[BIOTIME LOGO] BIOTIME, INC.
935 Pardee Street, Berkeley, CA 94710
November 9, 2004
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
BioTime, Inc. which will be held on Friday, December 10, 2004 at 10:00 a.m. at
the DoubleTree Hotel & Executive Meeting Center, Berkeley Marina, 200 Marina
Boulevard, Berkeley, California.
The Notice and Proxy Statement on the following pages contain details
concerning the business to come before the meeting. Management will report on
current operations and there will be an opportunity for discussion concerning
BioTime and its activities. Please sign and return your proxy card in the
enclosed envelope to ensure that your shares will be represented and voted at
the meeting even if you cannot attend. You are urged to sign and return the
enclosed proxy card even if you plan to attend the meeting.
I look forward to personally meeting all shareholders who are able to
attend.
/s/ Hal Sternberg, Ph.D
----------------------------------------
Hal Sternberg, Ph.D
Vice President and Member of the
Office of the President
[BIOTIME LOGO] BIOTIME, INC.
935 Pardee Street, Berkeley, CA 94710
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 10, 2004
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of BioTime,
Inc. (the "Company") will be held at the DoubleTree Hotel & Executive Meeting
Center, Berkeley Marina, 200 Marina Boulevard, Berkeley, California, on December
10, 2004 at 10:00 a.m. for the following purposes:
1. To elect seven (7) directors of the Company to hold office until the
next Annual Meeting of Shareholders and until their respective successors are
duly elected and qualified;
2. To approve an amendment to the BioTime 2002 Stock Option Plan;
3. To ratify the appointment of BDO Seidman, LLP as the independent
auditors of the Company for the fiscal year ending December 31, 2004; and
4. To transact such other business as may properly come before the
meeting or any adjournments of the meeting.
The Board of Directors has fixed the close of business on November 1, 2004
as the record date for determining shareholders entitled to receive notice of
and to vote at the Annual Meeting or any postponement or adjournment of the
meeting.
Whether or not you expect to attend the meeting in person, you are urged to
sign and date the enclosed form of proxy and return it promptly so that your
shares of stock may be represented and voted at the meeting. If you should be
present at the meeting, your proxy will be returned to you if you so request.
By Order of the Board of Directors,
/s/ Judith Segall
----------------------------------------
Judith Segall
Vice President and Secretary
Berkeley, California
November 9, 2004
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on December 10, 2004
The accompanying proxy is solicited by the Board of Directors of BioTime,
Inc., a California corporation ("BioTime") having its principal offices at 935
Pardee Street, Berkeley, California 94710, for use at the Annual Meeting of
Shareholders (the "Meeting") to be held at 10:00 a.m. on Friday, December 10,
2004 at the DoubleTree Hotel & Executive Meeting Center, Berkeley Marina,
Berkeley, California. Properly executed proxies in the accompanying form that
are received at or before the Meeting will be voted in accordance with the
directions noted on the proxies. If no direction is indicated, such shares will
be voted FOR (1) each nominee for election as director, (2) the amendment of the
BioTime 2002 Stock Option Plan, and (3) approval of the appointment of BDO
Seidman, LLP as our independent auditors for the fiscal year ending December 31,
2004.
The enclosed proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the Meeting: (1)
matters that the Board of Directors does not know a reasonable time before the
Meeting are to be presented at the Meeting; and (2) matters incidental to the
conduct of the Meeting. Management does not intend to present any business for a
vote at the Meeting other than the matters set forth in the accompanying Notice
of Annual Meeting of Shareholders, and as of the date of this Proxy Statement,
no shareholder has notified us of any other business that may properly come
before the meeting. If other matters requiring the vote of the shareholders
properly come before the Meeting, then it is the intention of the persons named
in the attached form of proxy to vote the proxy held by them in accordance with
their judgment on such matters.
Only shareholders of record at the close of business on November 1, 2004
are entitled to notice of and to vote at the Meeting. On that date, there were
17,811,450 BioTime common shares issued and outstanding, which constitutes the
only class of BioTime voting securities outstanding. Each BioTime common share
is entitled to one vote in the election of directors and in all other matters
that may be acted upon at the Meeting, except that shareholders may elect to
cumulate votes in the election of directors. Under cumulative voting, each
shareholder may give one candidate or may distribute among two or more
candidates, a number of votes equal to the number of directors to be elected
multiplied by the number of common shares owned. Shareholders may not cumulate
votes unless at least one shareholder gives notice of his or her intention to
cumulate votes at the Meeting. The enclosed proxy confers discretionary
authority to cumulate votes.
Any shareholder giving a proxy has the power to revoke that proxy at any
time before it is voted. A proxy may be revoked by filing with the Secretary of
BioTime either a written revocation or a duly executed proxy bearing a date
subsequent to the date of the proxy being revoked, or by voting in person at the
meeting. Any shareholder may attend the Meeting and vote in person, whether or
not such shareholder has previously submitted a proxy, but attendance at the
Meeting will not revoke a proxy unless the shareholder votes in person.
BioTime will bear all of the costs of the solicitation of proxies for use
at the Meeting. In addition to the use of the mails, proxies may be solicited by
a personal interview, telephone and telegram by our directors, officers and
employees, who will undertake such activities without additional compensation.
Banks, brokerage houses and other institutions, nominees or fiduciaries will be
requested to forward the proxy materials to the beneficial owners of the common
shares held of record by such persons and entities and will be reimbursed for
their reasonable expense incurred in connection with forwarding such material.
This Proxy Statement and the accompanying form of proxy are first being
sent or given to our shareholders on or about November 9, 2004.
ELECTION OF DIRECTORS
At the Meeting, seven directors will be elected to hold office for a
one-year term until the next Annual Meeting of Shareholders, and until their
successors have been duly elected and qualified. All of the nominees named below
are incumbent directors. One nominee, Valeta A.Gregg, joined the Board of
Directors during October 2004. We consider Milton H. Dresner, Katherine Gordon,
Valeta A. Gregg, and Michael D. West to be "independent" within the meaning of
American Stock Exchange Rule 121A.
It is the intention of the persons named in the enclosed proxy, unless such
proxy specifies otherwise, to vote the shares represented by such proxy FOR the
election of the nominees listed below. In the unlikely event that any nominee
should be unable to serve as a director, proxies may be voted in favor of a
substitute nominee designated by the Board of Directors.
Directors and Nominees
The names and ages of our directors are as follows.
Hal Sternberg, Ph.D., 51, is ourVice President of Research and a Member of
the Office of the President, and has served on the Board of Directors since
1990. Dr. Sternberg was a visiting scientist and research Associate at the
University of California at Berkeley from 1985-1988, where he supervised a team
of researchers studying Alzheimer's Disease. Dr. Sternberg received his Ph.D.
from the University of Maryland in Biochemistry in 1982.
Harold Waitz, Ph.D., 62, is our Vice President of Engineering and
Regulatory Affairs and a member of the Office of the President, and has served
on the Board of Directors since 1990. He received his Ph.D. in Biophysics and
Medical Physics from the University of California at Berkeley in 1983.
Judith Segall, 51, is our Vice President of Operations and Secretary and a
member of the Office of the President, and has served on the Board of Directors
from 1990 through 1994, and from 1995 through the present date. Ms. Segall
received a B.S. in Nutrition and Clinical Dietetics from the University of
California at Berkeley in 1989.
Milton H. Dresner, 79, has served on the Board of Directors since 1998. Mr.
Dresner is a private investor and principal of Milton Dresner Investments. From
1950 until 2000 Mr. Dresner was the Co-Chairman of the Highland Companies, a
diversified organization that was engaged in the development and ownership of
residential and industrial real estate. Mr. Dresner serves as a director of
Avatar Holdings, Inc., a real estate development company.
Katherine Gordon, Ph.D., 50, has served on the Board of Directors since
June 2001. Dr. Gordon is currently Director of Business Development at Harvard
Medical School. Prior to her appointment at Harvard in June 2004, Dr. Gordon was
head of corporate development for NovaNeuron, a molecular neurobiology company.
Before joining NovaNeuron in 2003, Dr. Gordon was Senior Vice President of
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MitoKor, a company discovering novel therapeutics that act by modulating the
activity of mitochondria. Dr. Gordon founded neuroscience company Apollo
BioPharmaceutics in 1992 and ran the company as Chief Executive Officer until
its acquisition by MitoKor, Inc. in 2001. Prior to founding Apollo
BioPharmaceutics, Dr. Gordon was Associate Director at Genzyme Corporation. Dr.
Gordon obtained her Ph.D. from Wesleyan University in 1982 and was a
post-doctoral fellow at Yale University.
Michael D. West, Ph.D., 51, has served on the Board of Directors since
2002. Dr. West is the President and Chief Executive Officer of Advanced Cell
Technology, Inc. of Worcester, Massachusetts, a company focused on the medical
applications of nuclear transfer (cloning) and embryonic stem cell
technologies. Dr. West founded Geron Corporation in 1990 where he served on the
board of directors and in a number of executive positions, including as Vice
President of New Technologies from 1993 to 1998, and as a director from
inception to 1998. Geron Corporation is engaged in the research and development
of diagnostic and therapeutic products for the treatment of cancer and
degenerative diseases. Dr. West organized and managed the collaboration that
led to the discovery of human embryonic stem and human embryonic germ cells. He
received his Ph.D. from Baylor College of Medicine in 1989 concentrating on the
biology of cellular aging.
Valeta Gregg, 52, joined the Board of Directors during October 2004. Ms.
Gregg is Vice President and Assistant General Counsel, Patents of Regeneron
Pharmaceuticals, Inc., a Tarrytown, New York based company engaged in the
development of pharmaceutical products for the treatment of a number of serious
medical conditions, including cancer, diseases of the eye, rheumatoid arthritis
and other inflammatory conditions, allergies, asthma, and obesity. Prior to
joining Regeneron in 2002, Ms. Gregg worked as a patent attorney, at Klauber &
Jackson in Hackensack, New Jersey from 2001 to 2002, and for Novo Nordisk A/S
and its United States subsidiary from 1996 to 2001, and for Fish & Richardson,
P.C., Menlo Park, California from 1994 to 1996. Ms. Gregg received her law
degree from University of Colorado School of Law in 1992 and received a Ph.D. in
Biochemistry from the University of Alberta in 1982.
Executive Officers
Hal Sternberg, Harold Waitz, Judith Segall, Steven Seinberg, and Jeffrey B.
Nickel are the only executive officers of BioTime. Following the death of Dr.
Paul Segall, our Chairman and Chief Executive Officer, in June 2003 the Board of
Directors appointed Hal Sternberg, Harold Waitz, and Judith Segall to serve as
members of the Office of the President. The members of the Office of the
President collectively exercise the powers of the Chief Executive Officer.
Steven A. Seinberg, J.D., 38, has been Chief Financial Officer and
Treasurer since 2001. Prior to assuming these positions, Mr. Seinberg worked for
over five years as BioTime's Director of Financial and Legal Research, a
position that involved, among other duties, contract modifications and
management of our intellectual property portfolio. Mr. Seinberg received a J.D.
from Hastings College of the Law in San Francisco in 1994.
Jeffrey B. Nickel, Ph.D., 61, became Vice President of Business Development
and Marketing during June 2004 and has served on the Board of Directors since
1997. Dr. Nickel is the President of Nickel Consulting through which he has
served as a consultant to companies in the pharmaceutical and biotechnology
industries since 1990. Prior to starting his consulting business, Dr. Nickel
served in a number of management positions for Syntex Corporation and Merck &
Company. Dr. Nickel received his Ph.D. in Organic Chemistry from Rutgers
University in 1970.
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There are no family relationships among our directors and officers.
Directors' Meetings
During the fiscal year ended December 31, 2003, the Board of Directors met
eight times. No director attended fewer than 75% of the meetings of the Board or
any committee on which they served.
Directors are also encouraged to attend the Company's annual meetings of
shareholders, although they are not formally required to do so. Last year all of
the directors attended the annual meeting.
Shareholder Communications With Directors
Shareholders who wish to communicate with the Board of Directors or with
individual directors may do so by following the procedure described on our
website at www.biotimeinc.com.
Compensation of Directors
Directors did not receive cash fees during 2003. Instead, the four
directors who are not employees each received options to purchase 20,000 common
shares exercisable at $1.55 per share, which was the closing price for BioTime
stock on the American Stock Exchange on the last day of March, 2003. Of the
20,000 options granted to each of these directors, 5,000 were fully vested and
exercisable upon grant and the remaining 15,000 options vested and became
exercisable in nine equal monthly installments based on continued service on the
Board of Directors. Directors and members of committees of the Board of
Directors who are BioTime employees are not compensated for serving as directors
or attending meetings of the Board or committees of the Board. Directors are
entitled to reimbursements for their out-of-pocket expenses incurred in
attending meetings of the Board or committees of the Board. Directors who are
BioTime employees are also entitled to receive compensation in such capacity.
Code of Ethics
We have adopted a Code of Ethics that applies to our principal executive
officers, our principal financial officer and accounting officer, our other
executive officers, and our directors. The purpose of the Code of Ethics is to
promote (i) honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships; (ii) full, fair, accurate, timely and understandable disclosure
in reports and documents that we file with or submit to the Securities and
Exchange Commission and in our other public communications; (iii) compliance
with applicable governmental rules and regulations, (iv) prompt internal
reporting of violations of the Code to an appropriate person or persons
identified in the Code; and (v) accountability for adherence to the Code. A copy
of our Code of Ethics has been posted on our internet website and can be found
at www.biotimeinc.com.
Committees of the Board
The Board of Directors has an Audit Committee, a Compensation Committee and
a Nominating Committee. Each of those committees is composed of three directors
who are independent in accordance with Section 121(A) of the American Stock
Exchange ("AMEX") listing standards and Section 10A-3 under the Securities
Exchange Act of 1934, as amended.
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The members of the Audit Committee are Milton H. Dresner, Katherine Gordon,
and Michael D. West. The Audit Committee met five times during the fiscal year
ended December 31, 2003. The purpose of the Audit Committee is to recommend the
engagement of our independent auditors and to review their performance, the
plan, scope and results of the audit, and the fees paid to our independent
auditors. The Audit Committee also will review our accounting and financial
reporting procedures and controls and all transactions between us and our
officers, directors, and shareholders who beneficially own 5% or more of the
common shares.
The Audit Committee operates under a written charter adopted by the Board
of Directors. A copy of the Audit Committee Charter is attached to this Proxy
Statement as Appendix A.
The members of the Nominating Committee are Milton H. Dresner, Katherine
Gordon, and Michael D. West. The Nominating Committee was formed during 2004.
The purpose of the Nominating Committee is to recommend to the Board of
Directors individuals qualified to serve as directors and on committees of the
Board.
The Nominating Committee will also consider nominees proposed by
shareholders; provided that they notify the Nominating Committee in writing at
least 120 days before the date of the next annual meeting and they and the
nominee provide the Nominating Committee with all information that the
Nominating Committee may reasonably request regarding the nominee no later than
90 days prior to the annual meeting. A copy of the Nominating Committee Charter
has been posted on our internet website and can be found at www.biotimeinc.com.
The Nominating Committee has not set any specific minimum qualifications
that a prospective nominee would need in order to be recommended by the
Nominating Committee or to serve on the Board of Directors. Rather, in
evaluating any new nominee or incumbent director, the Committee will consider
whether the particular person has the management, financial, scientific, and
industry knowledge, skills, experience, and expertise needed to manage our
affairs in light of the skills, experience and expertise of the other members of
the Board as a whole. The Committee will also consider whether including a
prospective director on the Board will result in a Board composition that
complies with (a) applicable state corporate laws, (b) applicable federal and
state securities laws, and (c) the rules of the AMEX and the SEC;
The members of the Compensation Committee are Milton H. Dresner, Katherine
Gordon, and Michael D. West. The Compensation Committee was formed during 2004.
The Compensation Committee oversees our compensation and employee benefit plans
and practices, including executive compensation arrangements and incentive
plans. The Compensation Committee administers our 2002 Stock Option Plan and
makes grants of options to key employees, consultants, scientific advisory board
members and independent contractors, but not to officers or directors. Grants of
options to officers and directors may be recommended by the Compensation
Committee but must be approved by the Board of Directors. A copy of the
Compensation Committee Charter is available upon request.
Audit Committee Report
During the last year, the Audit Committee met five times and held
discussions with management and representatives of BDO Seidman, LLP, BioTime's
independent auditors. The independent public auditors are responsible for
performing an independent audit of BioTime's consolidated financial statements
and issuing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles.
The Audit Committee reviewed and discussed with management and
representatives of the auditors the audited financial statements contained in
BioTime's Annual Report on Form 10-K for the year ended December 31, 2003. The
5
Audit Committee also discussed with the auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communications with Audit
Committees). BDO Seidman, LLP submitted to the Audit Committee the written
disclosures and the letter required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees). Based on the reviews and
discussions referred to above, the members of the Audit Committee unanimously
approved the inclusion of the audited financial statements in BioTime's Annual
Report on Form 10-K for the year ended December 31, 2003, filed with the
Securities and Exchange Commission.
The Audit Committee also meets on a quarterly basis with the auditors to
review and discuss BioTime's financial statements for the quarter and the
adequacy of internal financial and reporting controls.
Report of the Compensation Committee
The Compensation Committee was formed during 2004. During the fiscal year
ended December 31, 2003, the Board of Directors, as a whole, and the Audit
Committee approved all executive compensation. BioTime executive officers who
served on the Board of Directors did not vote on matters pertaining to their own
personal compensation. Paul Segall and Judith Segall did not vote on matters
pertaining to each other's compensation.
BioTime's compensation policies have been influenced by the need to attract
and retain executives with the scientific and management expertise to conduct
BioTime's product development program in a highly competitive industry dominated
by larger, more highly capitalized companies. Executive compensation is also
influenced by the cost of living in the San Francisco Bay Area. These factors
have been balanced against BioTime's financial position and capital resources.
Executive compensation may be composed of three major components: (i) base
salary; (ii) annual variable performance awards payable in cash and tied to the
attainment of corporate objectives and the officer's achievement of personal
goals; and (iii) long-term stock-based incentive awards (stock options) designed
to strengthen the mutuality of interests between the executive officers and the
shareholders.
An annual bonus may be earned by each executive officer based upon the
achievement of personal and corporate performance goals. Because BioTime is in
the development stage, the use of performance milestones based upon profit
levels and return on equity as the basis for such incentive compensation has not
been considered appropriate. Instead, the incentive awards in the past have been
tied to the achievement of personal and corporate performance targets.
Performance goals vary from year to year according to the stage of BioTime's
operations. Important milestones that have been considered by the Board of
Directors in determining incentive bonuses have been (i) procurement of
additional capital, (ii) licensing BioTime products, (iii) completing specified
research and development goals, and (iv) achievement of certain organizational
goals. Personal goals are related to the functional responsibility of each
executive officer. In the past, the Board of Directors determined whether or not
particular performance goals were achieved. The Compensation Committee will make
that determination for the 2004 fiscal year.
During 2001, BioTime implemented a salary reduction program to reduce
costs. All of the current executive officers participated in the program during
2003. No stock options were granted and no cash bonuses were awarded to the five
most highly compensated executive officers during the year ended December 31,
2003.
The Compensation Committee: Milton H. Dresner, Katherine Gordon, and
Michael D. West.
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Executive Compensation
We do not have long term employment agreements with our executive officers.
However, each executive officer has executed an Intellectual Property Agreement
which provides that BioTime is the owner of all inventions developed by the
executive officer during the course of his or her employment.
The following table summarizes certain information concerning the
compensation paid during the past three fiscal years to the Chief Executive
Officer and to each of the current members of the Office of the President. No
executive officer received compensation in excess of $100,000 during the past
fiscal year.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
--------------------------------- ------------------------
Salary($)
Name and Principal Position Year Ended (Shares) Bonus Stock Options
-------------------------------------- -------------------- ---------- ------- --------------
Paul Segall December 31, 2003* $ 16,500 -- --
Chairman and Chief Executive Officer December 31, 2002 $ 36,000 -- 125,000
December 31, 2001 $101,792 -- --
Hal Sternberg December 31, 2003 $ 72,000 -- --
Vice President of Research December 31, 2002 $ 72,000 -- 90,000
Member, Office of the President December 31, 2001 $115,292 -- --
Harold Waitz December 31, 2003 $ 72,000 -- --
Vice President of Engineering December 31, 2002 $ 72,000 -- 80,000
Member, Office of the President December 31, 2001 $125,083 -- --
Judith Segall December 31, 2003 $ 90,000 -- --
Vice President of Operations, December 31, 2002 $ 72,000 -- 80,000
Corporate Secretary, December 31, 2001 $115,292 -- --
Member, Office of the President
------------
* Dr. Segall passed away during June 2003.
Stock Options
The following table certain information concerning stock options held by
our Chief Executive Officer, each member of the Office of the President, and the
Chief Financial Officer as of December 31, 2003.
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Aggregated Options Exercised in Last Fiscal Year,
and Fiscal Year-End Option Values
Number of Number of Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired Value December 31, 2003 December 31, 2003
on Realized ------------------------------- ------------------------------
Name Exercise ($) Exercisable Unexercisable Exercisable Unexercisable
-------------------- ---------- ---------- ------------- --------------- ------------- --------------
Paul Segall* -- -- 41,666 83,334 -- --
Judith Segall -- -- 26,666 53,334 -- --
Hal Sternberg -- -- 30,000 60,000 -- --
Harold Waitz -- -- 26,666 53,334 -- --
Steven A. Seinberg -- -- 27,666 13,334 -- --
* Dr. Segall passed away during June 2003.
Certain Relationships and Related Transactions
During September 1995, we entered into an agreement for financial advisory
services with Greenbelt Corp. ("Greenbelt"), a corporation controlled by Alfred
D. Kingsley and Gary K. Duberstein, who are also BioTime shareholders. Under
this agreement we issued to the financial advisor warrants to purchase 311,276
common shares at a price of $1.93 per share, and we agreed to issue additional
warrants to purchase up to an additional 622,549 common shares at a price equal
to the greater of (a) 150% of the average market price of the common shares
during the three months prior to issuance and (b) $2 per share. The additional
warrants were issued in equal quarterly installments over a two-year period,
beginning October 15, 1995.
The number of shares and exercise prices shown have been adjusted for our
subscription rights distributions during January 1997 and February 1999 and the
payment of a stock dividend during October 1997. Greenbelt has purchased 544,730
common shares by exercising some of those warrants at prices ranging from $1.93
to $2.35 per share. The other warrants have expired unexercised.
During April 1998, we entered into a new financial advisory services
agreement with Greenbelt. The new agreement provided for an initial payment of
$90,000 followed by an advisory fee of $15,000 per month paid quarterly. We
agreed to reimburse Greenbelt for all reasonable out-of-pocket expenses incurred
in connection with its engagement as financial advisor, and to indemnify
Greenbelt and its officers, affiliates, employees, agents, assignees, and
controlling persons from any liabilities arising out of or in connection with
actions taken on BioTime's behalf under the agreement. The agreement has been
renewed each year and will expire on March 31, 2005. As compensation, we issued
Greenbelt 30,000 common shares for the twelve months ended March 31, 2001 and
40,000 common shares for the twelve months ended March 31, 2002. We paid
Greenbelt $60,000 in cash and issued Greenbelt 100,000 common shares for the
twelve months ending March 31, 2003, and we paid $90,000 in cash and issued
Greenbelt 80,000 common shares for the twelve months ending March 31, 2004. We
have agreed to pay Greenbelt $90,000 in cash and to issue them 60,000 common
shares for the twelve months ending March 31, 2005.
During March 2001, we entered into a Line of Credit Agreement with Alfred
D. Kingsley under which Mr. Kingsley agreed to lend us $1,000,000. In
consideration of Mr. Kingsley's agreement to provide that line of credit, we
issued to him a warrant to purchase 51,000 common shares at an exercise price of
$8.14 per share. The warrant will expire in March 2006. The exercise price and
8
number of common shares for which the warrant may be exercised are subject to
adjustment to prevent dilution in the event of a stock split, combination, stock
dividend, reclassification of shares, sale of assets, merger or similar
transaction.
During August 2001, we received loans of $3,350,000 through the sale of
debentures to a group of private investors, including Mr. Kingsley, who
purchased $1,500,000 of debentures, and Milton Dresner, a BioTime director. Mr.
Kingsley's investment included the conversion of the $1,000,000 principal
balance of the line of credit that he had previously provided. Interest on the
debentures was payable at an annual rate of 10%, payable semiannually. Investors
who purchased the debentures also received warrants to purchase a total of
525,688 common shares at an exercise price of $6.37 per share. The warrants
expired unexercised on August 1, 2004.
During April 2003, holders of $2,750,000 principal amount of the
debentures, including Mr. Kingsley, granted BioTime a "pay in kind" right
allowing (but not requiring) BioTime to make interest payments in common shares
instead of cash for the interest payments due during August 2003 and February
2004 (the "PIK Right"). BioTime retained the right to pay the interest due in
cash.
Each debenture holder who agreed to grant BioTime the PIK Right received a
three-year warrant entitling the holder to purchase BioTime common shares for
$1.47 per share. The number of shares covered by the warrants is the amount of
debenture interest due in August 2003 and February 2004 divided by the $1.47
exercise price. Warrants to purchase a total of 226,595 common shares were
issued. We elected to pay all debenture interest due in cash rather than in
stock.
The warrants will expire in 2006. The warrants will be redeemable by
BioTime at $0.05 per warrant share if the closing price of the common shares on
the American Stock Exchange exceeds 200% of the exercise price for 20
consecutive trading days. BioTime has agreed to register the PIK Right warrants
under the Securities Act of 1933, as amended, at the request of the warrant
holders. BioTime will pay the expenses of registration but will not be obligated
to pay underwriting discounts or commissions. All prices and share amounts will
be adjusted for any stock splits, reverse splits, recapitalization, or similar
changes to the common shares.
Alfred Kingsley agreed with BioTime that if BioTime exercised the PIK Right
he would provide BioTime with the cash required to pay the interest due on any
debentures held by persons who did not grant BioTime the PIK Right. In
consideration of his agreement to do so, BioTime issued to Mr. Kingsley a
warrant for 40,799 additional common shares, which is the amount of warrants
that would have been issued had those debenture holders agreed to grant the PIK
Right.
During March 2002, we entered into a new Credit Agreement with Alfred D.
Kingsley for a $300,000 line of credit. In consideration of Mr. Kingsley's
agreement to provide that line of credit, we issued to him a warrant to purchase
30,600 common shares at an exercise price of $3.92 per share. The warrant will
expire in 2007. The exercise price and number of common shares for which the
warrant may be exercised are subject to adjustment to prevent dilution in the
event of a stock split, combination, stock dividend, reclassification of shares,
sale of assets, merger, or similar transaction.
During August 2002, Mr. Kingsley purchased 89,285 common shares, and
Jeffrey Nickel purchased 10,000 common shares, from us at the same price and on
the same terms as shares sold to other investors in a private placement.
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We have registered for sale under the Act, the warrants and common shares
described above, including common shares that may be issued upon the exercise of
the warrants, other than the PIK Right warrants and the shares issuable under
the Greenbelt financial advisory agreement for the periods April 1, 2003 through
March 31, 2005, which may be registered at a later date. We also included in the
registration 300,000 common shares that Mr. Kingsley acquired during December
2000 from certain BioTime officers and directors. We paid the expenses of
registration, but will not be obligated to pay any underwriting discounts or
commissions that may be incurred by any shareholder or warrant holder in
connection with any sale of the warrants or common shares.
On July 3, 2002 Paul Segall, our former Chairman and Chief Executive
Officer, and Harold Waitz each sold 200,000 common shares to Mr. Kingsley at a
price of $2.00 per share to eliminate margin indebtedness. Also on July 3, 2002,
Mr. Kingsley made unsecured loans in the amounts of $220,000 to Dr. Segall and
$252,000 to Dr. Waitz.
On December 10, 2003, we commenced a subscription rights offer by
distributing 13,654,949 subscription rights to our shareholders, entitling them
to purchase 1,706,869 units at a subscription price of $1.40 per unit. Each unit
consisted of one new common share and one-half of a warrant to purchase an
additional common share. We also reserved 853,434 additional units for sale to
fill over-subscriptions.
A group of private investors (the "Guarantors") and holders of $1,500,000
in principal amount of BioTime Series 2001-A debentures (the "Participating
Debenture Holders"), including Mr. Kingsley, agreed to purchase units that
remained unsold at the conclusion of the rights offer, excluding units that we
reserved to issue to fill over-subscriptions, and subject to a maximum purchase
commitment of $2,250,000. The Participating Debenture Holders agreed to purchase
their portion of any unsold units by exchanging a principal amount of Series
2001-A debentures equal to the purchase price of the units. Mr. Kingsley's
purchase commitment under the Standby Purchase Agreement as a Guarantor was
$187,500, payable in cash, and his purchase commitment as a Participating
Debenture Holder was $818,182, payable in debentures. The Guarantors and
Participating Debenture Holders did not to acquire any units through those
commitments because the rights offer was oversubscribed.
Under the Standby Purchase Agreement, Mr. Kingsley received total cash fees
of $67,045 and warrants to purchase 335,227 common shares in consideration of
his participation as a Guarantor and Participating Debenture Holder.
Under the Standby Purchase Agreement, we also offered to sell up to an
additional 428,571 units at the subscription price directly to the Guarantors
and their designees. Mr. Kingsley assigned his right to purchase 107,142 of
those units to another Guarantor. The Participating Debenture Holders agreed to
exchange $1,500,000 of their debentures for units if the rights offer was
over-subscribed so that we issued all of the units reserved to fill excess
over-subscriptions, and if the Guarantors purchased all 428,571 additional units
offered to them. Mr. Kingsley exchanged $818,182 of his debentures for 584,415
common shares and 292,207 warrants.
By exercising subscription rights, and purchasing additional common shares
and warrants through the over-subscription privilege in our rights offer, during
January 2004 Mr. Kingsley acquired 389,044 common shares and 194,521 warrants,
Greenbelt acquired 145,210 common shares and 72,604 warrants, and Greenway
Partners, LP, an affiliate of Mr. Kingsley, acquired 89,250 common shares and
44,624 warrants.
10
Following the rights offer, we eliminated the balance of our debenture
indebtedness by repaying $1,850,000 of debentures in cash. Mr. Kingsley received
$818,182 in cash, plus accrued interest, for his debentures. Milton Dresner
received $100,000 in cash, plus accrued interest for his debentures.
COMPARISON OF SHAREHOLDER RETURN
The graph depicted below reflects a comparison of the cumulative total
return (change in stock price plus reinvestment of dividends) of BioTime common
shares with the cumulative total returns of the Nasdaq Stock Market Index and
the BioCentury 100 Stock Index. The BioCentury 100 Stock Index includes many
companies in an early stage of development that have a market capitalization
similar to BioTime's. The graph covers the period from January 1, 1999, the
first day of our fifth preceding fiscal year, through the fiscal year ended
December 31, 2003.
[GRAPHIC OMITTED]
The graph assumes that $100 was invested on January 1, 1999 in BioTime
common shares and in each index and that all dividends were reinvested. No cash
dividends have been declared on our common shares.
12/31/98 12/31/99 12/29/00 12/31/01 12/31/02 12/31/03
---------- ---------- ---------- ---------- ---------- ---------
BioTime, Inc. 100.00 51.08 43.17 26.47 8.92 7.94
BioCentury 100 Index 100.00 198.03 274.66 195.41 98.24 142.62
NASDAQ Market Index 100.00 180.85 114.50 88.38 61.84 94.00
11
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of November 2, 2004
concerning beneficial ownership of common shares by each shareholder known by us
to be the beneficial owner of 5% or more of our common shares, and our executive
officers and directors. Information concerning certain beneficial owners of more
than 5% of the common shares is based upon information disclosed by such owners
in their reports on Schedule 13D or Schedule 13G.
Number of Percent of
Shares Total
----------- -----------
Alfred D. Kingsley (1)
Gary K. Duberstein
Greenbelt Corp.
Greenway Partners, L.P.
Greenhouse Partners, L.P.
110 E. 59th Street, Suite 3203
New York, New York 10022 .............. 5,276,708 27.8%
Neal C. Bradsher (2)
Broadwood Partners, L.P.
Broadwood Capital, Inc.
767 Fifth Avenue, 50th Floor
New York, NY 10153 .................... 1,339,084 7.4%
Judith Segall (3) ...................... 540,169 3.0%
Harold D. Waitz (4) .................... 277,443 1.5%
Hal Sternberg (5) ...................... 395,201 2.2%
Steven A. Seinberg (6) ................. 63,000 *
Jeffrey B. Nickel (7) .................. 182,812 1.0%
Milton H. Dresner (8) .................. 115,614 *
Katherine Gordon (9) ................... 75,000 *
Michael D. West (10) ................... 58,332 *
Valeta A. Gregg (11) ................... 18,332 *
All officers and directors as a group (9
persons) (12) ......................... 1,725,903 9.2%
------------
* Less than 1%
(1) Includes 1,059,670 shares, owned by Greenbelt Corp., 72,604 shares that may
be acquired upon the exercise of certain warrants owned by Greenbelt Corp.,
180,000 shares owned by Greenway Partners, L.P., 44,624 shares that may be
acquired upon the exercise of certain warrants owned by Greenway Partners,
L.P., 2,864,243 shares owned solely by Alfred D. Kingsley, 1,042,631 shares
that may be acquired upon the exercise of warrants owned solely by Mr.
Kingsley, 12,256 shares owned solely by Gary K. Duberstein, and 680 shares
that may be acquired upon the exercise of certain warrants owned solely by
Gary K. Duberstein. Alfred D. Kingsley and Gary K. Duberstein control
Greenbelt Corp. and may be deemed to beneficially own the warrants and
shares that Greenbelt Corp. beneficially owns. Greenhouse Partners, L.P. is
the general partner of Greenway Partners, L.P., and Mr. Kingsley and Mr.
Duberstein are the general partners of Greenhouse Partners, L.P. Greenhouse
Partners, L.P., Mr. Kingsley, and Mr. Duberstein may be deemed to
beneficially own the shares that Greenway Partners, L.P. owns. Mr.
12
Duberstein disclaims beneficial ownership of the shares and warrants owned
solely by Mr. Kingsley, and Mr. Kingsley disclaims beneficial ownership of
the shares owned solely by Mr. Duberstein.
(2) Includes 959,341 shares owned by Broadwood Partners, L.P., 336,835 shares
that may be acquired upon the exercise of certain warrants owned by
Broadwood Partners, L.P., 37,358 shares owned by Neal C. Bradsher, and
5,550 shares that may be acquired upon the exercise of certain warrants
owned by Mr. Bradsher. Broadwood Capital, Inc. is the general partner of
Broadwood Partners, L.P., and Neal C. Bradsher is the President of
Broadwood Capital, Inc. Mr. Bradsher and Broadwood Capital, Inc. may be
deemed to beneficially own the shares that Broadwood Partners, L.P. owns.
(3) Includes 130,000 shares that may be acquired upon the exercise of certain
stock options, and 21,587 shares that may be acquired upon the exercise of
certain warrants.
(4) Includes 2,362 shares held for the benefit of Dr. Waitz's minor children,
130,000 shares that may be acquired by Dr. Waitz upon the exercise of
certain stock options, 7,888 shares that may be acquired by Dr. Waitz upon
the exercise of certain warrants (including 130 warrants held for the
benefit of Dr. Waitz's minor children).
(5) Includes 140,000 shares that may be acquired upon the exercise of certain
options and 13,431 shares that may be acquired upon the exercise of certain
warrants.
(6) Includes 63,000 shares that may be acquired upon the exercise of certain
options.
(7) Includes 170,000 shares that maybe acquired upon the exercise of certain
options and 937 shares that maybe acquired upon the exercise of certain
warrants.
(8) Includes 90,000 shares that may be acquired upon the exercise of certain
options.
(9) Includes 75,000 shares that may be acquired upon the exercise of certain
options.
(10) Includes 58,332 shares that may be acquired upon the exercise of certain
options.
(11) Includes 18,332 shares that may be acquired upon the exercise of certain
options.
(12) Includes 874,664 shares that may be acquired upon the exercise of certain
options and 43,843 shares that may be acquired upon the exercise of certain
warrants.
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 Securities and Exchange Commission (the "SEC") initial reports
of ownership and reports of changes in ownership of our common shares and other
equity securities. Officers, directors and greater than ten percent beneficial
owners are required by SEC regulation 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 and written representations that no other reports were required,
all Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with during the fiscal
year ended December 31, 2003.
13
AMENDMENT OF 2002 STOCK OPTION PLAN
We are asking the shareholders to approve an amendment to our 2002 Stock
Option Plan (the "Plan") that would increase the number of shares available
under the Plan. The affirmative vote of shareholders representing a majority of
the shares present in person or by proxy and voting on this matter is required
to approve the amendment.
The Board of Directors Recommends a Vote "FOR" the Approval of the Amendment to
the 2002 Stock Option Plan
Reasons for the Amendment
Stock options are an important part of employee compensation packages.
Under the Plan, we were authorized to grant options to purchase a total of
1,000,000 common shares. We have granted options to purchase 768,332 common
shares so far. This means that only 231,668 shares remain available for the
grant of options in the future. The Board of Directors (the "Board") has
approved the Amendment so that we will have 1,000,000 additional shares
available for the grant of options under the Plan. The Board believes that these
additional shares will fulfill our needs for the near future. Any future
increase in the number of shares under the Plan would be submitted to the
shareholders for approval.
The Board strongly believes that our ability to attract and retain the
services of employees and consultants 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
companies. This is especially true for BioTime since the salaries we pay our
employees are lower than the compensation packages offered by competing
companies. The Board believes that we will be placed at a serious competitive
disadvantage in attracting and retaining capable employees and consultants at a
critical time in our corporate development, unless the Amendment is approved by
the shareholders.
The following summary of the Plan is qualified in all respects by reference
to the full text of the Plan.
Administration of the Plan
The Plan is administered by the Board, which determines which officers,
employees, consultants, scientific advisory board members and independent
contractors of BioTime 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. The Board has delegated administration of
the Plan, including the power to grant options to persons who are not officers
or directors of BioTime, to the Compensation Committee (the "Committee") of the
Board.
No options may be granted under the Plan more than ten years after the date
the Plan was adopted by the Board, and no options granted under the 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 October 31, 2004.
14
Number of Shares to Number of Shares Remaining
be Issued Upon Weighted Average Available
Exercise of Outstanding Exercise Price of the for Future Issuance
Options, Warrants, Outstanding Options, Under Equity Compensation
Plan Category and Rights Warrants, and Rights Plans
-------------------- ------------------------- ------------------------ ----------------------------
Equity Compensation
Plans Approved by
Shareholders 1,073,832 $ 3.99 231,668
Equity Compensation
Plans Not Approved
By Shareholders 200,000 $ 4.00 --
The equity compensation plans approved by shareholders include the 2002
Stock Option Plan and our 1992 Stock Option Plan. The outstanding options and
warrants under equity compensation plans not approved by shareholders are
options issued to a consultant as compensation for services rendered.
Terms of the Options
Options granted under the 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 employees of BioTime or its subsidiaries. The exercise
price of incentive stock options granted under the 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 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 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
15
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 Plan and all options granted under the Plan shall
terminate, unless provision can be made in writing in connection with such
transaction for either the continuance of the Plan and/or for the assumption of
options granted under the 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 and consultants 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.
The 1992 Plan
Prior to the adoption of the Plan, BioTime granted stock options to key
employees, directors, and consultants under its 1992 Stock Option Plan (the
"1992 Plan"). As of October 31, 2004, 305,500 options were granted and remain
outstanding under the 1992 Plan. The 1992 Plan has expired and no additional
options may be granted under it. However, outstanding stock options granted
under the 1992 Plan will remain in effect until the expiration date specified in
those options.
FEDERAL INCOME TAX CONSEQUENCE OF PARTICIPATION IN THE PLAN
The following discussion summarizes certain federal income tax consequences
of participation in the 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 effect 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 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.
16
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 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 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, but the participant will be taxed at the time the option is exercised.
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
17
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 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 INDEPENDENT AUDITORS
The Audit Committee has selected BDO Seidman, LLP as the Company's
auditors. The Board of Directors proposes and recommends that the shareholders
ratify the selection of the firm of BDO Seidman to serve as independent auditors
of the Company for the fiscal year ending December 31, 2004. BDO Seidman has
served as the Company's independent auditors since January 2003. Unless
otherwise directed by the shareholders, proxies will be voted FOR approval of
the selection of BDO Seidman to audit the Company's consolidated financial
statements. A representative of BDO Seidman 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.
The Board of Directors Recommends a Vote "FOR" Ratification of the Selection of
BDO Seidman, LLP as the Company's Independent Auditors
On January 14, 2003, the Company dismissed Deloitte & Touche LLP as the
Company's independent auditors and retained BDO Seidman as their new independent
auditors to audit the Company's financial statements. The dismissal of Deloitte
& Touche and the engagement of BDO Seidman was approved by the Audit Committee
and the Company's Board of Directors. Prior to engaging BDO Seidman, the Company
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 the Company's financial statements, or
with respect to any matter described below.
During the years ended December 31, 2001 and 2000, Deloitte & Touche's
reports on the financial statements of the Company did not contain an adverse
opinion or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. However, these reports
contained an explanatory paragraph as it relates to the Company being in the
development stage.
18
During the Company's two most recent fiscal years and the subsequent period
up to January 14, 2003 there were no disagreements between the Company and
Deloitte & Touche on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which if not resolved to
the satisfaction of Deloitte & Touche would have caused them to make a reference
to the subject matter of the disagreement in connection with their report. In
addition, during the Company's two most recent fiscal years and the subsequent
period up to January 14, 2003, Deloitte & Touche did not advise the Company that
(a) the Company's internal controls necessary for it 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 if further investigated may (i) have materially impacted the
fairness or reliability of either 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, or (ii) caused them to be
unwilling to rely on management's representations or be associated with the
Company's financial statements, or that (d) information had come to their
attention that they concluded materially impacts the fairness or reliability of
either (i) a previously issued audit report or the underlying financial
statements, or (ii) 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. However, as part of the review of the Company's
financial statements as of and for the three month period ended September 30,
2002, Deloitte & Touche communicated to the Company's Audit Committee their
recommendation, that the Company take certain steps to strengthen its accounting
and reporting functions, including improvement of the capabilities of its
accounting personnel, investigation into the possible replacement or updating of
its accounting software, adoption of more frequent internal reviews and
reconciliations of financial information, and improvement of the Company's
budgeting process. Management of the Company concurred with the recommendation
of Deloitte & Touche.
Audit Fees. BDO Seidman billed the Company $105,668 for the audit of the
Company's annual financial statements for the fiscal year ended December 31,
2002. Fees for the audit of our annual financial statements for the year ended
December 31, 2003, and fees for review of our financial statements included in
our quarterly reports on Form 10-Q for the first three quarters of 2003 were
$115,700. BDO Seidman also provided services related to the filing of a
securities registration statement. Fees for those services were $16,584 for the
fiscal year ended December 31, 2003. Prior to January 14, 2003, Deloitte &
Touche served as our auditors. Deloitte & Touche reviewed our financial
statements included in our quarterly reports on Form 10-Q for the first three
quarters of 2002 and assisted in the transition to BDO Seidman, and billed us
$73,500 for those services. Deloitte & Touche also provided services for the
aforementioned registration, and billed $8,300 for those services. Deloitte &
Touche billed us $45,600 for other services for the fiscal year ended December
31, 2002. Those services included primarily a securities registration statement
and other SEC filings.
Audit-Related Fees. There were no audit-related fees charged to us by
either BDO Seidman, or Deloitte & Touche during the fiscal years ended December
31, 2002 and 2003.
Tax Fees. BDO Seidmen and Deloitte & Touche did not provide any tax
compliance services, tax advice, or tax planning services to the Company during
the fiscal years ended December 31, 2002 and 2003.
Other Fees. There were no other fees charged to us by either BDO Seidman or
Deloitte & Touche during the fiscal years ended December 31, 2002 and 2003.
19
Under practices and procedures adopted by the Audit Committee, the prior
approval of the Audit Committee is required for the engagement of the Company's
auditors to perform any non-audit services for the Company. Other than diminimis
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.
PROPOSALS OF SHAREHOLDERS
Shareholders who intend to present a proposal for action at the next Annual
Meeting of Shareholders must notify us of such intention by notice received at
the Company's principal executive offices not later than August 8, 2005 for such
proposal to be included in the proxy statement and form of proxy relating to
that meeting.
ANNUAL REPORT
Our Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 2003, without exhibits, may be
obtained by a shareholder without charge upon written request to the Secretary
of BioTime.
By Order of the Board of Directors,
/s/ Hal Sternberg, Ph.D.
----------------------------------------
Hal Sternberg, Ph.D.
Vice President and Member of the
Office of the President
November 9, 2004
20
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 the Company's
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 the
Company's 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.
21
APPENDIX A
BIOTIME, INC.
AUDIT COMMITTEE CHARTER
ARTICLE 1.
The principal objectives of the Audit Committee shall be as follows:
1. To oversee the financial reporting process by identifying, understanding
and assessing the risk of each of the factors composing the financial
reporting process;
2. To oversee the establishment and maintenance of the internal controls
systems;
3. To review Company policies and procedures related to officer expenses and
perquisites, and to oversee and monitor compliance with such policies and
procedures;
4. To review and approve transactions between the Company and its officers,
directors and shareholders who beneficially own 5%or more of the common
shares of the Company;
5. To take such measures, and make such recommendations, as it deems necessary
or appropriate to assure that the Company's independent auditors remain
accountable to the Audit Committee and the Board of Directors; and
6. To report to the Board of Directors on the findings of the Audit Committee
and to recommend such action as the Audit Committee shall deem necessary or
appropriate.
ARTICLE 2.
The Audit Committee shall be structured as follows:
1. The Audit Committee shall be composed of not less than three (3) members.
2. All of the members of the Audit Committee shall be members of the Board of
Directors.
3. All of the members of the Audit Committee shall be "independent" as defined
in the rules of American Stock Exchange ("AMEX").
4. None of the Audit Committee members shall be:
a. an employee of the Company or any of its subsidiaries or have been an
employee of the Company or any of its subsidiaries during the past
three years;
b. a director who accepts or have an immediate family member who accepts
any payments from the Company or any of its subsidiaries in excess of
$60,000 during the current or any of the past three fiscal years,
other than compensation for service on the Board of Directors and its
committees, payments arising solely from investments in Company
securities, compensation paid to an immediate family member who is a
non-executive employee of the Company or a subsidiary, benefits under
tax-qualified retirement plans, non-discretionary compensation, or
loans permitted under Section 13(k) of the Securities Exchange Act of
1934, as amended;
c. a director who has a member of his or her immediate family who is, or
during the preceding three years was, employed by the Company or any
of its subsidiaries as an executive officer;
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d. a director who is, or has an immediate family member who is, a
partner, controlling shareholder, or an executive officer of any
organization to which the Company made, or from which it received,
payments (other than those which arose solely from investments in the
Company's securities) that exceed 5% of the organization's
consolidated gross revenue for that year, or $200,000, whichever is
more, in any of the most recent three fiscal years; or
e. a director who is, or has an immediate family member who is, employed
as an executive officer of any other entity where at any time during
the most recent three fiscal years any of the Company's executive
officers serve on that other entity's compensation committee.
f. a director who is, or has an immediate family member who is, a current
partner or the Company's outside auditor, or was a partner or employee
of the Company's outside auditor who worked on the Company's audit at
any time during any of the past three years.
5. Not withstanding Sections 3 and 4 of this Article II, if the Audit
Committee has at least three members, not more than one member of the Audit
Committee who is not "independent" as defined in the AMEX rules but who
satisfies the requirements of SEC Rule 10A-3and who is not a current
officer or employee of the Company or an immediate family member of an
officer or employee of the Company, may be appointed to the Audit Committee
if the Board of Directors, under special and limited circumstances,
determines that the membership of such person on the Audit Committee is
required by the best interests of the Company and its shareholders;
provided, that the Company shall disclose the nature of the relationship
that caused the member to not be "independent" and the reasons for the
Board of Directors' determination in the next annual proxy statement, if so
required by the rules and regulations promulgated by the Securities and
Exchange Commission ("SEC") or the AMEX or any other national securities
exchange or over-the-counter market on which the Company's common shares or
other securities are listed or traded; provided, that a director appointed
to the Audit Committee pursuant to this exception may not serve for in
excess of two consecutive years and my not chair the Audit Committee.
6. Each member of the Audit Committee shall be able to read and understand
fundamental financial statements, including the Company's balance sheet,
income statement, and cash flow statement.
7. At all times thereafter, the Audit Committee shall have at least one member
who is financially sophisticated in that he or she has past employment
experience in finance or accounting, requisite professional certification
in accounting, or any other comparable experience or background (such as
experience as chief executive officer, chief financial officer, or other
senior officer with financial oversight responsibilities).
8. Members of the Audit Committee shall be appointed from time to time by the
Board of Directors. Members shall serve at the pleasure of the Board, or
until their successors have been elected and have taken office.
ARTICLE 3.
The duties and responsibilities of the Audit Committee shall be as follows:
1. The Audit Committee is authorized to select, engage, retain or termination
of the independent auditors. The Company may continue to ask its
shareholders to ratify the appointment of the independent auditors selected
by the Audit Committee.
2. The Audit Committee shall review with management the performance of the
independent auditors and shall take such action as may be necessary or
appropriate.
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3. The Audit Committee shall review periodically the independence of its
outside auditor, including but not limited to receipt and review of a
formal written statement from the Company's independent auditor delineating
all relationships between the independent auditor and the Company,
consistent with Independence Standards Board Standard 1.
a. The Audit Committee will report to the Board of Directors any findings
that it determines might impair the independence of the Company's
outside auditor, and will take such action, if any, it determines to
be necessary or appropriate under the circumstances.
4. The Audit Committee will review and approve the fees paid to the
independent auditors.
5. The Audit Committee shall meet with the independent auditor to:
a. Review and approve the plan and scope of each audit;
b. Review the audited financial statements and the results of each audit;
c. Discuss the internal controls systems of the Company and its
subsidiaries;
d.Review the "management" letter given to the Company in connection with
the annual audit; and
e.Review the impact of new or proposed accounting, regulatory and auditing
pronouncements.
6. The Audit Committee shall meet with the Chief Financial Officer to:
a. Review accounting and financial reporting policies and procedures, and
internal controls;
b. Review internal and external audit recommendations;
c. Review the financial statements of the Company and its subsidiaries;
d. Review the impact of new or proposed accounting, regulatory and
auditing pronouncements; and
e. Review management's decisions to seek a review of significant
accounting issues with an accounting firm other than the external
auditors
f. Review the degree of coordination between management and the external
auditors.
7. The Audit Committee shall meet with such members of management as it deems
necessary or appropriate to further expand the members' knowledge of the
Company and its operation.
8. The Audit Committee will review and determine whether to approve all
proposed transactions between the Company and its officers, directors and
shareholders who beneficially own 5% or more of the common shares of the
Company. The Audit Committee will report to the Board of Directors its
decision and any related recommendation with respect to any such proposed
transaction.
9. The Audit Committee shall establish procedures for the receipt, retention,
and treatment of complaints regarding accounting, internal accounting
controls, or auditing matters, including procedures for the confidential,
anonymous submission concerns by employees of the Company regarding
questionable accounting or auditing matters.
10. The Audit Committee shall have the authority to retain such outside
counsel, experts, and other advisors as it may deem appropriate in its sole
discretion. The Audit Committee shall have the authority to approve the
fees and other terms of the retention of such counsel, experts, and
advisors.
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ARTICLE 4.
Meetings
1. The Audit Committee shall hold regular meetings at such times as the
Committee may determine by resolution; provided that the Audit Committee
shall meet not less frequently than once each calendar quarter.
2. Special meetings of the Audit Committee may be called by any member of the
Audit Committee, by the Board of Directors, by the Chief Executive Officer,
by at least two members of the Office of the President if there is no Chief
Executive Officer, or by the Chief Financial Officer. Notice of special
meetings, stating the time and place of the meeting, shall be given in the
same manner as provided in the Bylaws of the Company for special meetings
of the Board of Directors.
3. The agenda of each regular meeting shall take into account all of the
responsibilities of the Audit Committee, as set forth below. The agenda for
any special meeting shall be prepared by the person(s) calling such
meeting.
4. The Audit Committee may request that management appoint an officer of the
Company to serve as Secretary to the Audit Committee.
5. The Audit Committee will maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board of
Directors.
ARTICLE 5.
Further Authority
1. It shall be the policy of this Company that the Audit Committee shall have
full authority and resources sufficient to discharge its duties and
responsibilities, as set forth herein.
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APPENDIX B
PROXY FOR BIOTIME, INC.
ANNUAL MEETING OF SHAREHOLDERS
December 10, 2004
This Proxy is Solicited by the Board of Directors of BioTime, Inc.
The undersigned appoints Judith Segall and Hal Sternberg, 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 December
10, 2004 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.
DIRECTORS RECOMMEND A VOTE "FOR" PROPOSALS NUMBERED 1, 2 AND 3
1) ELECTION OF [_] FOR all nominees listed [_] WITHHOLD AUTHORITY
DIRECTORS below (except as marked to vote for all
to the contrary below) nominees listed below
MILTON H. DRESNER; KATHERINE GORDON; VALETA A. GREGG; JUDITH SEGALL; HAL
STERNBERG; HAROLD WAITZ; MICHAEL D. WEST
** To withhold authority to vote for any individual nominee, draw a line through
that person's name**
FOR AGAINST ABSTAIN
2) AMENDMENT OF THE 2002 STOCK OPTION PLAN [_] [_] [_]
3) RATIFYING APPOINTMENT OF INDEPENDENT AUDITORS [_] [_] [_]
The persons named as proxy may also vote on such other business as may
properly come before the Meeting or any adjournment thereof.
[_] WISH TO ATTEND AND
VOTE SHARES AT MEETING
Please sign exactly as
your shares are registered. _______________________ ______________
Persons signing as a corporate Signature Date
officer or in a fiduciary
capacity should indicate their _______________________ ______________
title or capacity. Signature if Held Jointly Date