| Significant Accounting Policies [Text Block] | Note 2 Liquidity and Summary of Significant Accounting Principles Liquidity Since our inception, we have financed our operations by raising debt, issuing equity and equity-linked instruments, and executing licensing arrangements, and to a lesser extent by generating royalties and product revenues. In mid-2019, we ceased ongoing operational activities as we worked to reach a favorable outcome to Medicare reimbursement coverage for the Aurix System. In April 2021, CMS issued an NCD mandating national reimbursement coverage for Aurix when used in chronic non-healing wounds where a diabetes clinical diagnosis exists for the patient. During the nine months ended September 30, 2024, the Company raised proceeds of (i) approximately $1,500,000 from the sale of common stock to certain accredited investors in two private placements which closed in May and September 2024 and (ii) $151,200 from the exercise of warrants. During the year ended December 31, 2023, the Company raised proceeds of approximately $1,997,500 from the sale of common stock to certain accredited investors in two equity private placements which closed in August and December 2023. We have incurred, and continue to incur, recurring losses and negative cash flows. As of September 30, 2024, we have an accumulated deficit of approximately $31.8 million and cash and cash equivalents of approximately $0.7 million. The accompanying unaudited consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations, and potential other funding sources, including cash on hand, to meet our obligations as they become due. We believe based on the operating cash requirements and capital expenditures expected for the next twelve months that our current resources and projected revenue from sales of Aurix products are insufficient to support our operations for the next 12 months. As such, we believe that substantial doubt about our ability to continue as a going concern exists. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Even assuming we succeed in raising sufficient additional funds in the near future, we require additional capital and will seek to continue financing our operations with external capital. Any equity financing may cause further substantial dilution to our stockholders and could involve the issuance of securities with rights senior to the common stock. Any debt financing may require us to comply with additional onerous financial covenants and restrict our business operations. Our ability to complete additional financings is dependent on, among other things, market reception of the Company and perceived likelihood of success of our business model, the state of the capital markets at the time of any proposed equity or debt offering, state of the credit markets at the time of any proposed loan financing, and on the relevant transaction terms, among other things. We may not be able to obtain additional capital as required to finance our efforts, through equity or debt financing, other transactions, or any combination thereof, on satisfactory terms or at all. Additionally, any such financing, if at all obtained, may not be adequate to meet our capital needs and to support our operations. Basis of Presentation and Principles of Consolidation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). In our opinion, the accompanying unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations and cash flows. The consolidated balance sheet at December 31, 2023, has been derived from audited financial statements of the Company as of that date. The interim unaudited consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules and regulations prescribed by the SEC. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited consolidated financial statements are read in conjunction with the audited financial statements and notes previously included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned, controlled, and inactive subsidiary Aldagen, Inc. (“Aldagen”). All significant inter-company accounts and transactions are eliminated in consolidation. The Company operates its business in one operating segment consisting of one reporting unit. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying unaudited consolidated financial statements, estimates are used for, but not limited to stock-based compensation, recoverability and depreciable lives of long-lived assets, deferred taxes, and associated valuation allowance and allowances for inventory obsolescence and credit losses. Actual results could differ from those estimates. Credit Concentration We generate accounts receivable from the sale of our products. Specific customer receivable balances in excess of 10% of total receivables at September 30, 2024 and December 31, 2023 is listed below.
September 30, 2024
December 31, 2023
Customer A 11% *
Customer B * 21%
Customer C * 12%
Customer D * 10% * less than 10% Revenue from significant customers exceeding 10% of total revenues for the three and nine months ended September 30, 2024 and 2023 is listed below. All our revenue for both periods was generated within the U.S.
Three Months Ended September 30, 2024
Three Months Ended September 30, 2023
Nine Months Ended September 30, 2024
Nine Months Ended September 30, 2023
Customer A 14% 14% 18% 11%
Customer D * 14% * 12%
Customer E * 12% * 10% * less than 10% Historically, we used single suppliers for several components of the Aurix product line. We outsource the manufacturing of various product components to contract manufacturers. While we believe these manufacturers demonstrate competency, reliability and stability, there is no assurance that one or more of them will not experience an interruption or inability to provide us with the products needed to satisfy customer demand. Additionally, while most of the components of Aurix are generally readily available on the open market, a reagent, bovine thrombin, is available exclusively through Pfizer, with whom we have an established vendor relationship. Cash, Cash Equivalents, and Restricted Cash We consider all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents potentially subject us to a concentration of credit risk, as approximately $0.7 million held in financial institutions was in excess of the FDIC insurance limit of $250,000 as of September 30, 2024. We maintain our cash in the form of money market deposit accounts with financial institutions that we believe are credit worthy. We maintained no cash equivalents as of September 30, 2024 or December 31, 2023. As of September 30, 2023, $55,000 of cash was considered as restricted as it collateralized a corporate credit card. Accounts Receivable, net We generate accounts receivable from the sale of Aurix products and accounts receivable as of September 30, 2024 and December 31, 2023 reflects customer receivables from commercial sales activities since the re-initiation of such sales beginning in the three months ended September 30, 2022. We provide for an allowance against receivables for estimated losses that may result from a customer’s inability or unwillingness to pay. We estimate credit losses expected over the life of our trade receivables and contract assets based on historical information combined with current conditions that may affect a customer’s ability to pay and reasonable and supportable forecasts. While the Company uses various credit quality metrics, it primarily monitors collectability by reviewing the duration of collection pursuits on its delinquent trade receivables and historical write-off trends. Based on the Company’s experience, the customer's delinquency status, which is analyzed periodically, is the strongest indicator of the credit quality of the underlying trade receivables. Accounts are written off against the allowance for credit losses when we determine that amounts are not collectable. Recoveries of previously written-off accounts are recorded when collected. For the nine-month period ending September 30, 2024, we recorded a provision for credit losses of $17,500. As of September 30, 2024, the allowance for credit losses was approximately $49,900. During the year ended December 31, 2023, we established a provision for credit losses of $160,000. As of December 31, 2023, the allowance for credit losses was approximately $32,400. Inventory, net Our inventory is produced by third-party manufacturers and consists of raw materials and finished goods. Inventory cost is determined on a first-in, first-out basis and is stated at the lower of cost or net realizable value. We maintain an inventory of kits, reagents, and other disposables having shelf-lives that generally range from 12 months to two years. As of September 30, 2024, our inventory consisted of approximately $102,000 of finished goods inventory and approximately $66,000 of raw materials acquired to facilitate the manufacturing of finished goods at our contract manufacturer and our warehouse/distribution facility. As of December 31, 2023, our inventory consisted of approximately $150,000 of finished goods inventory and approximately $60,000 of raw materials. We provide for an allowance against inventory for estimated losses that may result in excess and obsolete inventory (i.e., from the expiration of products). Our allowance for expired inventory is estimated based upon the inventory’s remaining shelf-life and our anticipated ability to sell such inventory, which is estimated using past experience and future forecasts, within its remaining shelf life. Expired products are segregated and used for demonstration purposes only; we will record the associated expense for this reserve to cost of sales in the consolidated statements of operations. For the three and nine months ended September 30, 2024, we incurred a provision of inventory obsolescence of $30,000 and wrote off an aggregate of approximately $27,400 of reagent and wound dressing kit raw materials. The reserve for inventory obsolescence totaled approximately $18,700 as of September 30, 2024. For the year ended December 31, 2023, we established an allowance for expired inventory of approximately $16,000. Property and Equipment, net Property and equipment is stated at cost less accumulated depreciation. Assets are depreciated, using the straight-line method, over their estimated useful life ranging from one six Leases At the inception of a contract, we determine if the arrangement is, or contains, a lease. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term. We have made certain accounting policy elections whereby we (i) do not recognize ROU assets or lease liabilities for short-term leases (those with original terms of 12-months or less) and (ii) combine lease and non-lease elements of any operating leases. Revenue Recognition We analyze our revenue arrangements to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers; (ii) identification of distinct performance obligations in the contract; (iii) determination of contract transaction price; (iv) allocation of contract transaction price to the performance obligations; and (v) determination of revenue recognition based on timing of satisfaction of the performance obligation. We recognize revenues upon the satisfaction of the performance obligations (upon transfer of control of promised goods or services to customers) in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. In certain instances where the revenue is variable and we cannot estimate the amount of consideration to which we expect to be entitled, we are constrained from initially recognizing revenue. In these cases, once the estimate is no longer constrained, we recognize revenue in the amount of consideration to which we expect to be entitled. We provide for the sale of our products, including disposable processing sets and supplies to customers. Revenue from the sale of products is recognized upon shipment of products to the customers. We do not maintain a reserve for returned products, as in the past those returns have not been material and are not expected to be material in the future. Direct costs associated with product sales are recorded at the time that revenue is recognized. Stock-Based Compensation The fair value of employee stock options is measured at the date of grant. Expected volatilities for the 2016 Omnibus Plan options are based on the equally weighted average historical volatility from five comparable public companies with an expected term consistent with ours. Expected years until exercise represents the period of time that options are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. We assume that the dividend rate on our common stock will be zero. There were 400,000 options granted during the three and nine months ended September 30, 2024 and 100,000 options granted during the three and nine months ended September 30, 2023. We recognize forfeitures of stock-based awards as they occur. The assumptions for options granted during the three and nine months ended September 30, 2024 and 2023 are summarized in the following table:
2024
2023
Risk free rate 4.08% 4.37%
Weighted average expected years until exercise 5.5 5
Expected stock volatility 74% 100%
Dividend yield - - Income Taxes We account for income taxes using the asset and liability method. Under the asset and liability method, current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. Tax rate changes are reflected in income during the period such changes are enacted. We measure our deferred tax assets and liabilities using the enacted tax rates that we believe will apply in the years in which the temporary differences are expected to be recovered or paid. We expect that recent tax law changes contained in the Inflation Reduction Act and CHIPS Act will not have a material impact on the provision for income taxes. A deferred income tax asset or liability is recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. All our tax years remain subject to examination by the tax authorities. Our policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. There were no such items in the nine months ended September 30, 2024 and 2023. Basic and Diluted Loss per Share In periods of net loss, basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. In periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti-dilutive. For periods of net income, diluted earnings per share is computed using the more dilutive of the “treasury method” or “two class method.” Dilutive earnings per share under the “treasury method” is calculated by dividing net income available to common stockholders by the weighted- average number of shares outstanding plus the dilutive impact of all potential dilutive common shares, consisting primarily of common shares underlying common stock options and stock purchase warrants using the treasury stock method, and convertible notes using the if-converted method. Because none of the Company’s equity-linked financial instruments contain non-forfeitable rights to dividends, the “two class” method results in the same diluted earnings per share as the “treasury method.” All of our potential dilutive securities are considered anti-dilutive for the three and nine months ended September 30, 2024 and 2023. The following table sets forth the potential dilutive securities excluded from the calculation of diluted loss per share for the periods presented.
Nine months ended September 30, 2024
Nine months ended September 30, 2023
Shares underlying:
Common stock options 3,476,667 3,476,667
Stock purchase warrants 450,000 450,000
Financing participation right and contingent warrant - 500,000
Performance shares 300,000 300,000
4,226,667 4,726,667 Recent Accounting Standards In December 2023, the FASB issued final guidance in ASU No. 2023-09, Income Taxes (ASC 740): Improvements to Income Tax Disclosures requiring entities to provide additional information in the rate reconciliation and disclosures about income taxes paid. For public business entities, the guidance is effective for annual periods beginning after December 15, 2024. We do not expect this ASU to have a material impact on the consolidated financial statements. We have evaluated all other issued and unadopted Accounting Standards Updates and believe the adoption of these standards will not have a material impact on our results of operations, financial position, or cash flows. |
