Neostem Inc. (NBS, Financial) filed Quarterly Report for the period ended 2010-03-31.
Neostem Inc. has a market cap of $143.88 million; its shares were traded at around $3.41 with and P/S ratio of 12.45.
The use of equity instruments to incentivize research staff totaled $143,600, an increase of $106,500 over the three months ended March 31, 2009. Research related to our VSEL TM technology increased operating expenses by $819,000. Our acquisition of Erye added $117,900 of research and development expense to our operating expenses. The balance of the increase in research and development expense is related to costs associated with our wound healing research.
Our cash used for operating activities in the three months ended March 31, 2010 totaled $2,581,800, which is the sum of (i) our net loss, adjusted for non-cash expenses totaling $2,822,700 which includes, principally, common stock, common stock options and common stock purchase warrants issued for services rendered in the amount of $2,055,100 and depreciation and amortization of $767,600; (ii) an increase in cash was provided from unearned revenue from advance payments from customers and licensees of $1,027,400, increases in accounts payable and accrued expenses of $1,813,400 and a reduction in accounts receivable of $210,000; (iii) cash used for prepaids and payments of other assets of $547,500 and increases in inventory of $4,595,400.
Under the License Agreement, SCTI agreed to engage in a diligent program to develop the VSEL technology. Certain license fees and royalties are to be paid to University of Louisville Research Foundation (“ULRF”) from SCTI, and SCTI is responsible for all payments for patent filings and related applications. Portions of the license may be converted to a non-exclusive license if SCTI does not diligently develop the VSEL™ technology or terminated entirely if SCTI chooses to not pay for the filing and maintenance of any patents thereunder. The License Agreement, which has an initial term of 20 years, calls for the following specific payments: (i) reimbursement of $29,000 for all expenses related to patent filing and prosecution incurred before the effective date (“Effective Date”) of the license agreement; (ii) a non-refundable prepayment of $20,000 creditable against the first $20,000 of patent expenses incurred after the Effective Date; (iii) a non-refundable license issue fee of $46,000; (iv) a non-refundable annual license maintenance fee of $10,000 upon issuance of the licensed patent in the United States; (v) a royalty of 4% on net sales; (vi) specified milestone payments; and (vii) specified payments in the event of sublicensing. Pursuant to a February 2009 amendment to the License Agreement the payments under (ii) and (iii) became due and were paid in March 2009. The License Agreement also contains certain provisions relating to "stacking," permitting SCTI to pay royalties to ULRF at a reduced rate in the event it is required to also pay royalties to third parties exceeding a specified threshold for other technology in furtherance of the exercise of its patent rights or the manufacture of products using the VSEL technology. Effective as of February 23, 2010, we entered into Amendment No. 3 to our SRA with the University of Louisville which amends the research plan and currently provides for additional payments during 2010 of up to $72,342 of which $68,725 was paid upon execution of Amendment No. 3. No later than April 30, 2010, the parties shall agree on any desired revisions to the research or research period under Amendment No. 3. This date was extended until May 15, 2010. On May 14, 2010, the parties executed Amendement No. 4 to the SRA extending the research period until December 31, 2011 and providing for total payments of $181,196 over the term of the SRA.
On March 15, 2010, NeoStem, Inc. (the “Company”) and RimAsia Capital Partners, L.P., a Cayman Islands exempted limited partnership (“RimAsia”) and an affiliate of the Company, made certain agreements with respect to outstanding warrants. RimAsia exercised its warrant to purchase 1,000,000 shares of the Company s common stock, par value $0.001 per share (“Common Stock”), exercisable at a per share exercise price of $1.75, which was issued to RimAsia in a private placement completed by the Company in September 2008 (the “September 2008 Warrant”) resulting in proceeds to the Company totaling $1,750,000. The condition for such exercise was that the Company would modify certain terms of RimAsia s warrant to purchase 4,000,000 shares of Common Stock, issued to RimAsia in a private placement completed by the Company in April 2009 (the “Series D Warrant”). RimAsia currently is subject to the terms of a lock-up agreement. The Series D Warrant was amended to provide for (i) a three (3) year extension of the Termination Date (as defined in the Series D Warrant) and (ii) an increase in the average closing price that triggers the Company s redemption option under the Series D Warrant from $3.50 to $5.00 (the Series D Warrant so amended and restated, the “Amended and Restated Warrant”). The expiration date of the September 2008 Warrant was September 1, 2013.
Erye is constructing a new pharmaceutical manufacturing facility and began transferring its operations in January 2010. The relocation will continue as the new production lines are completed and receive cGMP certification through 2011. The new facility is estimated to cost approximately $30 million, of which approximately $20 million has been paid for through March 31, 2010. To date, construction has been self-funded by Erye and EET, the holder of the minority joint venture interest in Erye. The remaining $10 million is expected to be funded from a combination of proceeds from the Company s February 2010 common stock offering in which it raised net proceeds of approximately $7.1 million, the proceeds from the exercise by RimAsia in March 2010 of a warrant to purchase 1,000,000 shares of Common Stock at a per share purchase price of $1.75 resulting in gross proceeds to the Company of $1,750,000 or a future capital raise (in each of the prior cases such funding would be in the form of a loan from the Company, an Erye line of credit and the reinvestment of certain dividends by Erye s shareholders). We have agreed for a period of three years to reinvest in Erye approximately 90% of the net earnings we would be entitled to receive under the Joint Venture Agreement by reason of our 51% interest in Erye.
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Neostem Inc. has a market cap of $143.88 million; its shares were traded at around $3.41 with and P/S ratio of 12.45.
Highlight of Business Operations:
For the three months ended March 31, 2010, total revenues were $15,833,200 compared to $45,100 for the three months ended March 31, 2009. Revenues for the three months ended March 31, 2010 were comprised of $15,771,300 of pharmaceutical product sales and $61,900 related to stem cell collections, license fees, royalties and other revenue. The pharmaceutical product sales represent sales generated by Erye. The stem cell revenues generated in the three months ended March 31, 2010 and 2009 were derived from a combination of revenues from the collection of autologous adult stem cells and license fees collected from collection centers in our collection center network. For the three months ended March 31, 2010, we earned $44,800 from the collection and storage of autologous adult stem cells and $13,900 of license fees. For the three months ended March 31, 2009, we earned $44,600 from the collection and storage of autologous adult stem cells and $500 from license fees. The increase in stem cell collection and storage revenue in 2010 compared to 2009 was due primarily to our efforts on recruiting clients into the existing network in the Northeast and Southern California. Cost of Sales for the three months ended March 31, 2010 is comprised of Cost of Goods sold of $10,826,300 related to the sale of our pharmaceutical products, and $25,400 of direct costs related to the cost of collecting autologous stem cells from clients.The use of equity instruments to incentivize research staff totaled $143,600, an increase of $106,500 over the three months ended March 31, 2009. Research related to our VSEL TM technology increased operating expenses by $819,000. Our acquisition of Erye added $117,900 of research and development expense to our operating expenses. The balance of the increase in research and development expense is related to costs associated with our wound healing research.
Our cash used for operating activities in the three months ended March 31, 2010 totaled $2,581,800, which is the sum of (i) our net loss, adjusted for non-cash expenses totaling $2,822,700 which includes, principally, common stock, common stock options and common stock purchase warrants issued for services rendered in the amount of $2,055,100 and depreciation and amortization of $767,600; (ii) an increase in cash was provided from unearned revenue from advance payments from customers and licensees of $1,027,400, increases in accounts payable and accrued expenses of $1,813,400 and a reduction in accounts receivable of $210,000; (iii) cash used for prepaids and payments of other assets of $547,500 and increases in inventory of $4,595,400.
Under the License Agreement, SCTI agreed to engage in a diligent program to develop the VSEL technology. Certain license fees and royalties are to be paid to University of Louisville Research Foundation (“ULRF”) from SCTI, and SCTI is responsible for all payments for patent filings and related applications. Portions of the license may be converted to a non-exclusive license if SCTI does not diligently develop the VSEL™ technology or terminated entirely if SCTI chooses to not pay for the filing and maintenance of any patents thereunder. The License Agreement, which has an initial term of 20 years, calls for the following specific payments: (i) reimbursement of $29,000 for all expenses related to patent filing and prosecution incurred before the effective date (“Effective Date”) of the license agreement; (ii) a non-refundable prepayment of $20,000 creditable against the first $20,000 of patent expenses incurred after the Effective Date; (iii) a non-refundable license issue fee of $46,000; (iv) a non-refundable annual license maintenance fee of $10,000 upon issuance of the licensed patent in the United States; (v) a royalty of 4% on net sales; (vi) specified milestone payments; and (vii) specified payments in the event of sublicensing. Pursuant to a February 2009 amendment to the License Agreement the payments under (ii) and (iii) became due and were paid in March 2009. The License Agreement also contains certain provisions relating to "stacking," permitting SCTI to pay royalties to ULRF at a reduced rate in the event it is required to also pay royalties to third parties exceeding a specified threshold for other technology in furtherance of the exercise of its patent rights or the manufacture of products using the VSEL technology. Effective as of February 23, 2010, we entered into Amendment No. 3 to our SRA with the University of Louisville which amends the research plan and currently provides for additional payments during 2010 of up to $72,342 of which $68,725 was paid upon execution of Amendment No. 3. No later than April 30, 2010, the parties shall agree on any desired revisions to the research or research period under Amendment No. 3. This date was extended until May 15, 2010. On May 14, 2010, the parties executed Amendement No. 4 to the SRA extending the research period until December 31, 2011 and providing for total payments of $181,196 over the term of the SRA.
On March 15, 2010, NeoStem, Inc. (the “Company”) and RimAsia Capital Partners, L.P., a Cayman Islands exempted limited partnership (“RimAsia”) and an affiliate of the Company, made certain agreements with respect to outstanding warrants. RimAsia exercised its warrant to purchase 1,000,000 shares of the Company s common stock, par value $0.001 per share (“Common Stock”), exercisable at a per share exercise price of $1.75, which was issued to RimAsia in a private placement completed by the Company in September 2008 (the “September 2008 Warrant”) resulting in proceeds to the Company totaling $1,750,000. The condition for such exercise was that the Company would modify certain terms of RimAsia s warrant to purchase 4,000,000 shares of Common Stock, issued to RimAsia in a private placement completed by the Company in April 2009 (the “Series D Warrant”). RimAsia currently is subject to the terms of a lock-up agreement. The Series D Warrant was amended to provide for (i) a three (3) year extension of the Termination Date (as defined in the Series D Warrant) and (ii) an increase in the average closing price that triggers the Company s redemption option under the Series D Warrant from $3.50 to $5.00 (the Series D Warrant so amended and restated, the “Amended and Restated Warrant”). The expiration date of the September 2008 Warrant was September 1, 2013.
Erye is constructing a new pharmaceutical manufacturing facility and began transferring its operations in January 2010. The relocation will continue as the new production lines are completed and receive cGMP certification through 2011. The new facility is estimated to cost approximately $30 million, of which approximately $20 million has been paid for through March 31, 2010. To date, construction has been self-funded by Erye and EET, the holder of the minority joint venture interest in Erye. The remaining $10 million is expected to be funded from a combination of proceeds from the Company s February 2010 common stock offering in which it raised net proceeds of approximately $7.1 million, the proceeds from the exercise by RimAsia in March 2010 of a warrant to purchase 1,000,000 shares of Common Stock at a per share purchase price of $1.75 resulting in gross proceeds to the Company of $1,750,000 or a future capital raise (in each of the prior cases such funding would be in the form of a loan from the Company, an Erye line of credit and the reinvestment of certain dividends by Erye s shareholders). We have agreed for a period of three years to reinvest in Erye approximately 90% of the net earnings we would be entitled to receive under the Joint Venture Agreement by reason of our 51% interest in Erye.
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