|
(5)
|
|
Includes 80,000 shares
that may be acquired upon the exercise of certain options and 25,931
shares that may be acquired upon the exercise of certain
warrants.
|
|
|
|
(6)
|
|
Includes 2,952 shares
held for the benefit of Dr. Waitz’s children, 80,000 shares that may be
acquired by Dr. Waitz upon the exercise of certain stock options, 38,379
shares that may be acquired by Dr. Waitz upon the exercise of certain
warrants (including 720 warrants held for the benefit of Dr. Waitz’s
children).
|
|
|
|
(7)
|
|
Includes 191,667
shares that may be acquired upon the exercise of certain stock options
that are presently exercisable or that may become exercisable within 60
days. Excludes 308,333 shares that may be acquired upon the exercise of
certain stock options that are not presently exercisable and that will not
become exercisable within 60 days.
|
|
|
|
(8)
|
|
Includes 80,000 shares
that may be acquired upon the exercise of certain options.
|
|
|
|
(9)
|
|
Includes 55,000 shares
that may be acquired upon the exercise of certain options. Excludes 15,000
shares that may be acquired upon the exercise of certain stock options
that are not presently exercisable and that will not become exercisable
within 60 days.
|
|
|
|
(10)
|
|
Includes 40,000 shares
that may be acquired upon the exercise of certain options. Excludes 15,000
shares that may be acquired upon the exercise of certain stock options
that are not presently exercisable and that will not become exercisable
within 60 days.
|
|
|
|
(11)
|
|
Includes 5,000 shares
that may be acquired upon the exercise of certain options that are
presently exercisable or that may become exercisable within 60 days.
Excludes 15,000 shares that may be acquired upon the exercise of certain
stock options that are not presently exercisable and that will not become
exercisable within 60 days.
|
|
|
|
(12)
|
|
Includes 11,458 shares
that may be acquired upon the exercise of certain stock options that are
presently exercisable or that may become exercisable within 60 days.
Excludes 263,542 shares that may be acquired upon the exercise of certain
stock options that are not presently exercisable and that will not become
exercisable within 60 days.
|
|
|
|
(13)
|
|
Includes 5,000 shares
that may be acquired upon the exercise of certain options that are
presently exercisable or that may become exercisable within 60 days.
Excludes 15,000 shares that may be acquired upon the exercise of certain
stock options that are not presently exercisable and that will not become
exercisable within 60 days.
|
|
|
|
(14)
|
|
Includes 2,500 shares
that may be acquired upon the exercise of certain options that are
presently exercisable or that may become exercisable within 60 days.
Excludes 17,500 shares that may be acquired upon the exercise of certain
stock options that are not presently exercisable and that will not become
exercisable within 60 days.
|
|
|
|
(15)
|
|
Includes 8,101,671
shares that may be acquired upon the exercise of certain options and
warrants. Excludes certain shares that may be acquired upon the exercise
of certain options that are not presently exercisable and will not become
exercisable within 60 days.
|
During April
2006, we entered into a Revolving Line of Credit Agreement (the “Credit
Agreement”) with Alfred D. Kingsley, Cyndel & Co., Inc., and George
Karfunkel under which we could borrow up to $500,000 for working capital
purposes at an interest rate of 10% per annum. In consideration for making the
line of credit available, we issued to the lenders a total of 99,999 common
shares.
In October
2007, the Credit Agreement was amended to increase the line of credit to
$1,000,000, to increase the interest rate to 12% per annum, and to extend the
maturity date to April 30, 2008. The loan payable to Cyndel & Co., Inc. was
paid in full, and Broadwood Partners, L.P. joined the lender group. In
consideration for extending the maturity date of the new line of credit, we
issued to the lenders a total of 200,000 common shares.
The Credit
Agreement was amended again during March and November 2008 when additional
lenders, including Greenway Partners, L.P., joined the lender group and the
amount of the line of credit was increased and the maturity date was extended. A
subsequent amendment to the Credit Agreement during April 2009 extended the
maturity date of the line of credit to December 1, 2009. Additional information
concerning the Credit Agreement can be found in “Management’s Discussion and
Analysis or Plan of Operation—Liquidity and Capital Resources” and Note 3 and
Note 10 to our Financial Statements.
On November
15, 2008, George Karfunkel exercised his option to convert his loan in the
amount of $250,000 and related interest accrued in the amount of $16,025 to
BioTime common shares in accordance with the terms of the Credit
Agreement.
As of June
30, 2009, we were obligated on loans in the amount of $1,025,000 from Broadwood
Partners, L.P., $250,000 from Alfred D. Kingsley, $204,154 from Greenway
Partners, L.P., $100,000 from Greenbelt Corp., and $500,000 from George
Karfunkel. We made cash payments for interest in the amounts of $44,325 to
Broadwood Partners, L.P. and $11,425 to Alfred D. Kingsley on loans made under
the Credit Agreement during 2008. Interest accrued for Broadwood Partners, L.P.,
Alfred D. Kingsley, and Greenway Partners, L.P. as of December 31, 2008 was
$8,250, $20,000, and $19,183, respectively, which became payable on April 15,
2009, and which has since been paid in full.
Under the
Credit Agreement, we issued common shares to lenders who agreed to provide loans
and to extend the maturity date of their outstanding loans. Since January 1,
2007, we have issued 230,348 common shares to Broadwood Partners, L.P., 117,243
common shares to Alfred D. Kingsley, 77,405 common shares to Greenway Partners,
L.P., 6,144 common shares to Greenbelt Corp., and 396,502 common shares to
George Karfunkel under the Credit Agreement.
During
August 2009 we completed an exchange offer with the lenders under our Credit
Agreement, through which we issued 1,989,515 common shares and 100,482 common
share purchase warrants, and we paid $294,351 in interest, to lenders in
exchange for $3,349.259 of Credit Agreement promissory notes. The warrants
issued in the exchange offer are exercisable at a price of $2.00 per share,
subject to adjustment under the terms of a warrant agreement governing the
warrants, and will expire at 5:00 p.m., New York time, on October 31, 2010. See
Note 10 to Consolidated Financial Statements for additional information about
the exchange offer.
The
following table shows the number of common shares and warrants issued to certain
shareholders in exchange for their line of credit promissory notes.
|
|
|
Number
of
|
|
|
|
|
|
Amount of Notes
|
|
Name
|
|
Shares
|
|
Number of Warrants
|
|
Exchanged
|
|
Alfred D. Kingsley
|
|
166,667
|
|
|
7,500
|
|
|
|
$
|
250,000
|
|
|
Greenbelt
Corp.
|
|
57,143
|
|
|
3,000
|
|
|
|
$
|
100,000
|
|
|
Greenway Partners, L.P.
|
|
136,103
|
|
|
6,125
|
|
|
|
$
|
204,167
|
|
|
Broadwood
Partners, L.P.
|
|
638,096
|
|
|
30,750
|
|
|
|
$
|
1,025,000
|
|
|
George Karfunkel
|
|
285,715
|
|
|
15,000
|
|
|
|
$
|
500,000
|
|
15
The
following table shows the amount of interest we paid on the promissory notes
tendered in the exchange offer by certain shareholders: We paid each tendering
note holder all interest accrued plus the amount of interest that would have
accrued had the note holder held their note to maturity.
|
Name
|
|
Interest Received
|
|
Alfred D. Kingsley
|
|
|
$
|
18,833.33
|
|
|
Greenbelt
Corp.
|
|
|
$
|
7,533.33
|
|
|
Greenway Partners, L.P.
|
|
|
$
|
15,379.60
|
|
|
Broadwood
Partners, L.P.
|
|
|
$
|
77,216.67
|
|
|
George Karfunkel
|
|
|
$
|
49,833.33
|
|
During 2008,
we issued a warrant to purchase 100,000 of our common shares at an exercise
price of $0.68 per share, expiring July 30, 2013, to the International Longevity
Center-USA, a non-profit institution for which Robert M. Butler, M.D., serves as
President, Chief Executive Officer, and a member of the Board of
Directors.
During May
and July 2009, we sold 2,200,000 common shares and 2,200,000 stock purchase
warrants to Broadwood Partners, L.P. for $4,000,000, and we concurrently sold a
like number of shares and warrants at the same price to George Karfunkel. The
warrants are on substantially the same terms as our publicly traded warrants and
entitle Broadwood Partners and the other investor to purchase common shares at
an exercise price of $2.00 per share. The warrants will expire on October 31,
2010 and may not be exercised after that date. We have agreed to file a
registration statement to register the warrants and shares issuable upon the
exercise of the warrants for sale under the Securities Act, subject to certain
limitations. We have also agreed to file a registration statement to register
the common shares, or to permit the investors to include the common shares in
any future registration statements that we may file, after May 15, 2010, subject
to certain limitations.
Approval by the Board of Directors and
Audit Committee
The
transactions described above have been approved by the Board. The Audit
Committee approved our agreement with Greenbelt for the 12 months ended March
31, 2008, and approved the April 2006 Credit Agreement. Following approval by
the Audit Committee, the Board approved the transactions. However, we did not
have a sufficient number of independent directors to serve on our Audit
Committee from October 2007 until August 2009, and during that time period all
transactions between us and our officers, directors, and shareholders who
beneficially own 5% or more of our outstanding common shares were reviewed
directly by the Board, and the Board determines whether to approve or withhold
approval of each transaction. The Board applied such criteria as it determined
to be appropriate in connection with its evaluation of each proposed transaction
on a transaction by transaction basis, and did not have any written guidelines,
other than our Code of Ethics, governing the Board’s exercise of its
discretion.
During
August 2009, we reconstituted our Audit Committee with independent directors.
The Audit Committee will review and determine whether to approve all future
proposed transactions between us and our officers, directors, and shareholders
who beneficially own 5% or more of our outstanding common shares. The Audit
Committee will report its decision and any related recommendation to the Board
of Directors with respect to the proposed transaction, as required by the Audit
Committee charter.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires our directors and executive officers and persons who own more than ten
percent (10%) of a registered class of our equity securities to file with the
SEC initial reports of ownership and reports of changes in ownership of common
shares and other BioTime equity securities. Officers, directors and greater than
ten percent beneficial owners are required by SEC regulations to furnish us with
copies of all reports they file under Section 16(a).
To our
knowledge, based solely on our review of the copies of such reports furnished to
us, all Section 16(a) filing requirements applicable to our officers, directors,
and greater than ten percent beneficial owners were complied with during the
fiscal year ended December 31, 2008, except that a total of twelve Forms 4 filed
on behalf of Alfred D. Kingsley (three late filings), Gary K. Duberstein (three
late filings), Greenbelt Corp. (two late filings), Greenway Partners, LP (one
late filing), Broadwood Partners, LP (two late filings), and Valeta Gregg (one
late filing) were filed late. There were no known failures to file any required
reports.
16
AMENDMENT OF ARTICLES OF
INCORPORATION TO INCREASE AUTHORIZED
NUMBER OF COMMON SHARES
The Board of
Directors has approved an amendment to our Articles of Incorporation to increase
the number of authorized common shares from 50,000,000 to 75,000,000. The
purpose of this amendment is to give us the flexibility to raise additional
capital through the issuance of additional shares, and to obtain and maintain
the services of consultants by issuing warrants to purchase common shares.
Common shares could also be issued in connection with the acquisition of another
business or business assets or technology.
There are
presently 32,614,563 common shares issued and outstanding. An additional
12,972,034 common shares are reserved for issuance under outstanding warrants,
1,604,168 common shares are reserved for issuance under our 2002 Stock Option
Plan, 1,808,832 common shares are reserved for issuance under the 2007 Amendment
to our 2002 Stock Option Plan, and 250,000 common shares are reserved for
issuance upon the exercise of options issued outside of our 2002 Stock Option
Plan. As a result, we only have 17,385,437 authorized but unissued common
shares, of which 16,635,034 have now been reserved for issuance under
outstanding warrants and options, leaving only 750,403 authorized common shares
still available. The Board of Directors believes that this amount is
insufficient for our future financing needs.
Although we
have no present plan, arrangement, or commitment to issue or sell any common
shares for cash or in connection with the acquisition of any business, assets,
or technology, the Board of Directors believes that it is in the best interest
of BioTime and its shareholders to have a sufficient number of authorized but
unissued shares available for issuance in the future for such purposes or other
opportunities that may come along. It is likely that the sale of common shares
will be the principal means by which we will raise additional capital until such
time as we are able to generate earnings sufficient to finance our
operations.
Our
shareholders last approved an amendment increasing the authorized number of
common shares from 40,000,000 to 50,000,000 in July 2006.
The approval
of the amendment of our Articles of Incorporation requires the affirmative vote
of the holders of a majority of the issued and outstanding common shares. A copy
of the amendment is attached to this proxy statement as Exhibit A.
The Board of Directors Recommends A
Vote “FOR” the
Approval of the Amendment to the Articles of Incorporation
AMENDMENT OF 2002 STOCK OPTION
PLAN
We are
asking the shareholders to approve two amendments to our 2002 Stock Option Plan
(the “2002 Plan”) that increase the number of shares available under the 2002
Plan. If the amendments are approved, an additional 4,000,000 common shares will
be available for sale or the grant of stock options under the 2002 Plan.
Approval of the amendments requires the affirmative vote of a majority of the
shares present and voting on the amendments at the Meeting, provided that the
affirmative vote cast constitutes a majority of a quorum. Unless otherwise
directed by the shareholders, proxies will be voted
FOR
approval of the
amendments.
The Board of Directors Recommends A
Vote “FOR” the
Approval of the Amendments to the 2002 Plan
Reasons for the
Amendments
Stock
options are an important part of employee and director compensation packages.
The Board strongly believes that our ability to attract and retain the services
of employees, consultants, and directors depends in great measure upon our
ability to provide the kind of incentives that are derived from the ownership of
stock and stock options and that are offered by other pharmaceutical development
and bio-technology companies. This is especially true for us since the salaries
we pay our employees are, in many cases, lower than the compensation packages
offered by competing companies. We believe that we will be placed at a serious
competitive disadvantage in attracting and retaining capable employees,
consultants, and directors at a critical time in our corporate development,
unless the amendments to the Plan are approved by the shareholders.
17
Under the
2002 Plan, we were authorized to grant options to purchase a total of 2,000,000
common shares. Because options to purchase nearly all 2,000,000 shares had been
granted, during August 2007 the Board approved an amendment to the Plan so that
we would have 2,000,000 additional shares available for the grant of options
(the “2007 Amendment”). A copy of the 2007 Amendment is attached to this proxy
statement as Appendix B-1. Most of these additional options were needed in
October 2007 when we hired Dr. Michael D. West as our new Chief Executive
Officer, and Robert Peabody as our Senior Vice President and Chief Operating
Officer. Under the terms of their employment agreements, we granted 1,500,000
options to Dr. West and 500,000 options to Mr. Peabody. These options will vest
in monthly installments over a period of five years from the date of grant,
provided that they remain our employees. A portion of those options were
available under the Plan prior to the 2007 Amendment, and the balance were
granted after the 2007 Amendment was approved by the Board, but subject to the
condition that our shareholders vote to approve the 2007 Amendment. Because a
portion of their stock option grant was subject to shareholder approval, we also
granted Dr. West and Mr. Peabody a number of SARs equal to the number of options
that remained subject to shareholder approval, with the condition that the SARs
would expire if our shareholders approved the 2007 Amendment.
Unlike the
stock options that entitle the employee to purchase common shares, if an
employee exercises SARs he will be entitled to receive a payment of cash. The
amount of cash per SAR share exercised will be equal to the amount by which the
fair market value of a BioTime common share on the date of exercise exceeds the
$0.50 per share exercise price of the SAR. The fair market value of a BioTime
common share shall be determined by the Board of Directors in the manner
provided in the 2002 Plan. Our Board believes that the elimination of the SARs
through the approval of the 2007 Amendment by shareholders would be advantageous
to us and our shareholders because it would eliminate the possibility of our
having to settle SAR exercises with cash payments. By way of example, based on
the closing price of the common shares on the OTCBB on June 30, 2009, if the
SARs that were vested on that date had been exercised, we would be obligated to
pay $988,407 on account of the exercise of the SARs.
As a result
of the grant of options to Dr. West, Mr. Peabody, and Walter Funk, subsequent
option grants to our non-employee directors, and subsequent grants of options to
an employee and certain consultants, only 191,168 common shares remained
available for the grant of new options under the 2007 Amendment to the Plan as
of August 11, 2009. The 2007 Amendment has not yet been approved by
shareholders. Our Board of Directors determined that that is not a sufficient
number of shares to fulfill the purpose of the Plan, namely to facilitate the
hiring and retention of employees and consultants, and to provide incentive
compensation to non-employee directors. Accordingly, during August 2009 the
Board approved an additional amendment to the Plan (the “2009 Amendment”),
subject to shareholder approval. The 2009 Amendment makes an additional
2,000,000 common shares available for sale or for the grant of options under the
Plan. A copy of the 2009 Amendment is attached to this proxy statement as
Appendix B-2.
The Board
believes that the additional shares under the 2007 Amendment and 2009 Amendment
will fulfill our needs for the near future. Any future increase in the number of
shares under the 2002 Plan would be submitted to the shareholders for
approval.
Options to
purchase a total of 1,808,832 common shares have already been granted by the
Board under the 2007 Amendment, subject to approval of the 2007 Amendment by our
shareholders at the Meeting. No options have as yet been granted under the 2009
Amendment. As of August 28, 2009, the 4,000,000 common shares that would be
added to the 2002 Plan by the 2007 Amendment and 2009 Amendment had a market
value of $13,649,000, based on the closing price of our common shares on the
OTCBB.
18
The
following table presents certain information about the options granted to our
executive officers, directors, and employees as a group, subject to shareholder
approval of the 2007 Amendment:
|
Name
|
|
Title
|
|
Number of Option
Shares
|
|
Michael D. West
|
|
Chief Executive Officer/Director
|
|
|
976,523
|
|
|
Robert
Peabody
|
|
Senior VP/Chief
Operating Officer
|
|
|
325,507
|
|
|
Walter Funk
|
|
Vice President
|
|
|
275,000
|
|
|
James
Murai
|
|
Director of Cell
Biology
|
|
|
130,000
|
|
|
Valeta A. Gregg
|
|
Director
|
|
|
50,000
|
|
|
Robert N.
Butler
|
|
Director
|
|
|
55,000
|
|
|
Alfred D. Kingsley
|
|
Director
|
|
|
50,000
|
|
|
Neal C.
Bradsher
|
|
Director
|
|
|
20,000
|
|
|
Arnold I. Burns
|
|
Director
|
|
|
20,000
|
|
|
Abraham E.
Cohen
|
|
Director
|
|
|
20,000
|
|
|
Pedro Lichtinger
|
|
Director
|
|
|
20,000
|
|
|
All officers as
a group
|
|
|
|
|
1,577,030
|
|
|
All non-employee directors as a group
|
|
|
|
|
235,000
|
|
|
All employees as
a group
|
|
|
|
|
1,707,030
|
|
Summary of the 2002 Plan
The
following summary of the 2002 Plan is qualified in all respects by reference to
the full text of the 2002 Plan, a copy of which is available upon request from
our corporate Secretary.
Administration of the 2002
Plan
The 2002
Plan is administered by the Board, which determines which of our officers,
directors, employees, consultants, and independent contractors are to be granted
options, the number of shares subject to the options granted, the exercise price
of the options, and certain other terms and conditions of the options. As
permitted by the 2002 Plan, the Board has delegated administration of the 2002
Plan, including the power to grant options to persons who are not directors, to
the Compensation Committee.
No options
may be granted under the 2002 Plan more than ten years after the date the 2002
Plan was adopted by the Board, and no options granted under the 2002 Plan may be
exercised after the expiration of ten years from the date of grant.
Options Granted
The
following table shows certain information concerning the options and warrants
outstanding and available for issuance under all of our compensation plans and
agreements as of August 21, 2009. The equity compensation plans approved by
shareholders include only the 2002 Plan and our 1992 Stock Option Plan.
Outstanding options under the 2007 Amendment and the 2009 Amendment to the 2002
Plan to be approved by our shareholders at the Meeting are not included in the
table.
|
|
|
Number of
Shares to be
|
|
Weighted
Average
|
|
Number of
Shares Remaining
|
|
|
|
Issued Upon
Exercise
|
|
Exercise
Price of the
|
|
Available
for Future Issuance
|
|
|
|
of
Outstanding Options,
|
|
Outstanding
Options,
|
|
Under
Equity Compensation
|
|
Plan Category
|
|
Warrants, and
Rights
|
|
Warrants, and
Rights
|
|
Plans
|
|
Equity Compensation Plans
|
|
|
|
|
|
|
|
Approved by Shareholders
|
|
1,604,168
|
|
$0.85
|
|
—
|
|
Equity
Compensation Plans
|
|
|
|
|
|
|
|
Not Approved By Shareholders*
|
|
974,167
|
|
$1.72
|
|
—
|
____________________
|
*
|
|
This amount includes 321,667
warrants and 250,000 stock options granted to certain consultants for
providing services to us, and 402,500 warrants granted to certain
investment bankers for arranging a portion of the loans under our
Revolving Line of Credit Agreement.
|
19
Terms of the Options
Options
granted under the 2002 Plan may be either “incentive stock options” within the
meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the
“Code”), or non-qualified stock options. Incentive stock options may be granted
only to our employees and employees of our subsidiaries. The exercise price of
incentive stock options granted under the 2002 Plan must be equal to the fair
market of BioTime common shares on the date the option is granted. In the case
of an optionee who, at the time of grant, owns more than 10% of the combined
voting power of all classes of BioTime stock, the exercise price of any
incentive stock option must be at least 110% of the fair market value of the
common shares on the grant date, and the term of the option may be no longer
than five years. The aggregate fair market value of the common shares
(determined as of the grant date of the option) with respect to which incentive
stock options become exercisable for the first time by an optionee in any
calendar year may not exceed $100,000.
The options’
exercise price may be payable in cash or in common shares having a fair market
value equal to the exercise price, or in a combination of cash and common
shares.
Options
granted under the 2002 Plan are nontransferable (except by will or the laws of
descent and distribution) and may vest in annual or other installments.
Incentive stock options may be exercised only during employment or within three
months after termination of such employment, subject to certain exceptions in
the event of the death or disability of the optionee.
Certain Adjustments to Number of
Shares and Exercise Price
The number
of common shares covered by the 2002 Plan, and the number of common shares and
exercise price per share of each outstanding option, shall be proportionately
adjusted for any increase or decrease in the number of issued and outstanding
common shares resulting from a subdivision or consolidation of shares or the
payment of a stock dividend, or any other increase or decrease in the number of
issued and outstanding common shares effected without receipt of consideration
by us.
Corporate Reorganization or
Liquidation
In the event
of the dissolution or liquidation of BioTime, or in the event of a
reorganization, merger, or consolidation of BioTime as a result of which the
common shares are changed into or exchanged for cash or property or securities
not of BioTime’s issue, or upon a sale of substantially all the property of
BioTime to, or the acquisition of stock representing more than eighty percent
80% of the voting power of the stock of BioTime then outstanding by, another
corporation or person, the 2002 Plan and all options granted under the 2002 Plan
shall terminate, unless provision can be made in writing in connection with such
transaction for either the continuance of the 2002 Plan and/or for the
assumption of options granted under the 2002 Plan, or the substitution for such
options by options covering the stock of a successor corporation, or a parent or
a subsidiary of a successor corporation, with appropriate adjustments as to the
number and kind of shares and prices.
Restricted Stock Sales
In lieu of
granting options, we may enter into restricted stock purchase agreements with
employees under which they may purchase common shares subject to certain vesting
and repurchase restrictions. We have the right to repurchase unvested shares at
the shareholder’s cost upon the occurrence of specified events, such as
termination of employment. The price at which shares may be sold under
restricted stock purchase agreements will be not less than 85% of fair market
value, or 100% of fair market value in the case of stock sold to a person who
owns capital stock representing more than 10% of the combined voting power of
all classes of BioTime’s stock. We may permit employees or consultants, but not
executive officers or directors, who purchase stock under restricted stock
purchase agreements to pay for their shares by delivering a promissory note that
is secured by a pledge of their shares.
20
Federal Income Tax Consequence of
Participation in the 2002 Plan
The
following discussion summarizes certain federal income tax consequences of
participation in the 2002 Plan. Although we believe the following statements are
correct based on existing provisions of the Code and the regulations thereunder,
the Code or regulations may be amended from time to time, and future judicial
interpretations may affect the veracity of the discussion.
Incentive Stock
Options
Under
Section 422(a) of the Code, the grant and exercise of an incentive stock option
pursuant to the 2002 Plan is entitled to the benefits of Section 421(a) of the
Code. Under Section 421(a), an optionee will not be required to recognize income
at the time the option is granted or at the time the option is exercised, except
to the extent that the optionee is subject to the alternative minimum tax. If
the applicable holding periods described below are met, when the shares of stock
received upon exercise of an incentive stock option are sold or otherwise
disposed of in a taxable transaction, the option holder will recognize
compensation income (taxed as a long term capital gain), for the taxable year in
which disposition occurs, in an amount equal to the excess of the fair market
value of the common shares at the time of such disposition over the amount paid
for the shares.
We will not
be entitled to any business expense deduction with respect to the grant or
exercise of an incentive stock option, except in connection with a disqualifying
disposition as discussed below. No portion of the amount received by the
optionee upon the sale of common shares acquired through the exercise of an
incentive stock option will be subject to withholding for federal income taxes,
or be subject to FICA or state disability taxes, except in connection with a
disqualifying disposition.
In order for
a participant to receive the favorable tax treatment provided in Section 421(a)
of the Code, Section 422 requires that the participant make no disposition of
the option shares within two years from the date the option was granted, nor
within one year from the date such option was exercised and the shares were
transferred to the participant. In addition, the participant must, with certain
exceptions for death or disability, be an employee of BioTime (or of a parent or
subsidiary of BioTime, as defined in Section 424(e) and (f) of the Code, or a
corporation, or parent or subsidiary thereof, issuing or assuming the option in
a merger or other corporate reorganization transaction to which Section 424(a)
of the Code applies) at all times within the period beginning on the date of the
grant of the option and ending on a date within three months before the date of
exercise. In the event of the death of the participant, the holding periods will
not apply to a disposition of the option or option shares by the participant’s
estate or by persons receiving the option or shares under the participant’s will
or by intestate succession.
If a
participant disposes of stock acquired pursuant to the exercise of an incentive
stock option before the expiration of the holding period requirements set forth
above, the participant will realize, at the time of the disposition, ordinary
income to the extent the fair market value of the common shares on the date the
shares were purchased exceeded the purchase price. The difference between the
fair market value of the common shares on the date the shares were purchased and
the amount realized on disposition is treated as long-term or short-term capital
gain or loss, depending on the participant’s holding period of the common
shares. The amount treated as ordinary income may be subject to the income tax
withholding requirements of the Code and FICA withholding requirements. The
participant will be required to reimburse us, either directly or through payroll
deduction, for all withholding taxes that we are required to pay on behalf of
the participant. At the time of the disposition, we will be allowed a
corresponding business expense deduction under Section 162 of the Code to the
extent of the amount of the participant’s ordinary income. We may adopt
procedures to assist us in identifying such deductions, and may require a
participant to notify us of his or her intention to dispose of any such
shares.
Other Options
The 2002
Plan also permits us to grant options that do not qualify as incentive stock
options. These “non-qualified” stock options may be granted to employees or
non-employees, such as members of our scientific advisory board and other
persons performing consulting or professional services for us. A 2002 Plan
participant who receives a non-qualified option will not be taxed at the time of
receipt of the option, provided that the option does not have an ascertainable
value or an exercise price below fair market value of the common shares on the
date of grant, but the participant will be taxed at the time the option is
exercised.
21
The amount
of taxable income that will be earned upon exercise of a non-qualified option
will be the difference between the fair market value of the common shares on the
date of the exercise and the exercise price of the option. We will be allowed a
business expense deduction to the extent of the amount of the participant’s
taxable income recognized upon the exercise of a non-qualified option. Because
the option holder is subject to tax immediately upon exercise of the option,
there are no applicable holding periods for the stock. The option holder’s tax
basis in the common shares purchased through the exercise of a non-qualified
option will be equal to the exercise price paid for the stock plus the amount of
taxable gain recognized upon the exercise of the option. The option holder may
be subject to additional tax on sale of the stock if the price realized exceeds
his or her tax basis.
Restricted Stock Purchase
Agreements
An employee
or consultant who purchases shares under a restricted stock purchase agreement
at fair market value will not incur any income tax at the time of the purchase.
Instead, the employee or consultant will incur income tax when the shares are
sold in a taxable transaction. The tax incurred will be either a long-term if
the shares have been held for at least one year, or a short-term capital gain if
the shares are sold before the expiration of the one year holding period.
Employees who purchase shares under restricted stock purchase agreements rather
than through the exercise of incentive stock options will not be subject to the
alternative minimum tax as a result of the purchase of the shares.
ERISA
The 2002
Plan is not subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended, and is not qualified under Code Section
401(a).
RATIFICATION OF THE SELECTION OF
OUR INDEPENDENT AUDITORS
The Board
has selected Rothstein, Kass & Company, P.C. (“RKCO”) as our auditors. The
Board proposes and recommends that the shareholders ratify the selection of the
firm of RKCO to serve as our independent auditors for the fiscal year ending
December 31, 2009. RKCO has served as our independent auditors since February
2007. Approval of the selection of RKCO to serve as our auditors requires the
affirmative vote of a majority of the shares present and voting on the matter at
the Meeting, provided that the affirmative vote cast constitutes a majority of a
quorum. Unless otherwise directed by the shareholders, proxies will be voted FOR
approval of the selection of RKCO to audit our consolidated financial
statements.
The Board of Directors Recommends a
Vote “FOR” Ratification of the Selection of
Rothstein, Kass & Company,
P.C. as Our Independent Auditors
We expect
that a representative of RKCO will attend the Meeting, and will have an
opportunity to make a statement if he or she so desires and may respond to
appropriate questions from shareholders.
RKCO audited
our annual financial statements for the fiscal years ended December 31, 2007 and
December 31, 2008.
Audit Fees
RKCO billed
us $95,000 in 2007 and $102,500 in 2008 for the audit of our annual financial
statements and for the review of our financial statements included in our
quarterly reports on Form 10-QSB and Form 10-Q.
Audit-Related Fees
BDO Seidman,
LLP (“BDO”), our previous independent auditing firm, billed us $20,466 for
audit-related fees during the fiscal year ended December 31 2007. These fees
were incurred in connection with the reissuance of BDO’s report on our fiscal
year 2005 financial statements in conjunction with the filing of our 2006
10-KSB. There were no other audit-related fees charged to us by RKCO during the
fiscal years ended December 31, 2007 and 2008.
Tax Fees
RKCO billed
us $6,000 and $6,500, respectively, for review and preparation of U.S. federal,
state, and local tax returns during the fiscal years ended December 31, 2007 and
December 31, 2008, respectively.
22
Other Fees
There were
no other fees charged to us by RKCO during the fiscal years ended December 31,
2007 and 2008.
The prior
approval of the Audit Committee is required for the engagement of our auditors
to perform any non-audit services for us. Other than de minimis services
incidental to audit services, non-audit services shall generally be limited to
tax services such as advice and planning and financial due diligence services.
All fees for such non-audit services must be approved by the Audit Committee,
except to the extent otherwise permitted by applicable SEC
regulations.
We first
engaged RKCO as our auditors on February 15, 2007 to audit our financial
statements for the year ended December 31, 2006, and on the same date we
dismissed BDO as our independent auditors. The dismissal of BDO and the
engagement of RKCO were approved by our Audit Committee.
Prior to
engaging RKCO, we did not consult with them regarding the application of
accounting principles to any specified transaction, either completed or
proposed, or with respect to the kind of opinion that might be rendered on our
financial statements, or with respect to any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure.
During the
years ended December 31, 2004 and 2005, BDO’s reports on our financial
statements did not contain an adverse opinion or disclaimer of opinion, and were
not qualified or modified as to uncertainty, audit scope or accounting
principles. During the years ended December 31, 2004 and 2005, and the
subsequent period up to February 15, 2007, there were no disagreements between
us and BDO on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which if not resolved to
the satisfaction of BDO would have caused them to make a reference to the
subject matter of the disagreement in connection with their report. In addition,
during the years ended December 31, 2004 and 2005, and the subsequent period up
to February 15, 2007, BDO did not advise us that (a) our internal controls
necessary to develop reliable financial statements do not exist, or that (b) the
information had come to their attention that led them to no longer be able to
rely on management’s representations or that made them unwilling to be
associated with the financial statements prepared by management, or that (c)
there was a need to expand the scope of the audit, or that information had come
to their attention during that time period that would or if further investigated
might (i) have materially impacted the fairness or reliability of a previously
issued audit report or the underlying financial statements, or the financial
statements issued or to be issued covering the fiscal periods subsequent to the
date of the most recent financial statements covered by an audit report
(including information that might have precluded the issuance of an unqualified
audit report).
PROPOSALS OF
SHAREHOLDERS
Shareholders
who intend to present a proposal for action at our 2009 Annual Meeting of
Shareholders must notify the our management of such intention by notice received
at our principal executive offices not later than July 16, 2010 for such
proposal to be included in our proxy statement and form of proxy relating to
such meeting.
23
ANNUAL REPORT
Our Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
fiscal year ended December 31, 2008, without exhibits, may be obtained by a
shareholder without charge, upon written request to the Secretary of
BioTime.
We may
deliver only one annual report and proxy statement to multiple shareholders
sharing an address, unless we receive notice from the instructions to the
contrary from those shareholders. We will deliver separate copies of the proxy
statement and annual report to each shareholder sharing a common address if they
notify us that they wish to receive separate copies. If you wish to receive a
separate copy of the proxy statement or annual report, you may contact us by
telephone at (510) 521-3390, or by mail at 1301 Harbor Bay Parkway, Suite 100,
Alameda, California 94502. You may also contact us at the above phone number or
address if you are presently receiving multiple copies of the proxy statement
and annual report but would prefer to receive a single copy instead.
By Order of the Board of
Directors,
/s/ Judith Segall
J
UDITH
S
EGALL
Vice President
and Secretary
September 15, 2009
24
HOW TO ATTEND THE ANNUAL
MEETING
If you are a
“shareholder of record” (meaning that you have a stock certificate registered in
your own name), your name will appear on our shareholder list. You will be
admitted to the Meeting upon showing your proxy card, driver’s license, or other
identification.
If you are a
“street name” shareholder (meaning that your shares are held in an account at a
broker-dealer firm) your name will not appear on our shareholder list. If you
plan to attend the Meeting, you should ask your broker for a “legal proxy.” You
will be admitted to the Meeting by showing your legal proxy. You probably
received a proxy form from your broker along with your proxy statement, but that
form can only be used by your broker to vote your shares, and it is not a “legal
proxy” that will permit you to vote your shares directly at the Meeting. If you
cannot obtain a legal proxy in time, you will be admitted to the Meeting if you
bring a copy of your most recent brokerage account statement showing that you
own BioTime stock. However, if you do not obtain a legal proxy, you can only
vote your shares by returning to your broker, before the Meeting, the proxy form
that accompanied your proxy statement.
25
APPENDIX A
AMENDMENT OF ARTICLES OF
INCORPORATION
Article THREE of the Articles of
Incorporation is amended to read as follows:
THREE: The
corporation is authorized to issue two classes of shares, which shall be
designated “Common Shares” and “Preferred Shares”. The number of Common Shares
which the corporation is authorized to issue is 75,000,000, and the number of
Preferred Shares which the corporation is authorized to issue is 1,000,000. The
Preferred Shares may be issued in one or more series as the board of directors
may by resolution designate. The board of directors is authorized to fix the
number of shares of any series of Preferred Shares and to determine or alter the
rights, preferences, privileges, and restrictions granted to or imposed upon the
Preferred Shares as a class, or upon any wholly unissued series of Preferred
Shares. The board of directors may, by resolution, increase or decrease (but not
below the number of shares of such series then outstanding) the number of shares
of any series of Preferred Shares subsequent to the issue of shares of that
series.
A-1
APPENDIX B-1
2007 AMENDMENT TO
BIOTIME,
INC.
2002 STOCK OPTION
PLAN
Article I, Section 4 is amended to read as
follows:
4.
SHARES OF STOCK SUBJECT TO THE
PLAN
The shares
that may be issued under the Plan shall be authorized and unissued or reacquired
common shares, no par value, of the Company (the “Shares”). The aggregate number
of Shares which may be issued under the Plan shall not exceed 4,000,000, unless
an adjustment is required in accordance with Article III.
B-1
APPENDIX B-2
2009 AMENDMENT TO
BIOTIME,
INC.
2002 STOCK OPTION
PLAN
Article I, Section 4 is amended to read as
follows:
4.
SHARES OF STOCK SUBJECT TO THE
PLAN
The shares
that may be issued under the Plan shall be authorized and unissued or reacquired
common shares, no par value, of the Company (the “Shares”). The aggregate number
of Shares which may be issued under the Plan shall not exceed 6,000,000, unless
an adjustment is required in accordance with Article III.
B-2
ANNUAL MEETING OF SHAREHOLDERS
OF
BIOTIME, INC.
October 15,
2009
IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SHAREHOLDER MEETING TO BE HELD ON OCTOBER 15,
2009.
The Letter to
Shareholders, Notice of Meeting and Proxy Statement, and Annual Report on Form
10-K
are available at
http://www.amstock.com/proxyservices/viewmaterial.asp?CoNumber=00714
Please sign, date and
mail
your proxy card in the
envelope provided as soon
as
possible.
ê
Please detach along perforated line and mail in the
envelope provided.
ê
DIRECTORS RECOMMEND A VOTE "FOR"
PROPOSALS NUMBERED 1, 2, 3, AND 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
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FOR
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AGAINST
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ABSTAIN
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2. APPROVAL OF AMENDMENT OF ARTICLES OF
INCORPORATION
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1.
ELECTION
OF DIRECTORS:
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NOMINEES:
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FOR ALL NOMINEES
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O NEAL C. BRADSHER
O
ARNOLD I. BURNS
O ROBERT N. BUTLER
O ABRAHAM E. COHEN
O VALETA A.
GREGG
O ALFRED D. KINGSLEY
O PEDRO LICHTINGER
O JUDITH
SEGALL
O MICHAEL D. WEST
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3. APPROVAL OF AMENDMENTS TO 2002 STOCK OPTION
PLAN
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WITHHOLD AUTHORITY FOR
ALL NOMINEES
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FOR ALL EXCEPT
(See instructions
below)
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4. RATIFYING APPOINTMENT OF INDEPENDENT
AUDITORS
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INSTRUCTIONS:
To withhold authority to
vote for any individual nominee(s), mark
“FOR ALL EXCEPT”
and fill
in the circle next to each nominee you wish to withhold, as shown here:
l
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I WISH TO ATTEND AND VOTE
SHARES AT MEETING
c
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To change the address on your account, please check the box
at right and indicate your new address in the address space above. Please
note that changes to the registered name(s) on the account may not be
submitted via this method.
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c
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Signature of Shareholder
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Date:
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Signature of Shareholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this
Proxy. When shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If
signer is a partnership, please sign in partnership name by authorized
person.
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PROXY FOR BIOTIME,
INC.
ANNUAL MEETING OF
SHAREHOLDERS
October 15,
2009
This Proxy is Solicited by the Board of
Directors of BioTime, Inc.
The
undersigned appoints Michael D. West and Alfred D. Kingsley, and each of them,
with full power of substitution, as the undersigned's lawful agent and proxy to
attend the Annual Meeting of Shareholders of BioTime, Inc. on October 15, 2009
and any adjournment thereof and to represent and vote all BioTime, Inc. common
shares standing in the name of the undersigned upon the books of the
corporation.
Shares represented
by this proxy will be voted in accordance with the instructions of the
undersigned specified below. If this card contains no specific voting
instructions the undersigned's shares will be voted FOR the election of
directors and FOR proposals 2, 3, and 4. This proxy also authorizes each of the
persons named above to vote at his discretion on (1) any other matter that the
Board of Directors did not know a reasonable time before the mailing of the
notice of annual meeting are to be presented at the meeting, and (2) matters
incidental to the conduct of the meeting.
(Continued and to be signed on the
reverse side)
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