StemCells Inc. (STEM, Financial) filed Quarterly Report for the period ended 2011-03-31.
Stemcells Inc. has a market cap of $107.9 million; its shares were traded at around $0.785 with and P/S ratio of 75.6.
Management forms its best estimate on a quarterly basis, after considering actual sublease activity, reports from our broker/realtor about current and predicted real estate market conditions in Rhode Island, the likelihood of new subleases in the foreseeable future for the specific facility and significant changes in the actual or projected operating expenses of the property. We discount the projected net outflow over the term of the leasehold to arrive at the present value, and adjust the reserve to that figure. The estimated vacancy rate for the facility is an important assumption in determining the reserve because changes in this assumption have the greatest effect on estimated sublease income. In addition, the vacancy rate estimate is the variable most subject to change, while at the same time it involves the greatest judgment and uncertainty due to the absence of highly predictive information concerning the future of the local economy and future demand for specialized laboratory and office space in that area. The average vacancy rate of the facility over the last eight years (2003 through 2010) was approximately 74%, varying from 62% to 89%. As of March 31, 2011, based on current information available to management, the vacancy rate is projected to be approximately 69% for 2011, and approximately 70% from 2012 through the end of the lease. These estimates are based on actual occupancy as of March 31, 2011, predicted lead time for acquiring new subtenants, historical vacancy rates for the area, and assessments by our broker/realtor of future real estate market conditions. If the assumed vacancy rate for the remainder of the lease had been 5% higher or lower at March 31, 2011, then the reserve would have increased or decreased by approximately $74,000. Similarly, a 5% increase or decrease in the operating expenses for the facility would have increased or decreased the reserve by approximately $64,000, and a 5% increase or decrease in the assumed average rental charge per square foot would have decreased or increased the reserve by approximately $22,000. Management does not wait for specific events to change its estimate, but instead uses its best efforts to anticipate them on a quarterly basis. See
On April 1, 2009, as part of our acquisition of the SCS operations, we acquired certain operations near Melbourne, Australia. In order to reduce operating complexity and expenses, we made the decision to close our site in Australia and consolidate personnel and programs to our Cambridge, U.K. and Palo Alto, California sites. At June 30, 2009, we established a reserve of approximately $310,000 for the estimated costs to close down and exit our Australia operations. The reserve reflects the estimated cost to terminate our facility lease in Australia (which provided for an original termination date of December 31, 2010), employee termination benefits and other liabilities associated with the wind-down and relocation of our operations in Australia. As of December 31, 2010, the facility lease agreement has been terminated and our operations in Australia have been relocated to Cambridge, U.K. and Palo Alto, California. We recorded actual expenses, net of foreign currency translation changes of approximately $241,000 against this reserve. At December 31, 2010, we concluded that all costs related to the close down and exit of our Australia operations have been recorded against the reserve and we closed the reserve by crediting the remaining reserve balance of $69,000 to wind-down expense.
First quarter ended March 31, 2011 versus first quarter ended March 31, 2010. R&D expenses increased approximately $488,000, or 10%, in 2011 compared to 2010. This increase was primarily attributable to (i) an increase of approximately $188,000 in expenses related to our clinical trials, (ii) an increase of approximately $108,000 in expenses related to continuing preclinical studies of our HuCNS-SC cells for spinal cord injury, retinal disorders and other potential indications, and (iii) an increase of approximately $363,000 of facility costs allocated to R&D. These increased expenses were partially offset by a decrease in personnel expenses of approximately $80,000, primarily attributable to lower stock-based compensation expense and a decrease of approximately $91,000 in other expenses.
First quarter ended March 31, 2011 versus first quarter ended March 31, 2010. SG&A expenses decreased approximately $509,000, or 20%, in 2011 compared to 2010. This decrease was primarily attributable to (i) a decrease of approximately $210,000 in legal fees, primarily patent related litigation fees, (ii) a decrease of approximately $207,000 in operating expenses at our U.K. operations as we consolidated our activities at the site, (iii) a decrease of approximately $147,000 in personnel expenses primarily attributable to a decrease in stock-based compensation expense, and (iv) a decrease in other expenses of approximately $32,000. These decreased expenses were partially offset by an increase of approximately $87,000 in stock listing fees and expenses related to investor relations.
In 1999, in connection with exiting our former research facility in Rhode Island, we created a reserve for the estimated lease payments and operating expenses related to it. The reserve has been re-evaluated and adjusted based on assumptions relevant to real estate market conditions and the estimated time until we could either fully sublease, assign or sell our remaining interests in the property. The reserve was approximately $2,644,000 at December 31, 2010. Payments net of subtenant income of approximately $317,000 for the first quarter of 2011 were recorded against this reserve. At March 31, 2011, we re-evaluated the estimate and adjusted the reserve to approximately $2,402,000 by recording additional wind-down expenses of approximately $75,000. For the similar period in 2010, payments recorded against the reserve were approximately $315,000 in the first quarter of 2010, and to adjust the reserve, we recorded additional wind-down expenses of approximately $165,000. Expenses for this facility will fluctuate based on changes in tenant occupancy rates and other operating expenses related to the lease. Even though it is our intent to sublease, assign, sell, or otherwise divest ourselves of our interests in the facility at the earliest possible time, we cannot determine with certainty a fixed date by which such events will occur. In light of this uncertainty, based on estimates, we will periodically re-evaluate and adjust the reserve, as necessary. See Note 6 Wind-down expenses, in the notes to condensed consolidated financial statements of Part I, Item 1 of this Form 10-Q for further information.
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Stemcells Inc. has a market cap of $107.9 million; its shares were traded at around $0.785 with and P/S ratio of 75.6.
Highlight of Business Operations:
In January 2011, we sold 10,000,000 shares of our common stock to selected institutional investors at a price of $1.00 per share. We received net proceeds, after deducting offering expenses and fees, of approximately $9,400,000. The investors were also granted an option to purchase an additional 6,000,000 shares at $1.00 per share. The option was not exercised and expired on February 18, 2011. The shares were offered under our effective shelf registration statement filed with the SEC on June 25, 2008.Management forms its best estimate on a quarterly basis, after considering actual sublease activity, reports from our broker/realtor about current and predicted real estate market conditions in Rhode Island, the likelihood of new subleases in the foreseeable future for the specific facility and significant changes in the actual or projected operating expenses of the property. We discount the projected net outflow over the term of the leasehold to arrive at the present value, and adjust the reserve to that figure. The estimated vacancy rate for the facility is an important assumption in determining the reserve because changes in this assumption have the greatest effect on estimated sublease income. In addition, the vacancy rate estimate is the variable most subject to change, while at the same time it involves the greatest judgment and uncertainty due to the absence of highly predictive information concerning the future of the local economy and future demand for specialized laboratory and office space in that area. The average vacancy rate of the facility over the last eight years (2003 through 2010) was approximately 74%, varying from 62% to 89%. As of March 31, 2011, based on current information available to management, the vacancy rate is projected to be approximately 69% for 2011, and approximately 70% from 2012 through the end of the lease. These estimates are based on actual occupancy as of March 31, 2011, predicted lead time for acquiring new subtenants, historical vacancy rates for the area, and assessments by our broker/realtor of future real estate market conditions. If the assumed vacancy rate for the remainder of the lease had been 5% higher or lower at March 31, 2011, then the reserve would have increased or decreased by approximately $74,000. Similarly, a 5% increase or decrease in the operating expenses for the facility would have increased or decreased the reserve by approximately $64,000, and a 5% increase or decrease in the assumed average rental charge per square foot would have decreased or increased the reserve by approximately $22,000. Management does not wait for specific events to change its estimate, but instead uses its best efforts to anticipate them on a quarterly basis. See
On April 1, 2009, as part of our acquisition of the SCS operations, we acquired certain operations near Melbourne, Australia. In order to reduce operating complexity and expenses, we made the decision to close our site in Australia and consolidate personnel and programs to our Cambridge, U.K. and Palo Alto, California sites. At June 30, 2009, we established a reserve of approximately $310,000 for the estimated costs to close down and exit our Australia operations. The reserve reflects the estimated cost to terminate our facility lease in Australia (which provided for an original termination date of December 31, 2010), employee termination benefits and other liabilities associated with the wind-down and relocation of our operations in Australia. As of December 31, 2010, the facility lease agreement has been terminated and our operations in Australia have been relocated to Cambridge, U.K. and Palo Alto, California. We recorded actual expenses, net of foreign currency translation changes of approximately $241,000 against this reserve. At December 31, 2010, we concluded that all costs related to the close down and exit of our Australia operations have been recorded against the reserve and we closed the reserve by crediting the remaining reserve balance of $69,000 to wind-down expense.
First quarter ended March 31, 2011 versus first quarter ended March 31, 2010. R&D expenses increased approximately $488,000, or 10%, in 2011 compared to 2010. This increase was primarily attributable to (i) an increase of approximately $188,000 in expenses related to our clinical trials, (ii) an increase of approximately $108,000 in expenses related to continuing preclinical studies of our HuCNS-SC cells for spinal cord injury, retinal disorders and other potential indications, and (iii) an increase of approximately $363,000 of facility costs allocated to R&D. These increased expenses were partially offset by a decrease in personnel expenses of approximately $80,000, primarily attributable to lower stock-based compensation expense and a decrease of approximately $91,000 in other expenses.
First quarter ended March 31, 2011 versus first quarter ended March 31, 2010. SG&A expenses decreased approximately $509,000, or 20%, in 2011 compared to 2010. This decrease was primarily attributable to (i) a decrease of approximately $210,000 in legal fees, primarily patent related litigation fees, (ii) a decrease of approximately $207,000 in operating expenses at our U.K. operations as we consolidated our activities at the site, (iii) a decrease of approximately $147,000 in personnel expenses primarily attributable to a decrease in stock-based compensation expense, and (iv) a decrease in other expenses of approximately $32,000. These decreased expenses were partially offset by an increase of approximately $87,000 in stock listing fees and expenses related to investor relations.
In 1999, in connection with exiting our former research facility in Rhode Island, we created a reserve for the estimated lease payments and operating expenses related to it. The reserve has been re-evaluated and adjusted based on assumptions relevant to real estate market conditions and the estimated time until we could either fully sublease, assign or sell our remaining interests in the property. The reserve was approximately $2,644,000 at December 31, 2010. Payments net of subtenant income of approximately $317,000 for the first quarter of 2011 were recorded against this reserve. At March 31, 2011, we re-evaluated the estimate and adjusted the reserve to approximately $2,402,000 by recording additional wind-down expenses of approximately $75,000. For the similar period in 2010, payments recorded against the reserve were approximately $315,000 in the first quarter of 2010, and to adjust the reserve, we recorded additional wind-down expenses of approximately $165,000. Expenses for this facility will fluctuate based on changes in tenant occupancy rates and other operating expenses related to the lease. Even though it is our intent to sublease, assign, sell, or otherwise divest ourselves of our interests in the facility at the earliest possible time, we cannot determine with certainty a fixed date by which such events will occur. In light of this uncertainty, based on estimates, we will periodically re-evaluate and adjust the reserve, as necessary. See Note 6 Wind-down expenses, in the notes to condensed consolidated financial statements of Part I, Item 1 of this Form 10-Q for further information.
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