2.	Summary of Significant Accounting Policies

Recently Adopted Accounting Standards

June 2018,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

2018

07,

“Compensation-Stock Compensation (Topic

718

): Improvements to Nonemployee Share-Based Payment Accounting”

, which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic

718

applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The Company adopted the standard on

January 1, 2019.

The adoption of this standard did

not

have a material impact on the Company’s financial statements.

February 2016,

the FASB issued ASU

2016

“

Leases

,” which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted the standard on

January 1, 2019.

The new standard requires lessees to recognize both the right-of-use assets and lease liabilities in the balance sheet for most leases, whereas under previous GAAP only finance lease liabilities (previously referred to as capital leases) were recognized in the balance sheet. In addition, the definition of a lease has been revised which

may

result in changes to the classification of an arrangement as a lease. Under the new standard, an arrangement that conveys the right to control the use of an identified asset by obtaining substantially all of its economic benefits and directing how it is used as a lease, whereas the previous definition focuses on the ability to control the use of the asset or to obtain its output. Quantitative and qualitative disclosures related to the amount, timing and judgements of an entity’s accounting for leases and the related cash flows are expanded. Disclosure requirements apply to both lessees and lessors, whereas previous disclosures related only to lessees. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have

not

significantly changed from previous GAAP. Lessor accounting is also largely unchanged.

The new standard provides a number of transition practical expedients, which the Company has elected, including:

●

A “package of three” expedients that must be taken together and allow entities to (

)

not

reassess whether existing contracts contain leases, (

) carryforward the existing lease classification, and (

)

not

reassess initial direct costs associated with existing leases, and

●

An implementation expedient which allows the requirements of the standard in the period of adoption with

restatement of prior periods.

The impact of adoption did

not

have a material impact to the Company as of

January 1, 2019

as the Company’s finance leases are immaterial and its operating leases had terms shorter than

one

year. In

January 2019,

the Company signed an amendment to its lease for office space at its corporate headquarters in Rancho Cordova, CA. The amendment extended the lease term by

five

years and was accounted for as a modification. At that time, the Company recorded lease assets and liabilities of

$966,000

and

cumulative effect adjustment to retained earnings.

Revenue Recognition

Revenue is recognized based on the

five

-step process outlined in Accounting Standards Codification (ASC)

606.

The following tables summarize the revenues of the Company’s reportable segments and product lines:

	Three Months Ended September 30, 2019
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
Device Segment:
AXP	$	2,255,000	$	51,000	$	--	$	2,306,000
BioArchive		243,000		351,000		--		594,000
Manual Disposables		212,000		--		--		212,000
CAR-TXpress		875,000		6,000		33,000		914,000
Other		--		--		19,000		19,000
Total Device Segment		3,585,000		408,000		52,000		4,045,000
Clinical Development Segment:
Manual Disposables		9,000		--		--		9,000
Other		--		4,000		--		4,000
Total Clinical Development		9,000		4,000		--		13,000
Total		3,594,000		412,000		52,000	$	4,058,000

	Nine Months Ended September 30, 2019
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
Device Segment:
AXP	$	6,550,000	$	160,000	$	--	$	6,710,000
BioArchive		1,274,000		1,117,000		--		2,391,000
Manual Disposables		711,000		--		--		711,000
CAR-TXpress		1,365,000		6,000		33,000		1,404,000
Other		--		--		40,000		40,000
Total Device Segment		9,900,000		1,283,000		73,000		11,256,000
Clinical Development Segment:
Manual Disposables		53,000		--		--		53,000
Other		5,000		11,000		--		16,000
Total Clinical Development		58,000		11,000		--		69,000
Total		9,958,000		1,294,000		73,000		11,325,000

	Three Months Ended September 30, 2018
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
Device Segment:
AXP	$	1,396,000	$	70,000	$	--	$	1,466,000
BioArchive		485,000		314,000		--		799,000
Manual Disposables		254,000		--		--		254,000
CAR-TXpress		517,000		--		--		517,000
Other		--		--		23,000		23,000
Total Device Segment		2,652,000		384,000		23,000		3,059,000
Clinical Development Segment:
Manual Disposables		8,000		--		--		8,000
Bone Marrow		--		40,000		--		40,000
Other		--		6,000		--		6,000
Total Clinical Development		8,000		46,000		--		54,000
Total	$	2,660,000	$	430,000	$	23,000	$	3,113,000

	Nine Months Ended September 30, 2018
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
Device Segment:
AXP	$	2,930,000	$	201,000	$	--	$	3,131,000
BioArchive		1,357,000		969,000		--		2,326,000
Manual Disposables		716,000		--		--		716,000
CAR-TXpress		547,000		--		--		547,000
Other		46,000		--		56,000		102,000
Total Device Segment		5,596,000		1,170,000		56,000		6,822,000
Clinical Development Segment:
Manual Disposables		31,000		--		--		31,000
Bone Marrow		--		101,000		--		101,000
Other		--		30,000		--		30,000
Total Clinical Development		31,000		131,000		--		162,000
Total	$	5,627,000	$	1,301,000	$	56,000	$	6,984,000

Contract Balances

Generally, all sales are contract sales (with either an underlying contract or purchase order). The Company does

not

have any material contract assets. When invoicing occurs prior to revenue recognition a contract liability is recorded (as deferred revenue on the consolidated balance sheet). Revenues recognized during the

three

and

nine

months ended

September 30, 2019

that were included in the beginning balance of deferred revenue were

$50,000

and

$480,000,

respectively. Short term deferred revenues increased from

$485,000

December 31, 2018

$840,000

September 30, 2019.

Supply

Agreement

August 30, 2019,

the Company entered into a supply agreement with a global distributor for substantially all

-Series® products under the CAR-TXpress™ platform (the “Products”). The agreement has an initial term of

five

years with automatic

two

-year renewal terms, unless terminated by either party in accordance with the terms of the agreement. Pursuant to the agreement, the Company has granted exclusive worldwide distribution rights for

-Series products, for the duration of the term, subject to certain geographical and other exceptions. In addition, the Company has granted rights of

first

refusal for the exclusive worldwide distribution of certain future products developed or introduced by the Company relating to cell isolation or cell selection, including any such products substantially related or similar to the Products (the “ROFR Products”). As consideration for the exclusive worldwide distribution rights for the Products and ROFR Products, the Company will receive a

$2,000,000

fee, in addition to any amounts payable throughout the term for the Products and any ROFR Products. The agreement also contains an option, exercisable by the global distributor at any time following

January 1, 2021,

to become the manufacturer for all or any portion of the Products.

The agreement contains covenants by the Company to negotiate in good faith regarding price reductions for the Products and, commencing in

2020,

cost reduction efforts with respect to development and manufacture of the Products. Moreover, the agreement contains a most-favored customer provision with respect to the pricing made available for the Products during the term. The agreement contains mutual indemnification provisions, as well as standard warranties with respect to the Products, including that the Products supplied and the services provided (including customer support services for Products sold) be manufactured or performed, as applicable, in a

first

class, workmanlike manner by personnel properly trained.

Fair Value Measurements

In accordance with ASC

820,

“

Fair Value Measurements and Disclosures

,” fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. The guidance establishes

three

levels of inputs that

may

be used to measure fair value:

Level

Quoted market prices in active markets for identical assets or liabilities.

Level

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level

Unobservable inputs reflecting the reporting entity’s own assumptions.

The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short duration. The fair value of the Company’s derivative obligation liability is classified as Level

within the fair value hierarchy since the valuation model of the derivative obligation is based on unobservable inputs. The impairment of goodwill and intangible assets is a non-recurring Level

fair value measurement.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, whose function is to allocate resources to and assess the performance of the operating segments. The Company has identified its chief executive officer as the CODM. In determining its reportable segments, the Company considered the markets and the products or services provided to those markets.

The Company has

two

reportable business segments:

●

The Device Segment, engages in the development and commercialization of automated technologies for cell-based therapeutics and bio-processing. The device division is operated through the Company’s ThermoGenesis Corp. subsidiary.

●

The Clinical Development Segment, utilizes autologous stem cell-based therapeutics in the vascular and orthopedic markets through the Company’s TotipotentRX subsidiary in Gurgaon, India.

Net Loss per Share

Net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding plus the pre-funded warrants (as described in Footnote

). For the purpose of calculating basic net loss per share, the additional shares of common stock that are issuable upon exercise of the pre-funded warrants have been included since the shares are issuable for a negligible consideration and have

vesting or other contingencies associated with them. There were

324,444

pre-funded warrants included in the quarter ended

September 30, 2019

calculation. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common stock equivalents noted below is anti-dilutive due to the Company’s net loss position for all periods presented. Anti-dilutive securities consisted of the following at

September 30:

	2019		2018
Common stock equivalents of convertible promissory notes and accrued interest		6,013,667		4,626,667
Vested Series A warrants		40,442		40,442
Unvested Series A warrants (1)		69,853		69,853
Warrants – other		1,300,091		1,319,728
Stock options		296,029		118,830
Total		7,720,082		6,175,520

______________

(

)

The unvested Series A warrants were subject to vesting based upon the amount of funds actually received by the Company in the

second

close of the

August 2015

financing which never occurred. The warrants will remain outstanding but unvested until they expire in

February 2021.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassifications did

not

have an impact on net loss as previously reported.