Shareholders' Equity | 10. Shareholders’ Equity Preferred Shares BioTime is authorized to issue 2,000,000 shares of preferred stock. The preferred shares may be issued in one or more series as the board of directors may by resolution determine. 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 on the preferred shares as a class, or upon any wholly unissued series of any 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. As of December 31, 2017, no shares of preferred stock were issued or outstanding. Common Shares BioTime is authorized to issue 150,000,000 common shares with no par value. As of December 31, 2017, BioTime had 126,865,634 issued and outstanding common shares. As of December 31, 2016, BioTime had 103,396,245 issued and 102,776,539 outstanding common shares. The difference of 619,706 common shares as of December 31, 2016 is attributed to shares held by BioTime subsidiaries which are accounted for as treasury stock on the consolidated balance sheet. On February 17, 2017, and in connection with the OncoCyte Deconsolidation, those treasury shares were considered to be issued and outstanding BioTime common shares. As of December 31, 2017, there are no outstanding shares of treasury stock. On October 17, 2017, BioTime completed a public offering of 11,057,693 common shares at a price of $2.60 per share, including the underwriters’ full exercise of their over-allotment option to purchase additional shares. The public offering generated net proceeds to BioTime of approximately $26.7 million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by BioTime. On July 10, 2017, BioTime issued 4,924,542 common shares valued at $15.2 million to purchase outstanding Cell Cure Convertible Notes and additional Cell Cure ordinary shares from noncontrolling interests in Cell Cure as further described in Note 9 and Transactions with Noncontrolling Interests of Cell Cure On April 6, 2017, BioTime, entered into a Controlled Equity Offering SM Statement of Cash Flows – Other Presentation Matters BioTime will pay Cantor Fitzgerald a commission of 3.0% of the aggregate gross proceeds from each sale of shares, reimburse legal fees and disbursements and provide Cantor Fitzgerald with customary indemnification and contribution rights. The Sales Agreement may be terminated by Cantor Fitzgerald or BioTime at any time upon notice to the other party, or by Cantor Fitzgerald at any time in certain circumstances, including the occurrence of a material and adverse change in BioTime’s business or financial condition that makes it impractical or inadvisable to market the shares or to enforce contracts for the sale of the shares. On February 15, 2017, BioTime sold 7,453,704 common shares in an underwritten public offering. The offering price to the public was $2.70 per share and net proceeds to BioTime were approximately $18.5 million, after deducting underwriting discounts, commissions and expenses related to the financing. On June 16, 2016, BioTime sold 7,322,176 common shares in an underwritten public offering at a public offering price of $2.39 per share, for net proceeds of $16.4 million, after deducting underwriting discounts and commissions and other expenses. On July 5, 2016, BioTime issued an additional 1,098,326 common shares upon the full exercise of the over-allotment option by the underwriters for net proceeds of $2.2 million, after deducting underwriting discounts. Significant common share transactions during the year ended December 31, 2015 are as follows: ● In September 2015, BioTime raised $8.6 million through the sale of 2,607,401 common shares at an offering price of $3.29 to three of its shareholders. ● During October 2015, BioTime sold 6,530,612 common shares for $20.4 million in the aggregate to certain investment funds in Israel that hold shares of companies that are included within certain stock indexes of the TASE. The $3.13 purchase price per share was determined with reference to the closing price of BioTime common shares on the TASE on the date of sale. In addition, OncoCyte sold 246,356 BioTime common shares at the same price to one of the Israeli investment funds. ● In October 2015, BioTime sold 1,600,000 common shares to a shareholder for $5.1 million. The $3.19 price of price per share was the closing price of the common shares on the NYSE American on October 1, 2015, the last trading day before BioTime and the shareholder entered into a purchase agreement for the sale of the shares. ● On December 31, 2015, BioTime distributed 4.7 million shares of OncoCyte common stock to its shareholders, on a pro rata basis, accounted for as a dividend in kind. On this date, BioTime shareholders received one share of OncoCyte common stock for every twenty shares of BioTime common stock held. As a result of this distribution, BioTime recorded a reduction in the carrying value of its investment in OncoCyte with a corresponding increase to noncontrolling interests in OncoCyte in the amount of $712,000, representing the reduction in BioTime’s ownership in OncoCyte by 18.7% from 76.5% to 57.8%. BioTime continues to hold a controlling financial interest in OncoCyte. This distribution generated a taxable gain of approximately $7.4 million to BioTime, however BioTime had sufficient current year losses to offset the entire gain. BioTime Warrants BioTime has issued equity-classified warrants to purchase its common shares. Activity related to warrants in 2017, 2016, and 2015 is presented in the table below (in thousands, except price per share): Number of Warrant Shares Per Share Exercise Price Weighted Average Exercise Price Outstanding, January 1, 2015 9,195 $ 5.00 $ 5.00 Exercised in 2015 (4) 5.00 5.00 Warrant adjustment (1) 919 Outstanding, December 31, 2015 10,110 $ 4.55 $ 4.55 Expired in 2016 (715) 4.55 4.55 Outstanding, December 31, 2016 9,395 $ 4.55 $ 4.55 Expired in 2017 - Outstanding, December 31, 2017 (2) 9,395 $ 4.55 $ 4.55 (1) The number of shares issuable upon the exercise of the warrants was adjusted as a result of the distribution of OncoCyte common stock to BioTime shareholders during December 2015. (2) The 9,394,862 outstanding warrants will expire, if unexercised, beginning June 5, 2018 through September 30, 2018. Transactions with Noncontrolling Interests of Asterias and OncoCyte BioTime accounts for a change in ownership interests in its subsidiaries that does not result in a change of control of the subsidiary by BioTime under the provisions of ASC 810-10-45-23 , The subsidiary financing transactions with noncontrolling interests in Asterias for $18.3 million, and OncoCyte for $4.0 million, reported in the consolidated statements of shareholders’ equity for the year ended December 31, 2016, represent this proportional transfer of carrying value to BioTime pertaining to investments in Asterias and OncoCyte common stock made by noncontrolling shareholders in which BioTime’s ownership was reduced, but not below 50%. Transactions with Noncontrolling Interests of Cell Cure On July 10, 2017, BioTime purchased all of the outstanding Cell Cure Convertible Notes and Cell Cure ordinary shares held by HBL , a former Cell Cure shareholder that owned 21.2% of the issued and outstanding Cell Cure ordinary shares and substantially all of the Cell Cure Convertible Notes issued by Cell Cure shareholders other than BioTime (see Note 9) million based on the closing price of BioTime common shares on the NYSE American to acquire the Cell Cure ordinary shares from HBL and Teva. Prior to the consummation of the transactions with HBL and Teva, BioTime held 62.5% of the issued and outstanding Cell Cure ordinary shares and upon the consummation of the transactions BioTime held 99.8%. Accordingly, BioTime recorded a corresponding charge to equity of $10.1 million and a proportional transfer of carrying value of $3.5 million for purchase of noncontrolling interests in Cell Cure, included in the consolidated statement of shareholders’ equity for the year ended December 31, 2017, in accordance with On July 10, 2017, as an inducement to HBL to sell their Cell Cure ordinary shares to BioTime, Cell Cure issued 24,566 warrants to HBL (the “HBL Warrants”) to purchase Cell Cure ordinary shares at an exercise price of $40.5359 per warrant share, payable in U.S. dollars, the same Cell Cure price per ordinary share paid by BioTime to each of HBL and Teva for the purchase of their Cell Cure ordinary shares as discussed above. No warrants were issued to Teva. The HBL Warrants are immediately exercisable and expire on the earliest of the lapse of 5 years from the issuance date or immediately prior to the closing of a Corporate Transaction or an initial public offering, as defined in the HBL Warrant Agreements. Since the exercise price is U.S. dollar-denominated and settlement is not expected to occur in the next twelve months, Cell Cure classified the HBL Warrant as a long-term liability in accordance with ASC 815, Derivatives and Hedging The fair value of the HBL Warrants at the time of issuance was determined by using the Black-Scholes-Merton option pricing model using the contractual term of the warrants. In applying this model, the fair value is determined by applying Level 3 inputs, as defined by ASC 820; these inputs are based on certain key assumptions including the fair value of the Cell Cure ordinary shares and the expected stock price volatility over the term of the warrants. The fair value of the Cell Cure ordinary shares is determined by Cell Cure's Board of Directors, which, among other methods, may include engaging valuation specialists to estimate the fair value or use recent transactions, if any or as applicable, as a reasonable approximation of fair value. BioTime determines the stock price volatility using historical prices of comparable public company common stock for a period equal to the remaining term of the warrants. The HBL Warrants are revalued each reporting period using the same methodology described above. Changes in any of the key assumptions used to value the HBL Warrants could materially impact the fair value of the warrants and BioTime's consolidated financial statements. For the year ended December 31, 2017, Cell Cure recorded a noncash expense of $555,000 included in general and administrative expenses. As of December 31, 2017, the HBL Warrants, valued at $535,000 were included in other long-term liabilities on the consolidated balance sheet. See Note 9 for the accounting of the purchase of the Cell Cure Convertible Notes from HBL. On October 4, 2017, a Cell Cure option holder exercised Cell Cure stock options to purchase 4,400 Cell Cure ordinary shares, reducing BioTime’s ownership from 99.8% to 98.8% of total issued and outstanding Cell Cure ordinary shares. Transactions with Noncontrolling Interests of AgeX Therapeutics, Inc. AgeX was incorporated in January 2017 for the purpose of acquiring and developing BioTime technology relating to cell immortality and regenerative biology by developing products for the treatment of aging and age-related diseases. Initial product development plans include: pluripotent stem cell-derived brown adipocytes (AGEX-BAT1); vascular progenitors (AGEX-VASC1); and induced Tissue Regeneration (iTR). Initial planned indications for these products are type II diabetes, cardiac ischemia, and cancer, respectively. On August 17, 2017, AgeX received its initial assets and cash from BioTime and certain investors. BioTime contributed certain assets and cash to AgeX in exchange for 28,800,000 shares of AgeX common stock pursuant to an Asset Contribution and Separation Agreement (the “Asset Contribution Agreement”). BioTime and AgeX also entered into a License Agreement pursuant to which BioTime licensed or sublicensed to AgeX, and AgeX granted to BioTime an option to license back, certain patent rights. Concurrently with the acquisition of assets from BioTime under the Asset Contribution Agreement, AgeX sold 4,950,000 shares of its common stock for $10.0 million in cash primarily to investors, which included the Chairman of BioTime’s Board of Directors (see Note 9). At the close of the financing, BioTime owned 85.4% of the issued and outstanding shares of AgeX common stock. The AgeX shares were offered and sold without registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on exemptions from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D and Regulation S thereunder. AgeX has agreed to use commercially reasonable efforts to register the shares of AgeX common stock issued to the AgeX investors for sale under the Securities Act. Asset Contribution Agreement Assets Contributed: Pursuant to the Asset Contribution Agreement, BioTime contributed to AgeX the following assets: ● Intellectual property and proprietary technology, including certain patents and patent applications and know-how that comprised BioTime’s “iTR” and adipose brown fat tissue technology; ● Approximately 95% of the outstanding shares of ReCyte Therapeutics common stock, which constituted all of the shares BioTime held prior to the contribution; ● Approximately 82% of the outstanding shares of LifeMap Sciences common stock, which constituted all of the shares BioTime held prior to the contribution; ● Approximately 44% of the outstanding shares of Ascendance Biotechnology, Inc., (“Ascendance”) which constituted all of the shares BioTime held prior to the contribution. ● $100,000 in cash; and ● Certain other assets and contracts related to the AgeX research and development programs. Assumption of Liabilities: AgeX agreed to assume all third-party obligations and liabilities related to the assets contributed and contracts assigned to AgeX or the operation of the AgeX related business. Other Matters: The Asset Contribution Agreement also sets forth other terms that govern certain aspects of BioTime’s ongoing relationship with AgeX if in the future BioTime determines to distribute its AgeX shares to BioTime shareholders. License Agreement Concurrently with the contribution of assets to AgeX under the Asset Contribution Agreement, BioTime and AgeX entered into a License Agreement pursuant to which BioTime has licensed to AgeX, with rights to sublicense, certain intellectual property, including patents and patent applications and know-how for use in the development, manufacture and commercialization of products or services for the prevention, treatment, amelioration, diagnosis or monitoring of all human and non-human animal diseases and conditions except for the field of medical products, devices and services for the reserved BioTime fields of orthopedic, ophthalmic and medical aesthetic uses. In addition, BioTime retained an option right to license, on terms to be negotiated, iTR patents in research, development, manufacturing and commercialization of treatments in the reserved BioTime fields. The licensed patents and know-how relate generally to (a) BioTime’s PureStem ® The BioTime patent rights licensed to AgeX are exclusive and worldwide except for existing third-party licenses, and for medical products, devices, and services related to tendon. AgeX additionally received an option to license certain BioTime retained patent rights outside of orthopedic indications unless a license grant would compete with a BioTime program or products in the retained BioTime field. The Asset Contribution Agreement transactions were completed between entities under common control and the assets contributed by BioTime to AgeX were transferred at historical carrying values with no gain or loss recognized in accordance with ASC 810-10-45-23. As a result, pursuant to the new cash investment made by the outside noncontrolling interests in AgeX, this transaction resulted in a $8.2 million proportional equity transfer, at carrying value, from noncontrolling interests in AgeX to BioTime recorded in consolidated shareholders’ equity for the year ended December 31, 2017 Transactions with Noncontrolling Interests of Other Subsidiaries On June 6, 2017, BioTime increased its ownership in LifeMap Sciences from 78% to 82% and obtained a direct 100% ownership interest in LifeMap Solutions, of which 78% was previously indirectly owned by BioTime through LifeMap Sciences, for settlement and cancellation of certain intercompany debt owed by LifeMap Sciences. In 2017, certain OrthoCyte option holders exercised OrthoCyte stock options to purchase 51,000 shares of OrthoCyte common stock reducing BioTime’s ownership from 100% to 99.8% of total issued and outstanding shares of OrthoCyte common stock. BioTime recorded a $5.5 million net proportional equity transfer, at carrying values, from noncontrolling interests in these subsidiaries to BioTime included in consolidated shareholders’ equity for the year ended December 31, 2017, in accordance with |