| 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. Reclassifications Certain reclassifications have been made to the 2017 and 2016 consolidated financial statements to separately disclose transactions and balances related to Healios to conform to the 2018 presentation. 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. 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 either be applied to Healios' option fee for the China license or be creditable against potential milestone payments under the existing Healios licenses. 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. Effect of Adoption of Topic 606 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 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. The adoption of ASC 606 primarily resulted in the acceleration of revenue as of December 31, 2017, which in turn reduced our existing deferred tax asset for net operating loss carryforwards. As we have provided a full valuation allowance against our deferred tax assets, this impact was offset by a corresponding reduction to the valuation allowance. Our performance obligations and methods used for determining the relative selling prices and transaction prices of the Healios contract elements is further discussed in Note E . As noted above, our arrangement with Healios was the only collaboration that was impacted by the adoption of Topic 606. Notes E and F further describe our arrangement with Healios, including subsequent modifications to the original collaboration. For contracts that were modified prior to January 1, 2018, we aggregated the effect of those modifications when identifying the satisfied and unsatisfied performance obligations and determining the transaction price to be allocated. We applied the practical expedient under Topic 606 and reflected the aggregate effect of all modifications at January 1, 2018. The components of the cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of Topic 606 were as follows (in thousands): Balance at December 31, 2017 Adjustments Due to Topic 606 Balance at January 1, 2018 Assets Accounts receivable - Healios $ 153 $ 30 $ 183 Contractual right to consideration from Healios — 1,436 1,436 Liabilities Deferred revenue - Healios (521 ) 521 — Advance from Healios (134 ) (116 ) (250 ) Stockholders' Equity Accumulated deficit $ (350,630 ) $ 1,871 $ (348,759 ) In accordance with the new revenue recognition requirements, the disclosure of the impact of adoption on our consolidated balance sheet as of December 31, 2018 and statement of operations for the twelve-month period ended December 31, 2018 was as follows (in thousands, except per share data): As of December 31, 2018 As Reported Balances without Adoption of Topic 606 Effect of Change Assets Unbilled accounts receivable from Healios $ 3,620 $ — $ 3,620 Liabilities Deferred revenue - Healios (674 ) (2,154 ) 1,480 Stockholders' Equity Accumulated deficit $ (373,042 ) $ (378,142 ) $ (5,100 ) Twelve months ended December 31, 2018 As Reported Balances without Adoption of Topic 606 Effect of Change Revenues Contract revenues from Healios $ 22,276 $ 19,047 $ 3,229 Net loss (24,283 ) (27,512 ) (3,229 ) Net loss per common share Basic and diluted $ (0.18 ) $ (0.20 ) $ 0.02 The adoption of Topic 606 had no impact on our total cash flows from operations. 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 both 2018 and 2016. Investments in Available-for-Sale Securities We determine the appropriate classification of investment securities, if any, at the time of purchase and re-evaluate such designation as of each balance sheet date. Our investments, if any, typically consist of United States government obligations, United States government-backed municipal bonds and bank certificates of deposit, which are classified as available-for-sale and are valued based on market prices for similar assets using third party certified pricing sources. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of applicable tax, reported as a component of accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization or accretion is included in interest income. The cost of securities sold is based on the specific identification method. Interest earned on securities classified as available-for-sale is included in interest income. At December 31, 2018 , we had no available-for-sale securities, and realized gains and losses for each of the three years in the period ended December 31, 2018 on available-for-sale securities were insignificant. 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, 2018 , 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 $0.6 million and $0.3 million were recorded as research and development expenses in the Consolidated Statements of Operations in the years ended December 31, 2018 and 2016 , 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 were 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 classify these warrant liabilities on the consolidated balance sheet as non-current liabilities. The warrant liabilities are revalued at fair value at each balance sheet date subsequent to the initial issuance. Changes in the fair market value of the warrants are reflected in the consolidated statement of operations as income or expense from change in fair value of warrants. We had no warrant liabilities at December 31, 2018 and 2017, since certain warrants that were classified as liabilities expired during 2017. 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, 2018 , the majority 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 are 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. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons that receive equity awards. 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. In regards to forfeitures, we account for them when they occur following the adoption of ASU 2016-09, Compensation - Stock Compensation - Improvements to Employee Share-Based Payment Accounting, in 2017. All of 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, 2018 2017 2016 Volatility 70.8 % 71.2 % 70.3 % Risk-free interest rate 2.8 % 2.0 % 1.5 % Expected life of option 6.0 years 6.2 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, 2018 and 2017 . 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. Refer to Note H regarding recent tax reform. 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, 2018, 2017 and 2016. 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, 2018 2017 2016 Stock options 10,955,508 8,919,113 9,236,228 Restricted stock units 1,656,688 1,648,986 1,201,159 Warrants, including Healios Warrant 18,500,000 — 1,893,527 31,112,196 10,568,099 12,330,914 Recently Issued Accounting Standards In August 2018, the Financial Accounting Standards Board (“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. We have outstanding cloud computing arrangements and continue to incur costs that we believe may be required to be capitalized under ASU 2018-15, including those related to our 2018 implementation of a new enterprise resource planning system. We are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements and we do not intend to early adopt. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which adds, modifies and removes several disclosure requirements relative to the three levels of inputs used to measure fair value in accordance with Topic 820, Fair Value Measurement . This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted. We are currently assessing the effect that this ASU will have on our disclosures. In February 2016, the FASB issued 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. We adopted Topic 842 effective January 1, 2019. We will elect the ‘package of practical expedients’ and will not reassess our prior conclusions about lease identification, lease classification and initial direct costs. We will also elect the short-term lease recognition exemption for all leases that qualify and will not recognize right-of-use assets or lease liabilities for those leases. Based on contracts in place at December 31, 2018, we expect our ROU asset and lease liability recorded will be approximately 2% of our total assets and do not expect the standard to have a material effect on our cash flows or results of operations. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (“Topic 718”), Improvements to Nonemployee Share-Based Payment Accounting. This aligns the measurement and classification guidance for share-based payments to nonemployees with that for employees, with certain exceptions. It also expands the scope of Topic 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in the entity's own operations. We have elected to early adopt this guidance which did not materially impact our consolidated financial statements. In August 2018, the Securities and Exchange Commission (“SEC”) issued the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification , that amends certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated or superseded. The amendments include replacing the requirement to disclose the high and low trading prices of entity's ordinary shares with a requirement to disclose the ticker symbol of its shares. Additionally, the final rule extends to interim periods the annual disclosure requirement of presenting changes in each caption of stockholders' equity and the amount of dividends per share. These disclosures are required to be provided for the current and comparative year-to-date interim periods. We have adopted all relevant disclosure requirements in our annual report on Form 10-K for the year ended December 31, 2018. 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, with early adoption permitted. We are currently evaluating the impact of this clarifying guidance. |
