Note 3 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes in the Company’s significant accounting policies to those disclosed in the Company’s Annual Report filed on its Form 10-K for the year ended December 31, 2020.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. The Company was not profitable for the nine months ended September 30, 2021 and has a full valuation allowance on all net operating loss (“NOL”) tax carryforwards. As such, the adoption of this standard did not have a material impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-01, “Investments – Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”. The new guidance clarifies the interaction of accounting for the transition into and out of the equity method and the accounting for measuring certain purchased options and forward contracts to acquire investments. It is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The adoption of this standard did not have a material impact on the Company’s financial statements.

Revenue Recognition

Revenue is recognized based on the five-step process outlined in Accounting Standards Codification (“ASC”) 606.

The following tables summarize the revenues by product line:

	Three Months Ended September 30, 2021
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
AXP	$	2,217,000	$	72,000	$	21,000	$	2,310,000
BioArchive		221,000		297,000		--		518,000
CAR-TXpress		160,000		31,000		71,000		262,000
Manual Disposables		55,000		--		--		55,000
Other		9,000		--		4,000		13,000
Total	$	2,662,000	$	400,000	$	96,000	$	3,158,000

	Nine Months Ended September 30, 2021
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
AXP	$	3,490,000	$	159,000	$	1,000	$	3,670,000
BioArchive		652,000		1,165,000		--		1,817,000
CAR-TXpress		702,000		89,000		214,000		1,005,000
Manual Disposables		300,000		--		--		300,000
Other		46,000		--		38,000		84,000
Total	$	5,190,000	$	1,413,000	$	273,000	$	6,876,000

	Three Months Ended September 30, 2020
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
AXP	$	1,137,000	$	32,000	$	--	$	1,169,000
BioArchive		337,000		282,000		--		619,000
CAR-TXpress		332,000		22,000		71,000		425,000
Manual Disposables		100,000		--		--		100,000
Other		26,000		--		16,000		42,000
Total	$	1,932,000	$	336,000	$	87,000	$	2,355,000

	Nine Months Ended September 30, 2020
	Device Revenue		Service Revenue		Other Revenue		Total Revenue
AXP	$	4,009,000	$	103,000	$	--	$	4,112,000
BioArchive		675,000		900,000		--		1,575,000
CAR-TXpress		1,035,000		47,000		214,000		1,296,000
Manual Disposables		499,000		--		--		499,000
Other		276,000		--		39,000		315,000
Total	$	6,494,000	$	1,050,000	$	253,000	$	7,797,000

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 balance sheet).  Revenues recognized during the three and nine months ended September 30, 2021 that were included in the beginning balance of deferred revenue were $118,000 and $521,000, respectively.  Short-term deferred revenues increased from $608,000 to $943,000 and long-term deferred revenues decreased from $1,596,000 to $1,395,000 during the nine months ended September 30, 2021, respectively.

Exclusivity Fee

On August 30, 2019, the Company entered into a Supply Agreement with Corning Incorporated (the “Supply Agreement”).  The Supply Agreement has an initial term of five years with Corning having two options to renew for an additional two-years (up to four years total), unless terminated by either party in accordance with the terms of the Supply Agreement (collectively, the “Term”). Pursuant to the Supply Agreement, the Company has granted Corning exclusive worldwide distribution rights for substantially all X-Series® products under the CAR-TXpress™ platform (the “Products”) manufactured by its subsidiary, ThermoGenesis Corp., for the duration of the Term, subject to certain geographical and other exceptions. In addition to any amounts payable throughout the Term for the Products, as consideration for the exclusive worldwide distribution rights for the Products, Corning paid a $2,000,000 exclusivity fee.  For the three and nine months ended September 30, 2021 and 2020, the Company recorded revenue related to the exclusivity fee of $71,000 and $214,000, respectively.  The remaining balance of the $2,000,000 payment of $1,405,000 is recorded as deferred revenue, with $286,000 in short-term deferred revenue and $1,119,000 recorded in long-term deferred revenue.

Distribution Agreement

The Company signed a new agreement with its AXP distributor in China through 2023.  The new agreement called for the distributor to purchase a minimum of $1,400,000 of AXP disposables in 2021, then $650,000 in each of the next two years.  In return for the minimum purchase commitment, the Company is providing the distributor with AXP processing devices to use during the term of the agreement.  The Company maintains ownership of these devices and they must be returned to the Company at the end of the agreement in 2024.  The Company analyzed the relevant accounting guidance and determined that the equipment and AXP bagsets represented distinct performance obligations. The equipment was concluded to be an embedded lease, accounted for as a sales-type operating lease.  At September 30, 2021, the value of those assets was approximately $180,000 and they will be amortized over their accounting estimated useful life of five years.  A portion of the revenue from each bagset shipment will be allocated and recorded as deferred revenue to be recognized as lease revenue over the term of the agreement.  The expected lease revenue is $21,000 per quarter.  At September 30, 2021, the Company had $82,000 in short term and $27,000 in long term deferred revenue related to future lease revenue.

Backlog of Remaining Customer Performance Obligations

The following table includes revenue expected to be recognized and recorded as sales in the future from the backlog of performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.

	Remainder of 2021		2022		2023		2024		2025 and beyond		Total
Service revenue	$	359,000	$	962,000	$	462,000	$	189,000	$	85,000	$	2,057,000
Clinical revenue		3,000		13,000		13,000		13,000		160,000		202,000
Device revenue(1)		21,000		674,000		674,000		41,000		--		1,410,000
Exclusivity fee		72,000		286,000		286,000		286,000		476,000		1,406,000
Total	$	455,000	$	1,935,000	$	1,435,000	$	529,000	$	721,000	$	5,075,000

(1) Represents the minimum purchase requirements related to the Company AXP distributor in China

Revenues are net of normal discounts. Shipping and handling fees billed to customers are included in net revenues, while the related costs are included in cost of revenues.

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. For the three and nine month periods ended September 30, 2021, sales and marketing and general and administrative expenses were combined into one line item identified as sales, general and administrative expenses on the Statement of Operations. Additionally, the loss on equity method investments was combined with other income on the Statement of Operations.