1.	Organization and Business Overview

General – BioTime, Inc. is a clinical-stage biotechnology company focused on developing and commercializing novel therapies developed from two of its core technology platforms. The foundation of its core therapeutic technology platform is pluripotent stem cells that are capable of becoming any of the cell types in the human body. Cell types derived from pluripotent stem cells have potential application in many areas of medicine with large unmet patient needs, including various age-related degenerative diseases and degenerative conditions for which there presently are no cures. Unlike pharmaceuticals, which almost always require a molecular target, therapeutic strategies based on the use of cell types derived from pluripotent stem cells are generally aimed at regenerating or replacing affected cells and tissues, and therefore, may have broader applicability than pharmaceutical products. BioTime’s pluripotent stem cell technology is complemented by its HyStem^® technology for the delivery and engraftment of cells, whether derived from pluripotent stem cells or the patient’s own somatic stem cells, at the desired location.

In order to efficiently advance product candidates through the clinical trial process, BioTime historically created operating subsidiaries for each program and product line. Management believes this approach has fostered efficient use of resources and reduced shareholder dilution as compared to strategies commonly deployed by the biotechnology industry, as the various programs and product lines have advanced through basic research and animal studies. As a result, BioTime has developed multiple clinical-stage products rather than being dependent on a single product program. BioTime and its subsidiaries have received substantial amounts of non-dilutive financial support from government and nonprofit organizations that are seeking to identify and accelerate the development of potential breakthroughs in the treatment of various major diseases. BioTime currently has an equity method investment in Asterias Biotherapeutics, Inc. (NYSE MKT: AST) and a majority-owned subsidiary, OncoCyte Corporation (NYSE MKT: OCX), both of which companies have shares publicly traded on the NYSE MKT.

As further discussed in Notes 3 and 4, effective May 13, 2016, BioTime deconsolidated Asterias Biotherapeutics, Inc. (“Asterias”) financial statements and results of operations due to the decrease in BioTime’s percentage ownership in Asterias from 57.1% to 48.7% as a result of a public offering of Asterias common stock, in which BioTime did not participate. Prior to that date, Asterias was a majority-owned and consolidated subsidiary. On May 13, 2016, BioTime experienced a loss of control of Asterias under generally accepted accounting principles. Loss of control is deemed to have occurred when, among other things, a parent company owns less than a majority of the outstanding common stock in the subsidiary, lacks a controlling financial interest in the subsidiary and, is unable to unilaterally control the subsidiary through other means such as having, or the ability to obtain, a majority of the subsidiary’s Board of Directors. All of these loss of control factors were present for BioTime as of May 13, 2016. Accordingly, since May 13, 2016, BioTime has accounted for its investment in Asterias using the equity method of accounting at fair value (see Notes 3 and 4).

BioTime, its subsidiaries, and companies accounted for as equity method investments now have four therapeutic product candidates in human clinical trials. BioTime’s Renevia^®, a potential treatment for HIV related facial lipoatrophy, is currently in a pivotal clinical trial in Europe to assess its efficacy in restoring normal skin contours in patients whose subcutaneous fat, or adipose tissue, has been lost due to antiviral drug treatment for HIV. Renevia^® consists of BioTime’s proprietary cell-transplantation delivery matrix (HyStem^®) combined with the patient’s own adipose cells. Asterias has three clinical stage programs based on proprietary cell therapy platforms: AST-OPC1 is a therapy derived from pluripotent stem cells that is currently in a Phase I/IIa clinical trial for spinal cord injuries; AST-VAC1 is a patient-specific cancer immunotherapy being evaluated by Asterias in Acute Myeloid Leukemia (AML); and AST-VAC 2 is a non-patient specific cancer immunotherapy for whic the initiation of a Phase I/IIa clinical trial is planned for the first quarter of 2017. BioTime’s majority-owned subsidiary, Cell Cure Neurosciences, Ltd., is developing OpRegen^®, a potential therapy derived from pluripotent stem cells for the treatment of the dry form of age-related macular degeneration. OpRegen^®is currently in a Phase I/IIa clinical trial.