined company raises additional capital by issuing equity securities, such issuance may cause significant dilution to the combined company’s shareholders’ ownership and the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing arrangements, it may be necessary to grant licenses on terms that are not favorable to the combined company.