National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from prospectus requirements to allow U.S. parent company to distribute shares of its U.S. majority owned subsidiary to shareholders -- distributions not covered by legislative exemptions -- U.S. parent company is a public company in the U.S. but is not a reporting issuer in Canada -- U.S. company has a de minimis presence in Canada -- following the distribution, U.S. subsidiary will not be a reporting issuer in Canada -- no investment decision required from Canadian shareholders in order to receive distributions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5., as am., ss. 53, 74(1).
December 17, 2015
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the "Jurisdiction") AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF BIOTIME, INC. (the "Filer")
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation") for an exemption (the "Exemption Sought") from the prospectus requirement of section 53 of the Securities Act (Ontario) (the "Act") in connection with the proposed distribution (the "Distribution") by the Filer of common shares ("OncoCyte Shares") of OncoCyte Corporation ("OncoCyte"), a majority-owned subsidiary of the Filer by way of a pro rata dividend in specie, to the holders of common shares (the "BioTime Shares") of the Filer (the "BioTime Shareholders") who are resident in Canada (the "BioTime Canadian Shareholders").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, Quebec, Saskatchewan and the Northwest Territories.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer.
Representations relating to the Filer
1. The Filer is a biotechnology corporation incorporated in California that focuses on regenerative medicine. The Filer was incorporated on November 30, 1990 and has been publicly traded since 1992. The Filer's corporate headquarters are located at 1301 Harbor Bay Parkway, Alameda, California, 94502, U.S.A.
2. The BioTime Shares are listed on the NYSE MKT and on the Tel Aviv Stock Exchange under the ticker symbol BTX. Other than the foregoing listings on the NYSE MKT and the Tel Aviv Stock Exchange, no securities of the Filer are listed or posted for trading on any exchange or market in Canada or outside of Canada. The Filer has no present intention of listing its securities on any Canadian exchange.
3. The Filer is a registrant with the United States Securities and Exchange Commission (the "SEC") and is subject to the requirements of the United States Securities Exchange Act of 1934 (the "1934 Act"), as amended, and the rules and regulations of the NYSE MKT.
4. The Filer is not a reporting issuer in any province or territory of Canada and currently has no intention of becoming a reporting issuer under the securities laws of any province or territory of Canada.
5. As at November 9, 2015, the authorized share capital of the Filer consisted of 125,000,000 BioTime Shares and, 2,000,000 preferred shares, of which 94,894,152 BioTime Shares and no preferred shares were issued and outstanding as at the close of business on November 9, 2015.
6. According to a registered shareholder report ("Registered Report") prepared for BioTime by American Stock Transfer & Trust Company, LLC ("Transfer Agent"), its transfer agent as at November 9, 2015, there was one BioTime Canadian Shareholder holding one BioTime Share, representing approximately 0.31447% of the registered shareholders of BioTime worldwide and less than 0.0001% of the total outstanding BioTime Shares as at such date.
7. According to a beneficial ownership report (the "Beneficial Ownership Report") prepared for the Filer by Broadridge Financial Solutions, Inc., as at October 30, 2015 (the "Report Date"), and a beneficial ownership report prepared for the Filer by the Transfer Agent as of the Report Date ("Transfer Agent Beneficial Ownership Report" and together with the Beneficial Ownership Report, the "Beneficial Reports") residents of Canada: (i) beneficially owned 915,850 BioTime Shares, representing approximately 1.26% of the total number of BioTime Shares identified in the Beneficial Reports; and (ii) represented in number 639 beneficial owners of BioTime Shares, representing approximately 4.1% of the total number of beneficial holders identified in the Beneficial Reports. Together, the Beneficial Reports account for 94.2% of the BioTime Shares held through DTC (Cede & Co.) the registered holder for the U.S. book based system. The Beneficial Reports and Registered Reports account for approximately 95.3% of the total number of issued and outstanding BioTime Shares as at the Report Date and are the most comprehensive source of information available to the Filer regarding the holdings and jurisdictions of residence of the beneficial and registered holders of BioTime Shares. Based on the total number of issued and outstanding BioTime Shares at November 9, 2015, as of the Report Date, residents of Canada owned approximately 0.97% of the total number of issued and outstanding BioTime Shares. The Filer does not expect the number of BioTime Canadian shareholders, or the number of BioTime Shares beneficially owned by residents of Canada, to have changed materially between the Report Date and the record date for the Distribution, being the close of business on December 21, 2015.
Representations relating to OncoCyte
8. OncoCyte is a biopharmaceutical corporation incorporated in California on September 30, 2009 that develops screening and diagnosis techniques for lung, breast and bladder cancers. OncoCyte's corporate headquarters is located at 1301 Harbor Bay Parkway, Alameda, California, 94502, U.S.A.
9. The Filer currently holds 19,418,952 OncoCyte Shares, representing 76.4% of the issued and outstanding OncoCyte Shares. The other OncoCyte Shares of OncoCyte are held by three individuals who are registered and beneficial shareholders, none of which are Canadian residents.
10. OncoCyte is not a reporting issuer in any province or territory of Canada nor are its securities listed on any stock exchange in Canada. Oncocyte currently has no intention to become a reporting issuer under the securities laws of any province or territory of Canada or to list its securities on any exchange in Canada after the completion of the Distribution.
Representations Relating to the Distribution
11. The Distribution will be effected in accordance with the laws of California.
12. OncoCyte has prepared and, on November 23, 2015, filed a registration statement on Form 10 with the SEC detailing the proposed Distribution (the "Registration Statement"), in order to qualify the OncoCyte Shares for distribution to the public and as freely tradable shares (the "Registration of Securities"). The OncoCyte General Form for Registration of Securities will be declared effective by the SEC by the date of the Distribution, which is expected to take place on or about December 31, 2015.
13. Further to the completion of the Registration of Securities, OncoCyte Shares will be listed and traded in the United States on the NYSE MKT, or traded on the OTC Bulletin Board.
14. Pursuant to the Distribution, BioTime Shareholders will receive an in specie dividend of OncoCyte Shares on a ratio equal to one OncoCyte Share for every 20 BioTime Shares (the "Ratio").
15. Based on the Ratio and without accounting for: (i) fractional OncoCyte Shares which will not be distributed in connection with the Distribution; and (ii) OncoCyte Shares attributable to jurisdictions in which no prospectus exemption is available, and which in both cases, the distribution agent will sell the OncoCyte Shares in the open market at prevailing market prices and distribute the net cash proceeds from the sales pro rata to such BioTime Shareholders otherwise entitled to have received the OncoCyte Shares in the Distribution, following completion of the Distribution,
a. BioTime Shareholders as of the close of business on December 21, 2015, being the record date for the Distribution (the "Record Date"), will receive approximately 4,744,708 OncoCyte Shares representing approximately 19% of the issued and outstanding OncoCyte Shares;
b. OncoCyte will continue to be a majority-owned subsidiary of the Filer, as the Filer will continue to hold directly and through a subsidiary 14,866,888 OncoCyte Shares, representing approximately 58.55% of the issued and outstanding OncoCyte Shares; and
c. The Filer expects there will be 639 holders of common shares of OncoCyte who are resident in Canada (the "OncoCyte Canadian Shareholders") holding approximately 45,793 OncoCyte Shares, representing approximately 0.18% of the approximately 25,421,952 OncoCyte Shares outstanding as at November 25, 2015.
16. Following completion of the Distribution, the BioTime Shares will continue to be listed for trading on the NYSE MKT and on the Tel Aviv Stock Exchange.
17. At the time of the Distribution and based on the Beneficial Reports and Registered Report, the number of registered and beneficial OncoCyte Canadian Shareholders and the proportion of OncoCyte Shares that will be held by OncoCyte Canadian Shareholders as a result of the Distribution, will be de minimis.
18. No shareholder approval of the Distribution is required or is being sought under the laws of California or any applicable United States federal securities laws.
19. BioTime Shareholders will not be required to pay any cash, deliver any other consideration or surrender or exchange their BioTime Shares in order to receive the OncoCyte Shares in connection with the Distribution. The Distribution will occur automatically without any investment decision on the part of the BioTime Shareholders (including the BioTime Canadian Shareholders).
20. The Ratio, the Record Date and the payment date for the Distribution was disclosed by the Filer by way of news release on December 11, 2015.
21. All materials relating to the Distribution sent by or on behalf of the Filer to BioTime Shareholders resident in the United States (including the information statement comprising part of the Registration Statement) (the "Information Statement") will be sent concurrently to the BioTime Canadian Shareholders.
22. The Information Statement will contain prospectus-level disclosure about OncoCyte.
23. Following completion of the Registration of Securities and the Distribution, OncoCyte will be subject to the requirements of the 1934 Act and, if listed for trading on the NYSE MKT, its rules and regulations, and will send the continuous disclosure materials that it sends to holders of OncoCyte Shares resident in the United States concurrently to the OncoCyte Canadian Shareholders.
24. The Distribution will not cancel or affect the number of outstanding BioTime Shares and the BioTime Shareholders will retain their BioTime Share certificates, if any.
25. The BioTime Canadian Shareholders who receive the OncoCyte Shares pursuant to the Distribution will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Distribution that are available to BioTime Shareholders resident in the United States under the laws of the United States.
26. Following the completion of the Distribution, the BioTime Canadian Shareholders who receive OncoCyte Shares pursuant to the Distribution, to the extent they continue to hold such shares, will be treated as any other OncoCyte Shareholder and will be concurrently sent the same disclosure materials required to be sent under applicable U.S. laws that OncoCyte sends to OncoCyte Shareholders in the United States.
27. There will be no active trading market for the OncoCyte Shares in Canada following the Distribution and none is expected to develop. Consequently, it is expected that any resale of OncoCyte Shares distributed in the Distribution will occur through the facilities of the NYSE MKT, the OTC Bulletin Board, or any other exchange or market outside of Canada on which the OncoCyte Shares may be quoted or listed at the time that the trade occurs or to a person or company outside of Canada.
28. Neither the Filer nor OncoCyte is in default of any of its obligations under the securities legislation of any jurisdiction in Canada.
29. The distribution by the Filer of OncoCyte Shares would be exempt from the prospectus requirement pursuant to Section 2.31(2) of National Instrument 45-106 Prospectus Exemptions ("NI 45-106") but for the fact that each of BioTime and OncoCyte is not and has no intention of becoming a reporting issuer in any jurisdiction of Canada.
30. The distribution by the Filer of OncoCyte Shares would be exempt from the prospectus requirement pursuant to Section 2.31(1) of NI 45 106 but for the fact that the securities to be distributed by BioTime pursuant to the Distribution are securities of OncoCyte.
31. The distribution by the Filer of OncoCyte Shares would be exempt from the prospectus requirement pursuant to Section 2.11 of NI 45-106 but for the fact that the Distribution is not a distribution of securities pursuant to an amalgamation, merger, reorganization or arrangement described in section 2.11(a) or (b) or pursuant to a dissolution or winding-up of an issuer as provided in section 2.11(c).
32. The distribution by the Filer of OncoCyte Shares to BioTime Canadian Shareholders meets the requirements of paragraph 2.11(b)(i) of NI 45-106 in that an information circular will be delivered to each holder of BioTime Shares. However, shareholder approval of the transaction is not required under California corporate law or applicable United States federal securities laws and accordingly is not being sought. As a result, the requirement in paragraph 2.11(b)(ii) of NI 45-106 is not met.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the first trade in the OncoCyte Shares acquired pursuant to the Distribution will be deemed to be a distribution unless the conditions in section 2.6 or section 2.14(1) of National Instrument 45-102 -- Resale of Securities are satisfied.