| Accounting Policies | B. Accounting Policies Principles of Consolidation The consolidated financial statements include our accounts and results of operations and those of our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Revenue Recognition Our license and collaboration agreements may contain multiple elements, including license and technology access fees, research and development funding, product supply revenue, service revenue, cost-sharing, milestones and royalties. As further described below, on January 1, 2018, we adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), to account for revenue. The deliverables under our arrangements are evaluated under Topic 606 which requires an entity to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Milestone Payments Topic 606 does not contain guidance specific to milestone payments, but rather requires potential milestone payments to be considered in accordance with the overall model of Topic 606. As a result, revenues from contingent milestone payments are recognized based on an assessment of the probability of milestone achievement and the likelihood of a significant reversal of such milestone revenue at each reporting date. This assessment may result in recognizing milestone revenue before the milestone event has been achieved. Since the milestones in the Healios arrangement are generally related to development and commercial milestone achievement by Healios, we have not included any of the Healios milestones in the estimated transaction price of the Healios arrangement, since they would be constrained, as a significant reversal of revenue could result in future periods. Other than for our collaboration with Healios that has remaining deliverables, as of the date of adoption of Topic 606 on January 1, 2018, we had recognized the full amount of license fees under our collaboration agreements as contract revenue under the prior guidance associated with multiple-element arrangements, since the performance periods for our multiple element arrangements had concluded. The events triggering any future contingent milestone payments from these arrangements were determined to be non-substantive and revenue will be recognized in the period that the triggering event occurs, and the remaining potential commercial milestones will be recognized when earned. Grant Revenue Grant revenue, which is not within the scope of Topic 606 for our grant arrangements, consists of funding under cost reimbursement programs primarily from federal and non-profit foundation sources for qualified research and development activities performed by us, and as such, are not based on estimates that are susceptible to change. Such amounts are invoiced and recorded as revenue as grant-funded activities are performed, with any advance funding recorded as deferred revenue until the activities are performed. Royalty Revenue We generate royalty revenue from the sale of licensed products by our licensees. Royalty revenue is recognized upon the later to occur of (i) achievement of the collaborator’s underlying sales and (ii) satisfaction of any performance obligation(s) related to these sales, in each case assuming the license to our intellectual property is deemed to be the predominant item to which the sales-based royalties relate. Unbilled Accounts Receivable We record amounts that are due to us under contractual arrangements for which invoicing has not yet occurred if our performance has concluded for the billable activity, and we have the unconditional right to the consideration, but such amounts have not yet been billed. The remaining transaction price for the performance obligations that were not yet delivered was not significant at December 31, 2019. At December 31, 2018, unbilled accounts receivable from Healios was $3.6 million , which includes $2.5 million of license fees that were paid to us by Healios in the first quarter of 2019 related to the expansion of our arrangement described in Note E . The remainder of the unbilled accounts receivable on the consolidated balance sheets at December 31, 2018 relates to manufacturing technology transfer services performed that were not yet billed to Healios. Contractual Right to Consideration and Deferred Revenue Amounts included in deferred revenue or contract assets are determined at the contract level, and for our Healios arrangement, such amounts are included in a contract asset or liability depending on the overall status of the arrangement. Amounts received from customers or collaborators in advance of our performance of services or other deliverables are included in deferred revenue, while amounts for performance of services or other deliverables before customer payment is received or due are included in contract assets, with those amounts that are unconditional being included in either accounts receivable or unbilled accounts receivable. Grant proceeds received in advance of our performance under the grant is included in deferred revenue. Generally, deferred revenue and contract assets or liabilities are classified as current assets or obligations, as opposed to non-current. Deposit from Healios Included in the deposit from Healios at December 31, 2018 is a $2.0 million payment received from Healios to extend the period of its exclusive right to negotiate for an option to expand its license to develop and commercialize certain disease indications in China. These nonrefundable proceeds will be creditable against potential milestone payments under the existing Healios licenses. The exclusive right of negotiation period expired on June 30, 2019. Advances from Healios The clinical trial supply agreement with Healios was amended in July 2017 to clarify a cost-sharing arrangement associated with our supply of clinical product for Healios' ischemic stroke trial in Japan. The proceeds from Healios for clinical supply that relate specifically to the cost-sharing arrangement may (i) result in a decrease in the amount we receive from Healios upon the achievement of certain milestones and an increase to a commercial milestone or (ii) be repaid at our election. While the amendment to the supply agreement resulted in a revision to the terms associated with the product supply, namely the cost of product supply, the revision did not affect any of the performance obligations under the overall arrangement. The proceeds from Healios that relate specifically to the cost-sharing arrangement for Healios’ ischemic stroke study in Japan are recognized as a non-current advance from Healios until the related milestones are achieved or such amounts are repaid to Healios at our election. No revenue has been recognized yet related to this advance. Recently Adopted Accounting Standards In May 2014, the Financial Accounting Standards Board ("FASB") issued guidance codified in ASC 606, Revenue Recognition - Revenue from Contracts with Customers ("Topic 606"), which amends the guidance in former ASC 605, Revenue Recognition . The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those good or services. We adopted Topic 606 utilizing the modified retrospective transition method applied to contracts that were not complete as of January 1, 2018. We evaluated all of our arrangements on a contract-by-contract basis, identifying all of the performance obligations, including those that are contingent. For our contracts with customers that contain multiple performance obligations, we account for the individual performance obligations separately when they are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. Under the new standard, we assessed whether licenses granted under our collaboration and license agreements were distinct in the context of the agreement from other performance obligations and functional when granted. After considering the relative selling prices of the contract elements and the allocation of revenue thereto, we recognized a cumulative effect adjustment of $1.9 million as an adjustment to the opening balance of our December 31, 2018 accumulated deficit primarily related to a contract asset since the revenue permitted to be recognized at inception was not limited to the cash proceeds received as of that time, which was a requirement of the previous guidance. We concluded that the new guidance resulted in revisions to accounting for our arrangement with Healios, only, since our other collaborations had no remaining performance obligations and potential contingent receipts would be constrained. Notes E and F further describe our arrangement with Healios. The comparative information for fiscal year ended December 31, 2017 has not been restated and continues to be reported under the accounting standards in effect for those periods. In January 2019 we adopted ASU 2016-02, Leases ("Topic 842"), which requires lessees to put most leases with a term greater than 12 months on their balance sheets, but recognize expenses on their statement of operations in a manner similar to current accounting practice. Under the guidance, lessees initially recognize a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset for the right to use the underlying asset for the lease term. The lease liability is measured at the present value of the lease payments over the lease term. The ROU asset is measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs. The guidance is effective for the annual and interim periods beginning after December 15, 2018. The impact of adoption to our consolidated financial statements is further discussed in Note J . Cash and Cash Equivalents We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are primarily invested in money market funds. The carrying amount of our cash equivalents approximates fair value due to the short maturity of the investments. Cash used in investing activities excluded $0.1 million of accrued capital expenditures in 2018. Research and Development Research and development expenditures, which consist primarily of costs associated with clinical trials, preclinical research, product manufacturing and process development for manufacturing, personnel, legal fees resulting from intellectual property application and maintenance processes, and laboratory supply and reagent costs, including direct and allocated overhead expenses, are charged to expense as incurred. Clinical Trial Costs Clinical trial costs are accrued based on work performed by outside contractors that manage and perform the trials, and those that manufacture the investigational product. We obtain initial estimates of total costs based on enrollment of subjects, trial duration, project management estimates, manufacturing estimates, patient treatment costs and other activities. Actual costs may be charged to us and recognized as the tasks are completed by the contractor or, alternatively, may be invoiced in accordance with agreed-upon payment schedules and recognized based on estimates of work completed to date. Accrued clinical trial costs may be subject to revisions as clinical trials progress, and any revisions are recorded in the period in which the facts that give rise to the revisions become known. Royalty Payments and Sublicense Fees We are required to make royalty payments to certain parties based on our product sales under license agreements. No royalties were recorded during the three-year period ended December 31, 2019 , since we have not yet generated sales revenue. We are also required to record sublicense fees from time-to-time in connection with license fees from collaborators and clinical and commercial milestone achievement, of which $0.1 million and $0.6 million were recorded as research and development expenses in the Consolidated Statements of Operations in the years ended December 31, 2019 and 2018 , respectively. Long-Lived Assets Equipment is stated at acquired cost less accumulated depreciation. Laboratory and office equipment are depreciated on the straight-line basis over the estimated useful lives ( three to ten years ). Leasehold improvements are amortized over the shorter of the lease term or estimated useful life. Long-lived assets are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the asset or related group of assets may not be recoverable. If the expected future undiscounted cash flows are less than the carrying amount of the asset, an impairment loss is recognized at that time. Measurement of impairment may be based upon appraisal, market value of similar assets or discounted cash flows. Proceeds from Insurance In 2016, our facility sustained flood damage representing both an unusual and infrequent event, and we recognized a net insurance recovery gain of $0.7 million in 2016 that was reported as a separate component of our loss from operations. An additional $0.6 million of insurance proceeds, net of associated expenses, were received in 2018, concluding the insurance claim. Proceeds from insurance settlements, except for those directly related to investing or financing activities, were recognized as cash inflows from operating activities. Since the majority of the damage from the flood was to fully depreciated leasehold improvements, the amount of losses was less than the amount of the insurance proceeds received. Patent Costs and Rights Costs of applying for, prosecuting and maintaining patents and patent rights are expensed as incurred. We have filed for broad intellectual property protection on our proprietary technologies and have numerous United States and international patents and patent applications related to our technologies. Warrants We account for common stock warrants as either liabilities or as equity instruments depending on the specific terms of the warrant agreements. Generally, warrants are classified as liabilities, as opposed to equity, if the agreement includes the potential for a cash settlement or an adjustment to the exercise price, and warrant liabilities are recorded at their fair values at each balance sheet date. We had no warrant liabilities at December 31, 2019 and 2018. Refer to Note F for a warrant issued in 2018 to Healios (the “Healios Warrant”), which is accounted for as an equity instrument. Concentration of Credit Risk Our accounts receivable are generally comprised of amounts due from collaborators and granting authorities and are subject to concentration of credit risk due to the absence of a large number of customers. At December 31, 2019 and 2018, most of our accounts receivable are due from Healios. We do not typically require collateral from our customers. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Stock-Based Compensation We recognize stock-based compensation expense on the straight-line method and use a Black-Scholes option-pricing model to estimate the fair value of option awards. The expected term of options granted represent the period of time that option grants are expected to be outstanding. We use the “simplified” method to calculate the expected life of option grants given our limited history of exercise activity and determine volatility by using our historical stock volatility. The fair value of our restricted stock units is equal to the closing price of our common stock on the date of grant and is expensed over the vesting period on a straight-line basis. Options may be exercised for cash or by a cashless exercise that is permitted under certain conditions. In the event of a cashless exercise, we retain the number of shares equivalent to the exercise cost based on the market value at the time of exercise and issue the net number of shares to the holder. We recognize income tax benefits and deficiencies as income tax expense or benefit in the consolidated statement of operations and the tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. We also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits are classified along with other income tax cash flows as an operating activity in the consolidated statement of cash flows. Regarding forfeitures, we account for them when they occur. All the aforementioned estimates and assumptions are evaluated on a quarterly basis and may change as facts and circumstances warrant. Changes in these assumptions can materially affect the estimate of the fair value of our share-based payments and the related amount recognized in our financial statements. Annual stock-based awards to employees typically vest over a four -year period, although the 2018 awards vest over a three -year period, have an exercise price equal to the fair market value of a share of common stock on the grant date and have a contractual term of 10 years. The following weighted-average input assumptions were used in determining the fair value of the Company’s stock options: December 31, 2019 2018 2017 Volatility 71.1 % 70.8 % 71.2 % Risk-free interest rate 2.0 % 2.8 % 2.0 % Expected life of option 6.2 years 6.0 years 6.2 years Expected dividend yield 0.0 % 0.0 % 0.0 % Income Taxes Deferred tax liabilities and assets are determined based on the differences between the financial reporting and tax basis of assets and liabilities and are measured using the tax rate and laws currently in effect. We evaluate our deferred income taxes to determine if a valuation allowance should be established against the deferred tax assets or if the valuation allowance should be reduced based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. We had no liability for uncertain income tax positions as of December 31, 2019 and 2018 . Our policy is to recognize potential accrued interest and penalties related to the liability for uncertain tax benefits, if applicable, in income tax expense. Net operating loss and credit carryforwards since inception remain open to examination by taxing authorities and will for a period post utilization. Net Loss per Share Basic and diluted net loss per share have been computed using the weighted-average number of shares of common stock outstanding during the period. For each reporting period in which we have outstanding warrants, we evaluate the income from such warrant liabilities and consider whether it results in a potentially dilutive effect to net loss per share. There were no such dilutive effects from warrant liabilities for each of the periods ended December 31, 2019 , 2018 and 2017 . We have outstanding options, restricted stock units and outstanding warrants that were not used in the calculation of diluted net loss per share because to do so would be antidilutive. The following instruments, were excluded from the calculation of diluted net loss per share because their effects would be antidilutive: Years ended December 31, 2019 2018 2017 Stock options 13,975,671 10,955,508 8,919,113 Restricted stock units 2,032,180 1,656,688 1,648,986 Warrants 4,000,000 18,500,000 — 20,007,851 31,112,196 10,568,099 Recently Issued Accounting Standards In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . The ASU simplifies the accounting for income taxes, changes the accounting for certain income tax transactions, and other minor changes. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods, with early adoption permitted. We are currently assessing the impact that this ASU will have on our consolidated financial statements and disclosures. In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (“Topic 808”): Clarifying the Interaction between Topic 808 and Topic 606 . The amendments in this update make targeted improvements to generally accepted accounting principles (“GAAP”) for collaborative arrangements as follows: clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements; add unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606; and require that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. The provisions of ASU 2018-18 are effective for years beginning after December 15, 2019. We are currently evaluating the impact of this clarifying guidance. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018-15”). ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software and deferred over the noncancellable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The guidance is effective for the annual and interim periods beginning after December 15, 2019, with early adoption permitted. Entities can choose to adopt prospectively or retrospectively. We will adopt the standard effective January 1, 2020 prospectively and are currently evaluating the potential impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) . This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Subsequent to issuing ASU 2016-13, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326): Effective Dates , delaying the effective date for smaller reporting companies until January 2023. We are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements and disclosures, and we do not intend to early adopt. |
